-----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, RdE6gX4b0v4yu+uG/FkIIrt+upSB6rpE3ubw5A6gyLziRUhIhftX4OGORMxMjs/X g0nLbypUO1iWh1zrZ6WUaw== 0000950129-00-001191.txt : 20000316 0000950129-00-001191.hdr.sgml : 20000316 ACCESSION NUMBER: 0000950129-00-001191 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000131 FILED AS OF DATE: 20000315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VERITAS DGC INC CENTRAL INDEX KEY: 0000028866 STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382] IRS NUMBER: 760343152 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07427 FILM NUMBER: 570316 BUSINESS ADDRESS: STREET 1: 3701 KIRBY DR STREET 2: STE 112 CITY: HOUSTON STATE: TX ZIP: 77098 BUSINESS PHONE: 7135128300 MAIL ADDRESS: STREET 1: 3701 KIRBY DRIVE SUITE 112 CITY: HOUSTON STATE: TX ZIP: 77098 FORMER COMPANY: FORMER CONFORMED NAME: DIGICON INC DATE OF NAME CHANGE: 19920703 10-Q 1 VERITAS DGC INC. - DATED JANUARY 31, 2000 1 ================================================================================ 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 JANUARY 31, 2000 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 1-7427 VERITAS DGC INC. (Exact name of registrant as specified in its charter) DELAWARE 76-0343152 (State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.) organization) 3701 KIRBY DRIVE, SUITE #112 HOUSTON, TEXAS 77098 (Address of principal executive offices) (Zip Code)
(713) 512-8300(Registrant's telephone number, including area code) NO CHANGES (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 period 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 --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. The number of shares of the Company's common stock (the "Common Stock"), $.01 par value, outstanding at February 29, 2000 was 25,831,666 (including 2,315,001 Veritas Energy Services Inc. exchangeable which are identical to the Common Stock in all material respects). ================================================================================ 2 VERITAS DGC INC. AND SUBSIDIARIES FORM 10-Q INDEX ================================================================================
Page Number ----------- PART I. Financial Information Item 1. Financial Statements Consolidated Statements of Income and Comprehensive Income - For the Three and Six Months Ended January 31, 2000 and 1999 1 Consolidated Balance Sheets - January 31, 2000 and July 31, 1999 2 Consolidated Statements of Cash Flows - For the Six Months Ended January 31, 2000 and 1999 3 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. Other Information Item 2. Changes in Securities 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 18
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VERITAS DGC INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME UNAUDITED
THREE MONTHS ENDED SIX MONTHS ENDED JANUARY 31, JANUARY 31, ---------------------- ---------------------- 2000 1999 2000 1999 --------- --------- --------- --------- (In thousands) REVENUES $ 91,023 $ 101,652 $ 159,700 $ 248,451 COSTS AND EXPENSES: Cost of services Operating expenses 60,584 68,294 103,325 170,061 Research and development 2,078 1,721 4,040 3,465 Depreciation and amortization 18,460 17,734 36,838 34,584 Selling, general & administrative 4,267 4,501 7,710 9,057 Interest expense 3,499 3,551 6,990 5,603 Other income (196) (2,630) (1,175) (2,403) --------- --------- --------- --------- Total costs and expenses 88,692 93,171 157,728 220,367 Income before provision for income taxes and equity in loss of joint venture 2,331 8,481 1,972 28,084 Provision for income taxes 1,078 3,057 1,063 8,939 Equity in (earnings) loss of joint venture 83 (12) 319 87 --------- --------- --------- --------- Net income before extraordinary charge 1,170 5,436 590 19,058 Extraordinary loss on debt repurchase (net of tax, $95) 187 --------- --------- --------- --------- Net income $ 1,170 $ 5,436 $ 403 $ 19,058 Other comprehensive income (loss) (net of tax - $0 in both periods) Foreign currency translation adjustments 1,665 (2,898) 2,237 (3,253) Unrealized gain (loss) on investments-available for sale 68 (1,279) --------- --------- --------- --------- Comprehensive income $ 2,903 $ 2,538 $ 1,361 $ 15,805 ========= ========= ========= ========= PER SHARE: BASIC Net income per common share before extraordinary item $ .05 $ .24 $ .02 $ .84 Net loss per common share from extraordinary item (.01) --------- --------- --------- --------- Net income per common share $ .05 $ .24 $ .02 $ .84 ========= ========= ========= ========= Weighted average common shares 24,474 22,712 24,554 22,704 ========= ========= ========= ========= DILUTED Net income per common share before extraordinary item $ .05 $ .24 $ .02 $ .83 Net loss per common share from extraordinary item (.01) --------- --------- --------- --------- Net income per common share $ .05 $ .24 $ .02 $ .83 ========= ========= ========= ========= Weighted average common shares 25,893 22,830 25,049 22,852 ========= ========= ========= =========
See Notes to Consolidated Financial Statements 1 4 VERITAS DGC INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
JANUARY 31, JULY 31, 2000 1999 ------------ ------------ unaudited (In thousands) ASSETS Current assets: Cash and cash equivalents $ 31,259 $ 73,447 Restricted cash investments 198 300 Accounts and notes receivable (net of allowance for doubtful accounts: January $3,339; July $3,038) 124,262 113,761 Materials and supplies inventory 4,040 4,417 Prepayments and other 9,825 8,259 Investments-available for sale 3,284 3,671 ------------ ------------ Total current assets 172,868 203,855 Property and equipment 388,767 357,397 Less accumulated depreciation 239,795 201,026 Plus assets held for sale (see Note 2) 14,000 ------------ ------------ Property and equipment - net 162,972 156,371 Multi-client data library 193,532 138,753 Investment in and advances to joint venture 2,321 2,640 Goodwill (net of accumulated amortization: January $5,731; July $3,683) 12,225 2,159 Deferred tax asset 29,521 23,120 Long term notes receivable (net of allowance: $1,000) 4,066 3,696 Other assets 8,804 11,252 ------------ ------------ Total $ 586,309 $ 541,846 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 226 $ 240 Accounts payable - trade 28,992 26,243 Accrued interest 3,857 4,010 Other accrued liabilities 58,174 48,640 Income taxes payable 1,439 5,472 ------------ ------------ Total current liabilities 92,688 84,605 Non-current liabilities: Long-term debt - less current maturities 135,082 135,011 Other non-current liabilities 10,717 6,672 ------------ ------------ Total non-current liabilities 145,799 141,683 Stockholders' equity: Preferred stock, $.01 par value; authorized: 1,000,000 shares; none issued Common stock, $.01 par value; authorized: 40,000,000 shares; issued: 23,275,126 shares at January and 21,470,938 shares at July (excluding exchangeable shares of 2,468,064 at January and 1,505,595 at July) 233 214 Additional paid-in capital 239,350 208,749 Accumulated earnings (from August 1, 1991 with respect to Digicon Inc.) 115,055 114,652 Accumulated comprehensive income Cumulative foreign currency translation adjustment (2,115) (4,352) Unrealized loss on investments-available for sale (1,836) (557) Unearned compensation (892) (602) Treasury stock, at cost; 116,388 shares at January and 150,068 shares at July (1,973) (2,546) ------------ ------------ Total stockholders' equity 347,822 315,558 ------------ ------------ Total $ 586,309 $ 541,846 ============ ============
See Notes to Consolidated Financial Statements 2 5 VERITAS DGC INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
SIX MONTHS ENDED JANUARY, 31 ------------------------ 2000 1999 ---------- ---------- (In thousands) OPERATING ACTIVITIES: Net income $ 403 $ 19,058 Non-cash items included in net income: Depreciation and amortization 36,838 34,584 Net loss on disposition of property and equipment 108 319 Equity in loss of joint venture 319 87 Amortization of multi-client data library 471 670 Deferred taxes (3,983) 2,357 Amortization of unearned compensation 319 168 Change in operating assets/liabilities: Accounts and notes receivable (6,545) (12,010) Materials and supplies inventory 444 139 Prepayments and other (2,186) 7,929 Multi-client data library (53,999) (42,469) Other 2,007 112 Accounts payable and other accrued liabilities 4,632 12,037 Income taxes payable (5,750) (10,551) Other non-current liabilities 3,889 (51) ---------- ---------- Total cash provided (used ) by operating activities (23,033) 12,379 FINANCING ACTIVITIES: Net borrowings from long-term debt 39 (146) Senior notes issue costs (34) (1,737) Net proceeds from sale of common stock 3,859 947 Purchase of treasury stock (2,869) ---------- ---------- Total cash provided by financing activities 3,864 56,195 INVESTING ACTIVITIES: Increase (decrease) in restricted cash investments 102 (94) Decrease in investment in and advances to joint venture 1,183 Purchase of Time Seismic Exchange Ltd., net of cash received (704) Purchase of Guardian Data Seismic, net of cash received (1,409) Purchase of Enertec Resource Services Inc., net of cash received (1,538) Purchase of property and equipment (22,994) (30,870) Sale of property and equipment 2,880 131 ---------- ---------- Total cash used by investing activities (22,959) (30,354) Currency loss on foreign cash (60) (3,253) ---------- ---------- Change in cash and cash equivalents (42,188) 34,967 Beginning cash and cash equivalents balance 73,447 40,089 ---------- ---------- Ending cash and cash equivalents balance $ 31,259 $ 75,056 ========== ==========
See Notes to Consolidated Financial Statements 3 6 VERITAS DGC INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULES TO CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
SIX MONTH ENDED JANUARY 31, -------------------- 2000 1999 -------- -------- (In thousands) SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Increase in property and equipment for accounts payable - trade $ 3,108 $ 373 Utilization of net operating loss carryforwards existing prior to the quasi-reorganization resulting in an increase (decrease) in: Deferred tax asset valuation allowance (1,088) (2,887) Additional paid-in capital 1,088 2,887 Treasury stock issued for purchase of Time Seismic Exchange Ltd. 664 Treasury stock issued in lieu of cash for bonuses payable 383 Restricted stock issued for future services resulting in an increase in additional paid-in capital and unearned compensation 42 Treasury stock issued for future services resulting in an increase in Additional paid-in-capital 37 Unearned compensation 610 Stock and options issued for purchase of Enertec Resource Services Inc. (net of cash received) 25,189 Settlement of accounts receivable and interest payments from investments-available for sale 892 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for: Interest - Senior notes 6,581 3,656 Equipment purchase obligations 3 22 Other 559 325 Income taxes 9,389 16,501
