<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 29, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_________ to_________
Commission File Number 0-19655
TETRA TECH, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 95-4148514
------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) number)
670 N. ROSEMEAD BOULEVARD, PASADENA, CALIFORNIA 91107
-----------------------------------------------------
(Address of principal executive offices)
(626) 351-4664
----------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
As of July 27, 1997, the total number of outstanding shares of the Registrant's
common stock was 16,548,271.
-1-
<PAGE>
TETRA TECH, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to the Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Risk Factors 14
PART II. OTHER INFORMATION
Item 2. Changes in Securities 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 21
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1.
- -------
Tetra Tech, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
$ in thousands, except share data June 29, September 29,
1997 1996
----------- --------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 12,793 $ 6,129
Accounts receivable - net.......................................... 25,433 22,306
Unbilled receivables - net........................................ 33,769 25,201
Prepaid and other current assets................................... 6,353 1,939
Deferred income taxes.............................................. 2,358 2,358
-------- -------
Total Current Assets............................................. 80,706 57,933
PROPERTY AND EQUIPMENT:
Leasehold improvements............................................. 990 733
Equipment, furniture and fixtures.................................. 16,201 13,072
-------- -------
Total............................................................ 17,191 13,805
Accumulated depreciation and amortization.......................... (8,770) (6,790)
-------- -------
PROPERTY AND EQUIPMENT - NET......................................... 8,421 7,015
INTANGIBLE ASSETS - NET.............................................. 63,935 22,047
OTHER ASSETS......................................................... 1,301 1,468
-------- -------
TOTAL ASSETS......................................................... $154,363 $88,463
-------- -------
-------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................... $ 11,329 $13,423
Accrued compensation............................................... 10,892 7,311
Other current liabilities.......................................... 6,250 3,356
Payable to stockholder............................................. 5,479 0
Current portion of long-term obligations........................... 8,000 0
Income taxes payable............................................... 1,339 1,104
-------- -------
Total Current Liabilities........................................ 43,289 25,194
STOCKHOLDERS' EQUITY:
Preferred stock - authorized, 2,000,000 shares of $.01 par value;
issued and outstanding 1,231,840 and 0 shares at June 29, 1997
and September 29, 1996, respectively.............................. 12 0
Common stock - authorized, 20,000,000 shares of $.01 par value;
issued and outstanding 16,264,251 and 14,127,002 shares at
June 29, 1997 and September 29, 1996, respectively................ 163 141
Additional paid-in capital......................................... 72,112 33,452
Retained earnings.................................................. 38,787 29,676
-------- -------
TOTAL STOCKHOLDERS' EQUITY........................................... 111,074 63,269
-------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................... $154,363 $88,463
-------- -------
-------- -------
</TABLE>
See accompanying notes to the condensed consolidated
financial statements.
-3-
<PAGE>
Tech, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
$ in thousands, except share data Three Months Ended Nine Months Ended
---------------------- -----------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Gross Revenue.......................................... $60,922 $54,152 $171,406 $162,243
Subcontractor costs................................. 12,301 13,838 38,447 43,830
------- ------- -------- --------
Net Revenue............................................ 48,621 40,314 132,959 118,413
Cost of Net Revenue.................................... 35,660 30,479 100,077 90,638
------- ------- -------- --------
Gross Profit........................................... 12,961 9,835 32,882 27,775
Selling, General and Administrative Expenses........... 6,754 5,329 17,390 15,420
------- ------- -------- --------
Income From Operations................................. 6,207 4,506 15,492 12,355
Interest Expense....................................... 84 203 127 1,023
Interest Income........................................ (88) (72) (210) (253)
------- ------- -------- --------
Income Before Income Taxes............................. 6,211 4,375 15,575 11,585
Income Tax Expense..................................... 2,567 1,750 6,464 4,634
------- ------- -------- --------
Net Income............................................. $3,644 $2,625 $9,111 $6,951
------- ------- -------- --------
------- ------- -------- --------
Net Income Per Common Share............................ $0.24 $0.18 $0.61 $0.48
------- ------- -------- --------
------- ------- -------- --------
Shares Used in Per Share Calculations.................. 15,432 14,565 14,918 14,405
------- ------- -------- --------
------- ------- -------- --------
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
-4-
<PAGE>
Tetra Tech, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
$ in thousands Nine Months Ended
-----------------------
June 29, June 30,
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................................... $ 9,111 $ 6,951
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and Amortization.............................................. 2,929 2,731
Other...................................................................... (71) (2)
Changes in operating assets and liabilities, net of effects of
acquisitions:
Accounts receivable........................................................ 10 15,157
Unbilled receivables....................................................... (8,849) 224
Prepaid and other assets................................................... (305) (519)
Accounts payable........................................................... (2,844) (7,618)
Accrued compensation....................................................... (3,976) (1,467)
Other current liabilities.................................................. (1,214) 525
Income taxes payable....................................................... 174 410
------- -------
Net Cash (Used In) Provided By Operating Activities...................... (5,035) 16,392
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................................... (1,832) (1,751)
Proceeds from sale of property and equipment................................... 44 45
Payments for business acquisitions, net of cash acquired....................... (1,124) (6,748)
------- -------
Net Cash Used In Investing Activities.................................... (2,912) (8,454)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt..................................................... (1,842) (19,003)
Proceeds from issuance of long-term debt....................................... 8,000 5,145
Proceeds from payable to stockholder........................................... 5,479 0
Payments on obligations under capital leases................................... 0 (6)
Net proceeds from issuance of common stock..................................... 2,974 542
------- -------
Net Cash Provided By (Used In) Financing Activities...................... 14,611 (13,322)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,664 (5,384)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............................... 6,129 13,130
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................................... $12,793 $7,746
------- -------
------- -------
(Continued)
</TABLE>
-5-
<PAGE>
Tetra Tech, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
$ in thousands Nine Months Ended
-----------------------
June 29, June 30,
1997 1996
-------- --------
<S> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.................................................................... $ 83 $ 1,077
Income taxes................................................................ $ 9,513 $ 4,225
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING
ACTIVITIES:
In November 1995, the Company purchased all of the capital stock of
KCM, Inc. In conjunction with this acquisition, liabilities were
assumed as follows:
Fair value of assets acquired............................................ $ 20,393
Cash paid................................................................ (2,645)
Issuance of common stock................................................. (10,313)
Other acquisition costs.................................................. (415)
--------
Liabilities assumed.................................................... $ 7,020
--------
--------
In December 1996, the Company purchased all of the capital stock of
IWA Engineers. In conjunction with this acquisition, liabilities were
assumed as follows:
Fair value of assets acquired............................................ $ 2,956
Cash paid................................................................ (310)
Issuance of common stock................................................. (1,056)
Other acquisition costs.................................................. (70)
-------
Liabilities assumed.................................................... $ 1,520
-------
-------
In December 1996, the Company purchased all of the capital stock of
FLO Engineering, Inc. In conjunction with this acquisition, liabilities
were assumed as follows:
Fair value of assets acquired............................................ $ 892
Cash paid................................................................ (139)
Issuance of common stock................................................. (459)
Other acquisition costs.................................................. (70)
-------
Liabilities assumed.................................................... $ 224
-------
-------
In March 1997, the Company purchased all of the capital stock of
SCM Consultants, Inc. In conjunction with this acquisition, liabilities
were assumed as follows:
Fair value of assets acquired............................................ $ 2,859
Cash paid................................................................ (311)
Issuance of common stock................................................. (1,830)
Other acquisition costs.................................................. (70)
-------
Liabilities assumed.................................................... $ 648
-------
-------
</TABLE>
(Continued)
-6-
<PAGE>
Tetra Tech, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
$ in thousands Nine Months Ended
-----------------------
June 29, June 30,
1997 1996
-------- --------
<S> <C> <C>
In June 1997, the Company purchased all of the capital stock of Whalen
& Company, Inc. and Whalen Service Corps Inc. In conjunction with
this acquisition, liabilities were assumed as follows:
Fair value of assets acquired............................................ $ 53,282
Cash paid................................................................ (8,051)
Issuance of common and preferred stock................................... (33,304)
Other acquisition costs.................................................. (1,925)
--------
Liabilities assumed.................................................... $ 10,002
--------
--------
(Concluded)
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
-7-
<PAGE>
TETRA TECH, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
---------------------
The accompanying condensed consolidated balance sheets as of June 29,
1997, the condensed consolidated statements of income for the three-month and
nine-month periods ended June 29, 1997 and June 30, 1996 and the condensed
consolidated statements of cash flows for the nine-month periods ended June
29, 1997 and June 30, 1996 are unaudited, and in the opinion of management
include all adjustments, consisting of only normal and recurring adjustments,
necessary for a fair presentation of the financial position and the results
of operations for the periods presented.
The condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year
ended September 29, 1996.
The results of operations for the three and nine months ended June 29,
1997 are not necessarily indicative of the results to be expected for the
fiscal year ending September 28, 1997.
The computation of net income per common share is based upon the weighted
average number of shares outstanding, including the effects of common stock
equivalents (common stock options and Series A Preferred Stock).
2. CASH AND CASH EQUIVALENTS
-------------------------
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. Cash totaled
$8,705,000 and cash equivalents totaled $4,088,000 at June 29, 1997.
3. ACQUISITIONS
------------
On June 11, 1997, the Company acquired 100% of the capital stock of
Whalen & Company, Inc. and Whalen Service Corps Inc. (collectively, "WAC").
WAC, a wireless telecommunications firm, provides a full range of wireless
telecommunications site development services for PCS, cellular, ESMR,
air-to-ground, microwave, paging, fiber optic and switching centers
technology. The acquisition was accounted for as a purchase. The purchase
has been valued at approximately $43,070,000 consisting of cash and Company
common and preferred stock. The common and preferred stock was issued in a
private placement and had a combined value of $33,304,000. The preferred
stock carries dividend and voting rights substantially identical to those of
common stock and will be converted to common stock on a share for share basis
immediately upon the authorization of additional common shares. Holders of
the preferred stock may put the preferred stock to the Company for cash at
the average closing price of the Company's common stock on the five days
ending one day prior to the exercise of the put if the preferred stock is not
converted to common stock by December 10, 1997. The Company's stock was
valued based upon the extended restriction period and economic factors
specific to the Company's circumstances which resulted in a fair valuation
approximately 28% below the then prevailing market price. On the business
day prior to the merger, WAC distributed to its stockholders (i) cash in the
amount of $4,138,000 and (ii) accounts receivable having a net value of
$18,455,000.
-8-
<PAGE>
On March 20, 1997, the Company acquired 100% of the capital stock of SCM
Consultants, Inc. ("SCM"), a consulting and engineering firm, providing
design of irrigation, water and wastewater systems, as well as facility and
infrastructure engineering services, to State and local government, private
and industrial customers. The acquisition was accounted for as a purchase.
The purchase was valued at approximately $2,211,000, consisting of cash and
Company common stock, as adjusted based upon SCM's Net Asset Value on March
30, 1997 as described in the related purchase agreement.
On December 18, 1996, the Company acquired 100% of the capital stock of
FLO Engineering, Inc. ("FLO"), a consulting and engineering firm specializing
in water resource engineering involving hydraulic engineering and
hydrographic data collection. The acquisition was accounted for as a
purchase. The purchase was valued at approximately $668,000, consisting of
cash and Company common stock, as adjusted based upon FLO's Net Asset Value
on December 29, 1996 as described in the related purchase agreement.
On December 11, 1996, the Company acquired 100% of the capital stock of
IWA Engineers ("IWA"), an architecture and engineering firm providing a wide
range of planning, engineering, and design capabilities in water, wastewater,
and facility design, and serving State and local government and private
customers. The acquisition was accounted for as a purchase. The purchase
was valued at approximately $1,436,000, consisting of cash and Company common
stock, as adjusted based upon IWA's Net Asset Value on December 29, 1996 as
described in the related purchase agreement.
On November 7, 1995, the Company acquired 100% of the capital stock of
KCM, Inc. ("KCM"), an engineering services firm specializing in areas of
water quality, water and wastewater systems, surface water management,
fisheries and facilities. The acquisition was accounted for as a purchase.
The purchase was valued at approximately $13,373,000 consisting of cash and
Company common stock issued in a private placement. The Company's stock was
valued based upon the extended restriction period and economic factors
specific to the Company's circumstances which resulted in a fair valuation
approximately 26% below the then prevailing market price.
The results of operations from each of the acquired entities have been
included in the Company's condensed consolidated financial statements from
the effective dates of the acquisitions. The purchase price of the
acquisitions in excess of the fair value of the net assets acquired is being
amortized over a period of 30 years and is included under the caption
"INTANGIBLE ASSETS-NET" in the accompanying condensed consolidated balance
sheets. The final determination of such excess amount is subject to a final
determination of the value of the consideration paid and the net assets
acquired.
-9-
<PAGE>
The effect of unaudited pro forma operating results of the SCM, FLO and
IWA transactions, had they been acquired on October 2, 1995, is not material.
The effect of unaudited pro forma operating results assuming that the
Company had acquired KCM and WAC on October 2, 1995 is presented in Note 6.
