<PAGE>
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 28, 1998
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 August 3, 1998, the total number of outstanding shares of the Registrant's
common stock was 22,863,478.
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TETRA TECH, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I. FINANCIAL INFORMATION
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 7
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
</TABLE>
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<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1.
Tetra Tech, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
In thousands, except share data June 28, September 28,
1998 1997
-------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,872 $ 12,262
Accounts receivable - net 60,566 30,089
Unbilled receivables - net 46,367 35,145
Prepaid and other current assets 6,733 2,522
Deferred income taxes 867 867
---------- ----------
Total Current Assets 121,405 80,885
---------- ----------
PROPERTY AND EQUIPMENT:
Leasehold improvements 1,307 1,177
Equipment, furniture and fixtures 20,797 16,838
---------- ----------
Total 22,104 18,015
Accumulated depreciation and amortization (12,672) (9,592)
---------- ----------
PROPERTY AND EQUIPMENT - NET 9,432 8,423
INTANGIBLE ASSETS - NET 71,939 69,439
OTHER ASSETS 1,317 766
---------- ----------
TOTAL ASSETS $ 204,093 $ 159,513
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 16,639 $ 11,621
Accrued compensation 10,819 10,981
Other current liabilities 4,835 6,386
Current portion of long-term obligations 19,522 8,000
Income taxes payable 400 1,358
---------- ----------
Total Current Liabilities 52,215 38,346
---------- ----------
LONG-TERM OBLIGATIONS 10,000 --
---------- ----------
MINORITY INTEREST 1,956 --
---------- ----------
REDEEMABLE PREFERRED STOCK -- 13,526
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock - authorized, 2,000,000
shares of $.01 par value; issued and
outstanding 0 and 1,231,840 shares at
June 28, 1998 and September 28, 1997,
respectively -- --
Common stock - authorized, 30,000,000
shares of $.01 par value; issued and
outstanding 22,621,565 and 20,714,254
shares at June 28, 1998 and September
28, 1997, respectively 226 207
Additional paid in capital 81,700 63,502
Retained earnings 57,996 43,932
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 139,922 107,641
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 204,093 $ 159,513
========== ==========
</Table)
See accompanying notes to the condensed consolidated financial statements.
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Tetra Tech, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
In thousands, except per Three Months Ended Nine Months Ended
share data --------------------- ---------------------
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Gross Revenue $ 98,231 $ 60,922 $257,396 $171,406
Subcontractor costs 23,082 12,301 56,777 38,447
---------- ---------- ---------- ----------
Net Revenue 75,149 48,621 200,619 132,959
Cost of Net Revenue 54,405 35,660 149,530 100,077
---------- ---------- ---------- ----------
Gross Profit 20,744 12,961 51,089 32,882
Selling, General and
Administrative Expenses 9,333 6,754 23,627 17,390
---------- ---------- ---------- ----------
Income From Operations 11,411 6,207 27,462 15,492
Interest Expense 624 84 1,433 127
Interest Income (114) (88) (254) (210)
---------- ---------- ---------- ----------
Income Before Income Taxes
and Minority Interest 10,901 6,211 26,283 15,575
Income to Minority Interest 1,194 -- 1,397 --
---------- ---------- ---------- ----------
Income Before Income Taxes 9,707 6,211 24,886 15,575
Income Tax Expense 4,214 2,567 10,822 6,464
---------- ---------- ---------- ----------
Net Income $ 5,493 $ 3,644 $ 14,064 $ 9,111
========== ========== ========== ==========
Basic Earnings Per Share $ 0.24 $ 0.20 $ 0.63 $ 0.51
========== ========== ========== ==========
Diluted Earnings Per Share $ 0.24 $ 0.19 $ 0.61 $ 0.49
========== ========== ========== ==========
Weighted Average Common Shares
Outstanding:
Basic 22,518 18,543 22,205 18,025
========== ========== ========== ==========
Diluted 23,361 19,252 23,196 18,635
========== ========== ========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
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<PAGE>
Tetra Tech, Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
In thousands Nine Months Ended
------------------------
June 28, June 29,
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14,064 $ 9,111
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,102 2,929
Undistributed earnings to minority interest 1,397 --
Other (631) (71)
Changes in operating assets and liabilities, net
of effects of acquisitions:
Accounts receivable (16,655) 10
Unbilled receivables 1,074 (8,849)
Prepaid and other assets (4,981) (305)
Accounts payable 4,937 2,844
Accrued compensation (304) (3,976)
Other current liabilities (4,511) (1,214)
Income taxes payable (1,346) 174
---------- ----------
Net Cash Used In Operating Activities (1,854) (5,035)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,374) (1,832)
Proceeds from sale of property and equipment -- 44
Payments for business acquisitions, net of
cash acquired (25,948) (1,124)
---------- ----------
Net Cash Used In Investing Activities (28,322) (2,912)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (27,519) (1,842)
Proceeds from issuance of long-term debt 49,000 8,000
Proceeds from payable to stockholder -- 5,479
Net proceeds from issuance of common stock 3,305 2,974
---------- ----------
Net Cash Provided By Financing Activities 24,786 14,611
---------- ----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (5,390) 6,664
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 12,262 6,129
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,872 $ 12,793
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION -
Cash paid during the period for:
Interest $ 1,197 $ 83
========== ==========
Income taxes $ 12,168 $ 9,513
========== ==========
</TABLE>
(Continued)
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Tetra Tech, Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
In thousands Nine Months Ended
------------------------
June 28, June 29,
1998 1997
---------- ----------
<S> <C> <C>
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING
ACTIVITIES:
In the nine months ended June 29, 1997, the
Company purchased all of the capital stock
of IWA Engineers, FLO Engineering, Inc.,
SCM Consultants, Inc., Whalen & Company, Inc.
and Whalen Service Corps Inc. In conjunction
with these acquisitions, liabilities were
assumed as follows:
Fair value of assets acquired $ 60,255
Cash paid (8,811)
Issuance of common stock (35,789)
Other acquisition costs (1,926)
----------
Liabilities assumed $ 13,729
==========
In December 1997, the Company, through its
wholly-owned subsidiary Tetra Tech NUS, Inc.,
purchased the assets of certain environmental
services businesses of Brown & Root, Inc. and
Halliburton NUS Corporation, both of which
were subsidiaries of Halliburton Company. In
conjunction with this acquisition, liabilities
were assumed as follows:
Fair value of assets acquired $ 27,794
Cash paid (24,872)
Other acquisition costs (325)
----------
Liabilities assumed $ 2,597
==========
In March 1998, the Company, through its wholly-
owned subsidiary Whalen Service Corps Inc.,
purchased certain assets of TANCO LLC, dba
Integration Technologies from ANTEC Corporation.