See Notes to Consolidated Financial Statements 4 7 VERITAS DGC INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION Veritas DGC Inc. ("Veritas DGC") provides seismic data acquisition, data processing, multi-client data sales and exploration and development information services to the petroleum industry in selected markets worldwide. The accompanying consolidated financial statements include the accounts of Veritas DGC and all majority-owned domestic and foreign subsidiaries. Investment in a joint venture is accounted for on the equity method. All material intercompany balances and transactions have been eliminated. All material adjustments consisting only of normal recurring adjustments that, in the opinion of management are necessary for a fair statement of the results for the interim periods, have been reflected. These interim financial statements should be read in conjunction with the annual consolidated financial statements of Veritas DGC. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This standard requires companies to record derivative financial instruments on the balance sheet as assets or liabilities, as appropriate, at fair value. Gains or losses resulting from changes in the fair values of those derivatives are accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. Veritas DGC will be required to implement this statement in its first quarter of fiscal year 2001. Veritas DGC believes that the implementation of this standard will not have a material effect on its consolidated financial position, results of operations or liquidity. 2. PURCHASE OF ENERTEC RESOURCE SERVICES INC. On September 30, 1999, Veritas DGC, Veritas Energy Services Inc. ("VESI") and Enertec Resource Services Inc. ("Enertec"), a Canadian company, consummated a business combination (the "Combination") whereby Enertec became a wholly owned subsidiary of VESI. As a result of the Combination, each share of Enertec stock was converted into the right to receive VESI Class A Exchangeable Series 1 stock (the "Exchangeable" shares) at an exchange ratio of 0.345 of a share of the Exchangeable stock for each share of Enertec. All of the holders of Enertec common shares became holders of Exchangeable shares and accordingly, 2,437,527 shares of Exchangeable stock were issued. Each Exchangeable share is convertible, at the option of the shareholder, into one share of Veritas DGC's common stock. Outstanding options to purchase shares of Enertec stock were converted into options to purchase approximately 236,000 shares of Veritas DGC's common stock at the exchange ratio of 0.345 of a Veritas DGC stock option for each Enertec option. The total purchase price of Enertec is approximately $28.0 million, which is comprised of approximately $24.8 million of stock, $0.9 million of Veritas DGC options and $2.3 million of business combination costs. The acquisition is accounted for as a purchase with the preliminary allocation of purchase price, in accordance with APB 16, yielding approximately $5.2 million of current assets, $19.9 million of property and long-term assets, $6.5 million of liabilities and $9.4 million of goodwill. Goodwill will be amortized over no more than ten years. This allocation is subject to adjustment over the current fiscal year. 5 8 VERITAS DGC INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED Certain seismic acquisition assets obtained through the Enertec transaction are being held for sale. These assets have been assigned an estimated fair market value of $14.0 million based on the current sales prices of equivalent equipment in the marketplace and offers received for specific groups of equipment. This amount has been reclassified from property and equipment to assets held for sale on the balance sheet. Veritas DGC anticipates that most of the equipment will be disposed of within one year of its acquisition. The operating losses associated with these assets have been excluded from income and have been accounted for as an adjustment to the carrying value of the assets. The after tax losses excluded for the quarter and six months ended January 31, 2000 are $0.6 million and $0.7 million respectively. Pro forma revenue, net income before extraordinary item, net income and earnings per share of the combined Veritas DGC / Enertec entity, presented as if the Combination had occurred on August 1, 1999 and 1998, is shown below. This pro forma financial information is not necessarily indicative of the actual results that would have been achieved had the Combination occurred at the beginning of the periods presented.
Three months ended Six months ended January 31, January 31, ------------------------- ------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- (In thousands, except per share amounts) Revenue $ 91,023 $ 110,551 $ 165,069 $ 266,093 Net income before extraordinary item $ 1,170 $ 5,068 $ 823 $ 18,237 Net income $ 1,170 $ 5,068 $ 636 $ 18,237 Earnings per share: Basic Net income per common share before extraordinary item 0.05 0.20 0.03 0.73 Net income per common share 0.05 0.20 0.03 0.72 Diluted Net income per common share before extraordinary item 0.05 0.20 0.03 0.73 Net income per common share 0.05 0.20 0.02 0.72
3. INVESTMENT IN INDONESIAN JOINT VENTURE Veritas DGC owns 80% of an Indonesian joint venture (P.T. Digicon Mega Pratama). The joint venture is accounted for under the equity method due to provisions in the joint venture agreement that gives minority shareholders the right to exercise control. Summarized financial information is as follows: 6 9 VERITAS DGC INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) UNAUDITED
January 31, July 31, 2000 1999 ---------- ---------- (In thousands) Current assets $ 1,724 $ 1,380 Property and equipment, net 161 314 Multi-client data library 1,085 ---------- ---------- Total assets $ 2,970 $ 1,694 ========== ========== Current liabilities $ 489 $ 438 Advances from affiliates 14,056 12,479 Stockholders' deficit: Common stock 2,576 2,576 Accumulated deficit (14,151) (13,799) ---------- ---------- Total stockholders' deficit (11,575) (11,223) ---------- ---------- Total liabilities and stockholders' deficit $ 2,970 $ 1,694 ========== ==========
Three Months Ended Six Months Ended January 31, January 31, ------------------------ ------------------------ 2000 1999 2000 1999 ---------- ---------- ---------- ---------- (In thousands) Revenues $ 841 $ 386 $ 949 $ 784 Cost and expenses: Cost of services 786 289 1,060 614 Depreciation and amortization 83 84 170 170 Other (income) expense 55 1 38 87 ---------- ---------- ---------- ---------- Total costs and expenses 924 374 1,268 871 ---------- ---------- ---------- ---------- Net income (loss) $ (83) $ 12 $ (319) $ (87) ========== ========== ========== ==========
4. LONG-TERM DEBT Long-term debt is as follows:
January 31, July 31, 2000 1999 ------------ ------------ (In thousands) Senior notes due October 2003, at 9 3/4% $ 135,000 $ 135,000 Equipment purchase obligations maturing through September 2000, at a weighted average rate of 10% 135 251 Equipment purchase obligations maturing through July 2001, at 9% 173 ------------ ------------ Total $ 135,308 $ 135,251 Less current maturities 226 240 ------------ ------------ Due after one year $ 135,082 $ 135,011 ============ ============
The senior notes are due in October 2003 with interest payable semi-annually at 9 3/4% per annum. The senior notes are unsecured and are effectively subordinated to secured debt of Veritas DGC with respect to the assets securing such debt and to all debt of its subsidiaries whether secured or unsecured. The indenture relating to the senior notes contains certain covenants that limit Veritas DGC's ability to, among other things, incur additional debt, pay dividends and complete mergers, acquisitions and sales of assets. Upon a change in control of Veritas DGC, as defined in the indenture, the holders of the senior notes have the right to require Veritas DGC to purchase all or a portion of such holder's senior note at a price equal to 101% of the aggregate principal amount. Veritas DGC has the right to redeem the senior notes, in whole or part, on or after October 15, 2000. On September 24, 1999, Veritas DGC repurchased $5.6 million of 9 3/4% senior notes on the open market at a price of $5.7 million, resulting in an 7 10 VERITAS DGC INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) UNAUDITED extraordinary loss of $0.2 million, net of tax. On December 3, 1999, Veritas DGC reissued $1.0 million of 9 3/4% senior notes at a price of $1.0 million. On December 10, 1999, Veritas DGC reissued $4.6 million of 9 3/4% senior notes at a price of $4.7 million. Veritas DGC maintains a revolving credit agreement due July 2001 with commercial lenders that provides advances up to $50.0 million. Advances are limited by a borrowing base, which is in excess of the credit limit at January 31, 2000 and bears interest, at Veritas DGC's election, at LIBOR plus a margin or prime rate based on certain financial ratios maintained by Veritas DGC. Advances are secured by certain accounts receivable. Covenants in the agreement limit, among other things, Veritas DGC's right to take certain actions, including creating indebtedness. In addition, the agreement requires Veritas DGC to maintain certain financial ratios. No advances were outstanding at January 31, 2000 and July 31, 1999 under the credit agreement, although $5.8 million in letters of credit had been issued under the facility. Veritas DGC's equipment purchase obligations represent installment loans and capitalized lease obligations primarily related to computer and seismic equipment. 5. OTHER ACCRUED LIABILITIES Other accrued liabilities include the following:
January 31, July 31, 1999 1999 ---------- ---------- (In thousands) Accrued payroll and benefits $ 7,816 $ 5,518 Deferred revenues $ 23,512 $ 10,717 Accrued taxes other than income $ 4,158 $ 12,086
6. OTHER INCOME Other income consists of the following:
Three Months Ended Six Months Ended January 31, January 31, ------------------------ ------------------------ 2000 1999 2000 1999 ---------- ---------- ---------- ---------- (In thousands) Interest income $ (498) $ (1,177) $ (1,543) $ (1,454) Net loss on disposition of property and equipment 110 21 108 319 Net foreign currency exchange losses (gains) 170 (1,301) 238 (1,129) Other 22 (173) 22 (139) ---------- ---------- ---------- ---------- Total $ (196) $ (2,630) $ (1,175) $ (2,403) ========== ========== ========== ==========
8 11 VERITAS DGC INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) UNAUDITED 7. EARNINGS PER COMMON SHARE Earnings (losses) per common share - basic and diluted are computed as follows:
Three Months Ended Six Months Ended Ended January 31, January 31, ---------------------------- --------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ (In thousands, except per per share amounts) Net income before extraordinary item $ 1,170 $ 5,436 $ 590 $ 19,058 Extraordinary loss on debt repurchase 187 ------------ ------------ ------------ ------------ Net income $ 1,170 $ 5,436 $ 403 $ 19,058 ============ ============ ============ ============ Weighted average common shares 24,474 22,712 24,554 22,704 Basic Net income per common share before extraordinary item $ .05 $ .24 $ .02 $ .84 Net loss per common share from extraordinary item (.01) ------------ ------------ ------------ ------------ Net income per common share $ .05 $ .24 $ .02 $ .84 ============ ============ ============ ============ Weighted average common shares - assuming dilution: Weighted average common shares 25,474 22,712 24,554 22,704 Shares issuable from assumed conversion of: Options 419 118 495 148 Warrants ------------ ------------ ------------ ------------ Total 25,893 22,830 25,049 22,852 ============ ============ ============ ============ Diluted Net income per common share before extraordinary item $ .05 $ .24 $ .02 $ .83 Net loss per common share from extraordinary item (.01) ------------ ------------ ------------ ------------ Net income per common share $ .05 $ .24 $ .02 $ .83 ============ ============ ============ ============
VESI exchangeable shares, which were issued in business combinations and may be exchanged for Veritas DGC's common stock and are identical to Veritas DGC's common stock in all material respects, are included in both computations. The following options to purchase common shares have been excluded from the computation assuming dilution because the options' exercise prices exceeded the average market price of the underlying common shares.