PRO FORMA OPERATING RESULTS.
4. ACCOUNTS RECEIVABLE
-------------------
The Accounts Receivable valuation allowance includes amounts to provide
for doubtful accounts and for the potential disallowance of billed and
unbilled costs. The allowance for doubtful accounts as of June 29, 1997 and
September 29, 1996 was $1,178,000 and $1,062,000, respectively. The allowance
for disallowed costs as of June 29, 1997 and September 29, 1996 was $9,943,000
and $10,039,000, respectively. Disallowance of billed and unbilled costs is
primarily associated with contracts with the U.S. government which contain
clauses that subject contractors to several levels of audit. Management
believes that resolution of these matters will not have a material adverse
impact on the Company's financial position or results of operations.
5. SUBSEQUENT EVENT
----------------
On July 11, 1997, the Company acquired 100% of the capital stock of
CommSite Development Corporation ("CDC"), a wireless telecommunications site
development service firm. The purchase price of $5,700,000 consisted of
Company common stock and is subject to a purchase price adjustment as
described in the related purchase agreement. The acquisition will be
accounted for as a purchase. The effect of unaudited pro forma operating
results, had CDC been acquired on October 2, 1995, is presented in Note 6.
Pro Forma Operating Results.
6. PRO FORMA OPERATING RESULTS
---------------------------
The following table presents summarized unaudited pro forma operating
results assuming that the Company had acquired KCM, WAC and CDC (the
historical information for WAC and CDC is unaudited) on October 2, 1995:
<TABLE>
<CAPTION>
PRO FORMA NINE MONTHS ENDED
---------------------------
JUNE 29, 1997 JUNE 30, 1996
------------- -------------
($ in thousands, except per share data)
<S> <C> <C>
Gross revenue $219,040 $203,155
Income from operations 27,411 21,434
Net income 15,780 12,244
Net income per share 0.87 0.69
Weighted average shares outstanding 18,038 17,696
</TABLE>
-10-
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents the percentage relationship of selected items in
the Company's condensed consolidated statements of income to net revenue, and
the percentage increase or (decrease) in the dollar amount of such items:
<TABLE>
<CAPTION>
% RELATIONSHIP TO NET REVENUE % RELATIONSHIP TO NET REVENUE
----------------------------- -----------------------------
QUARTER ENDED PERIOD TO NINE MONTHS ENDED PERIOD TO
------------- PERIOD ----------------- PERIOD
JUN. 29, 1997 JUN. 30, 1996 CHANGE JUN. 29, 1997 JUN. 30, 1996 CHANGE
------------- ------------- --------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net revenue 100.0% 100.0% 20.6% 100.0% 100.0% 12.3%
Cost of net revenue 73.3 75.6 17.0 75.3 76.5 10.4
----- ----- ------ ----- ----- ------
Gross profit 26.7 24.4 31.8 24.7 23.5 18.4
Selling, general and
administrative expenses 13.9 13.2 26.7 13.1 13.0 12.8
----- ----- ------ ----- ----- ------
Income from operations 12.8 11.2 37.8 11.7 10.5 25.4
Net interest (expense) income 0.0 (0.3) (103.1) 0.1 (0.7) (110.9)
----- ----- ------ ----- ----- ------
Income before income taxes 12.8 10.9 42.0 11.7 9.8 34.4
Income tax expense 5.3 4.4 46.7 4.9 3.9 39.5
----- ----- ------ ----- ----- ------
Net income 7.5% 6.5% 38.8% 6.9% 5.9% 31.1%
----- ----- ------ ----- ----- ------
----- ----- ------ ----- ----- ------
</TABLE>
Gross revenue increased by 12.5% to $60,922,000 for the three months ended
June 29, 1997 compared to $54,152,000 for the comparable prior year period.
For the nine months ended June 29, 1997, gross revenue increased by 5.6% to
$171,406,000 from $162,243,000 in the prior year. Net revenue increased by
20.6% to $48,621,000 for the quarter from $40,314,000 a year ago. For the
nine months ended June 29, 1997, net revenue increased by 12.3% to
$132,959,000 from $118,413,000 last year. The percentage of the Company's
net revenue attributable to the Federal government, State and local
government, commercial, and international clients was affected by the
acquisitions of IWA Engineers, FLO Engineering, Inc., SCM Consultants, Inc.
and WAC (the "Acquisitions"). The Acquisitions benefit the Company's
strategic objective of further balancing the Company's revenue mix between
Federal and private sector programs and will increase the amount of the
Company's business driven by economics rather than regulatory requirements in
both domestic and international arenas. The following table presents the
percentage of net revenue for each client sector:
<TABLE>
<CAPTION>
Percentage of Net Revenue
------------------------------------------------------------------------------------
Quarter Ended Nine Months Ended
-------------------------------------- ------------------------------------
Client Sector June 29, 1997 June 30, 1996 June 29, 1997 June 30, 1996
- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Federal government 50 60 55 62
State & local government 14 17 15 16
Commercial 34 22 27 20
International 2 1 3 2
</TABLE>
-11-
<PAGE>
For the quarter ended June 29, 1997, the Acquisitions contributed $6,650,000
in net revenue growth, of which $5,576,000 was in the commercial sector. For
the nine months ended June 29, 1997, the Acquisitions contributed $10,495,000
in net revenue growth, of which $7,917,000 was in the commercial sector.
Actual dollar volume growth was experienced not only in the commercial
sector, but also in the State and local government and international sectors
for both the three and nine months ended June 29, 1997.
Cost of net revenue increased 17.0% to $35,660,000 for the three months ended
June 29, 1997 compared to $30,479,000 for the comparable prior year period.
For the nine months ended June 29, 1997, cost of net revenue increased 10.4%
to $100,077,000 from $90,638,000 in the prior year. As a percentage of net
revenue, cost of net revenue decreased in the quarter and nine months from
75.6% and 76.5% last year to 73.3% and 75.3% this year, respectively. This
decrease was due substantially to the Company's emphasis on strong project
management techniques as well as cost containment efforts.
Selling, general and administrative ("SG&A") expenses, inclusive of
amortization, increased 26.7% to $6,754,000 for the three months ended June
29, 1997 compared to $5,329,000 for the comparable prior year period. For
the quarter ended June 29, 1997, this increase was due to the amortization of
the goodwill associated with the WAC acquisition ($106,000), and the addition
of SG&A expenses of WAC ($1,103,000). For the nine months ended June 29,
1997, SG&A increased 12.8% to $17,390,000 from $15,420,000 in the prior year,
primarily due to goodwill amortization and SG&A expenses from the
Acquisitions of $152,000 and $2,343,000, respectively. As a percentage of
net revenue, SG&A expenses increased to 13.9% for the quarter ended June 29,
1997 from 13.2% for the comparable period last year, and for the nine months
ended June 29, 1997, SG&A expenses increased to 13.1% from 13.0% last year.
For the quarter ended June 29, 1997, net interest income of $4,000 was
recognized compared to net interest expense of $131,000 in the quarter ended
June 30, 1996. For the nine months ended June 29, 1997, net interest income
of $84,000 was recognized compared to net interest expense of $770,000 in the
prior year. The reduction of interest expense and increase in interest
incomes are related to the repayment of borrowings on the Company's revolving
credit facility.
Income tax expense increased to $2,567,000 and $6,464,000 for the quarter and
nine months ended June 29, 1997, respectively, from $1,750,000 and $4,634,000
for the comparable prior year period due to higher income before income taxes
and the non-deductibility for income tax purposes of amortization of goodwill
associated with the Acquisitions. The Company estimates that its fiscal 1997
effective tax rate could reach 42.0% compared to 40.4% for fiscal 1996,
primarily due to the non-deductibility of goodwill amortization for income
tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
As of June 29, 1997, the Company's cash and cash equivalents totaled
$12,793,000, of which $5,479,000 was payable to the WAC stockholders pursuant
to the purchase agreement. In addition, the Company has a credit agreement
(the "Credit Agreement") with a bank which provides for a revolving credit
facility of $25,000,000. This facility was amended and increased
-12-
<PAGE>
in June 1997 from $15,000,000. The increase accommodates operational needs
that may be required in connection with the WAC merger. Under the facility,
the Company may also request standby letters of credit up to the aggregate
sum of $10,000,000 outstanding at any one time. As of June 29, 1997,
outstanding borrowings totaled $8,000,000 and outstanding letters of credit
totaled $995,000.
In the nine months ended June 29, 1997, cash used in operating activities was
$5,035,000. The decrease compared to the nine months ended June 30, 1996 is
primarily attributable to increases in unbilled accounts receivable of
$8,849,000, of which $3,938,000 is related to WAC, and a bonus distribution
of approximately $5,000,000 to WAC employees, as agreed upon prior to the
merger agreement. The Company has targeted, as an ongoing practice, to
reduce the timing of invoicing and the collecting of receivables. For the
nine months ended June 29, 1997, cash used in investing activities was
$2,912,000. The decrease of $5,542,000 was primarily due to the decrease in
the distribution of cash for business acquisitions. For the nine months
ended June 29, 1997, cash provided by financing activities was $14,611,000
and resulted primarily from the proceeds of the issuance of long-term debt,
the proceeds from the amounts due to WAC stockholders and the proceeds from
the issuance of Company common stock under the Employee Stock Purchase Plan.
The Company continuously evaluates the marketplace for strategic acquisition
opportunities. Once an opportunity is identified, the Company examines the
effect an acquisition may have on the business environment, as well as on the
Company's results of operations. The Company proceeds with an acquisition
only if it determines that the acquisition is anticipated to have an
accretive effect on future operations. The Company's strategy is to position
itself to address existing and emerging markets. The Company views
acquisitions as a key component of its growth strategy, and intends to use
both cash and its securities, as it deems appropriate, to fund such
acquisitions.
The Company expects that existing cash balances, internally generated funds,
and its credit facility will be sufficient to meet the Company's capital
requirements through the end of fiscal 1997.
ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE, which
the Company will adopt in its annual financial statements for the year ended
October 4, 1998. The Statement prohibits adoption during the fiscal 1997 and
1998 interim periods. The Statement replaces the presentation of primary EPS
with a presentation of basic EPS, which excludes dilution and is computed by
dividing income available to common stockholders by the weighted average
number of common shares outstanding for the period. The Statement also
requires the dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
-13-
<PAGE>
Diluted EPS is computed similarly to fully diluted EPS pursuant to Accounting
Principles Board Opinion No. 15.
The Company has determined that the effect of adoption of SFAS No. 128 would
not have a material effect on the Company's financial statements for the
three months and the nine months ended June 29, 1997.
RISK FACTORS
STATEMENTS IN THIS REPORT THAT ARE FORWARD-LOOKING ARE BASED ON CURRENT
EXPECTATIONS, AND ACTUAL RESULTS MAY DIFFER MATERIALLY. FORWARD-LOOKING
STATEMENTS INVOLVE NUMEROUS RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY, INCLUDING, BUT NOT LIMITED TO, THE
POSSIBILITIES THAT THE DEMAND FOR THE COMPANY'S SERVICES MAY DECLINE AS A
RESULT OF POSSIBLE CHANGES IN GENERAL AND INDUSTRY SPECIFIC ECONOMIC
CONDITIONS AND THE EFFECTS OF COMPETITIVE SERVICES AND PRICING; ONE OR MORE
CURRENT OR FUTURE CLAIMS MADE AGAINST THE COMPANY MAY RESULT IN SUBSTANTIAL
LIABILITIES; AND SUCH OTHER RISKS AND UNCERTAINTIES AS ARE DESCRIBED IN THIS
REPORT ON FORM 10-Q AND OTHER DOCUMENTS FILED BY THE COMPANY FROM TIME TO
TIME WITH THE SECURITIES AND EXCHANGE COMMISSION.
POTENTIAL LIABILITY AND INSURANCE. Because of the type of projects in
which the Company is or may be involved, the Company's current and
anticipated future services may involve risks of potential liability under
Superfund, common law or contractual indemnification agreements. These
projects, and the associated risks, range in both size and complexity. The
risk factors include, but are not limited to, location; site characteristics;
past, present and future uses; and political, legal and economic
environments. Such factors make it difficult to assess accurately both the
areas and magnitude of potential risks.
The Company maintains comprehensive general liability insurance in the
amount of $1,000,000. This amount, together with $9,000,000 coverage under
umbrella policies, provides total general liability coverage of $10,000,000.
The Company's professional liability insurance ("E&O") policy, which includes
pollution coverage, for 1997 provides $10,000,000 in coverage, with a
$100,000 self-insured retention. The Company procures insurance coverage
through a broker who is experienced in the engineering field. The broker,
together with the Company's Risk Manager, reviews the Company's
risk/insurance programs with those of the Company's competitors and clients.
This review, combined with historical experience, claims history and
contractual requirements, allow the Company to determine the adequate amount
of insurance. However, because there are various exclusions and retentions
under the Company's insurance policies, there can be no assurance that all
liabilities that may be incurred by the Company are subject to insurance
coverage. In addition, the E&O policy is a "claims made" policy which only
covers claims made during the term of the policy. If a policy terminates and
retroactive coverage is not obtained, a claim subsequently made, even a claim
based on events or acts which occurred during the term of the policy, would
not be covered by the policy. In the event the Company expands its services
into new markets, no assurance can be given that the Company will be able to
obtain insurance coverage for such
-14-
<PAGE>
activities or, if insurance is obtained, that the dollar amount of any
liabilities incurred in connection with the performance of such services will
not exceed policy limits.
