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KEITH COMPANIES INC - DEF 14A - 20010413 - EXECUTIVE_COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid or
accrued by us to our chief executive officer and to each of our other three most
highly compensated executive officers who earned more than $100,000, in salary
and bonus for all services rendered to us in all capacities during the year
ended December 31, 2000.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
------------------------------------- UNDERLYING
FISCAL ALL OTHER STOCK
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
--------------------------- ------ -------- ------ ------------ ------------
Aram H. Keith..................... 2000 $381,926(1) -- $15,115(2) --
Chief Executive Officer and 1999 $375,423(3) -- $66,573(4) 46,000
Chairman of the Board 1998 $373,419(5) -- $ 6,832(6) --
Eric C. Nielsen(7)................ 2000 $172,551(8) $6,985(9) $39,553(10) 20,000
President and Chief 1999 $158,290(11) -- $15,561(12) 10,000
Operating Officer
Gary C. Campanaro................. 2000 $164,122(13) $5,000 $17,435(14) --
Chief Financial Officer 1999 $146,116(15) -- $ 9,186(16) 12,500
and Secretary 1998 $115,016(17) -- $ 5,171(18) 31,482
Jerry M. Brickman(19)............. 2000 $155,780(20) -- $11,157(21) --
Chief Operating Officer 1999 $147,309 -- $26,090(22) 8,000
1998 $130,403 -- $ 5,186(23) 9,259
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(1) Consists of $373,523 in salary and $8,403 in matching contributions made by
us under our 401(k) plan.
(2) Consists of a $4,500 auto allowance, $3,688 in payout of accrued vacation
and sick time, $6,787 in membership dues paid by us on behalf of Mr. Keith
and $140 in premiums on a life insurance policy of which Mr. Keith is the
beneficiary.
(3) Consists of $373,923 in salary and $1,500 in matching contributions made by
us under our 401(k) plan.
(4) Consists of $53,957 in payout of accrued vacation and sick time, $5,443 in
reimbursement of various automobile expenses, $6,987 in membership dues
paid by us on behalf of Mr. Keith and $186 in premiums on a life insurance
policy of which Mr. Keith is the beneficiary.
(5) Consists of $371,562 in salary and $1,857 in matching contributions made by
us under our 401(k) plan.
(6) Consists of a $1,500 auto allowance, $5,146 in membership dues paid by us
on behalf of Mr. Keith and $186 in premiums on a life insurance policy of
which Mr. Keith is the beneficiary.
(7) Effective as of March 13, 2001, Mr. Nielsen was elected to serve as our
chief operating officer.
(8) Consists of $166,426 in salary and $6,125 in matching contributions made by
us under our 401(k) plan.
(9) Consists of $5,000 year-end bonus and $1,985 as a 15-year service bonus.
(10) Consists of a $12,000 auto allowance, $3,000 in membership dues paid by us
on behalf of Mr. Nielsen, $140 in premiums on a life insurance policy of
which Mr. Nielsen is the beneficiary, $1,328 for an executive medical
examination paid for by us and $23,085 in payout of accrued vacation and
sick time.
(11) Consists of $156,790 in salary and $1,500 in matching contributions made by
us under our 401(k) plan.
(12) Consists of a $12,000 auto allowance, $3,375 in membership dues paid by us
on behalf of Mr. Nielsen and $186 in premiums on a life insurance policy of
which Mr. Nielsen is the beneficiary.
(13) Consists of $158,746 in salary and $5,376 in matching contributions made by
us under our 401(k) plan.
(14) Consists of a $6,000 auto allowance, $3,000 in membership dues paid by us
on behalf of Mr. Campanaro, $140 in premiums on a life insurance policy of
which Mr. Campanaro is the beneficiary, $1,624 for an executive medical
examination paid for by us and $6,671 in payout of accrued vacation and
sick time.
(15) Consists of $144,616 in salary and $1,500 in matching contributions made by
us under our 401(k) plan.
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(16) Consists of a $6,000 auto allowance, $3,000 in club membership dues paid by
us on behalf of Mr. Campanaro and $186 in premiums on a life insurance
policy of which Mr. Campanaro is the beneficiary.
(17) Consists of $114,423 in salary and $593 in matching contributions made by
us under our 401(k) plan.
(18) Consists of a $5,000 auto allowance and $171 in premiums paid on a life
insurance policy of which Mr. Campanaro is the beneficiary.
(19) Effective as of January 5, 2001, Mr. Brickman ceased being an employee of
our company.
(20) Consists of $149,576 in salary and $6,204 in matching contributions made by
us under our 401(k) program.
(21) Consists of a $6,000 auto allowance, $140 in premiums paid on a life
insurance policy of which Mr. Brickman is the beneficiary and $5,017 in
payout of accrued vacation and sick time.
(22) Consists of a $6,000 auto allowance, $186 in premiums paid on a life
insurance policy of which Mr. Brickman is the beneficiary and $19,904 in
payout of accrued vacation and sick time.
(23) Consists of a $5,000 auto allowance and $186 in premiums paid on a life
insurance policy of which Mr. Brickman is the beneficiary.
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth certain information concerning stock options
granted to the executive officers named in the summary compensation table in
this proxy statement during the fiscal year ended December 31, 2000. This
information includes hypothetical potential gains from stock options granted in
fiscal 2000. These hypothetical gains are based entirely on assumed annual
growth rates of 5% and 10% in the value of our common stock price over the
10-year life of the stock options granted in 2000. These assumed rates of growth
were selected by the Securities and Exchange Commission for illustrative
purposes only and are not intended to predict future stock prices, which will
depend upon market conditions and our future performance and prospects.
% OF TOTAL
OPTIONS POTENTIAL REALIZABLE
GRANTED VALUE AT ASSUMED
NUMBER OF TO ANNUAL RATES OF STOCK
SECURITIES EMPLOYEES PRICE APPRECIATION
UNDERLYING IN EXERCISE FOR OPTION TERM(3)
OPTIONS FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED(1) YEAR(2) ($/SHARE) DATE 5% 10%
---- ---------- ---------- --------- ---------- -------- ---------
Aram H. Keith..................... 0 0% -- -- -- --
Eric C. Nielsen................... 20,000 11.2% $4.38 2010 $55,100 $139,600
Gary C. Campanaro................. 0 0% -- -- -- --
Jerry M. Brickman(4).............. 0 0% -- -- -- --
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(1) Options vest 20% annually over five years.
(2) Based on options to purchase 178,150 shares granted to our employees during
the fiscal year ended December 31, 2000.
(3) Calculated using the potential realizable value of each grant.
(4) On January 5, 2001, Mr. Brickman ceased being an employee of our company.
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AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding stock options
exercised by the executive officers named in the summary compensation table in
this proxy statement during the fiscal year ended December 31, 2000, as well as
the number of exercisable and unexercisable in-the-money stock options and their
values at fiscal year-end. An option is in-the-money if the fair market value
for the underlying securities exceeds the exercise price of the option.
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT DECEMBER 31, 2000 AT DECEMBER 31, 2000(1)
ACQUIRED VALUE ------------------------- -------------------------
ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
----------- -------- ------------------------- -------------------------
Aram H. Keith.................... 0 0 0/0 $ 0/$ 0
Eric C. Nielsen.................. 0 0 32,593/24,444 $172,743/$95,953
Gary C. Campanaro................ 0 0 11,111/16,667 $ 58,888/$88,335
Jerry M. Brickman(2)............. 0 0 19,260/ 2,962 $102,078/$15,699
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(1) Based on the last reported sale price of underlying securities ($8.00) on
December 29, 2000 (the last trading day during 2000) as reported by Nasdaq,
minus the exercise price of the options.
(2) On January 5, 2001, Mr. Brickman ceased being an employee of our company.
In September 2000, we made an offer to our option holders which gave them a
one-time election to have us cancel their options as of September 30, 2000 and
to receive new options covering the same number of shares at an option exercise
price equal to market value on a date six months and one day later. Prior to the
expiration of the six month and one day period, the Securities and Exchange
Commission stated its position regarding the regulatory treatment of such
offers. Based on that position and consultation with our legal counsel, we
concluded that the attempt by us to cancel the options was ineffective and the
participants continue to hold their original options.