This purchase was related to a limited liability
company agreement between Whalen Service Corps
Inc. and Sentrex Cen-Comm. In conjunction with
this acquisition, liabilities were assumed
as follows:
Fair value of assets acquired $ 1,572
Cash paid (623)
----------
Liabilities assumed $ 949
==========
In March 1998, the Company purchased all of the
capital stock of C.D.C. Engineering, Inc.
In conjunction with this acquisition,
liabilities were assumed as follows:
Fair value of assets acquired $ 2,299
Cash paid (323)
Issuance of common stock (1,294)
Other acquisition costs (70)
----------
Liabilities assumed $ 612
==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
(Concluded)
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TETRA TECH, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated balance sheets as of June 28, 1998,
the condensed consolidated statements of income for the three-month and nine-
month periods ended June 28, 1998 and June 29, 1997 and the condensed
consolidated statements of cash flows for the nine-month periods ended June 28,
1998 and June 29, 1997 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 28, 1997.
The results of operations for the three and nine months ended June 28, 1998
are not necessarily indicative of the results to be expected for the fiscal year
ending October 4, 1998.
2. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE, which the
Company has adopted in the accompanying financial statements. The Statement
replaces the presentation of primary Earnings Per Share (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. Diluted EPS is computed similarly to
fully diluted EPS pursuant to Accounting Principles Board Opinion No. 15. EPS
for 1997 have been restated to reflect the requirement of SFAS 128. Basic and
diluted EPS reflect, on a retroactive basis, a 5-for-4 stock split, effected in
the form of a 25% stock dividend, wherein one additional share of stock was
issued on December 1, 1997 for each four shares outstanding as of the record
date of November 14, 1997.
3. CURRENT ASSETS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. Cash and cash
equivalents totaled $6,872,000 and $12,262,000 at June 28, 1998 and September
28, 1997, respectively.
-7-
<PAGE>
<PAGE>
4. MERGERS AND ACQUISITIONS
On March 26, 1998, the Company acquired 100% of the capital stock of C.D.C.
Engineering, Inc. (CDCE), a consulting and engineering firm specializing in
civil engineering, transportation engineering, structural engineering and land
surveying. The purchase has been valued at approximately $1,617,000 consisting
of Company common stock and cash, and is subject to a purchase price adjustment
based on CDCE's Net Asset Value as of March 26, 1998 as described in the related
purchase agreement.
On March 2, 1998, Whalen Service Corps Inc. (WSC) agreed to participate in
a partnership with Sentrex Cen-Comm and ANTEC Corporation to provide design,
engineering, information management and construction services to support
advanced communication system upgrades to the broadband information transport
industries. WSC holds a 51% majority interest in Whalen/Sentrex LLC, a
California limited liability company. The agreement required the purchase of
certain assets of TANCO LLC from ANTEC Corporation for a price in cash of
approximately $623,000.
On December 31, 1997, the Company, through its wholly-owned subsidiary
Tetra Tech NUS, Inc., acquired the assets of certain environmental services
businesses of Brown & Root, Inc. and Halliburton NUS Corporation, both of which
are subsidiaries of Halliburton Company (collectively, NUS). NUS provides
consulting, engineering and design services for the environmental remediation of
contaminated air, water and soil conditions. The purchase price of
approximately $24,872,000, as adjusted, consisted of cash.
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 has been valued at approximately
$5,702,000, consisting of cash and 318,079 shares of Company common stock, as
adjusted based on CDC's Net Asset Value on July 11, 1997 as described in the
related purchase agreement.
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
telecommunications firm, provides a full range of services including
telecommunications site development services for PCS, cellular, ESMR, air-to-
ground, microwave, paging, fiber optic and switching centers technology. In
addition, WAC provides consulting, engineering, design services and construction
management with respect to the cable television industry. The purchase has been
valued at approximately $41,738,000, consisting of cash and 3,639,800 shares of
Company common stock. The common stock was issued in a private placement and
had a value of $31,972,000. 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 $18,456,000.
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,
-8-
<PAGE>
<PAGE>
private and industrial customers. The purchase was valued at approximately
$2,431,000, consisting of cash and 197,572 shares of 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 purchase was valued at approximately $724,000, consisting of
cash and 40,138 shares of 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 purchase was valued at approximately $1,632,000, consisting of cash and
95,675 shares of Company common stock, as adjusted based upon IWA's Net Asset
Value on December 29, 1996 as described in the related purchase agreement.
All of the acquisitions above have been accounted for as purchases and,
accordingly, the purchase prices of the businesses acquired have been allocated
to the assets and liabilities acquired based upon their fair market values. The
excess of the purchase cost of the acquisitions over the fair value of the net
assets acquired was recorded as goodwill and is included in Intangible Assets -
Net in the accompanying balance sheets. The final determination of such excess
amount for CDCE, NUS and CDC is subject to a final determination of the value of
the consideration paid and the net assets acquired as various studies and
valuations are not yet complete. The results of operations of each of the
companies acquired have been included in the Company's financial statements from
their respective acquisition effective dates as set forth in the related
purchase agreements.
The effect of unaudited pro forma operating results of the CDCE, SCM, FLO
and IWA transactions, had they been acquired on September 30, 1996, is not
material.
Pro forma operating results assuming the Company had acquired NUS, CDC and
WAC on September 30, 1996 is presented in Note 7. UNAUDITED PRO FORMA OPERATING
RESULTS.