The Company evaluates and determines the risk associated with an
uninsured claim. In the event the Company determines that an uninsured claim
has potential liability, the Company establishes an appropriate reserve. The
Company does not establish a reserve if it determines that the claim has no
merit. The Company's historical levels of insurance coverage and reserves
have been shown to be adequate. However, a partially or completely uninsured
claim, if successful and of significant magnitude, could have a material
adverse effect on the Company.
SIGNIFICANT COMPETITION. The market for the Company's services is highly
competitive. The Company competes with many other firms, ranging from small
local firms to large national firms having greater financial and marketing
resources than the Company. Competition is likely to increase as the
industries in which the Company competes further mature; as more companies
enter the market and expand the range of services which they offer; and as
the Company and its competitors move into new geographic markets.
Historically, competition has been based primarily on the quality and
timeliness of service. However, as the industry continues to mature, the
Company believes that price will become an increasingly important competitive
factor.
CONTRACTS. The Company's contracts with Federal and State governments
and some of its other client contacts are subject to termination at the
discretion of the client. Some contracts made with the Federal government
are subject to annual approval of funding and audits of the Company's rates.
Limitations imposed on spending by Federal government agencies may limit the
continued funding of the Company's existing contracts with the Federal
government and may limit the Company's ability to obtain additional
contracts. These limitations, if significant, could have a material adverse
effect on the Company.
All of the Company's contracts with the Federal government are subject to
audit by the government, primarily by the Defense Contract Audit Agency (the
"DCAA"), which reviews the Company's overhead rates, operating systems and
cost proposals. During the course of its audit, the DCAA may disallow costs
if it determines that the Company improperly accounted for such costs in a
manner inconsistent with Cost Accounting Standards. A disallowance of costs
by the DCAA could have a material adverse effect on the Company. The
Company's government contracts are also subject to renegotiation of profits
in the event of a change in the contractual scope of work to be performed.
The Company enters into various types of contracts with its clients,
which include fixed-price contracts. In fiscal 1996, 17.1% of the Company's
net revenue was derived from fixed-price contracts. Under a fixed-price
contract, the customer agrees to pay a specified price for the Company's
performance of the entire contract. Fixed-price contracts carry certain
inherent risks, including risks of losses from underestimating costs,
problems with new technologies and economic and other changes that may occur
over the contract period. Losses under fixed-price contracts could have a
material adverse effect on the Company.
-15-
<PAGE>
CONFLICTS OF INTEREST. Many of the Company's clients are concerned about
potential or actual conflicts of interest in retaining environmental
consultants and engineers. For example, Federal government agencies have
formal policies against continuing or awarding contracts that would create
actual or potential conflicts of interest with other activities of a
contractor. These policies, among other things, may prevent the Company in
certain cases from bidding for or performing contracts resulting from or
relating to certain work the Company has performed for the government. In
addition, services performed for a private client may create a conflict of
interest which precludes or limits the Company's ability to obtain work from
another private entity. The Company has, on occasion, declined to bid on a
project because of an actual or potential conflict of interest. However, the
Company has not experienced disqualification during a bidding or award
negotiation process by any government or private client as a result of a
conflict of interest.
POTENTIAL VOLATILITY OF STOCK PRICE. The market price of the Company's
common stock may be significantly affected by factors such as
quarter-to-quarter variations in the Company's results of operations, changes
in environmental legislation and changes in investors' perception of the
business risks and conditions in the environmental services business. In
addition, market fluctuations, as well as general economic or political
conditions, may adversely affect the market price of the Company's common
stock, regardless of the Company's actual performance.
QUALIFIED PROFESSIONALS. The Company's ability to attract and retain
qualified scientists and engineers is an important factor in determining the
Company's future growth and success. The market for environmental
professionals is competitive and there can be no assurance that the Company
will continue to be successful in its efforts to attract and retain such
professionals.
-16-
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
- ------ ---------------------
On June 11, 1997, the Company acquired 100% of the capital stock of
Whalen & Company, Inc., a Delaware corporation, and Whalen Service Corps
Inc., a Delaware corporation (collectively, the "Whalen Companies"), through
the merger of the Whalen Companies with and into the Company (the "Whalen
Merger"). In connection with the Whalen Merger, the Company issued an
aggregate of 1,680,000 shares of its common stock, $.01 par value ("Common
Stock"), and 1,231,840 shares of its Series A Preferred Stock, $.01 par value
("Series A Stock"), to the former stockholders of the Whalen Companies. For
purposes of the Whalen Merger, each share of Common Stock and Series A Stock
was valued at $15.25. The issuance of Common Stock and Series A Stock were
made by private placement in reliance on the exemption from the registration
provisions of the Securities Act of 1933, as amended (the "Act"), provided
for in Section 4(2) of the Act.
On June 30, 1997, the Company issued an aggregate of 12,665 shares of
Common Stock to certain former shareholders of SCM Consultants, Inc., a
Washington corporation ("SCM"). Such shares were issued in connection with
an adjustment to the purchase price the Company paid for 100% of the capital
stock of SCM on March 20, 1997, in accordance with the terms of the related
purchase agreement. For purposes of the purchase price adjustment, each
share of Common Stock was valued at $15.4375. The issuances of Common Stock
were made by private placement in reliance on the exemption from the
registration provisions of the Act provided for in Section 4(2) of the Act.
On July 11, 1997, the Company acquired 100% of the capital stock of
CommSite Development Corporation, a California corporation ("CDC"), through
the merger of the Company's wholly-owned subsidiary with and into CDC (the
"CDC Merger"). In connection with the CDC Merger, the Company issued an
aggregate of 254,463 shares of Common Stock to the former shareholders of CDC
of which is subject to a purchase price adjustment. For purposes of the CDC
Merger, each share of Common Stock was valued at $22.40. The issuances of
Common Stock were made by private placement in reliance on the exemption from
the registration provisions of the Act provided for in Section 4(2) of the
Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------ --------------------------------
(a) EXHIBITS
--------
3.1 Restated Certificate of Incorporation of the Company,
as amended to date (incorporated herein by reference to
Exhibit 3.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 1, 1995).
-17-
<PAGE>
3.2 Bylaws of the Company, as amended to date (incorporated
herein by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1, No. 33-43723).
3.3 Certificate of Amendment of Certificate of Incorporation
of the Company (incorporated by reference to Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 30, 1997).
3.4 Certificate of Designation of Series A Preferred Stock
(incorporated herein by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K for the event of
June 11, 1997).
10.1 Credit Agreement dated as of September 15, 1995 between
the Company and Bank of America Illinois, as amended by
the First Amendment to Credit Agreement dated as of
November 27, 1995 (incorporated herein by reference to
Exhibit 10.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 1, 1995).
10.2 Second Amendment dated as of June 20, 1997 to the Credit
Agreement dated as of September 15, 1995 between the
Company and Bank of America Illinois.
10.3 Security Agreement dated as of September 15, 1995 among
the Company, GeoTrans, Inc., Simons Li & Associates,
Inc., Hydro-Search, Inc., PRC Environmental Management,
Inc. and Bank of America Illinois (incorporated herein
by reference to Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended October 1,
1995).
10.4 Pledge Agreement dated as of September 15, 1995 between
the Company and Bank of America Illinois (incorporated
herein by reference to Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 1, 1995).
10.5 Guaranty dated as of September 15, 1995, executed by
the Company in favor of Bank of America Illinois
(incorporated herein by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the fiscal
year ended October 1, 1995).
*10.6 Architect-Engineer Contract No. N62474-88-R-5086 dated
as of June 6, 1989 between PRC Environmental Management,
Inc. (a subsidiary of the Company) and the Western
Division, Naval Facilities Engineering Command
(incorporated herein by reference to Exhibit 10.5 to
the Company's Annual Report on Form 10-K/A
(Amendment No. 1) for the fiscal year ended
September 29, 1996).
-18-
<PAGE>
10.7 1989 Stock Option Plan dated as of February 1, 1989
(incorporated herein by reference to Exhibit 10.13 to
the Company's Registration Statement on Form S-1,
No. 33-43723).
10.8 Form of Incentive Stock Option Agreement executed by the
Company and certain individuals in connection with the
Company's 1989 Stock Option Plan (incorporated herein
by reference to Exhibit 10.14 to the Company's
Registration Statement on Form S-1, No. 33-43723).
10.9 Executive Medical Reimbursement Plan (incorporated
herein by reference to Exhibit 10.16 to the Company's
Registration Statement on Form S-1, No. 33-43723).
10.10 1992 Incentive Stock Plan (incorporated herein by
reference to Exhibit 10.18 to the Company's Annual
Report on Form 10-K for the fiscal year ended October 3,
1993).
10.11 Form of Incentive Stock Option Agreement used by the
Company in connection with the Company's 1992 Incentive
Stock Plan (incorporated herein by reference to Exhibit
10.19 to the Company's Annual Report on Form 10-K for
the fiscal year ended October 3, 1993).
10.12 1992 Stock Option Plan for Nonemployee Directors
(incorporated herein by reference to Exhibit 10.20 to
the Company's Annual Report on Form 10-K for the fiscal
year ended October 3, 1993).
10.13 Form of Nonqualified Stock Option Agreement used by the
Company in connection with the Company's 1992 Stock
Option Plan for Nonemployee Directors (incorporated
herein by reference to Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 3, 1993).
10.14 1994 Employee Stock Purchase Plan (incorporated herein
by reference to Exhibit 10.22 to the Company's Annual
Report on Form 10-K for the fiscal year ended October 2,
1994).
10.15 Form of Stock Purchase Agreement used by the Company in
connection with the Company's 1994 Employee Stock
Purchase Plan (incorporated herein by reference to
Exhibit 10.23 to the Company's Annual Report on Form
10-K for the fiscal year ended October 2, 1994).
10.16 Employment Agreement dated as of June 11, 1997 between
the Company and Daniel A. Whalen.
10.17 Registration Rights Agreement dated as of June 11, 1997
among the Company and the parties listed on Schedule A
attached thereto.
-19-
<PAGE>
11 Computation of Net Income Per Common Share.
27 Financial Data Schedule.
_______________
* Certain portions of this Exhibit were omitted from the copies filed as part
of the Annual Report on Form 10-K/A (Amendment No. 1). Complete copies of
this Exhibit were filed separately, together with an application to obtain
confidential treatment with respect thereto.
(b) REPORTS ON FORM 8-K
-------------------
1. Current Report on Form 8-K for the event of June 11, 1997, filed
with the Securities and Exchange Commission on June 23, 1997,
which relates to the Company's acquisition of the Whalen
Companies.
2. Current Report on Form 8-K/A (Amendment No. 1) for the event of
June 11, 1997, filed with the Securities and Exchange Commission
on June 24, 1997, which relates to the Company's acquisition of
the Whalen Companies.
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 13, 1997 TETRA TECH, INC.
By: /S/ LI-SAN HWANG
-----------------------------------------
Li-San Hwang
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)
By: /S/ JAMES M. JASKA
------------------------------------------
James M. Jaska
Vice President, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
-21-
<PAGE>
SECOND AMENDMENT
THIS SECOND AMENDMENT (this "Second Amendment") dated as of June 20,
1997 is to the Credit Agreement (the "Credit Agreement") dated as of
September 15, 1995 between TETRA TECH, INC. (the "Company") and BANK OF
AMERICA ILLINOIS (the "Bank"). Unless otherwise defined herein, terms
defined in the Credit Agreement are used herein as defined therein.
WHEREAS, the parties hereto have entered into the Credit Agreement which
provides for the Bank to make Loans to, and to issue Letters of Credit for
the account of, the Company from time to time; and
WHEREAS, the parties hereto desire to amend the Credit Agreement as set
forth below;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1 AMENDMENTS. Effective on (and subject to the occurrence of)
the Second Amendment Effective Date (as defined below), the Credit Agreement
shall be amended as follows:
SECTION 1.1 MARGIN. The definition of "Margin" in Section 1 of the Credit
Agreement is amended in its entirety to read as follows:
MARGIN means (i) if the Total Debt to EBITDA Ratio is greater than
2.00 to 1, 1.25% per annum in the case of Eurodollar Loans and Financial
Standby Letters of Credit and 0.625% per annum in the case of Non-Financial
Standby Letters of Credit, (ii) if the Total Debt to EBITDA Ratio is equal
to or less than 2.00 to 1 but greater than or equal to 1.00 to 1, 1.00% per
annum in the case of Eurodollar Loans and Financial Standby Letters of
Credit and 0.50% per annum in the case of Non-Financial Standby Letters of
Credit, and (iii) if the Total Debt to EBITDA Ratio is less than 1.00 to 1,
0.75% per annum in the case of Eurodollar Loans and Financial Standby
Letters of Credit and 0.375% per annum in the case of Non-Financial Standby
Letters of Credit. The Margin shall be deemed to be determined pursuant to
CLAUSE (III) above until the first date following the effective date of the
Second Amendment dated as of June 20, 1997 to this Agreement by which a
compliance certificate is required to be delivered by the Company pursuant
to SECTION 10.1.4. If any compliance certificate required to be delivered
by
<PAGE>
the Company pursuant to SECTION 10.1.4 shall give rise to any adjustment
in the Margin pursuant to the foregoing sentence, such adjustment shall be
effective for all Loans (including any then-outstanding Loans) on the date
which is 45 days (90 days in the case of any certificate delivered in
connection with the annual audit report of the Company) after the date as
of which such certificate is prepared; PROVIDED that if any such
certificate (together with the related financial statements) is not
delivered on or before the date due pursuant to SECTION 10.1.4, then the
Margin shall be 1.25% per annum in the case of Eurodollar Loans and
Financial Standby Letters of Credit and 0.625% per annum in the case of
Non-Financial Standby Letters of Credit from such due date until such
certificate is delivered.