Three Months Ended Six Months Ended January 31, January 31, ---------------------------------------- ---------------------------------------- 2000 1999 2000 1999 ----------------- ----------------- ----------------- ----------------- Number of options 823,470 810,501 828,667 801,635 Exercise price range $15 5/8 - $55 1/8 $17 7/8 - $56 1/2 $16 7/8 - $55 1/8 $15 5/8 - $56 1/2 Expiring through November 2008 November 2008 November 2008 November 2008
9 12 VERITAS DGC INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) UNAUDITED 8. UNREALIZED LOSS ON INVESTMENTS-AVAILABLE FOR SALE In April 1999, Veritas DGC exchanged a $4.7 million account receivable from Miller Exploration Company ("Miller"), a publicly traded company, for a long term note receivable paying 18% interest. Interest is paid in common stock warrants, with an exercise price of $0.01 per share, in advance, at six month intervals. The common stock underlying these warrants was registered with the SEC in August 1999. In addition, Veritas DGC exchanged a $4.1 million account receivable from Brigham Exploration Company ("Brigham"), a publicly traded company, for 1,211,580 shares of Brigham common stock. The cost basis of the investments available for sale is determined by the fair market value on the date received.
January 31, 2000 July 31, 1999 -------------------------------------- -------------------------------------- Unrealized Unrealized Cost Basis (Loss) Fair Value Cost Basis (Loss)/Gain Fair Value -------------------------------------- -------------------------------------- (In thousands) Brigham common stock $ 4,099 $ (1,676) $ 2,423 $ 3,809 $ (1,143) $ 2,666 Miller Warrants 1,021 (160) 861 419 586 1,005 ---------- ---------- ---------- ---------- ---------- ---------- $ 5,120 $ (1,836) $ 3,284 $ 4,228 $ (557) $ 3,671 ========== ========== ========== ========== ========== ==========
9. INCOME TAXES The effective tax rate results from unbenefitted losses in certain countries and the inability to use foreign tax credits in the current year. 10 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains forward-looking statements that involve risks and uncertainties. Veritas DGC's actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors which are more fully described in other reports filed with the Securities and Exchange Commission and which include changes in market conditions in the oil and gas industry as well as declines in prices of oil and gas. RESULTS OF OPERATIONS THREE MONTHS ENDED JANUARY 31, 2000 COMPARED WITH THREE MONTHS ENDED JANUARY 31, 1999 Revenues. Revenues decreased 11%, from $101.7 million to $91.0 million. Multi-client revenue increased 14%, from $42.8 million to $48.7 million. This is a reflection of Veritas DGC's expansion of its multi-client business into new markets, particularly Brazil, Nigeria and Canada. Contract revenue decreased 28%, from $58.9 million to $42.3 million. This is due to the continuing downturn in exploration spending which began in the second quarter of fiscal year 1999. Cost of services. Cost of services decreased 10%, from $70.0 million to $62.7 million, commensurate with the decrease in revenue. Depreciation and amortization. Depreciation and amortization expense increased by 5%, from $17.7 million to $18.5 million, due to capital spending and the Enertec acquisition. Gross property and equipment, excluding assets held for sale, increased by $34.1 million, or 10% between the comparative income statement period ending dates. Selling, general and administrative. Selling, general and administrative expense remained relatively the same as a percentage of revenue. Interest expense. Interest expense remained essentially flat, with long term debt being the same in both quarters. Other income. Other income decreased from $2.6 million to $0.2 million. Interest income in the current period was $.5 million, versus $1.2 million last year, due to a decrease in cash between the comparative period ending dates. A currency gain of $1.3 in the prior comparative quarter contributed most of the remaining difference. Income taxes. Income taxes decreased from a provision of $3.1 million to $1.1 million as a result of Veritas DGC's lower earnings in the current quarter. The increase in the effective tax rate from 36% to 46% is due to unbenefitted losses in certain countries and the inability to use foreign tax credits in the current year. Equity in (earnings) loss. Equity in (earnings) loss is related to the Indonesian joint venture. Decrease in marine contract work accounts for the decreased profitability in the current quarter. SIX MONTHS ENDED JANUARY 31, 2000 COMPARED WITH SIX MONTHS ENDED JANUARY 31, 1999 Revenues. Revenues decreased 36%, from $248.5 million to $159.7 million. Multi-client revenue decreased 14%, from $95.5 million to $82.2 million, while contract revenue decreased 49%, from $153.0 million to $77.5 million. The decrease is due to the continuing downturn in exploration spending which began in the second quarter of fiscal year 1999 . Cost of services. Cost of services decreased 38%, from $173.5 million to $107.4 million. However, cost of services as a percent of revenues decreased from 70% to 67%. This is due to the relatively smaller decline in the more profitable multi-client business as compared to the contract business. 11 14 Depreciation and amortization. Depreciation and amortization expense increased by 6%, from $34.6 million to $36.8 million, due to capital spending and the Enertec acquisition. Gross property and equipment, excluding assets held for sale, increased by $34.1 million, or 10%, between the comparative income statement period ending dates. Selling, general and administrative. Selling, general and administrative expense decreased by 15%, from $9.1 million to $7.7 million. The termination of a process improvement project in fiscal year 1999 and lower property tax accruals in the first quarter of fiscal year 2000, among other items, generated the reduction. Interest expense. Interest expense increased from $5.6 million to $7.0 million due to the addition of $60.0 million of 9 3/4% senior notes at the end of October 1998. Other income. Other income decreased from $2.4 million to $1.2 million due to net foreign currency exchange gains in Canada in the previous fiscal year. Income taxes. Income taxes decreased from a provision of $8.9 million to $1.1 million as a result of Veritas DGC's lower earnings in the current quarter. The increase in the effective tax rate from 32% to 54% is due to unbenefitted losses in certain countries and the inability to use foreign tax credits in the current year. Equity in loss. Equity in loss is related to the Indonesian joint venture. Decrease in marine contract work accounts for the decreased profitability in the current fiscal year. Extraordinary loss on debt repurchase. On September 24, 1999, Veritas DGC repurchased $5.5 million of its 9 3/4% senior notes on the open market at a price of $5.7 million. The excess of purchase price over face value and the write off of the pro rata debt issuance costs associated with the notes are reported as an extraordinary item, net of tax. LIQUIDITY AND CAPITAL RESOURCES SOURCES AND USES Veritas DGC's internal sources of liquidity are cash, cash equivalents and cash flow from operations. External sources include public and private financing, the unutilized portion of a revolving credit facility, equipment financing and trade credit. As of January 31, 2000, Veritas DGC had approximately $135.1 million in senior notes outstanding due in October 2003. Veritas DGC also has a revolving credit facility due July 2001 from commercial lenders that provides advances up to $50.0 million. Advances are limited by a borrowing base, which is in excess of the credit limit at January 31, 2000 (when calculated in accordance with the new credit agreement effective November 1, 1999) and bear interest, at Veritas DGC's election, at LIBOR plus a margin or prime rate based on certain financial ratios maintained by Veritas DGC. Advances are secured by certain accounts receivable. As of January 31, 2000, there are no outstanding advances under the credit facility, but $5.8 million of the credit facility has been utilized for letters of credit, therefore, $44.2 million is available for borrowings. Veritas DGC requires significant amounts of working capital to support its operations and fund capital spending and research and development programs. Veritas DGC's current capital expenditure forecast for fiscal 2000 is approximately $70.0 million, which includes expenditures of approximately $25.0 million to maintain or replace current operating equipment. Research and development expenditures for fiscal 2000 are budgeted at $8.3 million. Veritas DGC has also increased its multi-client activity and significantly expanded its multi-client data library. Because of the elapsed time between survey execution, sale and ultimate cash receipt, multi-client work generally requires greater amounts of working capital than contract work. Depending upon the timing of the sales of the multi-client surveys and the 12 15 contract terms relating to the collection of the proceeds from such sales, Veritas DGC's liquidity may be affected. Veritas DGC seeks pre-funding commitments from customers for a portion of the cost of these surveys. However, because of market conditions, purchase commitment levels are currently much lower than in past years. Veritas DGC believes that these multi-client surveys have good long-term sales, earnings and cash flow potential, but there is no assurance that Veritas DGC will recover the costs of these surveys. In addition to the capital expenditure budget, the planned net investment in the multi-client data library (the change in the balance