5. ACCOUNTS RECEIVABLE
Accounts receivable are presented net of a valuation allowance to provide
for doubtful accounts and for the potential disallowance of billed and unbilled
costs. The allowance for doubtful accounts as of June 28, 1998 and September
28, 1997 was $792,000 and $1,346,000, respectively. The allowance for disallowed
costs as of June 28, 1998 and September 28, 1997 was $10,034,000 and $9,807,000,
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.
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6. SUBSEQUENT EVENT
On July 9, 1998, the Company acquired 100% of the capital stock of McNamee,
Porter & Seeley, Inc. (MPS), a provider of water, wastewater and engineering
services to the public sector and industrial clients. The purchase price of
approximately $15,000,000 consisted of cash and Company common stock and is
subject to a purchase price adjustment. In conjunction with the acquisition,
MPS distributed to its shareholders accounts receivable having a net value of
$8,040,000. The acquisition will be accounted for as a purchase. In order to
support this acquisition, the Company increased its line of credit from
$55,000,000 to $70,000,000. Unaudited pro forma operating results, assuming MPS
had been acquired on September 30, 1996 is presented in Note 7. UNAUDITED PRO
FORMA OPERATING RESULTS.
7. UNAUDITED PRO FORMA OPERATING RESULTS
The following table presents summarized unaudited pro forma operating
results assuming that the Company had acquired MPS, NUS, CDC and WAC on
September 30, 1996:
<TABLE>
<CAPTION>
Pro Forma Nine Months Ended
------------------------------
June 28, 1998 June 29, 1997
------------- -------------
(In thousands, except
per share data)
<S> <C> <C>
Gross revenue $ 304,053 $ 314,238
Income from operations 29,740 28,685
Net income 14,535 14,768
Basic earnings per share 0.65 0.68
Diluted earnings per share 0.62 0.66
Weighted average shares outstanding:
Basic 22,425 21,799
Diluted 23,416 22,409
</TABLE>
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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 % Relationship
to Net Revenue to Net Revenue
------------------ ------------------
Three Months Ended Period Nine Months Ended Period
------------------ to ------------------ to
June 28, June 29, Period June 28, June 29, Period
1998 1997 Change 1998 1997 Change
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net revenue 100.0% 100.0% 54.6% 100.0% 100.0% 50.9%
Cost of net revenue 72.4 73.3 52.6 74.5 75.3 49.4
-------- -------- -------- -------- -------- --------
Gross profit 27.6 26.7 60.0 25.5 24.7 55.4
Selling, general
and administrative
expenses 12.4 13.9 38.2 11.8 13.1 35.9
-------- -------- -------- -------- -------- --------
Income from
operations 15.2 12.8 83.8 13.7 11.6 77.3
Net interest
(expense) income (0.7) -- nm* (0.6) 0.1 nm*
-------- -------- -------- -------- -------- --------
Income before income
taxes and minority
interest 14.5 12.8 75.5 13.1 11.7 68.8
Income to minority
interest (1.6) -- nm* (0.7) -- nm*
-------- -------- -------- -------- -------- --------
Income before income
taxes 12.9 12.8 56.3 12.4 11.7 59.8
Income tax expense 5.6 5.3 64.2 5.4 4.9 67.4
-------- -------- -------- -------- -------- --------
Net income 7.3% 7.5% 50.7% 7.0% 6.8% 54.4%
======== ======== ======== ======== ======== ========
* not meaningful
</TABLE>
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Gross revenue increased by 61.2% to $98,231,000 for the three months ended
June 28, 1998 compared to $60,922,000 for the comparable prior year period. For
the nine months ended June 28, 1998, gross revenue increased by 50.2% to
$257,396,000 from $171,406,000 in the prior year. Net revenue increased by
54.6% to $75,149,000 for the quarter from $48,621,000 a year ago. For the nine
months ended June 28, 1998, net revenue increased by 50.9% to $200,619,000 from
$132,959,000 last year. For both gross and net revenue, growth in actual
dollars was experienced in all client sectors.
The following table presents the percentage of net revenue for each client
sector:
<TABLE>
<CAPTION>
Percentage of Net Revenue
------------------------------------------------
Three Months Ended Nine Months Ended
------------------ ------------------
June 28, June 29, June 28, June 29,
Client Sector 1998 1997 1998 1997
- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Federal government 51 50 50 55
State & local government 11 14 12 15
Commercial 36 34 36 27
International 2 2 2 3
</TABLE>
For the quarter ended June 28, 1998, acquisitions made subsequent to June
29, 1997 contributed $16,050,000 of the $26,528,000 growth in net revenue, of
which $11,726,000 was in the Federal government sector, $554,000 was in the
state and local government sector and
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<PAGE>
$3,770,000 was in the commercial sector. For the nine months ended June 28,
1998, acquisitions made subsequent to June 29, 1997 contributed $32,294,000 of
the $67,660,000 growth in net revenue, of which $22,661,000 was in the Federal
government sector, $896,000 was in the state and local government sector and
$8,737,000 was in the commercial sector.
Cost of net revenue increased 52.6% to $54,405,000 for the three months
ended June 28, 1998 compared to $35,660,000 for the comparable prior year
period. For the nine months ended June 28, 1998, cost of net revenue increased
49.4% to $149,530,000 from $100,077,000 in the prior year. As a percentage of
net revenue, cost of net revenue decreased in the quarter and in the nine months
from 73.3% and 75.3% last year to 72.4% and 74.5% this year, respectively. The
Company continues to emphasize strong project management techniques.
Selling, general and administrative (SG&A) expenses, inclusive of
amortization, increased 38.2% to $9,333,000 for the three months ended June 28,
1998 compared to $6,754,000 for the comparable prior year period. For the
quarter ended June 28, 1998, this increase was primarily due to the amortization
of goodwill associated with acquisitions, as well as increases in SG&A expenses
as a result of acquisitions. For the nine months ended June 28, 1998, SG&A
increased 35.9% to $23,627,000 from $17,390,000 in the comparable period last
year. As a percentage of net revenue, SG&A expenses decreased to 12.4% for the
quarter ended June 28, 1998 from 13.9% for the comparable period last year, and
for the nine months ended June 28, 1998, SG&A expenses decreased to 11.8% from
13.1% for the comparable period last year. These decreases were primarily
attributable to increases in net revenue volume without commensurate increases
in SG&A expenses.