SECTION 1.2 REVOLVING TERMINATION DATE. The definition of "Revolving
Termination Date" in Section 1 of the Credit Agreement is amended by deleting
the date "September 15, 1998" therein and substituting therefor the date "May
30, 2000".
SECTION 1.3 SECTION 2.1. Section 2.1 of the Credit Agreement is amended
in its entirety to read as follows:
2.1 COMMITMENT OF THE BANK. On and subject to the terms and
conditions of this Agreement, the Bank agrees (a) to make loans to the
Company on a revolving basis ("LOANS") from time to time before the
Revolving Termination Date in such amounts as the Company may from time to
time request and (b) to issue standby letters of credit containing such
terms and conditions as shall be permitted pursuant to this Agreement and
satisfactory to the Bank (collectively the "LETTERS OF CREDIT" and each
individually a "LETTER OF CREDIT") for the account of the Company from time
to time before the Revolving Termination Date in such amounts as the
Company may from time to time request; PROVIDED, that (x) the sum of (i)
the aggregate outstanding principal amount of all Loans PLUS (ii) the
aggregate Stated Amount of all Letters of Credit shall not at any time
exceed $25,000,000 (less any reductions to the Commitment made pursuant to
SECTION 6.1) and (y) the aggregate Stated Amount of all Letters of Credit
shall not at any one time exceed $10,000,000.
SECTION 1.4 SECTION 2.5. Section 2.5 of the Credit Agreement is amended
by deleting the language "shall not be greater than one year and" in line 8
thereof.
SECTION 1.5 SECTION 5.1. Section 5.1 of the Credit Agreement is amended
by deleting the percentage "0.375%" therein and substituting therefor the
percentage "0.25%".
-2-
<PAGE>
SECTION 1.6 SECTION 5.2. Section 5.2 of the Credit Agreement is amended
in its entirety to read as follows:
5.2 LETTER OF CREDIT FEES. The Company agrees to pay the Bank a
letter of credit fee for each Letter of Credit in an amount equal to (x)
the Margin multiplied by (y) the Stated Amount of such Letter of Credit,
payable in arrears on the last day of each calendar quarter and on the
Revolving Termination Date for the period from and including the date of
the issuance of such Letter of Credit to and including such date or the
date upon which such Letter of Credit expired or was terminated. Such
letter of credit fee shall be computed for the actual number of days
elapsed on the basis of a year consisting of 365 or, if applicable, 366
days. In addition, the Company agrees to pay all other fees of the Bank
(at the standard rates of the Bank in effect from time to time) with
respect to each Letter of Credit (including, without limitation, all fees
associated with any transfer of a Letter of Credit), such fees to be
payable on demand upon invoice by the Bank therefor.
SECTION 1.7 SECTION 6.1.1. Section 6.1.1 of the Credit Agreement is
amended in its entirety to read as follows:
6.1.1 SCHEDULED REDUCTIONS OF COMMITMENT. The amount of the
Commitment shall be permanently reduced on each of the following dates to
the amounts set forth opposite such dates:
Commitment Maximum
Reduction Date Commitment
-------------- ----------
May 30, 1998 $ 20,000,000
May 30, 1999 15,000,000.
SECTION 1.8 SECTION 6.1.2. Section 6.1.2 of the Credit Agreement is
amended by deleting the amount "$1,000,000" therein and substituting therefor
the amount "$5,000,000".
SECTION 1.9 SECTION 10.1.3. Section 10.1.3 of the Credit Agreement is
amended in its entirety to read as follows:
10.1.3 [INTENTIONALLY OMITTED].
SECTION 1.10 SECTION 10.6.1. Section 10.6.1 of the Credit Agreement is
amended in its entirety to read as follows:
10.6.1 MINIMUM TANGIBLE NET WORTH. Not at any time permit Tangible
Net Worth to be less than the sum of (i) $38,000,000 PLUS (ii) 50% of
Consolidated Net Income for each Fiscal Quarter ending after June 30, 1997
PLUS (iii)
-3-
<PAGE>
100% of all proceeds (net of any underwriting discounts and
brokers' commissions) of any offering or distribution of the Company's
common stock or of any other equity investment in the Company.
SECTION 1.11 SECTION 10.6.5. Section 10.6.5 of the Credit Agreement is
amended in its entirety to read as follows:
10.6.6 FIXED CHARGE COVERAGE. Not permit the ratio, for any
Computation Period, of (i) EBITDA PLUS operating lease expense (whether or
not paid) of the Company and its Subsidiaries for such Computation Period
to (ii) interest expense of the Company and its Subsidiaries PLUS all
payments on Capital Leases and operating leases (without double-counting
with interest expense) by the Company and its Subsidiaries PLUS all
Restricted Payments PLUS all taxes paid by the Company and its Subsidiaries
PLUS Capital Expenditures of the Company and its Subsidiaries, in each case
during such Computation Period, to be less than 1.25 to 1 for any
Computation Period.
SECTION 1.12 SECTION 10.6.6. Section 10.6.6 of the Credit Agreement is
amended in its entirety to read as follows:
10.6.6 [INTENTIONALLY OMITTED].
SECTION 1.13 SECTION 13. Section 13 of the Credit Agreement is amended
by adding a new Section 13.11 following Section 13.10 of the Credit
Agreement which will read as follows:
SECTION 13.11 CONSENT TO JURISDICTION. THE COMPANY IRREVOCABLY
AGREES THAT ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT OR ANY LOAN DOCUMENT
SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE
OF ILLINOIS. THE COMPANY HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION
OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE AND
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON THE COMPANY, AND AGREES
THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED TO
THE COMPANY AT THE ADDRESS STATED ON THE SIGNATURE PAGE HEREOF AND SERVICE
SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF.
SECTION 1.14 EXHIBIT A. Exhibit A to the Credit Agreement is hereby
amended in its entirety to read in the form of EXHIBIT A hereto.
SECTION 2 CONSENT. The Bank hereby consents to the acquisition by the
Company of Whalen & Company, Inc. ("W&C") and
-4-
<PAGE>
Whalen Service Corps., Inc. ("Whalen Service") through a merger of W&C and
Whalen Service with and into the Company pursuant to the Reorganization
Agreement dated as of ________, 1997 (the "Reorganization Agreement") among
the Company, W&C, Whalen Service and the stockholders named in the
Reorganization Agreement the "Acquisition").
SECTION 3 LETTERS OF CREDIT. Notwithstanding any provision of the Credit
Agreement to the contrary, the Company and the Bank (i) agree that the Bank
may issue Letters of Credit ("Non-Dollar LCs") in currencies other than
Dollars, (ii) confirm that all Non-Dollar LCs previously issued under the
Credit Agreement are deemed properly issued thereunder and (iii) further
agree as follows with respect to such Non-Dollar LCs:
3.1 The Company agrees that its reimbursement obligation under Section 2.6
of the Credit Agreement in respect of any Non-Dollar LC (a) shall be
payable in the currency in which such Non-Dollar LC was issued and (b)
shall bear interest at a rate per annum equal to the sum of Overnight
Rate PLUS the Margin for Eurodollar Loans PLUS 2% for each day from
and including the disbursement date of such Non-Dollar LC to but
excluding the date such obligation is paid in full (it being
understood that any payment received after 12:00 noon, Chicago time,
on any day shall be deemed received on the following Business Day).
3.2 For purposes of determining whether there is availability for the
Company to request, continue or convert any Loan, or request, extend
or increase the face amount of any Letter of Credit, under the Credit
Agreement, the Dollar Equivalent Amount of each Non-Dollar LC shall be
calculated on the date such Loan is to be made, continued or converted
or such Letter of Credit is to be issued, extended or increased.
3.3 For purposes of determining the amount of the unused portion of the
Commitment and letter of credit fees, the Dollar Equivalent Amount of
any Non-Dollar LC shall be determined on each of (i) the date of an
issuance, extension or change in the face amount of such Non-Dollar
LC, (ii) the date of any payment by the Bank in respect of a drawing
under such Non-Dollar LC, (iii) the last day of each calendar month
and (iv) each day on which the Commitment is reduced.
3.4 If, on the last day of any calendar month or any day on which the
Commitment is reduced, the sum of the principal amount of all Loans
plus the Stated Amount of all Letters of Credit (valuing the Stated
Amount of any
-5-
<PAGE>
Non-Dollar LC at the Dollar Equivalent Amount thereof as
of such day) would exceed the Commitment, then the Company will
immediately eliminate such excess by prepaying Loans and/or causing
one or more Letters of Credit to be reduced or terminated.
3.5 If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due in respect of any Non-Dollar LC in one
currency into another currency, the rate of exchange used shall be
that at which in accordance with normal banking procedures the Bank
could purchase the first currency with such other currency on the
Business Day preceding that on which final judgment is given. The
obligation of the Company in respect of any such sum due from it to
the Bank hereunder shall, notwithstanding any judgment in a currency
(the "Judgment Currency") other than that in which such sum is
denominated in accordance with the applicable provisions of the
applicable Non-Dollar LC and this letter amendment (the "Agreement
Currency"), be discharged only to the extent that on the Business Day
following receipt by the Bank of any sum adjudged to be so due in the
Judgment Currency, the Bank may in accordance with normal banking
procedures purchase the Agreement Currency with the Judgment Currency.
If the amount of the Agreement Currency so purchased is less than the
sum originally due to the Bank in the Agreement Currency, the Company
agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify the Bank against such loss. If the amount of
the Agreement Currency so purchased is greater than the sum originally
due to the Bank in such currency, the Bank agrees to return the amount
of any excess to the Company (or to any other Person who may be
entitled thereto under applicable law).
3.6 For purposes of the foregoing provisions of this SECTION 3, the
following terms have the following meanings:
DOLLAR EQUIVALENT AMOUNT means, at any time for any currency, the
equivalent amount in Dollars as determined by the Bank at such time on
the basis of the Spot Rate for the purchase of Dollars with such
currency.
OVERNIGHT RATE means, for any day, the rate of interest per annum
at which overnight deposits in the applicable currency, in an amount
approximately equal to the amount with respect to which such rate is
being determined, would be offered for such day by the London
-6-
<PAGE>
Branch of Bank of America National Trust and Savings Association
("BofA") to major banks in the London or other applicable offshore
interbank market. The Overnight Rate for any day which is not a
Business Day (or on which dealings are not carried on in the
applicable offshore interbank market) shall be the Overnight Rate
for the preceding Business Day.
SPOT RATE means, for any currency, the rate quoted by BofA (as
defined in the preceding definition) for the purchase by BofA of such
currency with another currency through its FX Trading Office at
approximately 8:00 a.m., San Francisco time, on the date two Business
Days prior to the date as of which the applicable foreign exchange
computation is to be made.
SECTION 4 COLLATERAL DOCUMENTS. The Company and the Bank hereby agree
that, concurrently with the transfer of any assets to the New Obligor (as
defined below), the Company will deliver the following documents to the Bank
(it being understood that the failure to deliver any such documents shall
constitute an Event of Default under the Credit Agreement:
(a) RESOLUTIONS OF NEW OBLIGOR. Certified copies of resolutions of the
Board of Directors of the New Obligor authorizing the execution and delivery
of the Security Agreement, the Security Agreement Amendment and the Guaranty
and the performance of its obligations under each of the Amended Security
Agreement and the Guaranty.
(b) INCUMBENCY AND SIGNATURE CERTIFICATES OF NEW OBLIGOR. A certificate
of the Secretary or the Assistant Secretary of the New Obligor certifying the
names and true signatures of the officers of the New Obligor authorized to
execute, deliver and perform, as applicable, the Guaranty, the Security
Agreement and all other documents to be executed in connection therewith.
(c) GUARANTY. A counterpart of the Guaranty duly executed by the New
Obligor.
(d) SECURITY AGREEMENT. A counterpart of the Security Agreement duly
executed by the New Obligor, together with such UCC financing statements as
the Bank may request in order to perfect the security interest of the Bank in
the collateral granted under the Security Agreement.
(e) SECURITY AGREEMENT AMENDMENT. A counterpart of the Security
Agreement Amendment duly executed by the Company and its Subsidiaries
(including the New Obligor).