sheet account) for fiscal 2000 is $81.0 million. Veritas DGC will require substantial cash flow to continue operations on a satisfactory basis, complete its capital expenditure and research and development programs and meet its principal and interest obligations with respect to outstanding indebtedness. While management believes that Veritas DGC has adequate sources of funds to meet its liquidity needs, its ability to meet its obligations depends on its future performance, which, in turn, is subject to general economic conditions, business and other factors beyond Veritas DGC's control. Key factors affecting future results will include utilization levels of acquisition and processing assets and the level of multi-client data library sales, all of which are driven by exploration spending and, ultimately, by underlying commodity prices. If Veritas DGC is unable to generate sufficient cash flow from operations or otherwise to comply with the terms of its revolving credit facility or indentures, it may be required to refinance all or a portion of its existing debt or obtain additional financing. Veritas DGC cannot make any assurances that it would be able to obtain such refinancing or financing, or any refinancing or financing would result in a level of net proceeds required. To ensure that Veritas DGC has available as many financing options as possible, it has filed a shelf registration allowing the issuance of up to $200 million in debt, preferred stock or common stock. On October 26, 1999 Veritas DGC filed a prospectus supplement relating to the sale of up to 2.0 million shares of Veritas DGC common stock, from time to time through ordinary brokerage transactions, under the currently effective shelf registration. As of January 31, 2000, Veritas DGC has issued 0.2 million shares under this prospectus supplement. YEAR 2000 Year 2000 Issue. Some software applications, hardware, equipment and embedded chip systems identify dates using only the last two digits of the year. These products may be unable to distinguish between dates in the year 2000 and dates in the year 1900. That inability (referred to as the "Year 2000" issue), if not addressed, could cause applications, equipment or systems to fail or provide incorrect information after December 31, 1999, or when using dates after December 31, 1999. Compliance Program. Veritas DGC prepared a formal plan to address Year 2000 issues as they relate to Veritas DGC's business and its operations. In accordance with that plan, Veritas DGC evaluated all internal hardware and software used in its operations, including those used to support Veritas DGC's activities, such as geophysical data acquisition and processing equipment and accounting and payroll systems. Costs to Address Year 2000 Compliance Issues. Cost of compliance was approximately $125,000, and Veritas DGC is not aware of any material contingencies or costs that will be incurred in the future. Risk of Non-Compliance. Veritas DGC's Year 2000 compliance program substantially reduced the risks associated with the Year 2000 issue and no significant problems related to the issue have been encountered since January 1, 2000. 13 16 OTHER Since Veritas DGC's quasi-reorganization with respect to Digicon Inc. on July 31, 1991, the tax benefits of net operating loss carryforwards existing at the date of the quasi-reorganization have been recognized through a direct addition to paid-in capital, when realization is more likely than not. Additionally, the utilization of the net operating loss carryforwards existing at the date of the quasi-reorganization is subject to certain limitations. During the six months ended January 31, 2000, Veritas DGC recognized $1.1 million of these benefits, due to increased profitability of Veritas DGC's U.K. operations. Veritas DGC maintains operations in Europe, which are predominately conducted from its U.K. offices. Although the U.K. has not currently elected to convert to the new "euro" currency, Veritas DGC does have transactions with companies in countries that have adopted the new currency. Veritas DGC has made a preliminary assessment and does not anticipate any material effect to the consolidated financial statements as a result of the new currency. See Note 1 of Notes to Consolidated Financial Statements regarding new accounting pronouncements not yet adopted. PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES On September 21, 1999 the Veritas DGC Restated Certificate of Incorporation was amended to designate a new series of special voting stock and to delete a restriction which prohibits the Veritas DGC Board from designating a new series of ordinary share without the unanimous approval of all the outstanding ordinary shares. (See Item 4.) ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On September 21, 1999 the shareholders of Veritas DGC held a special meeting and approved a proposal to amend Veritas DGC's Restated Certificate of Incorporation to authorize a new series of special voting stock and to eliminate provisions that restrict the issuance of a new series of ordinary shares, both required to complete the acquisition of Enertec Resource Services Inc. The votes on the amendments were as follows: For - 12,404,041, Against - 4,031,980, Abstaining 21,017. On December 7, 1999 at the Annual Meeting of Stockholders of Veritas DGC, stockholders voted to elect eight directors nominated as follows:
For Withheld Clayton P. Cormier 18,839,288 63,510 Lawrence C. Fichtner 18,856,872 45,926 James R. Gibbs 18,854,406 48,392 Steven J. Gilbert 18,498,871 403,927 Stephen J. Ludlow 18,856,131 46,667 Brian F. MacNeill 18,856,472 46,326 David B. Robson 18,854,372 48,426 Jan Rask 18,850,610 52,188
14 17 INVESTMENTS IN OIL, GAS OR OTHER MINERAL EXPLORATION OR DEVELOPMENT PROGRAMS. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) EXHIBITS FILED WITH THIS REPORT: Exhibit ------------ 3-A) Restated Certificate of Incorporation with amendments of Digicon Inc. dated August 30, 1996. (Exhibit 3.1 to Veritas DGC Inc.'s Current Report on Form 8-K dated September 16, 1996 is incorporated herein by reference.) 3-B) Certificate of Ownership and Merger of New Digicon Inc. and Digicon Inc. (Exhibit 3-B to Digicon Inc.'s Registration Statement No. 33-43873 dated November 12, 1991 is incorporated herein by reference.) 3-C) By-laws of new Digicon Inc. dated June 24, 1991. (Exhibit 3-C to Digicon Inc.'s Registration Statement No. 33-43873 dated November 12, 1991 is incorporated herein by reference.) 3-D) Certificate of Amendment to Restated Certificate of Incorporation of Veritas DGC Inc. dated September 30, 1999. (Exhibit 3-D to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1999 is incorporated herein by reference.) *3-E) By-laws of Veritas DGC Inc. dated March 7, 2000. 4-A) Specimen certificate for Senior Notes (Series A). (Included as part of Section 2.2 Exhibit 4-B to Veritas DGC Inc.'s Registration Statement No. 333-12481 dated September 20, 1996 is incorporated herein by reference.) 4-B) Form of Trust Indenture relating to the 9 3/4% Senior Notes due 2003 of Veritas DGC Inc. between Veritas DGC Inc. and Fleet National Bank, as trustee. (Exhibit 4-B to Veritas DGC Inc.'s Registration Statement No. 333-12481 dated September 20, 1996 is incorporated herein by reference.) 4-C) Specimen Veritas DGC Inc. Common Stock certificate. (Exhibit 4-C to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1996 is incorporated herein by reference.) 4-D) Rights Agreement between Veritas DGC Inc. and ChaseMellon Shareholder Services, L.L.C. dated May 15, 1997. (Exhibit 4.1 to Veritas DGC Inc.'s Current Report on Form 8-K dated May 27, 1997 is incorporated herein by reference.) 4-E) Form of Restricted Stock Grant Agreement. (Exhibit 4.8 to Veritas DGC Inc.'s Registration Statement No. 333-48953 dated March 31, 1998 is incorporated herein by reference.) 4-F) Restricted Stock Plan as Amended and Restated September 14, 1999. (Exhibit 4.8 to Veritas DGC Inc.'s Registration Statement No. 333-87223 dated September 16, 1999 is incorporated herein by reference.) 4-G) Key Contributor Incentive Plan as Amended and Restated dated March 9, 1999. (Exhibit 4.9 to Veritas DGC Inc.'s Registration Statement No. 333-74305 dated March 12, 1999 is incorporated herein by reference.) 4-H) Specimen for Senior Notes (Series C). (Exhibit 4-K to Veritas DGC Inc.'s Form 10-Q for the quarter ended January 31, 1999 is incorporated herein by reference.) 4-I) Indentures relating to the 9 3/4% Senior Notes due 2003, Series B and Series C of Veritas DGC Inc. between Veritas DGC Inc. and State Street Bank and Trust Company dated 15 18 October 28, 1998. (Exhibit 4.3 to Veritas DGC Inc.'s Current Report on Form 8-K dated November 12, 1998 is incorporated herein by reference.) 9-A) Voting and Exchange Trust Agreement dated August 30, 1996 among Digicon Inc., Veritas Energy Services Inc. and the R-M Trust Company dated August 30, 1996. (Exhibit 9.1 to Veritas DGC Inc.'s Current Report on Form 8-K dated September 16, 1996 is incorporated herein by reference.) 9-B) Voting and Exchange Trust Agreement dated September 30, 1999 among Veritas DGC Inc., Veritas Energy Services Inc. and the CIBC Mellon Trust Company. (Exhibit 9-B to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1999 is incorporated herein by reference.) 10-A) Support Agreement between Digicon Inc. and Veritas Energy Services Inc. dated August 30, 1996. (Exhibit 10.1 to Veritas DGC Inc.'s Current Report on Form 8-K dated August 30, 1996 is incorporated herein by reference.) 10-B) Second Amended and Restated 1992 Non-Employee Director Stock Option Plan as Amended and Restated dated December 9, 1998. (Exhibit 10-B to Veritas DGC Inc.'s Form 10-Q for the quarter ended October 31, 1998 is incorporated herein by reference.) 