For the quarter ended June 28, 1998, net interest expense of $510,000 was
recognized compared to net interest income of $4,000 in the quarter ended June
29, 1997, primarily due to interest on borrowings on the Company's revolving
credit facility related to acquisitions. For the nine months ended June 28,
1998, net interest expense increased to $1,179,000, compared to net interest
income of $83,000 in the prior year. This increase was also the result of
interest on acquisition related borrowings.
Income tax expense increased to $4,214,000 and $10,822,000 for the quarter
and nine months ended June 28, 1998, respectively, from $2,567,000 and
$6,464,000 for the comparable prior year period due to higher income before
income taxes and the non-deductibility of certain goodwill amortization for
income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
As of June 28, 1998, the Company's cash and cash equivalents totaled
$6,872,000. In addition, the Company has a credit agreement (the "Credit
Agreement") with a bank which provides for a revolving credit facility of
$55,000,000. Under the Credit Agreement, 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 28, 1998, outstanding borrowings totaled $29,500,000 and
standby letters of credit totaled $1,780,000. Subsequent to June 28, 1998, the
Company amended the Credit Agreement to provide for a revolving credit facility
of $70,000,000 and standby letters of credit up
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<PAGE>
to an aggregate sum of $20,000,000 in order to support the July 9, 1998
acquisition of McNamee, Porter & Seeley, Inc. as described in Note 6.
SUBSEQUENT EVENT.
In the nine months ended June 28, 1998, cash used in operating activities
was $1,854,000 compared to $5,035,000 for the comparable prior year period. The
decrease is primarily attributable to the timing of invoicing and payments to
subcontractors. The Company has targeted, as an ongoing practice, to increase
its efficiency in the timing of invoicing and to accelerate the collecting of
receivables. For the nine months ended June 28, 1998, cash used in investing
activities was $28,322,000 compared to $2,912,000 for the comparable prior year
period. This increase was primarily due to business acquisitions. For the nine
months ended June 28, 1998, cash provided by financing activities was
$24,786,000 compared to $14,611,000 for the comparable prior year period. This
increase was primarily attributable to the incurrence of long-term debt related
to acquisitions.
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 1998. However, as acquisition
opportunities present themselves, the Company may seek to expand its borrowing
capabilities to accommodate such opportunities.
The Company is working to resolve the potential impact of the year 2000 on
its business processes and the ability of the Company's computerized information
systems to accurately process information that may be date-sensitive. Any of
the Company's programs that recognize a date using "00" as the year 1900 rather
than the year 2000 could result in errors or system failures. The Company
utilizes a number of computer programs across its entire operation. The Company
began its risk assessment in 1995. Since that time, the Company has procured
certain financial reporting systems that are deemed to be year 2000 compliant.
To date, the Company has spent approximately $1,200,000 on the procurement of
these systems, the conversion of data from historical systems to these systems,
and on implementation and testing of these systems. The Company has not
completed its full assessment, but currently believes that the cost of
addressing this issue will not have a material adverse impact on the Company's
financial position. However, if the Company and third parties upon which it
relies are unable to address this issue in a timely manner, it could result in a
material financial risk to the Company. The Company plans to devote all
resources required to resolve any significant year 2000 issues in a timely
manner.
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<PAGE>
RISK FACTORS
STATEMENTS REGRARDING THE COMPANY'S PERFORMANCE PROSPECTS COULD CONTAIN
FORWARD-LOOKING INFORMATION THAT INVOLVES RISK AND UNCERTAINTIES SUCH AS THE
LEVEL OF DEMAND FOR THE CONPANY'S SERVICES, FUNDING DELAYS FOR PROJECTS, LACK OF
REGULATORY CLARITY AFFECTING THE MARKETPLACE AND INDUSTRY-WIDE COMPETITIVE
FACTORS. THE FOLLOWING RISK FACTORS SHOULD BE REVIEWED IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-Q.
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. It is difficult to assess
accurately the magnitude of potential risk to the Company.
The Company maintains two comprehensive general liability policies, both in
the amount of $1,000,000. These policies, together with two $9,000,000 umbrella
policies, provide total general liability coverage of $10,000,000 for the
resource management and infrastructure business areas and coverage of
$10,000,000 for the telecommunications business area. The Company's
professional liability insurance (E&O) policy, which includes pollution
coverage, for 1998 provides $10,000,000 in coverage for resource management and
infrastructure business areas, with a $100,000 self-insured retention. The same
E&O policy covers the telecommunications business area with a sublimit of
$1,000,000 for each claim and $1,000,000 in the aggregate. 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, allows 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 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 premiums to be paid by the Company for its E&O policies during
fiscal 1998 are approximately $890,000.
The Company evaluates and determines the risk associated with uninsured
claims. 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.
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<PAGE>
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. The Company performs engineering and consulting
services across a broad spectrum of business areas, primarily in the resource
management, infrastructure, and the telecommunication service business areas.
Services within these business areas are provided to a client base including
Federal (Departments of Defense, the Interior and Energy; U.S Environmental
Protection Agency; and the U.S. Postal Service), state and local agencies, as
well as the commercial sector. The range of competitors for any one procurement
can vary from 10 to 100 firms, depending upon the relative value of the project,
the financial terms and risks associated with the work, and any restrictions
placed upon competition by the customer. Historically, competition has been
based primarily on the quality and timeliness of service. However, the Company
believes that price has become an increasingly important competitive factor.
The Company believes that its principal competitors include Dames & Moore, Inc.,
E A Engineering Science & Technology, ICF Kaiser International, Inc.,
International Technology Corp., TRC Companies, Inc., URS Consultants, Inc., Roy
F. Weston, Inc., Castle Tower Corporation, OSP Consultants, Inc. and Mastec,
Inc.
CONTRACTS. The Company's contracts with the Federal and state governments
and some of its other client contracts 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 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. Historically, the Company has not had any material cost
disallowances by the DCAA as a result of audit except as further described.