-7-
<PAGE>
(f) PLEDGE AGREEMENT AMENDMENT. A counterpart of the Pledge Agreement
Amendment duly executed by the Company, together with the share certificates
of the New Obligor and stock powers executed in blank with respect thereto.
(g) OPINION. The opinion of Riordan & McKinzie, counsel to the Company
and its Subsidiaries, in form and substance satisfactory to the Bank.
SECTION 5 REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Bank that each warranty set forth in Section 9 of the Credit
Agreement is true and correct as if made on the date hereof, (b) the
execution and delivery by the Company of this Second Amendment, the New Note
(as defined below) and the letter agreement (the "Pledge Agreement
Amendment") dated as of June 20, 1997 amending the Pledge Agreement, the
execution and delivery by Whalen & Company, Inc. (the "New Obligor") of the
Security Agreement and the Guaranty, the execution and delivery by the
Company and its Subsidiaries (including the New Obligor) of the letter
agreement (the "Security Agreement Amendment") dated as of June 20, 1997
amending the Security Agreement, the performance by the Company of its
obligations under the Credit Agreement as amended hereby (as so amended, the
"Amended Credit Agreement"), the New Note and the Pledge Agreement as amended
by the Pledge Agreement Amendment (as so amended, the "Amended Pledge
Agreement"), the performance by the New Obligor of its obligations under the
Guaranty and the Security Agreement and the performance by the Company and
its Subsidiaries (including the New Obligor) of their respective obligations
under the Security Agreement as amended by the Security Agreement Amendment
(as so amended, the "Amended Security Agreement") (i) are (or with respect to
those documents to be executed and delivered as of June 20, 1997, upon the
execution and delivery thereof will be) within the corporate powers of the
Company and each Subsidiary (including the New Obligor), (ii) have been (or
with respect to those documents to be executed and delivered as of June 20,
1997, upon the execution and delivery thereof will be) duly authorized by all
necessary corporate action, (iii) have received (or with respect to those
documents to be executed and delivered as of June 20, 1997, upon the execution
and delivery will have received) all necessary governmental approval and (iv)
do not and will not contravene or conflict with any provision of law or of
the charter or by-laws of the Company or any Subsidiary (including the New
Obligor) or of any indenture, loan agreement or other material contract,
order or decree which is binding upon the Company or any Subsidiary
(including the New Obligor), (c) this Second Amendment, the Amended Credit
Agreement, the New Note, the Pledge Agreement Amendment, the Amended Pledge
Agreement, the Security Agreement Amendment, the Amended Security Agreement
and the Guaranty is (or with respect to those documents to be executed and
delivered as of June 20, 1997, upon the execution and
-8-
<PAGE>
delivery thereof will be) the legal, valid and binding obligation of the
Company or such Subsidiary (including the New Obligor) which is party
thereto, as applicable, enforceable against the Company or such Subsidiary
(including the New Obligor) in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or other similar laws
of general application affecting the enforcement of creditor's rights or by
general principles of equity limiting the availability of equitable remedies,
(d) the Acquisition will comply in all material respects with all applicable
legal requirements, and all necessary governmental, regulatory, shareholder
and other consents and approvals required for the consummation of the
Acquisition will be, prior to the consummation thereof, duly obtained and in
full force and effect, (e) the execution and delivery of the Reorganization
Agreement, and the consummation of the transactions contemplated thereby will
not violate any requirement of law, and (f) all of the representations and
warranties of the Company and, to the best of the Company's knowledge, W&C
and Whalen Service contained in the Reorganization Agreement are true and
correct in all material respects as of the date such representations and
warranties were made and as of the date of the consummation of any
transaction under the Reorganization Agreement.
SECTION 6 EFFECTIVENESS. The amendments set forth in SECTION 1, and
the consent set forth in SECTION 2, shall become effective, as of the day and
year first above written, on such date (the "Second Amendment Effective
Date") that the Bank shall have received (i) an amendment fee of $25,500,
(ii) counterparts of this Second Amendment executed by the parties hereto and
(iii) each of the following documents in form and substance satisfactory to
the Bank:
(a) RESOLUTIONS OF COMPANY. Certified copies of resolutions of the Board
of Directors of the Company authorizing the execution and delivery of this
Second Amendment, the New Note, the Pledge Agreement Amendment, and the
Security Agreement Amendment and the performance of its obligations under
each of the Amended Credit Agreement, the New Note, the Amended Pledge
Agreement and the Amended Security Agreement.
(b) INCUMBENCY AND SIGNATURE CERTIFICATE OF COMPANY. A certificate of
the Secretary or the Assistant Secretary of the Company certifying the names
and true signatures of the officers of the Company authorized to execute,
deliver and perform, as applicable, this Second Amendment and all other
documents to be executed in connection therewith.
(c) NEW NOTE. The promissory note of the Company (herein called the "New
Note"), substantially in the form of Exhibit A to
-9-
<PAGE>
to the Credit Agreement, payable to the order of the Bank in the aggregate
principal amount of $25,000,000.
(d) ACQUISITION. Evidence, satisfactory to the Bank, that the
Acquisition has occurred or will occur concurrently with the effectiveness of
this Second Amendment.
(e) OPINION. The opinion of Riordan & McKinzie, counsel to the Company
and its Subsidiaries, in the form of ATTACHMENT I.
SECTION 7 MISCELLANEOUS.
-------------
SECTION 7.1 CONTINUING EFFECTIVENESS, ETC. As herein amended, the
Credit Agreement shall remain in full force and effect and is hereby ratified
and confirmed in all respects.
SECTION 7.2 COUNTERPARTS. This Second Amendment may be executed in any
number of counterparts and by the different parties on separate counterparts,
and each such counterpart shall be deemed to be an original but all such
counterparts shall together constitute one and the same Second Amendment.
SECTION 7.3 GOVERNING LAW. This Second Amendment shall be a contract
made under and governed by the internal laws of the State of Illinois.
SECTION 7.4 SUCCESSORS AND ASSIGNS. This Second Amendment shall be
binding upon the Company and the Bank and their respective successors and
assigns, and shall inure to the benefit of the Company and the Bank and the
successors and assigns of the Bank.
-10-
<PAGE>
Delivered at Chicago, Illinois, as of the day and year first above
written.
TETRA TECH, INC.
By_________________________________
Title____________________________
BANK OF AMERICA ILLINOIS
By_________________________________
Title____________________________
<PAGE>
Each of the undersigned hereby acknowledges and agrees to the foregoing
Second Amendment and the Amended Credit Agreement and hereby confirms the
continuing effectiveness of the Guaranty and the Security Agreement with
respect to the Amended Credit Agreement.
HSI GEOTRANS, INC.
By:___________________________
Title:________________________
SIMONS, LI & ASSOCIATES, INC.
By:___________________________
Title:________________________
TETRA TECH EM, INC.
By:___________________________
Title:________________________
<PAGE>
EXHIBIT A
FORM OF
NOTE
$25,000,000 June 20, 1997
Chicago, Illinois
The undersigned, for value received, promises to pay to the order of BANK
OF AMERICA ILLINOIS, an Illinois banking corporation having its principal
office at 231 South LaSalle Street, Chicago, Illinois (the "Bank") at the
principal office of the Bank in Chicago, Illinois, TWENTY-FIVE MILLION
DOLLARS or, if less, the aggregate unpaid amount of all Loans made by the
undersigned pursuant to the Credit Agreement referred to below (as shown on
the schedule attached hereto (and any continuation thereof) or in the records
of the Bank), such principal amount to be payable in installments as set
forth in the Credit Agreement.
The undersigned further promises to pay interest on the unpaid principal
amount of each Loan from the date of such Loan until such Loan is paid in
full, payable at the rate(s) and at the time(s) set forth in the Credit
Agreement. Payments of both principal and interest are to be made in lawful
money of the United States of America.
This Note evidences indebtedness incurred under, and is subject to the
terms and provisions of, the Credit Agreement, dated as of September 15, 1995
(herein, as amended or otherwise modified from time to time, called the "Credit
Agreement"; terms not otherwise defined herein are used herein as defined in the
Credit Agreement), between the undersigned and the Bank, to which Credit
Agreement reference is hereby made for a statement of the terms and provisions
under which this Note may or must be paid prior to its due date or its due date
accelerated.
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement, the undersigned further agrees, subject only to any
limitation imposed by applicable law, to pay all expenses, including reasonable
attorneys' fees and legal expenses, incurred by the holder of this Note in
endeavoring to collect any amounts payable hereunder which are not paid when
due, whether by acceleration or otherwise.
<PAGE>
This Note is made under and governed by the internal laws of the State of
Illinois.
TETRA TECH, INC.
By:__________________________
Title:____________________
-2-
<PAGE>
Schedule Attached to Note dated June 20, 1997 of TETRA TECH, INC. payable to
the order of BANK OF AMERICA ILLINOIS.
Date and Date and
Amount of Amount of
Loan or of Repayment or of Interest
Conversion from Conversion into Period/ Unpaid
another type of another type of Maturity Principal Notation
Loan Loan Date Balance Made by
1. FLOATING RATE LOANS
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
2. EURODOLLAR LOANS
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
-3-
<PAGE>
EXHIBIT 10.16
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made as of this 11th day of
June, 1997 between Tetra Tech, Inc. a Delaware corporation ("Tetra Tech"), and
Daniel A. Whalen (the "Employee").
R E C I T A L S
---------------
A. Concurrently herewith, Employee, Tetra Tech, Whalen & Company, Inc.,
a Delaware corporation ("Whalen & Company"), and Whalen Service Corps Inc., a
Delaware Corporation ("Whalen Service") (Whalen & Company and Whalen Service
are sometimes referred to collectively as the "Whalen Companies"), are
consummating the transactions contemplated by that certain Agreement and Plan
of Reorganization made and entered into as of June 11, 1997 (the
"Reorganization Agreement"), pursuant to which the Whalen Companies will be
merged with and into Tetra Tech.
B. This Agreement is the Employment Agreement referred to in SECTION 7.2
of the Reorganization Agreement and, pursuant thereto, must be entered into by
the parties hereto as a condition to the consummation of the transactions
contemplated by the Reorganization Agreement. The execution and performance of
this Agreement is a substantial inducement to Employee to enter into and
consummate the transactions contemplated by the Reorganization Agreement.
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the mutual covenants and the agreements
hereinafter set forth, and in consideration of Tetra Tech consummating the
transactions contemplated by the Reorganization Agreement, the parties hereto
covenant and agree as follows:
1. EMPLOYMENT. Tetra Tech agrees to employ the Employee, and the
Employee agrees to perform services for Tetra Tech, on the terms and conditions
set forth in this Agreement.
2. TERM. The term of this Agreement (the "Term") shall be four (4)
years, commencing on the date hereof and terminating on the fourth anniversary
of the date hereof.
3. POSITION AND DUTIES. During his term of employment under this
Agreement, the Employee shall serve on an exclusive and full-time basis as the
Executive Vice President -- Telecommunications of Tetra Tech and the President
of each of Tetra Tech's Whalen & Company and Whalen Service subsidiaries. In
addition, the Employee
<PAGE>
shall serve as a member of Tetra Tech's Executive Board. The Employee's
services will be performed at Whalen & Company's principal place of business.
The Employee shall have such additional authority and responsibility as
shall be determined from time to time by the Chief Executive Officer of Tetra
Tech. The Employee will at all times perform all of the duties and
obligations required of him by the terms of this Agreement in a loyal and
conscientious manner and in reasonable accordance with the Employee's ability
and experience.
4. BASE SALARY COMPENSATION.
(a) Tetra Tech shall pay the Employee for all his services a base
salary at the rate of One Hundred Forty Thousand Dollars ($140,000) per year,
which dollar amount shall be increased, on each anniversary date of the
commencement of the Term, by a percentage amount equal to the percentage
increase in the Consumer Price Index for Urban Wage Earners (San
Francisco-Oakland-San Jose, California; 1986=100) as published by the United
States Department of Labor, Bureau of Labor Statistics as of such anniversary
date compared to such index as in effect as of the commencement of the Term.
The base salary, as so adjusted on each anniversary date, is herein referred
to as the "Base Salary". Such Base Salary shall be payable in equal
installments at such intervals as salaries are paid by Tetra Tech to other
executives of Tetra Tech, subject to the usual and required employee payroll
deductions and withholdings.
(b) The Chief Executive Officer of Tetra Tech may, at any time in his
sole discretion, with the concurrence of Tetra Tech's Compensation Committee,
determine to increase the Base Salary of the Employee to an amount greater than
the amount determined pursuant to SECTION 4(a) above. The Chief Executive
Officer and the Compensation Committee shall, no less frequently than annually,
review the then-current level of the Base Salary and consider the propriety of a
discretionary Base Salary increase.