10-C) Fifth Amended and Restated 1992 Employee Nonqualified Stock Option Plan. (Exhibit 10-C to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1999 is incorporated herein by reference.) 10-D) 1997 Employee Stock Purchase Plan. (Exhibit 4.1 to Veritas DGC Inc.'s Registration Statement No. 333-38377 dated October 21, 1997 is incorporated herein by reference.) 10-E) Restricted Stock Agreement between Veritas DGC Inc. and Anthony Tripodo dated April 1, 1997. (Exhibit 10-O to Veritas DGC Inc.'s Form 10-Q for the year ended July 31, 1997 is incorporated herein by reference.) 10-F) Employment Agreement executed by David B. Robson. (Exhibit 10-L to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1997 is incorporated herein by reference.) 10-G) Employment Agreement executed by Stephen J. Ludlow. (Exhibit 10-B to Veritas DGC Inc.'s Form 10-Q for the quarter ended April 30, 1997 is incorporated herein by reference.) 10-H) Employment Agreement executed by Anthony Tripodo. (Refer to Exhibit 10-I to Veritas DGC Inc.'s Form 10-Q for the quarter ended April 30, 1997 is incorporated herein by reference.) 10-I) Employment Agreement executed by Rene M.J. VandenBrand. (Exhibit 10-N to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1997 is incorporated herein by reference.) 10-J) Employment Agreement executed by Timothy L. Wells. (Exhibit 10-J to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1999 is incorporated herein by reference.) 10-K) Credit Agreement among Veritas DGC Inc., as borrower, and Bank One, Texas, N.A., as issuing bank, as a bank and as agent for the banks, and the banks named therein dated July 27, 1998. ( Exhibit 10-K to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1998 is incorporated herein by reference.) 16 19 10-L) First Amendment to Credit Agreement among Veritas DGC Inc., as borrower, and Bank One, Texas, N.A., as issuing bank, as a bank and as agent for the banks, and the banks named therein dated October 23, 1998. (Exhibit 10-L to Veritas DGC Inc.'s Form 10-Q for the quarter ended October 31, 1998 is incorporated herein by reference.) 10-M) Second Amendment to Credit Agreement among Veritas DGC Inc., as borrower, and Bank One, Texas, N.A., as issuing bank, as a bank and as agent for the banks, and the banks named therein dated November 20, 1998. (Exhibit 10-M to Veritas DGC Inc.'s Form 10-Q for the quarter ended October 31, 1998 is incorporated herein by reference.) 10-N) Credit Agreement among Veritas DGC Inc., as borrower, and Bank One, Texas, N.A., as issuing bank, as a bank and agent for the banks, and the banks therein named dated November 1, 1999. (Exhibit 10-N to Veritas DGC Inc.'s Form 10-Q for the quarter ended October 31, 1999.) 10-O) Sales agency agreement between Veritas DGC Inc. and PaineWebber Incorporated, dated October 26, 1999. (Exhibit 1.1 to Veritas DGC Inc.'s Form 8-K filed on October 26, 1999 is incorporated herein by reference.) 10-P) Form of Indemnity Agreement between Veritas DGC Inc. and its executive officers and directors. (Exhibit 10-P to Veritas DGC Inc.'s Form 10Q for the quarter ended October 31, 1999.) *10-Q Employment Agreement executed by Richard C. White. *27) Financial Data Schedule 99) Audit Committee Charter of Veritas DGC Inc., approved by the Board of Directors on December 7, 1999. (Exhibit 99 to Veritas DGC Inc.'s Form 10Q for the quarter ended October 31, 1999.) * Filed herewith b) REPORTS ON FORM 8-K Veritas DGC filed a Form 8-K on October 26, 1999 with respect to its sales agency agreement related to its registered offering of up to 2.0 million shares of common stock, from time to time through ordinary brokerage transactions. 17 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, on the 15th day of March 2000. VERITAS DGC INC. By: /s/ Richard C. White ------------------------------------------ RICHARD C. WHITE Chief Executive Officer /s/ Anthony Tripodo ------------------------------------------ ANTHONY TRIPODO Executive Vice President, Chief Financial Officer and Treasurer 18 21 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- 3-A) Restated Certificate of Incorporation with amendments of Digicon Inc. dated August 30, 1996. (Exhibit 3.1 to Veritas DGC Inc.'s Current Report on Form 8-K dated September 16, 1996 is incorporated herein by reference.) 3-B) Certificate of Ownership and Merger of New Digicon Inc. and Digicon Inc. (Exhibit 3-B to Digicon Inc.'s Registration Statement No. 33-43873 dated November 12, 1991 is incorporated herein by reference.) 3-C) By-laws of new Digicon Inc. dated June 24, 1991. (Exhibit 3-C to Digicon Inc.'s Registration Statement No. 33-43873 dated November 12, 1991 is incorporated herein by reference.) 3-D) Certificate of Amendment to Restated Certificate of Incorporation of Veritas DGC Inc. dated September 30, 1999. (Exhibit 3-D to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1999 is incorporated herein by reference.) *3-E) By-laws of Veritas DGC Inc. dated March 7, 2000. 4-A) Specimen certificate for Senior Notes (Series A). (Included as part of Section 2.2 Exhibit 4-B to Veritas DGC Inc.'s Registration Statement No. 333-12481 dated September 20, 1996 is incorporated herein by reference.) 4-B) Form of Trust Indenture relating to the 9 3/4% Senior Notes due 2003 of Veritas DGC Inc. between Veritas DGC Inc. and Fleet National Bank, as trustee. (Exhibit 4-B to Veritas DGC Inc.'s Registration Statement No. 333-12481 dated September 20, 1996 is incorporated herein by reference.) 4-C) Specimen Veritas DGC Inc. Common Stock certificate. (Exhibit 4-C to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1996 is incorporated herein by reference.) 4-D) Rights Agreement between Veritas DGC Inc. and ChaseMellon Shareholder Services, L.L.C. dated May 15, 1997. (Exhibit 4.1 to Veritas DGC Inc.'s Current Report on Form 8-K dated May 27, 1997 is incorporated herein by reference.) 4-E) Form of Restricted Stock Grant Agreement. (Exhibit 4.8 to Veritas DGC Inc.'s Registration Statement No. 333-48953 dated March 31, 1998 is incorporated herein by reference.) 4-F) Restricted Stock Plan as Amended and Restated September 14, 1999. (Exhibit 4.8 to Veritas DGC Inc.'s Registration Statement No. 333-87223 dated September 16, 1999 is incorporated herein by reference.) 4-G) Key Contributor Incentive Plan as Amended and Restated dated March 9, 1999. (Exhibit 4.9 to Veritas DGC Inc.'s Registration Statement No. 333-74305 dated March 12, 1999 is incorporated herein by reference.) 4-H) Specimen for Senior Notes (Series C). (Exhibit 4-K to Veritas DGC Inc.'s Form 10-Q for the quarter ended January 31, 1999 is incorporated herein by reference.) 4-I) Indentures relating to the 9 3/4% Senior Notes due 2003, Series B and Series C of Veritas DGC Inc. between Veritas DGC Inc. and State Street Bank and Trust Company dated
22 October 28, 1998. (Exhibit 4.3 to Veritas DGC Inc.'s Current Report on Form 8-K dated November 12, 1998 is incorporated herein by reference.) 9-A) Voting and Exchange Trust Agreement dated August 30, 1996 among Digicon Inc., Veritas Energy Services Inc. and the R-M Trust Company dated August 30, 1996. (Exhibit 9.1 to Veritas DGC Inc.'s Current Report on Form 8-K dated September 16, 1996 is incorporated herein by reference.) 9-B) Voting and Exchange Trust Agreement dated September 30, 1999 among Veritas DGC Inc., Veritas Energy Services Inc. and the CIBC Mellon Trust Company. (Exhibit 9-B to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1999 is incorporated herein by reference.) 10-A) Support Agreement between Digicon Inc. and Veritas Energy Services Inc. dated August 30, 1996. (Exhibit 10.1 to Veritas DGC Inc.'s Current Report on Form 8-K dated August 30, 1996 is incorporated herein by reference.) 10-B) Second Amended and Restated 1992 Non-Employee Director Stock Option Plan as Amended and Restated dated December 9, 1998. (Exhibit 10-B to Veritas DGC Inc.'s Form 10-Q for the quarter ended October 31, 1998 is incorporated herein by reference.) 10-C) Fifth Amended and Restated 1992 Employee Nonqualified Stock Option Plan. (Exhibit 10-C to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1999 is incorporated herein by reference.) 10-D) 1997 Employee Stock Purchase Plan. (Exhibit 4.1 to Veritas DGC Inc.'s Registration Statement No. 333-38377 dated October 21, 1997 is incorporated herein by reference.) 10-E) Restricted Stock Agreement between Veritas DGC Inc. and Anthony Tripodo dated April 1, 1997. (Exhibit 10-O to Veritas DGC Inc.'s Form 10-Q for the year ended July 31, 1997 is incorporated herein by reference.) 10-F) Employment Agreement executed by David B. Robson. (Exhibit 10-L to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1997 is incorporated herein by reference.) 10-G) Employment Agreement executed by Stephen J. Ludlow. (Exhibit 10-B to Veritas DGC Inc.'s Form 10-Q for the quarter ended April 30, 1997 is incorporated herein by reference.) 10-H) Employment Agreement executed by Anthony Tripodo. (Refer to Exhibit 10-I to Veritas DGC Inc.'s Form 10-Q for the quarter ended April 30, 1997 is incorporated herein by reference.) 10-I) Employment Agreement executed by Rene M.J. VandenBrand. (Exhibit 10-N to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1997 is incorporated herein by reference.) 10-J) Employment Agreement executed by Timothy L. Wells. (Exhibit 10-J to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1999 is incorporated herein by reference.) 10-K) Credit Agreement among Veritas DGC Inc., as borrower, and Bank One, Texas, N.A., as issuing bank, as a bank and as agent for the banks, and the banks named therein dated July 27, 1998. ( Exhibit 10-K to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1998 is incorporated herein by reference.)