CHANGE IN CONTROL AGREEMENTS
In March 2001, our board of directors approved change in control agreements
with Aram H Keith, our chief executive officer and chairman of the board, Eric
C. Nielsen, our president and chief operating officer, and Gary C. Campanaro,
our chief financial officer and secretary. These agreements provide for
severance payments to these executive officers in certain circumstances
following a change in control of our company. Specifically, the change in
control agreements provide that if the executive officer's employment with us
terminates as a result of an involuntary or constructive termination (as these
terms are defined in the agreements) at any time within two years following a
change in control, the executive officer will receive a one-time payment, equal
to two times the executive officer's highest annual level of total cash
compensation (including any and all bonus amounts) paid by us to that executive
officer during any one of the three consecutive calendar years (inclusive of the
year of termination) immediately prior to termination. The level of annual cash
compensation for the year in which a termination occurs will include any bonus
amounts which the executive officer is eligible to receive during the year of
termination, whether or not such bonus was earned by the executive officer. In
addition, any unvested options previously granted to the executive officer will
immediately vest and become exercisable as of the date of termination. Under
these change in control agreements, for a two-year period following the
termination, the executive officer is also entitled to receive continuing health
coverage at a level commensurate to the coverage provided by us to the executive
officer immediately prior to the change in control; all other benefits under
welfare benefit plans, practices, policies and programs provided or offered by
us, including, medical, dental, prescription, disability, employee life, group
life, accidental death and travel accident insurance plans and programs; fringe
benefits; and a reasonable level of outplacement services selected by the
executive officer.
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Under the change in control agreements, a "change in control" means the
occurrence of any of the following events: (1) other than Aram Keith or his
family members and affiliates, a person becomes the beneficial owner of 20% or
more of the total voting power of our then outstanding voting securities, (2) a
change in the composition of our board of directors occurs within a two-year
period as a result of which fewer than a majority of the directors are directors
who were serving on our board at the beginning of such two-year period unless
the election of each director who was not a director at the beginning of such
period has been approved in advance by directors representing at least
two-thirds of the directors then on the board who were directors at the
beginning of the period, (3) the consummation of a merger or consolidation of
our company in which we do not survive as an independent public company, or (4)
our business or businesses for which the executive officer's services are
principally performed are disposed of by us under a partial or complete
liquidation of our company, a sale of assets (including stock of a subsidiary),
or otherwise.
Under these change in control agreements, the executive officer is also
entitled to receive a payment by us to offset any excise tax under the excess
parachute payment provisions of Section 4999 of the Internal Revenue Code of
1986, as amended, or the Code, that has been levied against the executive
officer for payments that we have made to, or for the benefit of that executive
officer (whether or not such payments are made pursuant to the executive
officer's change in control agreement). The payment by us will be "grossed up"
so that after the executive officer pays all taxes (including any interest or
penalties with respect to such taxes) on the payment, the executive officer will
retain an amount of the payment equal to the excise tax imposed.
Since Messrs. Keith and Campanaro are also directors of our company, each
of them voluntarily recused themselves from the board's vote on whether to
approve the change in control agreement to which they are a party. The
agreements were then unanimously approved by the remaining members of the board.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 2001, our board of directors approved the change in control
agreements with Aram H. Keith, Eric C. Nielsen and Gary C. Campanaro described
more fully above under the caption "Change in Control Agreements."
In March 2000, we granted options to purchase 20,000 shares of our common
stock to our president and chief operating officer, Eric C. Nielsen at an
exercise price of $4.38 per share, the closing sale price of our common stock as
reported on the Nasdaq Stock Market on that date.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation committee of our board of directors hereby submits its
report concerning the compensation of our executive officers, including the
chief executive officer. The compensation committee is responsible for the
establishment and administration of our compensation policies with respect to
our executive officers and other employees and for the administration of our
stock incentive plan.
Our executive compensation program is designed to align executive
compensation with our business strategy and performance. The goals of the
executive compensation program are: to attract and retain key executives
critical to our success; to provide levels of compensation which are competitive
with other entities of similar size within and outside of our industry; and to
motivate executives to enhance long-term shareholder value by providing
appropriate incentives, including ownership through stock options.
The annual compensation has been considered for the executive officers,
including Aram H. Keith, our chief executive officer and chairman of the board,
including base salaries, coupled with stock options, bonuses and other
incentives and compensation. Base salaries are the fixed component of the
executive officers' compensation packages. Salaries are set and adjusted based
upon competitive standards and individual performance.
Salary and bonus levels and the award of stock options are based upon our
performance during the prior year as set forth in our audited financial
statements, and the contribution of each individual executive officer to our
performance. Among the factors which the committee has established to assess our
overall performance
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are: our performance against budget and targets for revenue and expenses, the
successful implementation of both short- and long-term corporate strategies for
enhancing shareholder value (e.g. strategic acquisitions, accounting systems,
facilities expansion, productivity, improvements, etc.) and service development
along with technical advances.
A portion of the compensation of our executive officers is based upon the
award of stock options which rely on increases in the value of our common stock.
The issuance of options is intended to encourage such employees to establish a
meaningful, long-term ownership interest in us consistent with the interests of
our shareholders. Under our stock incentive plan, options are granted from time
to time to certain of our officers, directors and key employees at the fair
market value of our common stock at the time of grant. Because the compensation
element of options is dependent on increases over time in the market value of
such shares, stock options represent compensation that is tied to our long-term
performance.
The committee has reviewed the fiscal 2000 base salaries of each of the
executive officers and is of the opinion that such salaries are reasonable in
view of those paid by other entities of similar size within and outside our
industry. The committee also reviewed the stock options awarded in fiscal 2000
and is of the opinion that the option awards are reasonable in view of the
officers' individual performance and positions with us.
In May 2000, the committee reviewed Mr. Keith's base salary for 2000, and
concluded that his salary is not unreasonable in view of those paid to chief
executive officers of other entities of similar size within and outside our
industry.
COMPENSATION COMMITTEE:
Walter W. Cruttenden, III
Christine Diemer Iger
BOARD AUDIT COMMITTEE REPORT
The audit committee of the board of directors reviewed and discussed with
the independent auditors all matters required by generally accepted auditing
standards, including those described in Statement on Auditing Standards No. 61,
as amended, "Communication with Audit Committees," and reviewed and discussed
the audited financial statements of The Keith Companies, Inc., both with and
without management present. In addition, the audit committee obtained from the
independent auditors, a formal written statement describing all relationships
between the auditors and The Keith Companies, Inc. that might bear on the
auditors' independence consistent with Independence Standards Board Standard No.
1, "Independent Discussions with Audit Committees," and discussed with the
auditors any relationships that may impact their objectivity and independence
and satisfied itself as to the auditors' independence. Based upon the audit
committee's review and discussions with management and the independent auditors
referenced above, the audit committee recommended to the board of directors that
the audited financial statements of The Keith Companies, Inc. be included in its
Annual Report on Form 10-K for the fiscal year ended December 31, 2000, for
filing with the Securities and Exchange Commission. The audit committee also
recommended reappointment, subject to shareholder approval, of the independent
auditors and the board of directors concurred in such recommendation.
AUDIT COMMITTEE:
George Deukmejian
Christine Diemer Iger
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on our common stock, based on its market price, with the cumulative total
return of companies on the Nasdaq Industrial Index, the Wilshire 5000 Index and
a weighted average peer group index, assuming reinvestment of dividends, for the
period beginning July 13, 1999 through our fiscal year ended December 31, 2000.
We constructed our own peer group index which includes the following companies
listed in alphabetical order: Michael Baker Corporation; EA Engineering Science
& Technology, Inc.; Kaiser Group International, Inc.; Stone & Webster,
Incorporated; Tetra Tech, Inc.; URS Corporation; and Roy F. Weston, Inc. In the
proxy statement sent to our shareholders in connection with our annual
shareholders' meeting held last year, the peer group index also included Harding
Lawson Associates Group, Inc., however, this company is no longer a public
company and as a result, is no longer included in the peer group index. Our
common stock was initially offered to the public on July 13, 1999. This graph
assumes that the value of the investment in our common stock and each of the
comparison groups was $100 on July 13, 1999.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
------------------------------------------------------------------------------------------------------------
July 13, December 31, December 31,
1999 1999 2000
------------------------------------------------------------------------------------------------------------
The Keith Companies, Inc....................... $100.00 $ 48.61 $ 88.89
Nasdaq Industrial Index........................ $100.00 $135.52 $ 89.92
Wilshire 5000 Index............................ $100.00 $108.26 $ 95.43
Peer Group Index............................... $100.00 $ 79.72 $102.52
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership
of our common stock as of March 23, 2001 by:
- each person who is known by us to beneficially own more than 5% of our
common stock;
- each of our directors and executive officers; and
- all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission. In computing the number
of shares beneficially owned by a person and the percentage ownership of that
person, shares of common stock underlying options held by that person that are
currently exercisable or exercisable within 60 days of March 23, 2001 are deemed
outstanding. These shares, however, are not deemed outstanding for the purposes
of computing the percentage ownership of any other person. Except as indicated
in the footnotes to this table and pursuant to applicable community property
laws, each shareholder named in the table has sole voting and investment power
with respect to the shares set forth opposite such shareholder's name. Unless
otherwise indicated, the address for each of the following shareholders is c/o
The Keith Companies, Inc., 2955 Red Hill Avenue, Costa Mesa, California 92626.