There can be no assurance that DCAA audits will not result in material cost
disallowances in the future. The Company's government contracts are also
subject to renegotiation of profits in the event of a change in the contractual
scope of the work to be performed.
In September 1995, the Company acquired Tetra Tech EM Inc. (formerly known
as PRC Environmental Management, Inc., "EMI"). EMI likewise contracts with the
Federal government and such contracts are subject to the same auditing standards
as those of the Company. Audits and negotiations for the years 1987 through
1993 have recently been completed and cost disallowances as a result of audit
and negotiation totaled approximately $2,900,000. Audits for the years 1994 and
1995 have yet to be completed. At the time of acquisition, reserves for such
cost disallowances were established. The Company does not believe that the
ultimate resolution of such audits and disallowances will have a material
adverse effect on the Company.
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<PAGE>
The Company enters into various contracts with its clients, which include
fixed-price contracts. To date, in fiscal 1998, 27.3% 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 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, should they occur, could have a material adverse
effect on the Company.
The Company contracts with both domestic and international customers.
Certain contracts with international customers are denominated in a currency
other than the U.S. dollar. Contracts denominated in any currency other than
the U.S. dollar contain certain inherent risks, including risks on foreign
currency translation and risks in expatriating funds from foreign countries. To
date, in fiscal 1998, 2.7% of the Company's net revenue was derived from the
international marketplace. To the extent the Company's net revenue derived from
the international marketplace increases, so increases risks associated in
realizing the full contract value of those contracts denominated in foreign
currencies. The Company is currently evaluating options to hedge future
potential losses from foreign currency transactions.
CONFLICTS OF INTEREST. Many of the Company's clients are concerned about
potential or actual conflicts of interest in retaining 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 other public or private entities. The Company has,
on occasion, declined to bid on a project because of an actual or potential
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 and telecommunication 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 and
telecommunication 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-
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<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On March 26, 1998, the Company acquired 100% of the capital stock of
C.D.C. Engineering, Inc., a California corporation (CDCE), through the merger of
the Company's wholly-owned subsidiary with and into CDCE (the "CDCE Merger").
In connection with the CDCE Merger, subsequent to the purchase price adjustment
required by the Agreement and Plan of Reorganization relating to the CDCE
Merger, the Company issued an aggregate of 56,848 shares of its common stock,
$.01 par value ("Common Stock") to the former shareholders of CDCE. For
purposes of the CDCE Merger, each share of Common Stock was valued at $23.375.
The issuances of Common 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 July 9, 1998, the Company acquired 100% of the capital stock of
McNamee, Porter & Seeley, Inc., a Michigan corporation (MPS), through stock
purchases from the former shareholders of MPS (the "Stock Purchase"). In
connection with the Stock Purchase, the Company issued an aggregate of 219,911
shares of Common Stock to the former shareholders of MPS. For purposes of the
Stock Purchase, each share of Common Stock was valued at $23.51. 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
(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).
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 herein by reference to Exhibit
3.3 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 28, 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).
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<PAGE>
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 (incorporated herein by
reference to Exhibit 10.2 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 29, 1997).
10.3 Third Amendment dated as of December 15, 1997 to the Credit
Agreement dated as of September 15, 1995 between the Company
and Bank of America National Trust and Savings Association
(incorporated herein by reference to Exhibit 10.3 to the
Company's Annual Report on Form 10-K for the fiscal year
ended September 28, 1997).
10.4 Fourth Amendment dated as of January 30, 1997 to the Credit
Agreement dated as of September 15, 1995 between the Company
and Bank of America National Trust and Savings Association.
(incorporated herein by reference to Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended December 28, 1997).
10.5 Fifth Amendment dated as of July 6, 1998 to the Credit
Agreement dated as of September 15, 1995 between the Company
and Bank of America National Trust and Savings Association.
10.6 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).
10.7 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).
10.8 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).
10.9 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).
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<PAGE>
10.10 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).
10.11 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).
10.12 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).
10.13 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).
10.14 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).
10.15 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).
10.16 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).
10.17 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).
10.18 Employment Agreement dated as of June 11, 1997 between the
Company and Daniel A. Whalen (incorporated herein by
reference to Exhibit 10.16 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 29, 1997).
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10.19 Registration Rights Agreement dated as of June 11, 1997
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.17 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 29, 1997).
10.20 Registration Rights Agreement dated as of July 11, 1997
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.18 to the Company's Annual Report on Form 10-K
for the fiscal year ended September 28, 1997).
10.21 Registration Rights Agreement dated as of March 26, 1998
among the Company and the parties listed on Schedule A
attached thereto (incorporated herein by reference to
Exhibit 10.20 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 29, 1998).
10.22 Registration Rights Agreement dated as of July 9, 1998 among
the Company and the parties listed on Schedule A attached
thereto.
11 Computation of Net Income Per Common Share.
27 Financial Data Schedule.
(b) REPORTS ON FORM 8-K
None
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<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 11, 1998 TETRA TECH, INC.
By:
---------------------------------------------
Li-San Hwang
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)
By:
---------------------------------------------
James M. Jaska
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)
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EXHIBIT 10.5
FIFTH AMENDMENT
THIS FIFTH AMENDMENT (this "Fifth Amendment") dated as of July 6, 1998 is
to the Credit Agreement (the "Credit Agreement") dated as of September 15, 1995
between TETRA TECH, INC. (the "Company") and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (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
Fifth Amendment Effective Date (as defined below), the Credit Agreement shall be
amended as follows:
SECTION 1.1 SECTION 2.1. Section 2.1 of the Credit Agreement is amended by
(i) deleting the amount "$55,000,000" therein and substituting the amount
"$70,000,000" therefor and (ii) deleting the amount "$10,000,000" therein and
substituting the amount "$20,000,000" therefor.
SECTION 1.2 SUBSECTION 10.6.1. Subsection 10.6.1 is amended in its
entirety to read as follows:
10.6.1. TOTAL DEBT TO EBITDA RATIO. Not permit the Total Debt
to EBITDA Ratio to exceed 3.0 to 1 as of the last day of any Fiscal
Quarter after the Effective Date.