5. BONUS PLAN. The Employee shall be entitled to participate in and
receive benefits under Tetra Tech's annual bonus plan for the Whalen Companies
(the "Bonus Plan"). The Bonus Plan shall consist of a pool determined by
multiplying the Operating Profit (as hereinafter defined) from the Whalen
Companies for any fiscal year in excess of 6.5% of the Whalen Companies' gross
revenues for such fiscal year by 25%. "Operating Profit" is defined as income
from the Whalen Companies' operations (after consideration of the payment of all
bonuses to those employees of Tetra Tech or the Whalen Companies, as applicable,
performing services for the Whalen Companies during the applicable period)
before Federal income taxes and interest income/expense. For any partial fiscal
year during the Term, "Operating Profit" shall be appropriately annualized.
6. STOCK OPTION GRANT. On the date hereof, Tetra Tech will grant to the
Employee an incentive stock option (the "Option") covering 10,000 shares of
Tetra Tech's common stock, $.01 par value (the "Common Stock"). The exercise
price of the Option will be 110% of the closing price of the Common Stock on the
date hereof.
2
<PAGE>
7. EXPENSES AND BENEFITS.
(a) The Employee shall be entitled to reimbursement for all
reasonable and ordinary expenses incurred by Employee in the course of, and
directly related to, the rendering of services pursuant to this Agreement. Such
expenses shall be supported by reasonable documentation and shall be subject to
reasonable audit by Tetra Tech.
(b) During his employment under this Agreement, the Employee shall be
entitled to participate in or receive benefits under all of Tetra Tech's
employee benefit plans and arrangements then in effect and made available
generally to senior executives of Tetra Tech, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements.
8. TERMINATION. Tetra Tech's obligations and the Employee's rights upon
the termination of Employee's employment shall be governed by Tetra Tech's
standard policies and procedures as set forth in Tetra Tech's employee manual
(the "Policies and Procedures"), a copy of which has been delivered to the
Employee.
9. LICENSE OF WHALEN NAME. The Employee acknowledges and agrees that, in
connection with the transactions contemplated by the Reorganization Agreement,
Tetra Tech will acquire and own all rights to the names "Whalen & Company,"
"Whalen Service Corps Inc.," "Whalen Management Service, Co.," and "Whalen
Project Management, Inc.," and that such rights shall survive the death of the
Employee. The Employee further agrees that he will not use the name "Whalen" or
any derivative thereof (i) in any business in which Tetra Tech or any of its
divisions or subsidiaries is engaged on the date of termination of the
Employee's employment with Tetra Tech which uses the Whalen name or (ii) in any
business in the telecommunications industry in which Tetra Tech or any of its
divisions or subsidiaries is engaged on the date of termination of the
Employee's employment with Tetra Tech.
10. NOTICES. Any notice or other communication required or permitted
hereunder will be in writing and will be deemed sufficiently given only if
delivered in person or sent by registered airmail letter, postage prepaid, or by
facsimile transmission followed by U.S. Mail, addressed as follows:
If to the Employee:
Daniel A. Whalen
5866 Ostrander Road
Oakland, California 94618
Facsimile: (510) 547-1345
3
<PAGE>
with a copy to:
Piper & Marbury L.L.P.
36 S. Charles Street
Baltimore, Maryland 21201
Attention: Elizabeth Grieb, Esq.
Facsimile: (410) 539-0489
If to Tetra Tech:
Tetra Tech, Inc.
630 N. Rosemead Boulevard
Pasadena, California 91107
Attention: Chief Executive Officer
Facsimile: (818) 351-1188
or to such other address or facsimile number as any of the persons designated
above may have specified in a notice or communication duly given to the other
designated person as provided herein. Such notice or communication will be
deemed to have been given as of the date so delivered or telecopied, or if
mailed, two days thereafter.
11. POLICIES AND PROCEDURES. The Employee acknowledges that he shall
perform his services in full compliance with Tetra Tech's Policies and
Procedures, as the same may be in effect from time to time.
12. MODIFICATION/WAIVER; GOVERNING LAW; ATTORNEY FEES.
-------------------------------------------------
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing, and is signed by the Employee and Tetra Tech. No waiver by either
party to this Agreement at any time of any breach by the other party of, or
compliance with, any agreement, condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
agreements, provisions or conditions at the same or at any prior or subsequent
time.
(b) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of California
applicable to contracts to be performed wholly within California.
(c) If either party institutes any legal action (including any
mediation pursuant to SECTION 16 below) to enforce his or its rights under or to
recover damages for breach of, this Agreement, the prevailing party in such
action shall be entitled to recover from the other party all costs (including
costs of arbitration) and all reasonable expenses for attorney's fees and the
disbursements incurred by him or it.
4
<PAGE>
13. BINDING AGREEMENT; ASSIGNEES. This Agreement may not be assigned by
either party hereto without the written consent of the other; PROVIDED, HOWEVER,
that (a) Tetra Tech may, without such written consent of Employee, assign its
rights and obligations hereunder to subsidiary corporations in connection with
the formation of Whalen & Company and/or Whalen Service subsidiaries, and
(b) the Employee's rights to payments hereunder shall, upon his death, inure to
the benefit of the Employee's personal or legal representatives, executors,
administrators, heirs, distributees, devisees and legatees.
14. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
15. ENTIRE AGREEMENT. Except for the Noncompetition and Nondisclosure
Agreement of even date between the parties, no agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter of
this Agreement have been made by either party which are not set forth expressly
in this Agreement.
16. MEDIATION. The parties agree that any dispute as to the construction,
interpretation or application of provisions of this Agreement shall be submitted
to expedited mediation in an attempt to resolve such dispute prior to the
commencement of any litigation with respect to such dispute. In the event
either party intends to seek recourse against the other by action at law or
equity, such party shall first give notice to the other party. Within ten
business days of such notice, the parties shall attempt to agree on one mediator
who shall be a person mutually agreeable to both parties. In the event the
parties cannot agree on one mediator, each shall have the right to appoint one
mediator, and the two mediators shall appoint a third. Mediation shall commence
within 20 business days of the notice for request for mediation. Each party
agrees to cooperate fully with the mediator(s) in an attempt to resolve any
disputes. The mediator(s) shall use the rules of the American Arbitration
Association in conducting the mediation. Any decision reached through mediation
shall be in writing but shall not be legally binding on the parties nor
admissible as evidence in any legal proceedings. If the mediator or the parties
cannot resolve their differences to their mutual satisfaction within 30 business
days of the notice, either party shall be free to pursue any and all other
remedies available to such party.
17. EQUITABLE REMEDIES. The Employee and Tetra Tech agree that the
services to be rendered by the Employee pursuant to this Agreement are of a
special, unique and extraordinary character which gives them a peculiar value,
the loss of which may not be reasonably or adequately compensated in damages in
any action at law, and that a breach by Employee of any of the terms of this
Agreement may cause Tetra Tech great and irreparable injury and damage. The
Employee expressly agrees that Tetra Tech may apply for the remedies of
injunction, specific performance and other equitable relief to prevent a breach
of this Agreement by the Employee. This provision shall not, however, be
construed as a waiver of any of the rights which Tetra Tech may have hereunder,
at law, for damages or otherwise.
5
<PAGE>
18. HEADINGS. The headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
TETRA TECH, INC.
By: /s/ LI-SAN HWANG
----------------
Li-San Hwang
President and Chief Executive Officer
/s/ DANIEL A. WHALEN
--------------------
Daniel A. Whalen
6
<PAGE>
EXHIBIT 10.17
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (the "Agreement") is entered into as of
June 11, 1997 by and among Tetra Tech, Inc., a Delaware corporation ("Tetra
Tech"), and the parties listed on SCHEDULE A attached hereto (each, a "Holder"
and collectively, the "Holders").
R E C I T A L S
---------------
A. Tetra Tech, Whalen & Company, Inc., a Delaware corporation, Whalen
Service Corps Inc., a Delaware corporation (collectively, the "Companies"), and
the Holders are parties to an Agreement and Plan of Reorganization dated as of
June 11, 1997 (the "Reorganization Agreement"), pursuant to which the Companies
will merge with and into Tetra Tech; and
B. Pursuant to the Reorganization Agreement, the stockholders of the
Companies will receive (i) shares of the common stock, $.01 par value, of Tetra
Tech ("Tetra Tech Common Stock"), and (ii) shares of the Series A Preferred
Stock, $.01 par value, of Tetra Tech ("Tetra Tech Preferred Stock"), which are
convertible into shares of Tetra Tech Common Stock; and
C. This Agreement is the Registration Rights Agreement referred to in
SECTION 7.2 of the Reorganization Agreement and, pursuant thereto, must be
entered into by the parties as a condition to the consummation of the
transactions contemplated by the Reorganization Agreement.
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"FORM S-3" shall mean such form under the Securities Act as in effect
on the date hereof or any successor registration form under the Securities Act
subsequently
<PAGE>
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by Tetra Tech with the SEC.
"PROSPECTUS" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable Securities
covered by the Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such Prospectus.
"REGISTER", "REGISTERED" and "REGISTRATION" shall mean and refer to a
registration effected by preparing and filing a Registration Statement and
taking all other actions that are necessary or appropriate in connection
therewith, and the declaration or ordering of effectiveness of such Registration
Statement by the SEC.
"REGISTRATION EXPENSES" shall have the meaning set forth in SECTION 6.
"REGISTRABLE SECURITIES" shall mean the shares of Tetra Tech Common
Stock (i) issued pursuant to the Reorganization Agreement, (ii) issued upon
conversion of the Tetra Tech Preferred Stock, and (iii) issued as a dividend or
other distribution with respect to or in exchange for or in replacement of the
shares referenced in (i) or (ii) above; PROVIDED, HOWEVER, that Registrable
Securities shall not include any shares of Tetra Tech Common Stock that have
previously been registered or sold to the public or have been sold in a private
transaction.
"REGISTRATION STATEMENT" shall mean any registration statement of
Tetra Tech in compliance with the Securities Act that covers Registrable
Securities pursuant to the provisions of this Agreement, including, without
limitation, the Prospectus, all amendments and supplements to such Registration
Statement, including all post-effective amendments, all exhibits and all
material incorporated by reference in such Registration Statement.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act or
any similar successor rule, as the same shall be in effect from time to time.
"RULE 144A" shall mean Rule 144A promulgated under the Securities Act
or any similar successor rule, as the same shall be in effect from time to time.
"RULE 145" shall mean Rule 145 promulgated under the Securities Act,
or any similar successor rule, as the same shall be in effect from time to time.
"RULE 415" shall mean Rule 415 promulgated under the Securities Act,
or any similar successor rule, as the same shall be in effect from time to time.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended
from time to time.
2
<PAGE>
"SEC" shall mean the Securities and Exchange Commission.
"UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" shall mean a
registration in which securities of Tetra Tech are sold to an underwriter or
through an underwriter as agent for reoffering to the public.
2. TETRA TECH REGISTRATION. If Tetra Tech shall determine to register
any shares of Tetra Tech Common Stock, or any securities convertible into or
exchangeable or exercisable for shares of Tetra Tech Common Stock, for its own
account or for the account of any stockholder (other than a registration
relating to the sale of securities to employees of Tetra Tech pursuant to an
employee benefit plan or pursuant to a transaction of the type described in
Rule 145 under the Securities Act), the Holders shall be entitled to include
Registrable Securities in such registration (and related underwritten offering,
if any) on the following terms and conditions:
(a) Tetra Tech shall promptly give written notice of such
determination to each Holder and each such Holder shall have the right to
request, by written notice given to Tetra Tech within 30 days of the receipt by
such Holder of such notice, that a specific number of Registrable Securities
held by such Holder be included in such Registration Statement;
(b) If the Registration Statement relates to an underwritten
offering, the notice called for by SECTION 2(a) shall specify the name of the
managing underwriter for such offering and the number of securities to be
registered for the account of Tetra Tech and for the account of any other
stockholder of Tetra Tech;
(c) If the Registration Statement relates to an underwritten
offering, each Holder to be included therein must (i) sell such person's
Registrable Securities on the same basis provided in the underwriting
arrangements approved by Tetra Tech and (ii) complete and execute all
questionnaires, powers of attorney, indemnities, hold-back agreements,
underwriting agreements and other documents required under the terms of such
underwriting arrangements or by the SEC;
(d) If the managing underwriter for the underwritten offering under
the Registration Statement to be filed by Tetra Tech determines that inclusion
of all or any portion of the Registrable Securities in such offering would
adversely affect the ability of the underwriter for such offering to sell all of
the securities requested to be included for sale or the price per share in such
offering, the number of shares that may be included in such registration in such
offering shall be allocated as follows: (i) first, Tetra Tech shall be
permitted to include all shares of capital stock to be registered thereby;
(ii) second, the Holders, on a pro rata basis based on the total number of
Registrable Securities held thereby (or on such other basis as may be agreed
among them), shall be allowed to include such amount of the Registrable
Securities as the managing underwriter deems appropriate; and (iii) third, any
other selling stockholder exercising piggyback registration rights shall be
3
<PAGE>
allowed to include securities in such amounts as may be deemed appropriate by
such managing underwriter;
(e) Holders shall have the right to withdraw their Registrable
Securities from the Registration Statement at any time prior to the effective
date thereof, but if the same relates to an underwritten offering, they may only
do so during the time period and on terms deemed appropriate by the underwriters
for such underwritten offering; and
(f) Tetra Tech shall have the right to terminate or withdraw any
registration initiated by it under this SECTION 2 prior to the effective date of
such registration for any reason without liability to any Holder as a result
thereof, whether or not any Holder has elected to include such securities in
such registration.