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER OR IDENTITY OF GROUP BENEFICIAL OWNERSHIP COMMON STOCK
--------------------------------------------- -------------------- ------------
Aram H. Keith.............................................. 1,615,220(1) 30.0%
Walter W. Cruttenden, III.................................. 408,837 7.6%
Floyd S. Reid.............................................. 402,944(2) 7.5%
E*Capital Corporation and related parties.................. 297,000(3) 5.5%
Gary C. Campanaro.......................................... 49,167(4) *
Eric C. Nielsen............................................ 41,815(5) *
Jerry M. Brickman(6)....................................... 30,371 *
George Deukmejian.......................................... 8,907(7) *
Christine Diemer Iger...................................... 7,407(8) *
All directors and executive officers as a group (6
persons)................................................. 2,131,353 39.1%
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* Less than 1%.
(1) Includes 1,606,020 shares held in a trust of which Mr. Keith and his wife,
Margie Keith are the beneficiaries and co-trustees and 9,200 shares
underlying options.
(2) Includes 372,870 shares held in a trust of which Mr. Reid and his wife Ruth
Reid are the beneficiaries and co-trustees. Amount shown does not include
56,870 shares owned by Mr. Reid's daughter and granddaughter who reside with
Mr. Reid. Mr. Reid expressly disclaims beneficial ownership of these shares.
(3)E*Capital Corporation is the parent of Wedbush Morgan Securities, Inc.
Includes 236,600 shares owned by E*Capital Corporation, 31,600 shares owned
Edward W. Wedbush, the chairman of E*Capital Corporation and the president of
Wedbush Morgan Securities, Inc. and 28,800 shares owned by WMS PS Retirement
Plan, the employee retirement plan for the employees of Wedbush Morgan
Securities, Inc. Mr. Wedbush owns a majority of the outstanding shares of
E*Capital Corporation. Accordingly, Mr. Wedbush may be deemed the beneficial
owner of our shares that are owned by E*Capital Corporation. However,
beneficial ownership of our shares which are owned by E*Capital Corporation
is disclaimed by Mr. Wedbush.
(4) Includes 28,518 shares held as joint tenants with his wife, Lorraine
Campanaro, and includes 20,649 shares underlying options.
(5) Includes 1,000 shares held as joint tenants with his wife, Marilee Nielsen,
and includes 40,815 shares underlying options.
(6) On January 5, 2001, Mr. Brickman ceased being an employee of our company.
(7) Includes 1,500 shares held by a defined benefit pension plan of which Mr.
Deukmejian is the trustee and sole participant and 7,407 shares underlying
options.
(8)Consists solely of shares underlying options.
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COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, and the
regulations thereunder, require our directors, executive officers and persons
who own more than 10% of a registered class of our equity securities to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of our common stock and other equity securities
and to furnish us with copies of all Section 16(a) forms that they file. Mr.
Keith, our chief executive officer and chairman of the board, failed to file on
a timely basis, an Annual Statement of Changes in Beneficial Ownership on Form 5
for one transaction that occurred during 2000. An Annual Statement of Changes in
Beneficial Ownership on Form 5 has been subsequently filed. To our knowledge,
based solely on a review of the copies of the reports furnished to us and
written representations that no other reports were required, during the fiscal
year ended December 31, 2000, our officers, directors and beneficial owners of
more than 10% of a registered class of our equity securities complied with all
other Section 16(a) filing requirements applicable to them.
REQUIRED VOTE
The five nominees receiving the highest number of votes will be elected as
directors to our board of directors.
RECOMMENDATION OF THE BOARD OF DIRECTORS
Our board of directors recommends that the shareholders vote "FOR" the
election of each of the nominees listed in this proxy statement.
APPROVAL OF OUR
AMENDED AND RESTATED 1994 STOCK INCENTIVE PLAN
(PROPOSAL 2)
OUR SECOND AMENDED AND RESTATED 1994 STOCK INCENTIVE PLAN
Introduction
On March 13, 2001, our board of directors approved, subject to the approval
of our shareholders, a Second Amended and Restated 1994 Stock Incentive Plan, or
the Plan. The Plan increases the number of shares of common stock underlying
options or rights to purchase shares of our common stock, or purchase rights,
that may be granted under our current plan from its present number of 1,111,111
shares to 1,600,000 shares; deletes a provision requiring that nonqualified
stock options granted to a 10% shareholder have an exercise price of at least
110% of the fair market value of our common stock on the date of grant; and
extends the term of the current plan to March 13, 2011. As of March 23, 2001,
there were 664,773 shares available for future grants of options or purchase
rights under the Plan (assuming that the Plan is approved by our shareholders).
Of these, we have reserved for issuance, 63,373 shares of common stock
underlying options to be granted to the employees of Thompson-Hysell, Crosby,
Mead, Benton & Associates and Hook Engineering, Inc. in connection with our
acquisitions of those companies.
Our board of directors believes that increasing the number of shares
subject to our current plan and extending its term is necessary to ensure that
we will have an adequate number of shares of common stock for future grants to
provide incentives to our employees and to enable us to grant options or
purchase rights to attract and retain the services of qualified employees,
officers and directors, including nonemployee directors and service providers to
our company. Further, our board deems it advisable to delete the provision in
the current plan that requires nonqualified stock options granted to a 10%
shareholder to have an exercise price equal to at least 110% of the fair market
value of our common stock on the date of grant.
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The following is a general summary of the Second Amended and Restated 1994
Stock Incentive Plan, which is qualified in its entirety by reference to the
full text of the Plan, attached to this proxy statement as Appendix B.
Shares Subject to the Plan
A total of 1,111,111 shares of our common stock are currently authorized
for issuance under our current plan. If our shareholders approve the Second
Amended and Restated 1994 Stock Incentive Plan, the maximum number of shares
that may be issued upon exercise of stock options or purchase rights that may be
granted under the Plan will be 1,600,000 shares. Any shares of our common stock
which are subject to an option or a purchase right but which can no longer be
exercised or any shares of stock issued upon the exercise or acceptance of a
purchase right that are reacquired by us may again be used for awards under the
Plan. The number of shares issuable pursuant to the Plan, and the exercise price
of such options, is subject to proportional adjustments to reflect
recapitalizations, stock splits, stock dividends, mergers, consolidations, and
similar events.
Eligibility For Participation
The Plan provides for grants of incentive stock options, which are intended
to qualify for special tax treatment under Section 422 of the Code, nonqualified
stock options and purchase rights. Employees, including our officers and
directors who are employees, may be granted incentive stock options,
nonqualified stock options or purchase rights. However, members of our board of
directors who are not officers or employees, and service providers to our
company may only be granted nonqualified stock options or purchase rights under
the Plan.
As of March 23, 2001, approximately 635 persons were eligible to
participate in the Plan and 755,083 shares were subject to outstanding options.
There were no purchase rights outstanding as of that date.
Administration
The Plan is administered by our board of directors. Administration of the
Plan may be delegated by our board of directors to a committee of the board.
Subject to the terms of the Plan, our board of directors or a committee of our
board determines the persons who are to receive awards, the number of shares
subject to each award and the terms and conditions of the awards.