SECTION 1.3 SUBSECTION 10.6.2. Subsection 10.6.2 is amended in its
entirety by deleting the text thereof and substituting the phrase
"[Intentionally deleted.]" therefor.
SECTION 1.4 SUBSECTION 10.6.4. Subsection 10.6.4 is amended in its
entirety by deleting the text thereof and substituting the phrase
"[Intentionally deleted.]" therefor.
<PAGE>
<PAGE>
SECTION 1.5 EXHIBIT A. Exhibit A to the Credit Agreement is amended in
its entirety to read in the form of EXHIBIT A hereto.
SECTION 2 CONSENT. The Bank hereby consents to the acquisition (the
"Acquisition") by the Company of McNamee, Porter & Seeley, Inc. ("MPS"), a
Michigan corporation, pursuant to the Stock Purchase Agreement dated as of June
__, 1998 among the Company and MPS.
SECTION 3 REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Bank that (a) 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 Fifth Amendment, the New Note (as defined
below) and the letter agreement (the "Pledge Agreement Amendment") dated as of
June 19, 1998 amending the Pledge Agreement, the execution and delivery by MPS,
McNamee Industrial Services, Inc. ("MIS") and McNamee Leasing, Inc. ("MLI" and,
together with MPS and MIS, collectively the "New Subsidiaries" and each
individually a "New Subsidiary") of the Security Agreement and the Guaranty, the
execution and delivery by the Company and its Subsidiaries (including the New
Subsidiaries) of the letter agreement (the "Security Agreement Amendment") dated
as of June 19, 1998 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 Subsidiaries of their respective
obligations under the Guaranty and the performance by the Company and its
Subsidiaries (including the New Subsidiaries) of their respective obligations
under the Security Agreement as amended by the Security Agreement Amendment (as
so amended, the "Amended Security Agreement) (i) are within the corporate powers
of the Company and each Subsidiary, (ii) have been duly authorized by all
necessary corporate action, (iii) 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 or of any
indenture, loan agreement or other material contract, order or decree which is
binding upon the Company or any Subsidiary, and (c) this Fifth 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 are legal, valid and binding obligations of the
Company and each Subsidiary (including the New Subsidiaries) which is a party
thereto, as applicable, enforceable against the Company and each such Subsidiary
(including the New Subsidiaries) in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency or other
similar laws of
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<PAGE>
general application affecting the enforcement of creditor's rights or by general
principles of equity limiting the availability of equitable remedies.
SECTION 4 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 the date (the "Fifth Amendment Effective Date") that the
Bank shall have received (i) an amendment fee of $25,000, (ii) counterparts of
this Fifth Amendment executed by the Company and the Bank and acknowledged and
consented to by each existing Subsidiary 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 Fifth
Amendment and the performance of its obligations under the Amended Credit
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 Fifth Amendment and all other documents to be
executed in connection therewith.
(c) RESOLUTIONS OF NEW SUBSIDIARIES. Certified copies of resolutions of
the Board of Directors of each New Subsidiary 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.
(d) INCUMBENCY AND SIGNATURE CERTIFICATES OF NEW SUBSIDIARIES. A
certificate of the Secretary or the Assistant Secretary of each New Subsidiary
certifying the names and true signatures of its officers authorized to execute
and deliver the Guaranty, the Security Agreement, the Security Agreement
Amendment and all other documents to be executed by such New Subsidiary in
connection therewith.
(e) GUARANTY. A counterpart of the Guaranty duly executed by each New
Subsidiary.
(f) SECURITY AGREEMENT. A counterpart of the Security Agreement duly
executed by each New Subsidiary, together with such UCC financing statements as
are necessary or as the Bank may request in order to perfect the security
interest of the Bank in the collateral granted by such New Subsidiary under the
Security Agreement.
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<PAGE>
(g) SECURITY AGREEMENT AMENDMENT. A counterpart of the Security Agreement
Amendment duly executed by the Company and its Subsidiaries (including the New
Subsidiaries).
(h) PLEDGE AGREEMENT AMENDMENT. A counterpart of the Pledge Agreement
Amendment duly executed by the Company, together with the share certificates of
each New Subsidiary and stock powers executed in blank with respect thereto.
(i) NEW NOTE. The promissory note of the Company (the "New Note") in the
form of EXHIBIT A hereto.
(j) ACQUISITION. Evidence, satisfactory to the Bank, that the Acquisition
has occurred or will occur concurrently with the effectiveness of this Fifth
Amendment.
(k) OPINION. The opinion of Riordan & McKinzie, counsel to the Company
and its Subsidiaries (including the New Subsidiaries), in form and substance
satisfactory to the Bank.
SECTION 5 MISCELLANEOUS.
SECTION 5.1 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 5.2 COUNTERPARTS. This Fifth 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 Fifth Amendment.
SECTION 5.3 GOVERNING LAW. This Fifth Amendment shall be a contract made
under and governed by the internal laws of the State of Illinois.
SECTION 5.4 SUCCESSORS AND ASSIGNS. This Fifth 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.
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<PAGE>
Delivered at Chicago, Illinois, as of the day and year first above written.
TETRA TECH, INC.
By
-------------------------------
Title
-------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By
-------------------------------
Title
-------------------------------
<PAGE>
<PAGE>
Each of the undersigned hereby acknowledges and consents to the foregoing Fifth
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:
-------------------------
WHALEN & COMPANY, INC.
By:
-------------------------
Title:
-------------------------
TETRA TECH NUS, INC. (formerly
known as NUS Acquisition Corp.
By:
-------------------------
Title:
-------------------------
<PAGE>
<PAGE>
EXHIBIT A
FORM OF NOTE
$70,000,000 June __, 1998
Chicago, Illinois
The undersigned, for value received, promises to pay to the order of BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association having an office at 231 South LaSalle Street, Chicago, Illinois (the
"Bank") at the principal office of the Bank in Chicago, Illinois, SEVENTY
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
(as amended or otherwise modified from time to time, 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.
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This Note is made under and governed by the internal laws of the State of
Illinois.