23 10-L) First Amendment to Credit Agreement among Veritas DGC Inc., as borrower, and Bank One, Texas, N.A., as issuing bank, as a bank and as agent for the banks, and the banks named therein dated October 23, 1998. (Exhibit 10-L to Veritas DGC Inc.'s Form 10-Q for the quarter ended October 31, 1998 is incorporated herein by reference.) 10-M) Second Amendment to Credit Agreement among Veritas DGC Inc., as borrower, and Bank One, Texas, N.A., as issuing bank, as a bank and as agent for the banks, and the banks named therein dated November 20, 1998. (Exhibit 10-M to Veritas DGC Inc.'s Form 10-Q for the quarter ended October 31, 1998 is incorporated herein by reference.) 10-N) Credit Agreement among Veritas DGC Inc., as borrower, and Bank One, Texas, N.A., as issuing bank, as a bank and agent for the banks, and the banks therein named dated November 1, 1999. (Exhibit 10-N to Veritas DGC Inc.'s Form 10-Q for the quarter ended October 31, 1999.) 10-O) Sales agency agreement between Veritas DGC Inc. and PaineWebber Incorporated, dated October 26, 1999. (Exhibit 1.1 to Veritas DGC Inc.'s Form 8-K filed on October 26, 1999 is incorporated herein by reference.) 10-P) Form of Indemnity Agreement between Veritas DGC Inc. and its executive officers and directors. (Exhibit 10-P to Veritas DGC Inc.'s Form 10Q for the quarter ended October 31, 1999.) *10-Q Employment Agreement executed by Richard C. White. *27) Financial Data Schedule 99) Audit Committee Charter of Veritas DGC Inc., approved by the Board of Directors on December 7, 1999. (Exhibit 99 to Veritas DGC Inc.'s Form 10Q for the quarter ended October 31, 1999.)
* Filed herewith EX-3.E 2 BY-LAWS OF VERITAS DGC INC. 1 EXHIBIT 3-E VERITAS DGC INC. (A DELAWARE CORPORATION) B Y L A W S (As Amended and Restated March 7, 2000) ARTICLE I OFFICES SECTION 1.1 PRINCIPAL OFFICE. The principal office of the Corporation shall be in the City of Houston, Texas. SECTION 1.2 REGISTERED OFFICE. The registered office of the Corporation required to be maintained in the State of Delaware by the General Corporation Laws of the State of Delaware, may be, but need not be, the same as its place of business, and the location of the registered office in the State of Delaware may be changed to any other place in the State of Delaware from time to time by resolution of the Board of Directors. SECTION 1.3 OTHER OFFICES. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II STOCKHOLDER'S MEETINGS SECTION 2.1 ANNUAL MEETING. The annual meeting of the holders of shares of each class or series of stock as are entitled to notice thereof and to vote thereat pursuant to applicable 1 2 law and the Certificate of Incorporation for the purpose of electing directors and transacting such other proper business as may come before it shall be held in each year at such time, on such day and at such place, within or without the State of Delaware, as may be designated by the Board of Directors. SECTION 2.2 SPECIAL MEETINGS. In addition to such special meetings as are provided by law or the Certificate of Incorporation, special meetings of the holders of any class or series or of all classes or series of the Corporation's stock (the "Stockholders") for any purpose or purposes may be called at any time by a majority of the entire Board of Directors and may be held on such day, at such time and at such place, within or without the State of Delaware, as shall be designated by the Board of Directors. SECTION 2.3 NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Except as otherwise provided by law, written notice of any meeting of Stockholders shall be given either by personal delivery or by mail to each Stockholder of record entitled to vote thereat. Notice of each meeting shall be in such form as is approved by the Board of Directors and shall state the date, place and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Except as otherwise provided by law, the business that may be transacted at any such special meeting shall be limited to and consist of the purpose or purposes stated in such notice. Unless otherwise provided by law, such written notice shall be given not less than ten (10) or more than sixty (60) days before the date of the meeting. Except when a Stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened, presence in person or by proxy of a Stockholder shall constitute a 2 3 waiver of notice of such meeting. Further, a written waiver of any notice required by law or by these Bylaws, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. If a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Stockholder of record entitled to vote at the meeting. SECTION 2.4 VOTING LISTS. The officer or agent having charge of the stock transfer books for shares of the Corporation shall make, at least ten (10) days before each meeting of the Stockholders, a complete list of Stockholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of each and the number of shares held by each. For a period of at least ten (10) days prior to such meeting, such list shall be kept on file either (i) at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if such place is not specified, (ii) at the place where the meeting is to be held. Such list shall be subject to inspection by the Stockholders, for any purpose germane to the meeting, at any time during ordinary business hours during the ten (10) day period prior to the meeting. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any Stockholder for the duration of the meeting. The original stock transfer books shall be prima facie evidence as to who are the Stockholders entitled to examine such list or transfer books or to vote at any meeting of Stockholders. 3 4 SECTION 2.5 QUORUM. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the shares of the Corporation's stock issued and outstanding and entitled to vote at a meeting, present in person or represented by proxy, without regard to class or series, shall constitute a quorum at all meetings of the Stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the Stockholders, the holders of a majority of such shares of stock, present in person or represented by proxy, may adjourn any meeting from time to time without notice other than announcement at the meeting, except as otherwise required by these Bylaws, until a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally called. SECTION 2.6 ORGANIZATION. Meetings of the Stockholders shall be presided over by the Chairman of the Board of Directors, if one shall be elected, or in his absence, by the Vice-Chairman, if one shall be elected, the Chief Executive Officer, the President or by any Vice President, or, in the absence of any of such officers, by a chairman to be chosen by a majority of the Stockholders entitled to vote at the meeting who are present in person or by proxy. The Secretary, or, in his absence, any Assistant Secretary or any person appointed by the individual presiding over the meeting, shall act as secretary at meetings of the Stockholders. SECTION 2.7 VOTING. Each Stockholder of record, as determined pursuant to Section 2.8 hereof, who is entitled to vote in accordance with the terms of the Certificate of Incorporation and in accordance with the provisions of these Bylaws, shall be entitled to one vote, in person or by proxy, for each share of stock registered in his name on the books of the Corporation. 4 5 Every Stockholder entitled to vote at any Stockholder's meeting or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy duly appointed by instrument in writing subscribed by such Stockholder and executed not more than three (3) years prior to the meeting, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only so long as, it is coupled with an interest sufficient in law to support an irrevocable power. A Stockholder's attendance at any meeting, when such Stockholder who may have theretofore given a proxy, shall not have the effect of revoking such proxy unless such Stockholder shall in writing so notify the Secretary of the meeting prior to the voting of the proxy. Unless otherwise provided by law, no vote on the election of directors or any question brought before the meeting need be by written ballot unless (i) the chairman of the meeting shall determine that it shall be by written ballot or (ii) the holders of a majority of the shares of stock present in person or by proxy and entitled to participate in such vote shall so demand. In a vote by ballot, each ballot shall state the number of shares voted and the name of the Stockholder or proxy voting. Except as otherwise provided by law, by the Certificate of Incorporation or these Bylaws, all elections of directors and all other matters before the Stockholders shall be decided by the vote of the holders of a majority of the shares of stock present in person or by proxy at the meeting and entitled to vote in the election or on the question. In the election of directors, votes may not be cumulated. SECTION 2.8 STOCKHOLDER ENTITLED TO VOTE. The Board of Directors may fix a date not more than sixty (60) days nor less than ten (10) days prior to the date of any meeting of 5 6 Stockholders, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, or, in the case of corporate action by written consent in accordance with the terms of Section 2.11 hereof, not more than sixty (60) days prior to such action, as a record date for the determination of the Stockholders entitled to notice of and to vote at such meeting and any adjournment thereof, or to act by written consent, and in such case such Stockholders and only such Stockholders as shall be Stockholders of record on the date so fixed shall be entitled to notice of and to vote at, such meeting and any adjournment thereof, or to act by written consent, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after such record date fixed as aforesaid. SECTION 2.9 ORDER OF BUSINESS. The order of business at all meetings of Stockholders shall be as determined by the chairman of the meeting or as is otherwise determined by the vote of the holders of a majority of the shares of stock present in person or by proxy and entitled to vote without regard to class or series at the meeting. SECTION 2.10 INSPECTOR OF ELECTIONS. (a) In the event that the Corporation has a class of voting stock that is (i) listed on a national securities exchange, (ii) authorized for quotation on an interdealer quotation system of a registered national securities association, or (iii) held of record by more than 2,000 Stockholders, then the Board of Directors shall, in advance of any meeting of Stockholders, appoint one (1) or more inspectors to act at the meeting and make a written report thereof in accordance with Section 231 of the Delaware General Corporation Law ("DGCL"). If no inspector or alternate is able to act at a meeting of Stockholders, the chairman of the meeting shall appoint one (1) or more inspectors to act at the meeting. Each inspector, before entering 6 7 upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability. (b) The inspectors shall (i) ascertain the number of shares outstanding and the voting powers of each; (ii) determine the shares represented at a meeting and the validity of proxies and ballots; (iii) count all votes and ballots; (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and (v) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. (c) The date and time of the opening and the closing of the polls for each matter upon which the Stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxy or vote, nor any revocation thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery, upon application by a Stockholder, shall determine otherwise. (d) In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Section 212(c) of the DGCL, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the Stockholder holds of record. If the inspectors consider other reliable information for the limited purpose 7 8 permitted herein, the inspectors at the time they make their certification pursuant to Section 2.10(b) hereof shall specify the precise information considered by them