Exercise of Options
The exercise price of any incentive stock option granted under the Plan may
not be less than the fair market value of the shares of common stock underlying
the option, determined as of the date of the grant. If an optionee possesses at
least 10% of the total combined voting power of all classes of our stock at the
time of the grant of an incentive stock option, the exercise price may not be
less than 110% of the fair market value of the common stock underlying the
option, determined as of the date of the grant. The exercise price of non-
qualified stock options shall be not less than 85% of the fair market value of
the common stock underlying the option. The exercise price of an option may be
paid in the discretion of our board of directors or a committee of our board by:
- cash;
- check;
- the surrender of shares of our common stock owned by the optionee that
have been held by the optionee for at least six months, which surrendered
shares shall be valued at fair market value as of the date of exercise;
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- the optionee's promissory note in a form and on terms acceptable to our
board or a committee of the board;
- the cancellation of indebtedness by us to the optionee;
- the waiver of compensation due or accrued to the optionee for services
rendered;
- provided that a public market for our common stock exists, a "same day
sale" commitment from the optionee and an NASD dealer under which the
optionee irrevocably elects to exercise the option and to sell a portion
of the shares purchased on the exercise to pay for the exercise price and
under which the NASD dealer irrevocably commits upon receipt of the
shares to forward the exercise price directly to us;
- provided that a public market for our common stock exists a "margin"
commitment from the optionee and an NASD dealer under which the optionee
irrevocably elects to exercise the option and to pledge the shares
purchased on the exercise to the NASD dealer in a margin account as
security for a loan from the NASD dealer in the amount of the exercise
price, and under which the NASD dealer irrevocably commits upon receipt
of the shares to forward the exercise price directly to us; or
- any combination of the foregoing methods of payment or any other
consideration or method of payment as shall be permitted by applicable
corporate law.
Acceptance of Purchase Rights
An offeree shall have no rights with respect to the restricted stock
subject to a purchase right unless the offeree accepts or exercises the purchase
right within 30 days (or such shorter period as our board or a committee of our
board specifies) following the grant of the purchase right by making payment to
us of the full purchase price and by executing and delivering to us a stock
purchase agreement.
Payment of the purchase price upon exercise of a purchase right may be
made, in the discretion of our board or a committee of our board, by:
- cash;
- check;
- the surrender of shares of our common stock owned by the offeree that
have been held by the offeree for at least six months, which surrendered
shares shall be valued at fair market value as of the date of exercise;
- the offeree's promissory note in a form and on terms acceptable to our
board or a committee of our board;
- the cancellation of indebtedness by us to the offeree;
- the waiver of compensation due or accrued to the offeree for services
rendered; or
- any combination of the foregoing methods of payment or any other
consideration or method of payment as shall be permitted by applicable
corporate law.
As of March 23, 2001, the aggregate fair market value of shares of our
common stock subject to outstanding options under the Plan was $16,845,901 based
upon the closing sale price of our stock on the Nasdaq Stock Market on that
date.
Expiration of Options
No option granted under the Plan may be made exercisable after the
expiration of ten years from the date the option is granted. In addition, any
incentive stock option granted to an optionee who possesses at least 10% of the
total combined voting power of all classes of our stock at the time that an
incentive stock option is granted, may not be made exercisable after the
expiration of five years from the date of the grant.
15
Amendments
Our board may amend, suspend or terminate the Plan, without notice, and in
its sole discretion. Provided however, any amendment, suspension, or termination
of the Plan by the board shall not materially impair any option or purchase
right previously granted under the Plan without the express written consent of
the optionee or right holder. In addition, any amendment that increases the
number of shares subject to the Plan, materially modifies the eligibility
requirements for option grants, or materially increases the benefits accruing to
option holders, must be approved by our shareholders.
Term of the Plan
Unless terminated earlier as provided in the Plan, the Plan will terminate
on March 13, 2011.
Federal Income Tax Information
Incentive Stock Options. Upon the grant of an incentive stock option, the
optionee will not recognize any taxable income and we will not be entitled to a
tax deduction. Upon the exercise of an incentive stock option while the optionee
is employed by us, or within three months after termination of employment, the
optionee will not recognize taxable income if certain holding period
requirements under the Code are met; however, under certain circumstances, the
excess of the fair market value of the shares of common stock acquired upon
exercise of an incentive stock option over the exercise price may be subject to
the alternative minimum tax.
If the shares of common stock acquired through the exercise of an incentive
stock option are held for at least two years from the date of grant and at least
one year from the date of exercise, the optionee's gain or loss upon a
disposition of those shares of common stock will be a long-term capital gain or
loss equal to the difference, if any, between the sale price and the purchase
price of the shares. If the optionee satisfies these holding periods, upon a
sale of the shares, we will not be entitled to any deduction for federal income
tax purposes. If the shares are disposed of prior to the expiration of these
holding periods, the optionee will recognize ordinary income on certain amounts
in excess of the option price and we will be entitled to a corresponding tax
deduction.
Nonqualified Stock Options. Upon the grant of a nonqualified stock option,
the optionee will not recognize any taxable income. Upon the exercise of a
nonqualified stock option, the optionee will recognize taxable ordinary income
in an amount equal to the difference between the fair market value of the shares
of common stock acquired upon exercise of the nonqualified stock option and the
exercise price. At that time, we will be entitled to a corresponding tax
deduction. Upon a subsequent disposition of shares of common stock acquired upon
the exercise of a nonqualified stock option, the optionee will recognize
long-term or short-term capital gain or loss, depending on the holding period of
those shares.
Purchase Rights
The receipt of restricted stock pursuant to a purchase right will not cause
a recipient to realize taxable income until the expiration of any repurchase
rights retained by us with respect to the stock, unless the recipient makes an
election under Section 83(b) of the Code to be taxed as of the date of purchase.
If no repurchase rights are retained by us or if a Section 83(b) election is
made, the participant will recognize ordinary income in an amount equal to the
difference between the purchase price paid for the shares and the fair market
value of the shares on the date of purchase. If no Section 83(b) election is
made or if repurchase rights are retained by us, the recipient will realize
taxable income on each date that the recipient's ownership rights vest, or when
we no longer have the right to repurchase all or a portion of the shares. The
recipient will recognize ordinary income, and, subject to Section 162(m) of the
Code, we will be entitled to a deduction on each date shares vest in an amount
equal to the excess of the fair market value of the vesting shares on that date
over the purchase price paid for those shares. However, if the recipient is
subject to Section 16(b) of the Exchange Act, and if no Section 83(b) election
was made at the time of the purchase, the date that ordinary income is
recognized for shares which vest within six months of the purchase date shall be
deferred to six months from the date of purchase.
16
THE SUMMARY OF FEDERAL INCOME TAX INFORMATION SET FORTH ABOVE IS FOR
GENERAL REFERENCE ONLY AND DOES NOT PURPORT TO COVER ALL FEDERAL INCOME TAX
CONSEQUENCES THAT MAY APPLY TO ALL CATEGORIES OF SHAREHOLDERS. ALL OF OUR
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR
FEDERAL, FOREIGN, STATE AND LOCAL TAX CONSEQUENCES OF THE GRANTS OF OPTIONS OR
PURCHASE RIGHTS TO THEM.
Possible Anti-Takeover Effects
Although not intended as an anti-takeover measure by our board, one of the
possible effects of the Plan could be to place additional shares, and to
increase the percentage of the total number of shares outstanding, in the hands
of our directors and key employees. These persons may be viewed as part of, or
friendly to, incumbent management and may, therefore, under certain
circumstances be expected to make investment and voting decisions in response to
a hostile takeover attempt that may serve to discourage or render more difficult
the accomplishment of an attempt.
NEW PLAN BENEFITS
As stated above, under the Plan, our board of directors or a committee of
our board has the authority to determine the amounts, terms and grant dates of
options to be granted in the future to our employees, directors or service
providers. To date, no such determinations have been made and, as a result, it
is not possible to state such information.
The following table sets forth information concerning stock options granted
under our current Amended and Restated 1994 Stock Incentive Plan from January 1,
2000 through December 31, 2000 to each of the executive officers named in the
summary compensation table in this proxy statement, all current executive
officers as a group, all current directors who are not executive officers as a
group, and all employees, including all current officers who are not executive
officers, as a group:
NO. OF SHARES
SUBJECT TO
NAME TITLE OPTIONS GRANTED
---- ----- ---------------
Aram H. Keith............................. Chief Executive Officer and
Chairman of the Board 0
Eric C. Nielsen........................... President and Chief Operating
Officer 20,000
Gary C. Campanaro......................... Chief Financial Officer and
Secretary 0
All current executive officers as a group
(3 persons)............................. 20,000
All current directors (other than
executive officers) as a group (3
persons)................................ 0
All employees (including all officers who
are not executive officers) as a group
as of December 31, 2000 (536 persons)... 158,150
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INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Our directors and executive officers are eligible to participate in the
Plan and we may grant these persons additional options or purchase rights under
the Plan in the future.