TETRA TECH, INC.
By:
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Title:
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Schedule Attached to Note dated June __, 1998 of TETRA TECH, INC. payable to
the order of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION.
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
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
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EXHIBIT 10.22
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into as of
July 9, 1998 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 and the Holders are parties to a Stock Purchase Agreement
dated as of June 30, 1998 (the "Stock Purchase Agreement"), pursuant to which
Tetra Tech will acquire all of the outstanding shares of capital stock of
McNamee, Porter & Seeley, Inc., a Michigan corporation ("MPS"); and
B. Pursuant to the Stock Purchase Agreement, the shareholders of MPS will
receive shares of the common stock, $.01 par value, of Tetra Tech ("Tetra Tech
Common Stock"); and
C. This Agreement is the Registration Rights Agreement referred to in
SECTION 7.10 of the Stock Purchase Agreement and, pursuant thereto, must be
entered into by the parties as a condition to the consummation of the
transactions contemplated by the Stock Purchase 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 adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by Tetra Tech with
the SEC.
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"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 4.
"REGISTRABLE SECURITIES" shall mean the shares of Tetra Tech Common
Stock (i)issued pursuant to the Stock Purchase Agreement, and (ii)issued as a
dividend or other distribution with respect to or in exchange for or in
replacement of the shares referenced in (i)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
pursuant to Rule 144 ( or similar successor Rule).
"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 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.
"SEC" shall mean the Securities and Exchange Commission.
"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.
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2. REGISTRATION.
(a) Within 60 days after the date hereof, 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 commercially reasonable
efforts to cause such Registration Statement to become effective on or before
November 9, 1998 and to keep such Registration Statement continuously effective
for a period ending on the date on such all Holders are eligible to sell
Registrable Securities under Rule 144 (or similar successor rule) without any
volume limitation. If, at the time Tetra Tech is required to file a
Registration Statement pursuant to this SECTION 2(A), Tetra Tech is not eligible
to file a Registration Statement on Form S-3 to register resales by
stockholders, Tetra Tech shall initially file a Registration Statement on Form S
- -1 and shall comply with the provisions of the immediately preceding sentence.
Upon becoming eligible to use the Registration Statement on Form S-3 to register
resales by stockholders (whether pursuant to a ruling or waiver from the SEC or
otherwise), Tetra Tech shall promptly file a Registration Statement on Form S-3
or convert the existing Registration Statement to Form S-3 relating to the offer
and sale of Registrable Securities by the Holders from time to time.
Thereafter, Tetra Tech shall use commercially reasonable efforts to cause such
new or amended Registration Statement to be declared effective by the SEC as
promptly as practicable.
(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 reasonably 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.
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
3.
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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.
No seller of Registrable Securities shall (until further notice) effect
sales of shares covered by the Registration Statement after receipt of
telegraphic, telecopied or written notice from Tetra Tech to suspend sales to
permit Tetra Tech to correct or update a registration statement or prospectus.
3. REGISTRATION PROCEDURES. In connection with Tetra Tech's registration
obligations pursuant to SECTION 2 hereof, Tetra Tech will use commercially
reasonable 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 as
expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement with
respect to such Registrable Securities and use its commercially reasonable
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;
(c) 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
4.
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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 commercially reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement at the earliest possible moment;
(e) 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;
(f) 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
commercially 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 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;
(g) cooperate with the selling Holders 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 Holders may request;
(h) upon the occurrence of any event contemplated by SECTION 3(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;
5.
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(i) 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) 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;
(j) 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;
(k) 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; and
(l) enter into such agreements 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.
Each Holder agrees that, upon receipt of any notice from Tetra Tech of the
happening of any event of the kind described in SECTION 3(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 3(H) 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 3 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.
4. 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 and disbursements of one counsel and one accountant
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
6.
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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.
5. 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, (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
7.
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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 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 5(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 fault of the indemnifying party and the indemnified
8.
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party in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue statement or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by such indemnifying party or by such indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties acknowledge and
agree that it would not be just and equitable if contribution pursuant to this
SECTION 5(D) were determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to in this SECTION 5(D). 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 5(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 5(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
SECTION 5 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 5 shall remain in full force and effect, regardless of any
investigation made by or on behalf of Tetra Tech, a participating Holder, its
officers, directors, partners, attorneys, agents or any person, if any, who
controls Tetra Tech or such Holder as aforesaid, and shall survive the transfer
of such Registrable Securities by such Holder.
6. 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 2, 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 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
9.
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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.
7. 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 promptly deliver to such Holder a written statement verifying
that it has complied with such information and requirements.
8. 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 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.
9. 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.
10. 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 2 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
10.
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securities laws and the restrictions contained in the Investment Letter executed
by each Holder pursuant to the Stock Purchase Agreement.
11. 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.
12. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement, the Stock
Purchase 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 Stock Purchase 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
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.
13. 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.
14. 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.
15. 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, INC.
By: -----------------------------------
Li-San Hwang
Chairman, Chief Executive Officer
and President
11.
<PAGE>
<PAGE>
-----------------------------------
Khalil Z. Atasi
-----------------------------------
Dennis J. Benoit
-----------------------------------
Glenn S. Burkhardt, as Trustee of
the Glenn S. Burkhardt Trust
dated September 12, 1996
-----------------------------------
Thomas M. Doran, as Trustee of the
Thomas M. Doran Trust dated
June 26, 1996
-----------------------------------
Charles D. Fifield
-----------------------------------
Richard W. Force, as Trustee of the
Richard W. Force Trust dated
June 9, 1992
-----------------------------------
S. Joh Kang, as Trustee of the
Shin Joh Kang Trust dated
January 17, 1992
-----------------------------------
Kenneth E. Kingsley
-----------------------------------
Donald E. Lund
-----------------------------------
John P. Oyer, as Trustee of the
John P. Oyer Trust dated
January 21, 1997
12.
<PAGE>
<PAGE>
-----------------------------------
Suresh K. Sangal, as Trustee of the
Suresh Kumar Sangal Trust dated
July 22, 1992
-----------------------------------
Philip C. Youngs
13.