3. FORM S-3 REGISTRATION.
---------------------
(a) Tetra Tech shall file a Registration Statement on Form S-3
providing for the sale by the Holders, pursuant to Rule 415, and/or any similar
rule that may be adopted by the SEC, of the Registrable Securities, and Tetra
Tech shall use all commercially reasonable efforts to cause such Registration
Statement to become effective on or before December 10, 1997 and to keep such
Registration Statement continuously effective for a period ending on the date on
which all Holders are eligible to sell Registrable Securities under Rule 144(k)
(or similar successor Rule).
(b) No Holder shall have the right to register securities under this
Agreement unless such Holder provides and/or confirms in writing prior to or
after the filing of the Registration Statement such information (including,
without limitation, information as to the number of Registrable Securities that
such Holder has sold pursuant to any such Registration Statement from time to
time) as Tetra Tech requests in connection with such Registration Statement.
(c) Notwithstanding the foregoing, for a period not to exceed 90 days
in any 12-month period, Tetra Tech shall not be obligated to prepare and file,
or be prevented from delaying or abandoning, the Registration Statement required
hereunder if Tetra Tech, in its good faith judgment, reasonably believes that
the filing or maintenance of such Registration Statement would require the
disclosure of material non-public information regarding Tetra Tech and,
accordingly, that the filing thereof, at the time requested, or the offering of
Tetra Tech Common Stock pursuant thereto, would materially and adversely affect
(A) a pending or scheduled public offering or private placement of securities of
Tetra Tech, (B) an acquisition, merger, consolidation or similar transaction by
or of Tetra Tech, (C) preexisting and continuing negotiations, discussions or
pending proposals with respect to any of the foregoing transactions, or (D) the
financial condition of Tetra Tech in view of the disclosure of any pending or
threatened litigation, claim, assessment or governmental investigation which
might be required thereby.
4
<PAGE>
In the event that Tetra Tech, in good faith, reasonably believes that such
conditions are continuing after such 90-day period, it may, with the consent of
the Holders of a majority of the Registrable Securities subject (or to be
subject) to the Registration Statement, which consent shall not be unreasonably
withheld, extend such 90-day period for an additional 30 days. Any further
delay shall require the consent of the Holders of all such shares.
4. RESTRICTIONS ON PUBLIC SALE BY HOLDERS OF REGISTRABLE SECURITIES.
Each Holder whose Registrable Securities are included (in whole or in part) in a
Registration Statement filed by Tetra Tech under SECTION 2 for sale in an
underwritten offering agrees, if requested by the managing underwriter of such
offering, not to sell, make any short sale of, loan, grant any option for the
purchase of, dispose of or effect any public sale or distribution of securities
of the same series and class as (or securities exchangeable or exercisable for
or convertible into securities of the same series and class as) the Registrable
Securities included in the Registration Statement, including a sale pursuant to
Rule 144 (except as part of such underwritten registration), during the ten day
period prior to, and during the 180 day period (or shorter period requested by
the underwriter) beginning on the closing date of such underwritten offering, to
the extent timely notified in writing by Tetra Tech or the managing underwriter.
5. REGISTRATION PROCEDURES. In connection with Tetra Tech's registration
obligations pursuant to SECTIONS 2 or 3 hereof, Tetra Tech will use its diligent
efforts to effect such registration to permit the sale of the Registrable
Securities covered thereby in accordance with the intended method or methods of
disposition thereof, and pursuant thereto Tetra Tech will:
(a) prepare and file with the SEC a Registration Statement with
respect to such Registrable Securities and use its diligent efforts to cause
such Registration Statement to become effective; PROVIDED that, before filing
any Registration Statement or Prospectus or any amendments or supplements
thereto, Tetra Tech will furnish to the Holders of the Registrable Securities
covered by such Registration Statement and their counsel, copies of all such
documents proposed to be filed at least ten days prior thereto, and Tetra Tech
will not file any such Registration Statement or amendment thereto or any
Prospectus or any supplement thereto to which any such Holder shall reasonably
object within such ten day period; PROVIDED, FURTHER, that Tetra Tech will not
name or otherwise provide any information with respect to any Holder in any
Registration Statement or Prospectus without the express written consent of such
Holder, unless required to do so by the Securities Act and the rules and
regulations thereunder;
(b) prepare and file with the SEC such amendments, post-effective
amendments and supplements to the Registration Statement and the Prospectus as
may be necessary to comply with the provisions of the Securities Act and the
rules and regulations thereunder with respect to the disposition of all
securities covered by such Registration Statement;
5
<PAGE>
(c) promptly notify the selling Holders (i) when the Prospectus or
any Prospectus supplement or post-effective amendment has been filed, and, with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the SEC for amendments or
supplements to the Registration Statement or the Prospectus or for additional
information, (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose, (iv) of the receipt by Tetra Tech of any notification with
respect to the suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose and (v) of the happening of any event which makes any statement
made in the Registration Statement, the Prospectus or any document incorporated
therein by reference untrue or which requires the making of any changes in the
Registration Statement, the Prospectus or any document incorporated therein by
reference in order to make the statements therein not misleading in light of the
circumstances then existing;
(d) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(e) furnish to each selling Holder, without charge, at least one
signed copy of the Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference);
(f) deliver to each selling Holder, without charge, such reasonable
number of conformed copies of the Registration Statement (and any post-effective
amendment thereto) and such number of copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto (and any
documents incorporated by reference therein) as such Holder may reasonably
request; Tetra Tech consents to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders in connection with the offer
and sale of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto;
(g) prior to any offering of Registrable Securities covered by a
Registration Statement, register or qualify or cooperate with the selling
Holders in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions as any such selling Holder reasonably requests, and use its
reasonable efforts to keep each such registration or qualification effective,
including through new filings, or amendments or renewals, during the period such
Registration Statement is required to be kept effective pursuant to the terms of
this Agreement; and do any and all other acts or things necessary or advisable
to enable the disposition in all such jurisdictions reasonably requested by the
Holders of the Registrable Securities covered by such Registration Statement,
PROVIDED that under no circumstances shall
6
<PAGE>
Tetra Tech be required in connection therewith or as a condition thereof to
qualify to do business or to file a general consent to service of process in
any such states or jurisdictions;
(h) cooperate with the selling Holders and the managing underwriter
or underwriters to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, free of any and all
restrictive legends, such certificates to be in such denominations and
registered in such names as the managing underwriter or underwriters, if any, or
such Holders may request;
(i) upon the occurrence of any event contemplated by SECTION 5(c)(v)
above, prepare a supplement or post-effective amendment to the Registration
Statement or the Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading;
(j) make generally available to the holders of Tetra Tech's
outstanding securities earnings statements satisfying the provisions of
Section 11(a) of the Securities Act, no later than 60 days after the end of any
12 month period (or 90 days, if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm or best efforts underwritten offering, or, if not sold to
underwriters in such an offering, (ii) beginning with the first month of Tetra
Tech's first fiscal quarter commencing after the effective date of the
Registration Statement, which statements shall cover said 12 month period;
(k) provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities covered by each Registration Statement from and
after a date not later than the effective date of such Registration Statement;
(l) use its best efforts to cause all Registrable Securities covered
by each Registration Statement to be listed, subject to notice of issuance,
prior to the date of the first sale of such Registrable Securities pursuant to
such Registration Statement, on each securities exchange on which the Tetra Tech
Common Stock is then listed, and admitted to trading on the Nasdaq Stock Market,
if the Tetra Tech Common Stock is then admitted to trading on the Nasdaq Stock
Market;
(m) enter into such agreements (including underwriting agreements in
customary form containing, among other things, reasonable and customary
indemnities) and take such other actions as a majority of the Holders shall
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities; and
7
<PAGE>
(n) cooperate with the selling Holders and the managing underwriter
or underwriters in their marketing efforts with respect to the sale of the
Registrable Securities, including participation by Tetra Tech management in
"road show" presentations.
Each Holder agrees that, upon receipt of any notice from Tetra Tech of the
happening of any event of the kind described in SECTION 5(c)(v) hereof, such
Holder will forthwith discontinue disposition of Registrable Securities under
the Prospectus related to the applicable Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by SECTION 5(i) hereof, or until it is advised in writing by Tetra
Tech that the use of the Prospectus may be resumed. It shall be a condition
precedent to the obligations of Tetra Tech to take any action pursuant to this
SECTION 5 with respect to the Registrable Securities of any selling Holder that
such Holder shall furnish to Tetra Tech such information regarding itself and
the Registrable Securities held by it as shall be required by the Securities Act
to effect the registration of such Holder's Registrable Securities.
6. REGISTRATION EXPENSES. All expenses incident to any registration to
be effected hereunder and incident to Tetra Tech's performance of or compliance
with this Agreement, including without limitation all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, National Association of Securities
Dealers, Inc., stock exchange and qualification fees, fees and disbursements of
Tetra Tech's counsel and of independent certified public accountants of Tetra
Tech (including the expenses of any special audit required by or incident to
such performance), the fees of one counsel representing the Holders in such
offering, expenses of the underwriters that are customarily requested in similar
circumstances by such underwriters (excluding discounts, commissions or fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals relating to the distribution of the Registrable Securities, which
will be borne by the Holders), all such expenses being herein called
"Registration Expenses," will be borne by Tetra Tech. Tetra Tech will also pay
its internal expenses, the expense of any annual audit and the fees and expenses
of any person retained by Tetra Tech.
7. INDEMNIFICATION.
---------------
(a) INDEMNIFICATION BY TETRA TECH. Tetra Tech agrees to indemnify
and hold harmless each Holder of Registrable Securities, its officers,
directors, partners and employees and each person who controls such Holder
(within the meaning of SECTION 15 of the Securities Act) from and against any
and all losses, claims, damages and liabilities (including any investigation,
legal or other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim asserted)
(collectively, "Damages") to which such Holder may become subject under the
Securities Act, the Exchange Act or other federal or state securities law or
regulation, at common law or otherwise, insofar as such Damages arise out of or
are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or preliminary
prospectus or any amendment or supplement thereto,
8
<PAGE>
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading and
(iii) any violation or alleged violation by Tetra Tech of the Securities Act,
the Exchange Act or any state securities or blue sky laws in connection with
the Registration Statement, Prospectus or preliminary prospectus or any
amendment or supplement thereto, PROVIDED that Tetra Tech will not be liable
to any Holder to the extent that such Damages arise from or are based upon
any untrue statement or omission (x) based upon written information furnished
to Tetra Tech by such Holder expressly for the inclusion in such Registration
Statement, (y) made in any preliminary prospectus if such Holder failed to
deliver a copy of the Prospectus with or prior to the delivery of written
confirmation of the sale by such Holder to the party asserting the claim
underlying such Damages and such Prospectus would have corrected such untrue
statement or omission and (z) made in any Prospectus if such untrue statement
or omission was corrected in an amendment or supplement to such Prospectus
and such Holder failed to deliver such amendment or supplement prior to or
concurrently with the sale of Registrable Securities to the party asserting
the claim underlying such Damages.
(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. Each Holder
of Registrable Securities whose Registrable Securities are sold under a
Prospectus which is a part of a Registration Statement agrees to indemnify and
hold harmless Tetra Tech, its directors and each officer who signed such
Registration Statement and each person who controls Tetra Tech (within the
meaning of Section 15 of the Securities Act), and each other Holder of
Registrable Securities whose Registrable Securities are sold under the
Prospectus which is a part of such Registration Statement (and such Holder's
officers, directors and employees and each person who controls such Holder
within the meaning of Section 15 of the Securities Act), under the same
circumstances as the foregoing indemnity from Tetra Tech to each Holder of
Registrable Securities to the extent that such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement of a
material fact or omission of a material fact that was made in the Prospectus,
the Registration Statement, or any amendment or supplement thereto, in reliance
upon and in conformity with information relating to such Holder furnished in
writing to Tetra Tech by such Holder expressly for use therein, PROVIDED that in
no event shall the aggregate liability of any selling Holder of Registrable
Securities exceed the amount of the net proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation. Tetra Tech and the selling Holders shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to the same
extent as customarily furnished by such persons in similar circumstances.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person entitled to
indemnification hereunder will (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; PROVIDED, HOWEVER, that any person
entitled to indemnification hereunder shall have
9
<PAGE>
the right to employ separate counsel and to participate in the defense of
such claim, but the fees and expenses of such counsel shall be at the expense
of such person and not of the indemnifying party unless (A) the indemnifying
party has agreed to pay such fees or expenses, (B) the indemnifying party
shall have failed to assume the defense of such claim and employ counsel
reasonably satisfactory to such person or (C) in the reasonable judgment of
such person and the indemnifying party, based upon advice of their respective
counsel, a conflict of interest may exist between such person and the
indemnifying party with respect to such claims (in which case, if the person
notifies the indemnifying party in writing that such person elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such claim on behalf
of such person). If such defense is not assumed by the indemnifying party,
the indemnifying party will not be subject to any liability for any
settlement made without its consent (but such consent will not be
unreasonably withheld). No indemnified party will be required to consent to
entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by all claimants or plaintiffs to
such indemnified party of a release from all liability in respect to such
claim or litigation. Any indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim. As used in this SECTION
7(c), the terms "indemnifying party", "indemnified party" and other terms of
similar import are intended to include only Tetra Tech (and its officers,
directors and control persons as set forth above) on the one hand, and the
Holders (and their officers, directors, partners, employees, attorneys and
control persons as set forth above) on the other hand, as applicable.
