-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NruT6Mzwi8D2cBw6QI/Vm/cVvp5WOp9vZYodRuTFYfJiyDlwUD85QIj9mWEiJusK pnabVRAHsefeKr2JgjAsYw== 0000831641-98-000003.txt : 19980812 0000831641-98-000003.hdr.sgml : 19980812 ACCESSION NUMBER: 0000831641-98-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980628 FILED AS OF DATE: 19980811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TETRA TECH INC CENTRAL INDEX KEY: 0000831641 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 954148514 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19655 FILM NUMBER: 98682289 BUSINESS ADDRESS: STREET 1: 670 N ROSEMEAD BOULEVARD CITY: PASEDENA STATE: CA ZIP: 91107-2190 BUSINESS PHONE: 6263514664 MAIL ADDRESS: STREET 1: 670 N ROSEMEAD BLVD CITY: PASADENA STATE: CA ZIP: 91107 10-Q 1 FORM 10-Q 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. TETRA TECH, INC. INDEX
PAGE NO. 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
-2- PART I. FINANCIAL INFORMATION ITEM 1. Tetra Tech, Inc. Condensed Consolidated Balance Sheets
In thousands, except share data June 28, September 28, 1998 1997 -------------- -------------- (Unaudited) 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 ========== ========== Tetra Tech, Inc. Condensed Consolidated Statements of Income (Unaudited)
In thousands, except per Three Months Ended Nine Months Ended share data --------------------- --------------------- June 28, June 29, June 28, June 29, 1998 1997 1998 1997 ---------- ---------- ---------- ---------- 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 ========== ========== ========== ==========
See accompanying notes to the condensed consolidated financial statements. -4- Tetra Tech, Inc. Condensed Consolidated Statements of Cash Flow (Unaudited)
In thousands Nine Months Ended ------------------------ June 28, June 29, 1998 1997 ---------- ---------- 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 ========== ==========
(Continued) -5- Tetra Tech, Inc. Condensed Consolidated Statements of Cash Flow (Unaudited)
In thousands Nine Months Ended ------------------------ June 28, June 29, 1998 1997 ---------- ---------- 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 ==========
See accompanying notes to the condensed consolidated financial statements. (Concluded) -6- 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- 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- 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. -9- 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:
Pro Forma Nine Months Ended ------------------------------ June 28, 1998 June 29, 1997 ------------- ------------- (In thousands, except per share data) 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
-10- 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:
% 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 -------- -------- -------- -------- -------- -------- 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
- --------- 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:
Percentage of Net Revenue ------------------------------------------------ Three Months Ended Nine Months Ended ------------------ ------------------ June 28, June 29, June 28, June 29, Client Sector 1998 1997 1998 1997 - ------------- -------- -------- -------- -------- Federal government 51 50 50 55 State & local government 11 14 12 15 Commercial 36 34 36 27 International 2 2 2 3
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 -11- $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 -12- 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. -13- 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. -14- 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. -15- 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- 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). -17- 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). -18- 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). -19- 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 -20- 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) -21- EX-10.5 2 EXHIBIT 10.5 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. 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 -2- 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. -3- (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. -4- 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 ------------------------------- 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: ------------------------- 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. This Note is made under and governed by the internal laws of the State of Illinois. TETRA TECH, INC. By: ------------------------- Title: ------------------------- 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 _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ EX-10.22 3 EXHIBIT 10.22 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. "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. 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. 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. 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. (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. 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. 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. 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. 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. 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. ----------------------------------- 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. ----------------------------------- Suresh K. Sangal, as Trustee of the Suresh Kumar Sangal Trust dated July 22, 1992 ----------------------------------- Philip C. Youngs 13. SCHEDULE A ---------- SCHEDULE OF HOLDERS
Number of Shares of Tetra Tech Common Stock Issued Pursuant Holder's Name/Address/Facsimile No. to the Stock Purchase Agreement - ---------------------------------------- ------------------------------------ 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. 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. 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
16. EX-11 4 EXHIBIT 11 EXHIBIT 11
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 ---------- ---------- ---------- ---------- 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 ========== ========== ========== ==========
See accompanying notes to the condensed consolidated financial statements. EX-27 5 EXHIBIT 27
5 1,000 9-MOS OCT-04-1998 JUN-28-1998 6,872 0 117,759 10,826 0 121,405 22,104 12,672 204,093 52,215 0 0 0 226 81,700 204,093 98,231 98,231 63,738 63,738 0 0 624 9,707 4,214 5,493 0 0 0 5,493 0.24 0.24
-----END PRIVACY-ENHANCED MESSAGE-----