including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors' belief that such information is accurate and reliable. SECTION 2.11 ACTION BY WRITTEN CONSENT. Unless otherwise provided by law or the Certificate of Incorporation, any action required or permitted to be taken by the Stockholders of the Corporation may be taken without prior notice and an actual meeting if a consent in writing setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Except as provided above, no action shall be taken by the Stockholders by written consent. Prompt notice of the taking of any corporate action without a meeting by less than unanimous written consent shall be given to those Stockholders who have not consented in writing. ARTICLE III DIRECTORS SECTION 3.1 MANAGEMENT. The property, affairs and business of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all powers of the Corporation and do all lawful acts and things as are not by law, by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the Stockholders. SECTION 3.2 NUMBER AND TERM. The number of directors may be fixed from time to time by resolution of the Board of Directors adopted by the affirmative vote of a majority of the 8 9 members of the entire Board of Directors, but shall consist of not less than three (3) nor more than ten (10) members who shall be elected annually by the Stockholders except as provided in Section 3.4 hereof. Directors need not be Stockholders. No decrease in the number of directors shall have the effect of shortening the term of office of any incumbent director. SECTION 3.3 QUORUM AND MANNER OF ACTION. At all meetings of the Board of Directors a majority of the total number of directors holding office shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law, by the Certificate of Incorporation or these Bylaws. If at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at such adjourned meeting. Attendance by a director at a meeting shall constitute a waiver of notice of such meeting except where a director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened. SECTION 3.4 VACANCIES. Except as otherwise provided by law or the Certificate of Incorporation, in the case of any increase in the authorized number of directors or of any vacancy in the Board of Directors, however created, the additional director or directors may be elected by the Stockholders, or, as the case may be, the vacancy or vacancies may be filled by majority vote of the directors remaining on the whole Board of Directors although less than a quorum, or by a sole remaining director. In the event one or more directors shall resign, such vacancy or vacancies shall be filled by a majority of the remaining directors. Any director elected or chosen as provided herein shall serve until the sooner of (i) the expiration of the unexpired term of the directorship to which he is appointed; (ii) the election and qualification of his successor; or (iii) his resignation or removal. 9 10 SECTION 3.5 RESIGNATIONS. A director may resign at any time upon written notice of resignation to the Corporation. Any resignation shall be effective upon receipt by the Corporation, regardless of whether any other effective date is specified therein. Acceptance of such resignation shall not be necessary to make it effective. SECTION 3.6 REMOVALS. Any director or the entire Board of Directors may be removed, with or without cause, and another person or persons may be elected to serve for the remainder of his or their term by the holders of a majority of the shares of the Corporation entitled to vote in the election of directors. In case any vacancy so created shall not be filled by the Stockholders at such meeting, such vacancy may be filled by the directors as provided in Section 3.4 hereof. SECTION 3.7 ANNUAL MEETINGS. The annual meeting of the Board of Directors shall be held, if a quorum be present, immediately following each annual meeting of the Stockholders at the place such meeting of Stockholders took place, for the purpose of organization and transaction of any other business that might be transacted at a regular meeting thereof, and no notice of such meeting shall be necessary. If a quorum is not present, such annual meeting may be held at any other time or place that may be specified in a notice given in the manner provided in Section 3.9 hereof for special meetings of the Board of Directors or in a waiver of notice thereof. SECTION 3.8 REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such places and times as shall be determined from time to time by resolution of the Board of Directors. Except as otherwise provided by law, any business may be transacted at any regular meeting of the Board of Directors. SECTION 3.9 SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Secretary at the request of the Chairman of the Board, the Vice Chairman, if one be elected, the Chief Executive Officer, the President or any two (2) members of the Board of Directors. Notices of special meetings may be provided by mail, telephone, fax, electronic mail, or in person. If notice is mailed, it shall be mailed to each director not later than two (2) days before the day the meeting is to be held, and in all other cases, notice shall be given not later than 10 11 one (1) day before such meeting. Neither the business to be transacted at, nor the purpose of, any special meeting need be specified in any notice or written waiver of notice unless so required by the Certificate of Incorporation or by the Bylaws and, unless limited by law, the Certificate of Incorporation or by these Bylaws, any and all business may be transacted at a special meeting. SECTION 3.10 ORGANIZATION OF MEETINGS. At any meeting of the Board of Directors, business shall be transacted in such order and manner as such Board of Directors may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present at any meeting at which there is a quorum, except as otherwise provided by these Bylaws or required by law. SECTION 3.11 PLACE OF MEETINGS. The Board of Directors may hold their meetings, have one or more offices and keep the books of the Corporation outside the State of Delaware at any office or offices of the Corporation or at any other place as they may from time to time by resolution determine. SECTION 3.12 COMPENSATION OF DIRECTORS. Directors shall not receive any stated salary for their services as directors, but by resolution of the Board of Directors a fixed honorarium or fees and expenses, if any, of attendance may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 3.13 ACTION BY UNANIMOUS WRITTEN CONSENT. Unless otherwise restricted by law, the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if prior to such action all members of the Board of Directors or of such committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board of Directors or the committee. SECTION 3.14 PARTICIPATION IN MEETINGS BY TELEPHONE. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors or of any 11 12 committee thereof may participate in a meeting of such Board of Directors or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting in such manner shall constitute presence in person at such meeting. SECTION 3.15 USE OF CAPITALIZED TERMS. The capitalized terms used in this Article III and not defined herein shall have the definition and meaning ascribed to such terms in the Certificate of Incorporation. ARTICLE IV COMMITTEES OF THE BOARD SECTION 4.1 MEMBERSHIP AND AUTHORITIES. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board of Directors, designate three (3) or more Directors to constitute an Executive Committee and such other committees as the Board of Directors may determine, each of which committees to the extent provided in said resolution or resolutions or in these Bylaws, shall have and may exercise all the powers of the Board of Directors in the management of the business and affairs of the Corporation, except in those cases where the authority of the Board of Directors is specifically denied to the Executive Committee or such other committee or committees by law, the Certificate of Incorporation or these Bylaws, and may authorize the seal of the Corporation to be affixed to all papers that may require it. The designation of an Executive Committee or other committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him by law. SECTION 4.2 MINUTES. Each committee designated by the Board of Directors shall keep regular minutes of its proceedings and report the same to the Board of Directors when required. SECTION 4.3 VACANCIES. The Board of Directors may designate one (l) or more of its members as alternate members of any committee who may replace any absent or disqualified member at any meeting of such committee. If no alternate members have been appointed, the 12 13 committee member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. The Board of Directors shall have the power at any time to fill vacancies in, to change the membership of, and to dissolve, any committee. SECTION 4.4 TELEPHONE MEETINGS. Members of any committee designated by the Board of Directors may participate in or hold a meeting by use of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this Section 4.4 shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened. SECTION 4.5 ACTION WITHOUT MEETING. Any action required or permitted to be taken at a meeting of any committee designated by the Board of Directors may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all the members of the committee and filed with the minutes of the committee proceedings. Such consent shall have the same force and effect as a unanimous vote at a meeting. ARTICLE V OFFICERS SECTION 5.1 NUMBER AND TITLE. The elected officers of the Corporation shall be chosen by the Board of Directors and shall be a President, a Vice President, a Secretary and a Treasurer. The Board of Directors may also choose (i) a Chairman of the Board, who must be a member of the Board of Directors; (ii) if a Chairman of the Board is chosen, the Board of Directors may also choose a Vice Chairman, who must be a member of the Board of Directors; (iii) a Chief Executive Officer, who need not be a member of the Board of Directors; and (iv) 13 14 additional Vice Presidents, Assistant Secretaries and/or Assistant Treasurers. One person may hold any two or more of these offices. SECTION 5.2 TERM OF OFFICE; VACANCIES. So far as is practicable, all elected officers shall be elected by the Board of Directors at the annual meeting of the Board of Directors in each year, and except as otherwise provided in this Article V, shall hold office until the next such meeting of the Board of Directors in the subsequent year and until their respective successors are elected and qualified or until their earlier death, resignation or removal. All appointed officers shall hold office at the pleasure of the Board of Directors. If any vacancy shall occur in any office, the Board of Directors may elect or appoint a successor to fill such vacancy for the remainder of the term. SECTION 5.3 REMOVAL OF ELECTED OFFICERS. Any elected officer may be removed at any time, with or without cause, by affirmative vote of a majority of the whole Board of Directors, at any regular meeting or at any special meeting called for such purpose. SECTION 5.4 RESIGNATIONS. Any officer may resign at any time upon written notice of resignation to the President, Secretary or Board of Directors of the Corporation. Any resignation shall be effective immediately unless a date certain is specified for it to take effect, in which event it shall be effective upon such date, and acceptance of any resignation shall not be necessary to make it effective, irrespective of whether the resignation is tendered subject to such acceptance. SECTION 5.5 THE CHAIRMAN OF THE BOARD. The Chairman of the Board, if one shall be elected, shall preside at all meetings of the Stockholders and Board of Directors; shall be ex officio a member of all standing committees; and shall have general and active management of business of the corporation. In addition, the Chairman of the Board shall perform