VOTE REQUIRED
The proposal to approve the Second Amended and Restated 1994 Stock
Incentive Plan must receive the affirmative vote of a majority of the holders of
the shares of our common stock entitled to vote at and present
17
in person or represented by proxy at the annual meeting. If you are present in
person or represented by proxy at the meeting and abstain from voting, it has
the same effect as if you voted against this proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS
Our board of directors recommends that the shareholders vote "FOR" the
Second Amended and Restated 1994 Stock Incentive Plan.
AMENDMENT OF AMENDED AND RESTATED BYLAWS
(PROPOSAL 3)
The amendment of our Amended and Restated Bylaws will amend Article III,
Section 2 of the bylaws to increase the number of authorized directors to a
range of five to nine. Currently, our Amended and Restated Bylaws provide for a
range of three to five directors. The exact number of directors is currently
fixed at five. Our board of directors deems it to be in the best interests of
our company and our shareholders to effect the foregoing increase in the number
of authorized directors so that additional directors with appropriate experience
and credentials may be elected or appointed to our board of directors from time
to time in order to further the interests of our company and our shareholders.
The approval of a majority of the outstanding shares of our common stock on the
Record Date is required to approve the proposed amendment of our Amended and
Restated Bylaws.
VOTE REQUIRED
The proposal to approve the amendment of our Amended and Restated Bylaws
requires the affirmative vote of the holders of a majority of our outstanding
shares as of the Record Date. If you are present in person or represented by
proxy at the meeting and abstain from voting, it has the same effect as if you
voted against this proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS
Our board of directors recommends that the shareholders vote "FOR" approval
of the foregoing amendment to our Amended and Restated Bylaws.
RATIFICATION OF INDEPENDENT AUDITORS
(PROPOSAL 4)
Our board of directors has appointed the firm of KPMG LLP, our independent
public auditors during the fiscal year ended December 31, 2000, to serve in the
same capacity for the year ending December 31, 2001, and is asking the
shareholders to ratify this appointment. A representative of KPMG LLP is
expected to be present at the annual meeting, will have the opportunity to make
a statement if he or she desires to do so, and will be available to respond to
appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
Our board of directors recommends that the shareholders vote "FOR" the
ratification of the appointment of KPMG LLP to serve as our independent auditors
for the fiscal year ending December 31, 2001.
OTHER MATTERS
Our board of directors knows of no matter to come before the annual meeting
other than as specified in this proxy statement. If other business should,
however, be properly brought before the annual meeting, the persons voting the
proxies will vote them in accordance with their best judgment.
18
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders are advised that any shareholder proposal intended for
consideration at the next annual meeting must be received by us at the address
set forth on the first page of this proxy statement no later than December 13,
2001 to be included in the proxy material for the 2002 annual meeting. It is
recommended that shareholders submitting proposals direct them to our secretary
and utilize certified mail, return-receipt requested in order to ensure timely
delivery.
ANNUAL REPORT
A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER
31, 2000, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE
WITHOUT CHARGE BY WRITING TO: CORPORATE SECRETARY, THE KEITH COMPANIES, INC.,
2955 RED HILL AVENUE, COSTA MESA, CALIFORNIA 92626.
OUR SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN PROMPTLY THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors,
/s/ Gary C. Campanaro
--------------------------------------
Gary C. Campanaro, Secretary
Costa Mesa, California
April 16, 2001
|
19
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF
THE KEITH COMPANIES, INC.
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of The Keith Companies, Inc. (the "Corporation"), will have the
oversight responsibility, authority and specific duties as described below.
I. PURPOSE
The primary function of the Committee is to assist the Board in fulfilling
its oversight responsibilities with respect to the financial reports and other
financial information provided by the Corporation to the shareholders and
others, the Corporation's system of internal control, and the Corporation's
audit, accounting, and financial reporting processes generally. In carrying out
this function, the Committee shall serve as an independent and objective monitor
of the performance of the Corporation's financial reporting process and system
of internal control; review and appraise the audit efforts of the Corporation's
independent accountants; and provide for open, on-going communication among the
independent accountants, financial and senior management, and the Board
concerning the Corporation's financial position and affairs. To effectively
perform his or her role, each Committee member will obtain an understanding of
the responsibilities of Committee membership as well as the Corporation's
business, operations and risks.
II. MEMBERSHIP
As of the date that this charter is adopted, the Committee shall be
comprised of two non-employee members of the Board, as determined by the Board,
each of whom shall be an independent director as determined by Rule 4200(a)(15)
of the National Association of Securities Dealers' listing standards. A third
non-employee member of the Board has been appointed to the Committee which
appointment shall become effective on June 1, 2001. After June 1, 2001, the
Committee shall be comprised of three non-employee members of the Board. The
Board shall also designate a chairperson of the Committee. Members of the
Committee are elected to serve for a term of one year. Each Committee member
shall be financially literate (i.e. be able to read and understand fundamental
financial statements, including a company's balance sheet, income statement and
cash flow statement) or become financially literate within a reasonable period
of time after his or her appointment to the Committee. At least one member of
the Committee must have accounting or related financial management expertise.
III. FUNCTIONS
Without limiting the Committee's authority, the Committee shall carry out
the following specific activities:
A. REVIEW OF DOCUMENTS AND REPORTS
1. Review and reassess this Charter at least annually.
2. Review the Corporation's annual report on Form 10-K, including
the Corporation's year-end financial statements, before its release and
consider whether the information is adequate and consistent with
members' knowledge about the Corporation and its operations.
3. Review the Corporation's quarterly reports on Form 10-Q prior to
their filing or prior to the release of earnings and consider whether
the information is adequate and consistent with members' knowledge about
the Corporation and its operations.
A-1
B. INDEPENDENT AUDITORS
1. Recommend to the Board the selection of the independent
auditors, considering their qualifications, including their
independence. On an annual basis, the Committee shall require the
independent auditors to provide the Committee with a written statement
disclosing all relationships between the Corporation and the independent
auditors. The Committee should review and discuss these relationships
with the independent auditors to determine the auditors' independence.
The Committee shall take or recommend appropriate action to ensure the
independence of the independent auditors. The independent auditors are
accountable to the Board and the Committee.
2. Review with the independent auditors the intended scope and
approach of the annual audit and the audit methods and principles being
applied by the independent auditors, and the fees charged by the
independent auditors.
3. Review and discuss the results of the audit with both the
independent auditors and management.
4. Review with both management and the independent auditors
procedures established to prevent any fraud, illegal acts or
deficiencies in internal control, and ensure that the independent
auditors inform the Committee of any fraud, illegal acts or deficiencies
in internal control of which they become aware and communicate certain
required matters to the Committee.
5. Review with the independent auditors their performance and
approve any proposed discharge of the independent auditors when
circumstances warrant.
6. Direct and supervise special audit inquiries by the independent
auditors as the Board or the Committee may request.
C. FINANCIAL REPORTING PROCESSES
1. Review significant accounting and reporting issues, including
recent professional and regulatory pronouncements or proposed
pronouncements, and understand their impact on the Corporation's
financial statements.
2. In consultation with the independent auditors, review the
integrity of the Corporation's financial reporting processes, policies
and practices, both internal and external.
3. Consider the independent auditors' judgments about the quality
and appropriateness of the Corporation's accounting principles as
applied in its financial reporting.
4. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as
suggested by the independent auditors or management.
D. PROCESS IMPROVEMENT
1. Ensure that significant findings and recommendations made by the
independent auditors are received and discussed on a timely basis.
2. Review any significant disagreement among management and the
independent auditors in connection with the preparation of the financial
statements.
3. Review with the independent auditors and management, the extent
to which changes or improvements in financial or accounting practices,
as approved by the Committee, have been implemented. This review should
be conducted at an appropriate time subsequent to implementation of
changes or improvements, as decided by the Committee.
E. ETHICAL AND LEGAL COMPLIANCE
1. Establish, review and update periodically a code of ethical
conduct for the Corporation and ensure that management has established a
system to enforce this code.
A-2
2. Review management's monitoring of the Corporation's compliance
with the Corporation's code of ethical conduct, and ensure that
management has the proper review system in place to ensure that the
Corporation's financial statements, reports and other financial
information disseminated to governmental entities and the public satisfy
legal requirements.
3. Review legal compliance matters with the Corporation's counsel.
4. Review with the Corporation's counsel any legal matter that
could have a significant impact on the Corporation's financial
statements.