(d) CONTRIBUTION. If for any reason the foregoing indemnity is
unavailable, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand and the
indemnified party on the other, or (ii) if the allocation provided by CLAUSE (i)
above is not permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such proportion as
is appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other but
also the relative fault of the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. Notwithstanding the
foregoing, no Holder shall be required to contribute any amount in excess of the
amount such Holder would have been required to pay to an indemnified party if
the indemnity under SECTION 7(b) hereof was available. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The obligation of any person to
contribute pursuant to this SECTION 7(d) shall be several and not joint.
(e) TIMING OF PAYMENTS. An indemnifying party shall make payments of
all amounts required to be made pursuant to the foregoing provisions of this
10
<PAGE>
SECTION 7 to or for the account of the indemnified party from time to time
promptly upon receipt of bills or invoices relating thereto or when otherwise
due or payable.
(f) SURVIVAL. The indemnity and contribution agreements contained in
this SECTION 7 shall remain in full force and effect, regardless of any
investigation made by or on behalf of a participating Holder, its officers,
directors, partners, attorneys, agents or any person, if any, who controls such
Holder as aforesaid, and shall survive the transfer of such Registrable
Securities by such Holder.
8. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of a Registration Statement pursuant to the terms of this
Agreement:
(a) Tetra Tech shall, with respect to a Registration Statement filed
pursuant to SECTION 3, give the Holders of such Registrable Securities so
registered, their underwriters, if any, and their respective counsel and
accountants the opportunity to participate in the preparation of such
Registration Statement (other than reports and proxy statements incorporated
therein by reference and lawfully and properly filed with the SEC) and each
Prospectus included therein or filed with the SEC, and each amendment thereof or
supplement thereto; and
(b) Tetra Tech shall give the Holders of such Registrable Securities
so registered, their underwriters, if any, and their respective counsel and
accountants such reasonable access to its books and records and such
opportunities to discuss the business of Tetra Tech with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such Holders or such underwriters, to
conduct a reasonable investigation within the meaning of Section 11(b)(3) of the
Securities Act.
9. RULE 144. Tetra Tech covenants that it will use commercially
reasonable efforts to file, on a timely basis, the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder, and it will take such further action
as any Holder may reasonably request (including, without limitation, compliance
with the current public information requirements of Rule 144(c) and Rule 144A),
all to the extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the conditions provided by Rule 144, Rule 144A or any similar rule
or regulation hereafter adopted by the SEC. Upon the request of any Holder,
Tetra Tech will deliver to such holder a written statement verifying that it has
complied with such information and requirements.
10. SPECIFIC PERFORMANCE. Each Holder, in addition to being entitled to
exercise all rights provided herein or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. Tetra Tech agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a
11
<PAGE>
breach by it of the provisions of this Agreement and hereby agrees to waive
the defense in any action for specific performance that a remedy at law would
be adequate.
11. NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by United States first-class
mail, postage prepaid, sent by facsimile or delivered personally by hand or
nationally recognized courier addressed (a) if to a Holder, as indicated on the
list of Holders attached hereto as SCHEDULE A, or at such other address as such
Holder or permitted assignee shall have furnished to Tetra Tech in writing, or
(b) if to Tetra Tech, at such address or facsimile number as Tetra Tech shall
have furnished to each Holder in writing. All such notices and other written
communications shall be effective on the date of mailing, facsimile transfer or
delivery.
12. SUCCESSORS AND ASSIGNS: ASSIGNMENT OF RIGHTS. The rights and benefits
of a Holder hereunder may not be assigned to a transferee or assignee, without
the consent of Tetra Tech; PROVIDED, HOWEVER, that, no later than the 10th day
prior to the filing of the Registration Statement under SECTION 3 hereof, the
rights and benefits of a Holder hereunder may be transferred in connection with
a transfer or assignment of any Registrable Securities held by such Holder
(i) by gift to immediate family members of such Holder, or trusts or other
entities for the sole benefit thereof, or (ii) by gift to any entity in which
such Holder, his or her immediate family members, or trusts or other entities
for the sole benefit thereof beneficially own all of the voting securities;
PROVIDED, HOWEVER, that in each case, the transferee executes an instrument
pursuant to which the transferee agrees to be bound by the terms and conditions
hereof as a Holder, and such other documents as Tetra Tech or its counsel may
reasonably require, after which, such transferee shall be deemed a "Holder"
hereunder. Any transfer of Registrable Securities, and rights hereunder, shall
be subject to compliance with applicable securities laws and the restrictions
contained in the Investment Letter executed by each Holder pursuant to the
Reorganization Agreement.
13. SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
14. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement, the
Reorganization Agreement and the other agreements contemplated thereby
constitute the full and entire understanding and agreement among the parties
with regard to the subjects hereof and thereof. Without limiting the foregoing,
the rights of the Holders to registration pursuant to the terms of this
Agreement shall be subject to the limitations on resale contained in the
Investment Letter (as defined in the Reorganization Agreement). Neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated,
except by a written instrument signed by Tetra Tech and the holders of at least
51% of the Registrable Securities and any such amendment, waiver, discharge or
termination shall be
12
<PAGE>
binding upon all the parties hereto, but in no event shall the obligation of
any party hereto be materially increased, except upon the written consent of
such party.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be original, and all of which together shall
constitute one instrument.
16. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware without giving effect to
principles of conflicts of laws thereof.
17. NO THIRD PARTY BENEFICIARIES. The covenants and agreements set forth
herein are for the sole and exclusive benefit of the parties hereto and their
respective successors and assigns and such covenants and agreements shall not be
construed as conferring, and are not intended to confer, any rights or benefits
upon any other persons.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TETRA TECH: TETRA TECH, INC.
By: /s/ LI-SAN HWANG
----------------
Li-San Hwang
President and Chief Executive Officer
HOLDERS: /s/ DANIEL A. WHALEN
--------------------
Daniel A. Whalen
Daniel A. Whalen and Katharine C. Whalen as
Trustees for the MJW Whalen Trust 1997 - D
By: /s/ DANIEL A. WHALEN
--------------------
Daniel A. Whalen
By: /s/ KATHARINE C. WHALEN
-----------------------
Katharine C. Whalen
13
<PAGE>
Daniel A. Whalen and Katharine C. Whalen as
Trustees for the ACW Whalen Trust 1997 - D
By: /s/ DANIEL A. WHALEN
--------------------
Daniel A. Whalen
By: /s/ KATHARINE C. WHALEN
-----------------------
Katharine C. Whalen
Daniel A. Whalen and Katharine C. Whalen as
Trustees for the MCW Whalen Trust 1997 - D
By: /s/ DANIEL A. WHALEN
--------------------
Daniel A. Whalen
By: /s/ KATHARINE C. WHALEN
-----------------------
Katharine C. Whalen
Daniel A. Whalen and Katharine C. Whalen as
Trustees for the MJW Whalen Trust 1997 - K
By: /s/ DANIEL A. WHALEN
--------------------
Daniel A. Whalen
By: /s/ KATHARINE C. WHALEN
-----------------------
Katharine C. Whalen
14
<PAGE>
Daniel A. Whalen and Katharine C. Whalen as
Trustees for the ACW Whalen Trust 1997 - K
By: /s/ DANIEL A. WHALEN
--------------------
Daniel A. Whalen
By: /s/ KATHARINE C. WHALEN
-----------------------
Katharine C. Whalen
Daniel A. Whalen and Katharine C. Whalen as
Trustees for the MCW Whalen Trust 1997 - K
By: /s/ DANIEL A. WHALEN
--------------------
Daniel A. Whalen
By: /s/ KATHARINE C. WHALEN
-----------------------
Katharine C. Whalen
15
<PAGE>
SCHEDULE A
----------
SCHEDULE OF HOLDERS
Number of Shares of Tetra Tech
Common Stock and Tetra Tech
Preferred Stock Issued Pursuant
Holder's Name/Address/Telecopier No. to the Reorganization Agreement
- ------------------------------------ -------------------------------
Daniel A. Whalen 1,617,000 shares of Common Stock
586 Ostrander Road 1,185,646 shares of Preferred Stock
Oakland, California 94618
(510) 547-1345
Daniel A. Whalen and Katharine C. 10,500 shares of Common Stock
Whalen as Trustees for the MJW 7,699 shares of Preferred Stock
Whalen Trust 1997 - D
586 Ostrander Road
Oakland, California 94618
(510) 547-1345
Daniel A. Whalen and Katharine C. 10,500 shares of Common Stock
Whalen as Trustees for the ACW 7,699 shares of Preferred Stock
Whalen Trust 1997 - D
586 Ostrander Road
Oakland, California 94618
(510) 547-1345
Daniel A. Whalen and Katharine C. 10,500 shares of Common Stock
Whalen as Trustees for the MCW 7,699 shares of Preferred Stock
Whalen Trust 1997 - D
586 Ostrander Road
Oakland, California 94618
(510) 547-1345
Daniel A. Whalen and Katharine C. 10,500 shares of Common Stock
Whalen as Trustees for the MJW 7,699 shares of Preferred Stock
Whalen Trust 1997 - K
586 Ostrander Road
Oakland, California 94618
(510) 547-1345
16
<PAGE>
Daniel A. Whalen and Katharine C. 10,500 shares of Common Stock
Whalen as Trustees for the ACW 7,699 shares of Preferred Stock
Whalen Trust 1997 - K
586 Ostrander Road
Oakland, California 94618
(510) 547-1345
Daniel A. Whalen and Katharine C. 10,500 shares of Common Stock
Whalen as Trustees for the MCW 7,699 shares of Preferred Stock
Whalen Trust 1997 - K
586 Ostrander Road
Oakland, California 94618
(510) 547-1345
17
<PAGE>
EXHIBIT 11
Tetra Tech, Inc.
Computation of Net Income Per Common Share
(Unaudited)
$ in thousands, except share data
<TABLE>
Three Months Ended Nine Months Ended
------------------------ ----------------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Primary:
Common stock outstanding, beginning
of period.............................. 14,436,958 14,081,072 14,127,002 13,235,309
Stock options exercised................. 44,484 29,430 104,621 84,957
Stock Purchase plan issuance............ 98,585 -- 98,585 --
Payment of fractional/canceled shares... -- (189) -- (189)
Issuance of common stock................ 1,684,224 -- 1,934,043 790,236
----------- ----------- ----------- -----------
Common stock outstanding, end
of period.............................. 16,264,251 14,110,313 16,264,251 14,110,313
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Preferred stock outstanding............. 1,231,840 -- 1,231,840 --
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average common stock
outstanding during the period.......... 14,833,853 14,094,911 14,420,063 13,941,025
Common stock equivalents under the
treasury stock method assuming the
exercise of options and warrants
and the conversion of preferred
stock.................................. 598,573 469,693 498,145 465,471
----------- ----------- ----------- -----------
Total................................ 15,432,426 14,564,604 14,918,208 14,406,496
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income as reported in consolidated
financial statements................... $ 3,644,000 $ 2,625,000 $ 9,111,000 $ 6,951,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Primary net income per common share..... $ 0.24 $ 0.18 $ 0.61 $ 0.48
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Fully Diluted:
Weighted average common shares
outstanding during the period.......... 14,833,853 14,094,911 14,420,063 13,941,025
Common stock equivalents under the
treasury stock method assuming the
exercise of options and warrants
and the conversion of preferred
stock.................................. 811,877 531,078 660,232 539,212
----------- ----------- ----------- -----------
Total................................ 15,590,678 14,625,989 15,061,945 14,480,237
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income as reported in consolidated
financial statements................... $ 3,644,000 $ 2,625,000 $ 9,111,000 $ 6,951,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Fully diluted net income per common
share.................................. $ 0.23 $ 0.18 $ 0.60 $ 0.48
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to the condensed consolidated
financial statements.
-22-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-END> JUN-29-1997
<CASH> 12,793
<SECURITIES> 0
<RECEIVABLES> 59,202
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 80,706
<PP&E> 17,191
<DEPRECIATION> 8,770
<TOTAL-ASSETS> 154,363
<CURRENT-LIABILITIES> 43,289
<BONDS> 0
0
12
<COMMON> 163
<OTHER-SE> 110,899
<TOTAL-LIABILITY-AND-EQUITY> 154,363
<SALES> 60,922
<TOTAL-REVENUES> 60,922
<CGS> 47,971
<TOTAL-COSTS> 47,971
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84
<INCOME-PRETAX> 6,211
<INCOME-TAX> 2,567
<INCOME-CONTINUING> 3,644
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,644
<EPS-PRIMARY> .24
<EPS-DILUTED> .23
</TABLE>