<PAGE>
<PAGE>
SCHEDULE A
----------
SCHEDULE OF HOLDERS
<TABLE>
<CAPTION>
Number of Shares of Tetra Tech
Common Stock Issued Pursuant
Holder's Name/Address/Facsimile No. to the Stock Purchase Agreement
- ---------------------------------------- ------------------------------------
<S> <C>
Khalil Z. Atasi 11,365 shares
c/o McNamee, Porter & Seeley, Inc.
3131 South State Street
Ann Arbor, Michigan 48108
Facsimile: (734) 665-2570
Dennis J. Benoit 11,365 shares
c/o McNamee, Porter & Seeley, Inc.
3131 South State Street
Ann Arbor, Michigan 48108
Facsimile: (734) 665-2570
Glenn S. Burkhardt, as Trustee of the 21,025 shares
Glenn S. Burkhardt Trust dated
September 12, 1996
c/o McNamee, Porter & Seeley, Inc.
3131 South State Street
Ann Arbor, Michigan 48108
Facsimile: (734) 665-2570
Thomas M. Doran, as Trustee of the 21,025 shares
Thomas M. Doran Trust dated
June 26, 1996
c/o McNamee, Porter & Seeley, Inc.
3131 South State Street
Ann Arbor, Michigan 48108
Facsimile: (734) 665-2570
Charles D. Fifield 17,616 shares
c/o McNamee, Porter & Seeley, Inc.
3131 South State Street
Ann Arbor, Michigan 48108
Facsimile: (734) 665-2570
14.
<PAGE>
<PAGE>
Richard W. Force, as Trustee of the 21,025 shares
Richard W. Force Trust dated
June 9, 1992
c/o McNamee, Porter & Seeley, Inc.
3131 South State Street
Ann Arbor, Michigan 48108
Facsimile: (734) 665-2570
S. Joh Kang, as Trustee of the 21,025 shares
Shin Joh Kang Trust dated
January 17, 1992
c/o McNamee, Porter & Seeley, Inc.
3131 South State Street
Ann Arbor, Michigan 48108
Facsimile: (734) 665-2570
Kenneth E. Kingsley 11,365 shares
c/o McNamee, Porter & Seeley, Inc.
3131 South State Street
Ann Arbor, Michigan 48108
Facsimile: (734) 665-2570
Donald E. Lund 21,025 shares
c/o McNamee, Porter & Seeley, Inc.
3131 South State Street
Ann Arbor, Michigan 48108
Facsimile: (734) 665-2570
John P. Oyer, as Trustee of the 21,025 shares
John P. Oyer Trust dated
January 21, 1997
c/o McNamee, Porter & Seeley, Inc.
3131 South State Street
Ann Arbor, Michigan 48108
Facsimile: (734) 665-2570
15.
<PAGE>
<PAGE>
Suresh K. Sangal, as Trustee of the 21,025 shares
Suresh Kumar Sangal Trust dated
July 22, 1992
c/o McNamee, Porter & Seeley, Inc.
3131 South State Street
Ann Arbor, Michigan 48108
Facsimile: (734) 665-2570
Philip C. Youngs 21,025 shares
c/o McNamee, Porter & Seeley, Inc.
3131 South State Street
Ann Arbor, Michigan 48108
Facsimile: (734) 665-2570
</TABLE>
16.
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 11
<TABLE>
<CAPTION>
Tetra Tech, Inc.
Computation of Net Income Per Common Share
(Unaudited)
Three Months Ended Nine Months Ended
---------------------- ----------------------
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic:
Common stock outstanding,
beginning of period 22,439,360 18,046,198 20,714,254 17,658,753
Stock options exercised 90,095 55,605 214,049 130,776
Stock purchase plan issuance 92,110 123,231 92,110 123,231
Issuance of common stock -- 2,105,280 1,601,406 2,417,554
Payment of fractional shares -- -- (254) --
---------- ---------- ---------- ----------
Common stock outstanding,
end of period 22,621,565 20,330,314 22,621,565 20,330,314
========== ========== ========== ==========
Weighted average common
stock outstanding during
the period 22,517,513 18,542,316 22,204,928 18,025,079
========== ========== ========== ==========
Net income as reported in
condensed consolidated
financial statements $ 5,493,000 $ 3,644,000 $14,064,000 $ 9,111,000
========== ========== ========== ==========
Basic Earnings Per Share $ 0.24 $ 0.20 $ 0.63 $ 0.51
========== ========== ========== ==========
Diluted:
Weighted average common
stock outstanding during
the period 22,517,513 18,542,316 22,204,928 18,025,079
Potential common shares
under the treasury stock
method assuming the
exercise of options and
warrants and the conversion
of preferred stock 843,521 748,216 991,736 622,681
---------- ---------- ---------- ----------
Total 23,361,034 19,290,533 23,196,664 18,647,760
========== ========== ========== ==========
Net income as reported in
condensed consolidated
financial statements $ 5,493,000 $ 3,644,000 $14,064,000 $ 9,111,000
========== ========== ========== ==========
Diluted Earnings Per Share $ 0.24 $ 0.19 $ 0.61 $ 0.49
========== ========== ========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
<PAGE>
<TABLE> <S> <C>
<PAGE>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-04-1998
<PERIOD-END> JUN-28-1998
<CASH> 6,872
<SECURITIES> 0
<RECEIVABLES> 117,759
<ALLOWANCES> 10,826
<INVENTORY> 0
<CURRENT-ASSETS> 121,405
<PP&E> 22,104
<DEPRECIATION> 12,672
<TOTAL-ASSETS> 204,093
<CURRENT-LIABILITIES> 52,215
<BONDS> 0
0
0
<COMMON> 226
<OTHER-SE> 81,700
<TOTAL-LIABILITY-AND-EQUITY> 204,093
<SALES> 98,231
<TOTAL-REVENUES> 98,231
<CGS> 63,738
<TOTAL-COSTS> 63,738
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 624
<INCOME-PRETAX> 9,707
<INCOME-TAX> 4,214
<INCOME-CONTINUING> 5,493
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,493
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
<PAGE>
</TABLE>