5. Review annually external audits of employee benefit plans of the
Corporation (including subsidiaries) to determine that there are proper
procedures to ensure compliance with all relevant laws and regulations.
6. Review annually the adequacy of the Corporation's insurance.
7. Review annually the adequacy of protection of technology,
including physical security, patent and trademark programs and
proprietary information.
F. REPORTING RESPONSIBILITIES
1. Regularly update the Board about Committee activities and make
appropriate recommendations.
IV. MEETINGS
The Committee will meet from time to time whenever necessary or appropriate
in order to discharge the functions specified in this Charter. Minutes shall be
kept of each meeting of the Committee and will be provided to each member of the
Board. Any action of the Committee shall be subject to revision, modification or
rescission by the Board, provided that no rights of third parties shall be
affected by any such revision, modification or rescission.
A-3
APPENDIX B
THE KEITH COMPANIES, INC.
AMENDED AND RESTATED 1994 STOCK INCENTIVE PLAN
ARTICLE 1
PURPOSES OF THE PLAN
The purposes of the Plan are (a) to enhance the Company's ability to
attract and retain the services of qualified employees, officers and directors
(including non-employee officers and directors), and consultants and other
service providers upon whose judgment, initiative and efforts the successful
conduct and development of the Company's business largely depends, and (b) to
provide additional incentives to such persons to devote their utmost effort and
skill to the advancement and betterment of the Company, by providing them an
opportunity to participate in the ownership of the Company and thereby have an
interest in the success and increased value of the Company.
ARTICLE 2
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings
indicated:
2.1 ADMINISTRATOR. "Administrator" means the Board or, if the Board
delegates responsibility for any matter to the Committee, the term
Administrator shall mean the Committee.
2.2 AFFILIATED COMPANY. "Affiliated Company" means any "parent
corporation" or "subsidiary corporation" of the Company, whether now
existing or hereafter created or acquired, as those terms are defined in
Sections 424(e) and 424(f) of the Code, respectively.
2.3 BOARD. "Board" means the Board of Directors of the Company.
2.4 CODE. "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
2.5 COMMITTEE. "Committee" means a committee of two or more members
of the Board appointed to administer the Plan, as set forth in Section 7.1
hereof.
2.6 COMMON STOCK. "Common Stock" means the Common Stock, $.001 par
value per share, of the Company, subject to adjustment pursuant to Section
4.2 hereof.
2.7 DISABILITY. "Disability" means permanent and total disability as
defined in Section 22(e)(3) of the Code. The Administrator's determination
of Disability or the absence thereof shall be conclusive and binding on all
interested parties.
2.8 EFFECTIVE DATE. "Effective Date" means the date on which the Plan
is adopted by the Board, as set forth on the first page hereof.
2.9 EXERCISE PRICE. "Exercise Price" means the purchase price per
share of Common Stock payable upon exercise of an Option.
2.10 FAIR MARKET VALUE. "Fair Market Value" on any given date means
the value of one share of Common Stock, determined as follows:
(a) If the Common Stock is then listed or admitted to trading on
the Nasdaq National Market or a stock exchange which reports closing
sale prices, the Fair Market Value shall be the closing sale price on
the date of valuation on the Nasdaq National Market or principal stock
exchange on which the Common Stock is then listed or admitted to
trading, or, if no closing sale price is quoted or no sale takes place
on such day, then the Fair Market Value shall be the closing price of
the Common Stock on the Nasdaq National Market or such exchange on the
next preceding day on which a sale occurred.
B-1
(b) If the Common Stock is not then listed or admitted to trading
on the Nasdaq National Market or a stock exchange which reports closing
sale prices, the Fair Market Value shall be the average of the closing
bid and asked prices of the Common Stock in the over-the-counter market
on the date of valuation.
(c) If neither (a) nor (b) is applicable as of the date of
valuation, then the Fair Market Value shall be determined by the
Administrator in good faith using any reasonable method of valuation,
which determination shall be conclusive and binding on all interested
parties.
2.11 INCENTIVE OPTION. "Incentive Option" means any Option designated
and qualified as an "incentive stock option" as defined in Section 422 of
the Code.
2.12 INCENTIVE OPTION AGREEMENT. "Incentive Option Agreement" means
an Option Agreement with respect to an Incentive Option.
2.13 NASD DEALER. "NASD Dealer" means a broker-dealer that is a
member of the National Association of Securities Dealers, Inc.
2.14 NONQUALIFIED OPTION. "Nonqualified Option" means any Option that
is not an Incentive Option. To the extent that any Option designated as an
Incentive Option fails in whole or in part to qualify as an Incentive
Option, it shall to that extent constitute a Nonqualified Option.
2.15 NONQUALIFIED OPTION AGREEMENT. "Nonqualified Option Agreement"
means an Option Agreement with respect to a Nonqualified Option.
2.16 OFFEREE. "Offeree" means a Participant who has received a Right
to Purchase or who has acquired Restricted Stock under the Plan.
2.17 OPTION. "Option" means any option to purchase Common Stock
granted pursuant to the Plan.
2.18 OPTION AGREEMENT. "Option Agreement" means the written agreement
entered into between the Company and the Optionee with respect to an Option
granted under the Plan.
2.19 OPTIONEE. "Optionee" means a Participant who holds an Option.
2.20 PARTICIPANT. "Participant" means an individual who holds an
Option, a Right to Purchase or Restricted Stock under the Plan.
2.21 PURCHASE PRICE. "Purchase Price" means the price per share of
Restricted Stock purchased pursuant to the Right to Purchase.
2.22 RESTRICTED STOCK. "Restricted Stock" means shares of Common
Stock issued subject to such restrictions and conditions as are established
pursuant to Article 6 hereof.
2.23 RIGHT TO PURCHASE. "Right to Purchase" means a right to purchase
Restricted Stock granted to an Offeree pursuant to Article 6 hereof.
2.24 SERVICE PROVIDER. "Service Provider" means a consultant or other
person who provides services to the Company or an Affiliated Company who
the Administrator authorizes to become a Participant in the Plan.
2.25 STOCK PURCHASE AGREEMENT. "Stock Purchase Agreement" means the
written agreement entered into between the Company and the Offeree with
respect to a Right to Purchase offered under the Plan.
2.26 10% SHAREHOLDER. "10% Shareholder" means a person who, as of a
relevant date, owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company
or of an Affiliated Company.
B-2
ARTICLE 3
ELIGIBILITY
3.1 INCENTIVE OPTIONS. Officers and other key employees of the Company or
of an Affiliated Company (including members of the Board if they are employees
of the Company or of an Affiliated Company) are eligible to receive Incentive
Options under the Plan.
3.2 NONQUALIFIED OPTIONS AND RIGHTS TO PURCHASE. Officers and other key
employees of the Company or of an Affiliated Company, members of the Board
(whether or not employed by the Company or an Affiliated Company), and Service
Providers are eligible to receive Nonqualified Options or Rights to Purchase
under the Plan.
ARTICLE 4
PLAN SHARES
4.1 SHARES SUBJECT TO THE PLAN. A total of 1,600,000 shares of Common
Stock may be issued under the Plan, including shares issued under the similar
1994 Stock Incentive Plan adopted by Keith Engineering, Inc. (formerly an
Affiliate of the Company), as previously amended and restated on April 26, 1999,
all subject to future adjustment as to the number and type of shares pursuant to
Section 4.2 hereof. For purposes of this limitation, in the event that (a) all
or any portion of any Option or Right to Purchase granted or offered under the
Plan can no longer under any circumstances be exercised, or (b) any shares of
Restricted Stock are reacquired by the Company under the Plan, the shares of
Common Stock allocable to the unexercised portion of such Option or such Right
to Purchase, or the shares so reacquired, shall again be available for grant or
issuance under the Plan.
4.2 CHANGES IN CAPITAL STRUCTURE. In the event that the outstanding shares
of Common Stock are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of a recapitalization, stock split, combination of shares,
reclassification, stock dividend, or other change in the capital structure of
the Company, then appropriate adjustments shall be made by the Administrator to
the aggregate number and kind of shares subject to this Plan, and the number and
kind of shares and the price per share subject to outstanding Options, Rights to
Purchase and Stock Purchase Agreements in order to preserve as nearly as
practicable, but not to increase, the benefits of Participants.
ARTICLE 5
OPTIONS
5.1 OPTION AGREEMENT. Each Option granted pursuant to this Plan shall be
evidenced by an Option Agreement which shall specify the number of shares
subject thereto, the Exercise Price per share, and whether the Option is an
Incentive Option or Nonqualified Option. As soon as is practical following the
grant of an Option, an Option Agreement shall be duly executed and delivered by
or on behalf of the Company to the Optionee to whom such Option was granted.
Each Option Agreement shall be in such form and contain such additional terms
and conditions, not inconsistent with the provisions of this Plan, as the
Administrator shall, from time to time, deem desirable.
5.2 EXERCISE PRICE. The Exercise Price per share of Common Stock covered
by each Option shall be determined by the Administrator, subject to the
following: (a) the Exercise Price of an Incentive Option shall not be less than
100% of Fair Market Value on the date the Incentive Option is granted, (b) the
Exercise Price of a Nonqualified Option shall not be less than 85% of Fair
Market Value on the date the Nonqualified Option is granted, and (c) if the
person to whom an Incentive Option is granted is a 10% Shareholder on the date
of grant, the Exercise Price shall not be less than 110% of Fair Market Value on
the date the Option is granted.
5.3 PAYMENT OF EXERCISE PRICE. Subject to any legal restrictions, payment
of the Exercise Price upon exercise of an Option may be made, in the discretion
of the Administrator, by: (a) cash; (b) check; (c) the
B-3
surrender of shares of Common Stock owned by the Optionee that have been held by
the Optionee for at least six (6) months, which surrendered shares shall be
valued at Fair Market Value as of the date of such exercise; (d) the Optionee's
promissory note in a form and on terms acceptable to the Administrator; (e) the
cancellation of indebtedness of the Company to the Optionee; (f) the waiver of
compensation due or accrued to the Optionee for services rendered; (g) provided
that a public market for the Common Stock exists, a "same day sale" commitment
from the Optionee and an NASD Dealer whereby the Optionee irrevocably elects to
exercise the Option and to sell a portion of the shares so purchased to pay for
the Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt
of such shares to forward the Exercise Price directly to the Company; (h)
provided that a public market for the Common Stock exists, a "margin" commitment
from the Optionee and an NASD Dealer whereby the Optionee irrevocably elects to
exercise the Option and to pledge the shares so purchased to the NASD Dealer in
a margin account as security for a loan from the NASD Dealer in the amount of
the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt
of such shares to forward the Exercise Price directly to the Company; or (i) any
combination of the foregoing methods of payment or any other consideration or
method of payment as shall be permitted by applicable corporate law.
5.4 TERM OF OPTIONS. The term of each Option shall be fixed by the
Administrator at the time of grant, but no Incentive Option may be exercisable
more than ten (10) years after the date it is granted. An Incentive Option
granted to a person who is a 10% Shareholder on the date of grant shall not be
exercisable more than five (5) years after the date it is granted.
5.5 VESTING OF OPTIONS. Each Option shall vest and be exercisable in one
or more installments at such time or times and subject to such conditions,
including without limitation the achievement of specified performance goals or
objectives, as shall be determined by the Administrator.
5.6 ANNUAL LIMIT ON INCENTIVE OPTIONS. To the extent required for
"incentive stock option" treatment under Section 422 of the Code, if the
aggregate Fair Market Value (determined as of the time of grant) of the Common
Stock with respect to which Incentive Options granted under this Plan and any
other plan of the Company or any Affiliated Company become exercisable for the
first time by an Optionee during any calendar year exceeds $100,000, such
Incentive Option shall be treated as a Nonqualified Option with respect to such
excess.
5.7 NONTRANSFERABILITY OF OPTIONS. No Option shall be assignable or
transferable except by will or the laws of decent and distribution, and during
the life of the Optionee, shall be exercisable only by such Optionee; provided,
however, that a Nonqualified Option may, in the discretion of the Administrator,
be transferred pursuant to a "qualified domestic relations order" (as defined in
the Code).
5.8 RIGHTS AS SHAREHOLDER. An Optionee or permitted transferee of an
Option shall have no rights or privileges as a shareholder with respect to any
shares covered by an Option until such Option has been duly exercised and
certificates representing shares purchased upon such exercise have been issued
to such person.
ARTICLE 6
RIGHTS TO PURCHASE
6.1 NATURE OF RIGHT TO PURCHASE. A Right to Purchase granted to an Offeree
entitles the Offeree to purchase, for a Purchase Price determined by the
Administrator, shares of Common Stock subject to such restrictions and
conditions as the Administrator may determine at the time of grant ("Restricted
Stock"). Such conditions may include, but are not limited to, continued
employment or the achievement of specified performance goals or objectives.
6.2 ACCEPTANCE OF RIGHT TO PURCHASE. An Offeree shall have no rights with
respect to the Restricted Stock subject to a Right to Purchase unless the
Offeree shall have accepted, or exercised, the Right to Purchase within thirty
(30) days (or such shorter period as the Administrator may specify) following
the grant of the Right to Purchase by making payment of the full Purchase Price
to the Company in the manner set forth in Section 6.3 hereof and by executing
and delivering to the Company a Stock Purchase Agreement. Each Stock Purchase
Agreement shall be in such form, and shall set forth the Purchase Price and such
other
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terms, conditions and restrictions of the Restricted Stock, not inconsistent
with the provisions of this Plan, as the Administrator shall, from time to time,
deem desirable.
6.3 PAYMENT OF PURCHASE PRICE. Subject to any legal restrictions, payment
of the Purchase Price upon exercise of a Right to Purchase Restricted Stock may
be made, in the discretion of the Administrator, by: (a) cash; (b) check; (c)
the surrender of shares of Common Stock owned by the Offeree that have been held
by the Offeree for at least six (6) months, which surrendered shares shall be
valued at Fair Market Value as of the date of such exercise; (d) the Offeree's
promissory note in a form and on terms acceptable to the Administrator; (e) the
cancellation of indebtedness of the Company to the Offeree; (f) the waiver of
compensation due or accrued to the Offeree for services rendered; or (g) any
combination of the foregoing methods of payment or any other consideration or
method of payment as shall be permitted by applicable corporate law.
6.4 RIGHTS AS SHAREHOLDER. Upon complying with the provisions of Section
6.2 hereof, an Offeree shall have the rights of a shareholder with respect to
the Restricted Stock purchased pursuant to the Right to Purchase, including
voting and dividend rights, subject to nontransferability restrictions and
Company repurchase rights described in this Article 6 and subject to such other
conditions as are set forth in the Stock Purchase Agreement. Unless the
Administrator shall determine otherwise, certificates evidencing shares of
Restricted Stock shall remain in the possession of the Company until such shares
are vested as provided in Section 6.6 hereof.
6.5 RESTRICTIONS. Shares of Restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the Stock Purchase Agreement. In the event of
termination of a Participant's employment, service as a director of the Company
or Service Provider status for any reason whatsoever (including death or
Disability), the Company shall have the right, at the discretion of the
Administrator, to repurchase at the original Purchase Price any shares of
Restricted Stock which have not vested as of the date of termination.
6.6 VESTING OF RESTRICTED STOCK. The Stock Purchase Agreement shall
specify the date or dates, the performance goals or objectives which must be
achieved, and any other conditions on which the nontransferability of the
Restricted Stock and the Company's right of repurchase shall lapse. Subsequent
to such date or dates or the attainment of such specified performance goals or
objectives or other conditions, the shares as to which all restrictions have
lapsed shall no longer be Restricted Stock and shall be deemed "vested."
6.7 DIVIDENDS. If payment for shares of Restricted Stock is made by
promissory note, any cash dividends paid with respect to the Restricted Stock
may be applied, in the discretion of the Administrator, to repayment of such
note.
6.8 NONASSIGNABILITY OF RIGHTS. No Right to Purchase shall be assignable
or transferable except by will or the laws of decent and distribution. During
the life of an Offeree, a Right to Purchase may be exercised only by the
Offeree.
ARTICLE 7
ADMINISTRATION OF THE PLAN
7.1 ADMINISTRATOR. Authority to control and manage the operation and
administration of the Plan shall be vested in the Board, which may delegate such
responsibilities in whole or in part to a committee consisting of two (2) or
more members of the Board (the "Committee"). To the extent such laws or
regulations are applicable, the Committee shall consist of individuals that
satisfy Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and Section 162(m) of the Code. Members of the Committee may be
appointed from time to time by, and shall serve at the pleasure of, the Board.
The Committee may delegate all or any part of its authority under this Plan to
the Chief Executive Officer or other executive officer of the Company for
purposes of granting Options or Rights to Purchase to persons, except for (a)
the grant of Options or Rights to Purchase to persons who are then subject to
the reporting requirements of Section 16 of the Exchange Act, and (b) the grant
of Options or Rights to Purchase intended to satisfy Section 162(m) of the Code.
As used herein, the term "Administrator" means the Board or, with respect to
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any matter as to which responsibility has been delegated to the Committee, the
term Administrator shall mean the Committee. Notwithstanding anything herein to
the contrary, any action which may be taken by the Committee may also be taken
by the Board.
7.2 POWERS OF THE ADMINISTRATOR. In addition to any other powers or
authority conferred upon the Administrator elsewhere in the Plan or by law, the
Administrator shall have full power and authority: (a) to determine the persons
to whom, and the time or times at which, Incentive Options or Nonqualified
Options shall be granted and Rights to Purchase shall be offered, the number of
shares to be represented by each Option and Right to Purchase and the
consideration to be received by the Company upon exercise thereof; (b) to
interpret the Plan; (c) to create, amend or rescind rules and regulations
relating to the Plan; (d) to determine the terms, conditions and restrictions
contained in, and the form of, Option Agreements and Stock Purchase Agreements;
(e) to determine the identity or capacity of any persons who may be entitled to
exercise a participant's rights under any Option or Right to Purchase under the
Plan; (f) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Option Agreement or Stock Purchase
Agreement; (g) to amend outstanding Option Agreements and Stock Purchase
Agreements; and (h) to make all other determinations necessary or advisable for
the administration of the Plan, but only to the extent not contrary to the
express provisions of the Plan. Any action, decision, interpretation or
determination made in good faith by the Administrator in the exercise of its
authority conferred upon it under the Plan shall be final and binding on the
Company and all Participants.
7.3 LIMITATION ON LIABILITY. No employee or the Company or member of the
Board or Committee shall be subject to any liability with respect to duties
under the Plan unless the person acts fraudulently or in bad faith. To the
extent permitted by law, the Company shall indemnify each member of the Board or
Committee, and any employee of the Company with duties under the Plan, who was
or is a party, or is threatened to be made a party, to any threatened, pending
or completed proceeding, whether civil, criminal, administrative or
investigative, by reason of such person's conduct in the performance of duties
under the Plan.
ARTICLE 8
MERGERS, REORGANIZATIONS, ETC.
In the event that the Company at any time proposes to sell substantially
all of its assets, merge into, consolidate with or to enter into any other
reorganization in which the Company is not the surviving corporation, or if the
Company is the surviving corporation and the ownership of the voting power of
the Company's capital stock changes by more than 50% as a result of such
transaction, the Plan and all unexercised Options and Rights to Purchase shall
terminate upon the effective date of such transaction unless provision is made
in writing in connection with such transaction for (a) the continuance of the
Plan and for the assumption of outstanding Options or Rights to Purchase, or the
substitution of such Options and Rights to Purchase with new options and new
rights to purchase of comparable value covering shares of a successor
corporation, with appropriate adjustments as to the number and kind of shares
and prices, in which event the Plan and such Options and Rights to Purchase, or
the new options and rights to purchase substituted therefor, shall continue in
the manner and under the terms so provided, or (b) the substitution for the Plan
and outstanding Options and Rights to Purchase of a program or plan to provide
rights to the Participants to receive on exercise of such rights, the type and
amount of consideration they would have received had they exercised all Options
or Rights to Purchase prior to such transaction and less the aggregate Exercise
Price or Purchase Price therefor. If such provision is not made in such
transaction, then the Administrator shall cause written notice of the proposed
transaction to be given to all Participants no less than fifteen (15) days prior
to the anticipated effective date of the proposed transaction.
ARTICLE 9
AMENDMENT AND TERMINATION OF THE PLAN
9.1 AMENDMENTS. The Board may from time to time alter, amend, suspend or
terminate the Plan in such respects as the Board may deem advisable. No such
alteration, amendment, suspension or termination shall be made which shall
substantially affect or impair the rights of any Participant under an
outstanding
B-6
Option or Right to Purchase without such Participant's consent. The Board may
alter or amend the Plan to comply with requirements under the Code relating to
Incentive Options or other types of options which give Optionees more favorable
tax treatment than that applicable to Options granted under this Plan as of the
date of its adoption. Upon any such alteration or amendment, any outstanding
Option granted hereunder may, if the Administrator so determines and if
permitted by applicable law, be subject to the more favorable tax treatment
afforded to an Optionee pursuant to such terms and conditions. However, the
Board shall not, without the approval of the Corporation's shareholders (a)
increase the maximum number of shares issuable under the Plan, except for
permissible adjustments under Article 4, (b) materially modify the eligibility
requirements for grants of Options, or (c) materially increase the benefits
accruing to Option holders. In addition, the Board shall also obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with applicable laws, rules or regulations.
9.2 PLAN TERMINATION. Unless the Plan shall theretofore have been
terminated by the Board, the Plan shall terminate on March 13, 2011 and no
Options or Rights to Purchase may be granted under the Plan thereafter, but
Options and Rights to Purchase then outstanding shall continue in effect in
accordance with their respective terms.
ARTICLE 10
TAX WITHHOLDING
The Company shall have the power to withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy any applicable Federal,
State, and local tax withholding requirements with respect to any Options
exercised or Restricted Stock issued under the Plan. To the extent permissible
under applicable tax, securities and other laws, the Administrator may, in its
sole discretion and upon such terms and conditions as it may deem appropriate,
permit a Participant to satisfy his or her obligation to pay any such tax, in
whole or in part, up to an amount determined on the basis of the highest
marginal tax rate applicable to such Participant, by (a) directing the Company
to apply shares of Common Stock to which the Participant is entitled as a result
of the exercise of an Option or as a result of the lapse of restrictions on
Restricted Stock, or (b) delivering to the Company shares of Common Stock owned
by the Participant. The shares of Common Stock so applied or delivered in
satisfaction of the Participant's tax withholding obligation shall be valued at
their Fair Market Value as of the date of measurement of the amount of income
subject to withholding.
ARTICLE 11
MISCELLANEOUS
11.1 BENEFITS NOT ALIENABLE. Other than as provided above, benefits under
the Plan may not be assigned or alienated, whether voluntarily or involuntarily.
Any unauthorized attempt at assignment, transfer, pledge or other disposition
shall be without effect.
11.2 NO ENLARGEMENT OF EMPLOYEE RIGHTS. This Plan is strictly a voluntary
undertaking on the part of the Company and shall not be deemed to constitute a
contract between the Company and any Participant to be consideration for, or an
inducement to, or a condition of, the employment of any Participant. Nothing
contained in the Plan shall be deemed to give the right to any Participant to be
retained as an employee of the Company or any Affiliated Company or to interfere
with the right of the Company or any Affiliated Company to discharge any
Participant at any time.
11.3 APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Stock pursuant to Option Agreements and Stock Purchase
Agreements, except as otherwise provided herein, will be used for general
corporate purposes.
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THE KEITH COMPANIES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 16, 2001
The undersigned HEREBY appoints Aram H. Keith and Gary C. Campanaro, and each
of them, individually, the attorney, agent and proxy of the undersigned, each
with the power to appoint his substitute, to represent and vote, as designated
below, all shares of common stock of The Keith Companies, Inc. held of record by
the undersigned as of March 23, 2001, at the annual meeting of shareholders to
be held at 2955 Red Hill Avenue, Costa Mesa, California, 92626, on May 16, 2001
at 9:00 a.m. local time, and at all adjournments thereof.
1. To elect five directors as follows:
[ ] FOR approval of the election of nominees listed [ ] WITHHOLD AUTHORITY to vote for all nominees listed
below (except as marked to the contrary below). below.
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(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list provided below.)
Aram H. Keith Walter W. Cruttenden, III Christine M. Diemer Iger
Gary C. Campanaro George Deukmejian
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(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
2. To consider and vote upon a proposal to approve our Amended and Restated
1994 Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To consider and vote upon a proposal to amend our Amended and Restated
Bylaws.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To consider and vote upon a proposal to ratify the appointment of KPMG LLP
as our independent auditors for the fiscal year ending December 31, 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR Proposals 1, 2, 3, and 4.
Date
Signature(s)
NOTE: Please sign exactly as your
name appears in the records
of The Keith Companies, Inc.
If the stock is registered in
the name of two or more
persons, each should sign.
Executors, administrators,
trustees, guardians,
attorneys and corporate
officers should add their
titles.
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