whatever duties and shall exercise all powers that are given to him by the Board of Directors. Unless otherwise designated by the Board of Directors, the Chairman of the Board, if one shall be elected, shall also be the chief executive officer of the Corporation. In the absence of the Chairman, such of his duties shall be performed and his authority exercised by either the Vice 14 15 Chairman, if one shall be elected, or the Chief Executive Officer, if one shall be elected, as may be designated by the Chairman with the right reserved to the Board of Directors to designate or supersede any designation so made. SECTION 5.6 PRESIDENT. The President shall, in the absence of the Chairman of the Board and the Vice Chairman, if one shall be appointed, preside at meetings of the Stockholders and Board of Directors; shall implement the general directives, plans and policies formulated by the Board of Directors; and shall further have such duties, responsibilities and authorities as may be assigned to him by the Board of Directors. He may sign, with any other proper officer, certificates for shares of the Corporation and any deeds, bonds, mortgages, contracts and other documents which the Board of Directors has authorized to be executed, except where required by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors or these Bylaws, to some other officer or agent of the Corporation. In the absence of the President, his duties shall be performed and his authority may be exercised by a Vice President of the Corporation as may have been designated by the President with the right reserved to the Board of Directors to designate or supersede any designation so made. SECTION 5.7 VICE PRESIDENTS. The several Vice Presidents shall have such powers and duties as may be assigned to them by these Bylaws and as may from time to time be assigned to them by the Board of Directors and may sign, with any other proper officer, certificates for shares of the Corporation. SECTION 5.8 SECRETARY. The Secretary, if available, shall attend all meetings of the Board of Directors and all meetings of the Stockholders and record the proceedings of the meetings in a book to be kept for that purpose and shall perform like duties for any committee of the Board of Directors as shall designate him to serve. He shall give, or cause to be given, notice of all meetings of the Stockholders and meetings of the Board of Directors and committees thereof and shall perform such other duties incident to the office of secretary or as may be prescribed by the Board of Directors or the Chairman, under whose supervision he shall be. He 15 16 shall have custody of the corporate seal of the Corporation and he, or any Assistant Secretary, or any other person whom the Board of Directors may designate, shall have authority to affix the same to any instrument requiring it, and when so affixed it may be attested by his signature or by the signature of any Assistant Secretary or by the signature of such other person so affixing such seal. SECTION 5.9 ASSISTANT SECRETARIES. Each Assistant Secretary shall have the usual powers and duties pertaining to his office, together with such other powers and duties as may be assigned to him by the Board of Directors, the Chairman, the President or the Secretary. The Assistant Secretary or such other person as may be designated by the President shall exercise the powers of the Secretary during that officer's absence or inability to act. SECTION 5.10 TREASURER. The Treasurer shall have the custody of and be responsible for the corporate funds and securities, shall keep full and accurate accounts of receipts and disbursements in the books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation, and he shall perform all other duties incident to the position of Treasurer, or as may be prescribed by the Board of Directors or the President. If required by the Board of Directors, he shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. SECTION 5.11 ASSISTANT TREASURERS. Each Assistant Treasurer shall have the usual powers and duties pertaining to his office, together with such other powers and duties as may be 16 17 assigned to him by the Board of Directors, the President or the Treasurer. The Assistant Treasurer or such other person designated by the President shall exercise the power of the Treasurer during that officer's absence or inability to act. SECTION 5.12 SUBORDINATE OFFICERS. The Board of Directors may (a) appoint such other subordinate officers and agents as it shall deem necessary who shall hold their offices for such terms, have such authority and perform such duties as the Board of Directors may from time to time determine, or (b) delegate to any committee or officer the power to appoint any such subordinate officers or agents. SECTION 5.13 SALARIES AND COMPENSATION. The salary or other compensation of officers shall be fixed from time to time by the Board of Directors. The Board of Directors may delegate to any committee or officer the power to fix from time to time the salary or other compensation of subordinate officers and agents appointed in accordance with the provisions of Section 5.12 hereof. ARTICLE VI INDEMNIFICATION SECTION 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was, at any time prior to or during which this Article VI is in effect, a director, officer, employee or agent of the Corporation, or is or was, at any time prior to or during which this Article VI is in effect, serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan against reasonable expenses (including attorneys' fees), judgments, fines, penalties, amounts paid in settlement and other liabilities actually and reasonably incurred by such person in connection with such action, suit or 17 18 proceeding if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that such person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was, at any time prior to or during which this Article VI is in effect, a director, officer, employee or agent of the Corporation, or is or was, at any time prior to or during which this Article VI is in effect, serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees), actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; provided, that no indemnification shall be made under this subsection (b) in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery, or other court of appropriate jurisdiction, shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity of such expenses which the Delaware Court of Chancery, or other court of appropriate jurisdiction, shall deem proper. (c) To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding 18 19 referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (d) Any indemnification under subsections (a) or (b) (unless ordered by the Delaware Court of Chancery or other court of appropriate jurisdiction) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of such person is proper in the circumstances because he has met the applicable standard of conduct set forth in sub-sections (a) and (b). Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors not parties to such action, suit or proceeding; or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel, in a written opinion, selected by the Board of Directors; or (3) by the Stockholders. In the event a determination is made under this subsection (d) that the director, officer, employee or agent has met the applicable standard of conduct as to some matters but not as to others, amounts to be indemnified may be reasonably prorated. (e) Expenses (including attorneys' fees) incurred by a person who is or was a director or officer of the Corporation in appearing at, participating in or defending any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, shall be paid by the Corporation at reasonable intervals in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized by this Article VI. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. (f) It is the intention of the Corporation to indemnify the persons referred to in this Article VI to the fullest extent permitted by law and with respect to any action, suit or proceeding arising from events which occur at any time prior to or during which this Article VI 19 20 is in effect. The indemnification and advancement of expenses provided by this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be or become entitled under any law, the Certificate of Incorporation, these Bylaws, agreement, the vote of Stockholders or disinterested directors or otherwise, or under any policy or policies of insurance purchased and maintained by the Corporation on behalf of any such person, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. (g) The indemnification provided by this Article VI shall be subject to all valid and applicable laws, and, in the event this Article VI or any of the provisions hereof or the indemnification contemplated hereby are found to be inconsistent with or contrary to any such valid laws, the latter shall be deemed to control and this Article VI shall be regarded as modified accordingly, and, as so modified, to continue in full force and effect. ARTICLE VII CAPITAL STOCK SECTION 7.1 CERTIFICATES OF STOCK. Certificates of stock shall be issued to each Stockholder certifying the number of shares owned by him in the Corporation and shall be in a form not inconsistent with the Certificate of Incorporation and as approved by the Board of Directors. The certificates shall be signed by the Chairman of the Board, the President or a Vice President and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer and may be sealed with the seal of the Corporation or a facsimile thereof. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by 20 21 the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. If the Corporation shall be authorized to issue more than one (1) class of stock or more than one (1) series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided by statute, in lieu of the foregoing requirements, there may be set forth on the face or back of the Certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each Stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. SECTION 7.2 LOST CERTIFICATES. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the owner of such certificate, or his legal representative. When authorizing the issuance of a new certificate, the Board of Directors may in its discretion, as a condition precedent to the issuance thereof, require the owner, or his legal representative, to give a bond in such form and substance with such surety as it may direct, to indemnify the Corporation against any claim that may be made on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate. SECTION 7.3 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD FOR CERTAIN PURPOSES. (a) In order that the Corporation may determine the Stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of capital stock or for the 21 22 purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days prior to the date of payment of such dividend or other distribution or allotment of such rights or the date when any such rights in respect of any change, conversion or exchange of stock may be exercised or the date of such other action. In such a case, only Stockholders of record on the date so fixed shall be entitled to receive any such dividend or other distribution or allotment of rights or to exercise such rights or for any other purpose, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. (b) If no record date is fixed, the record date for determining Stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. SECTION 7.4 DIVIDENDS. Subject to the provisions of the Certificate of Incorporation, if any, and except as otherwise provided by law, the directors may declare dividends upon the capital stock of the Corporation as and when they deem it to be expedient. Such dividends may be paid in cash, in property or in shares of the Corporation's capital stock. Before declaring any dividend there may be set apart out of the funds of the Corporation available for dividends, such sum or sums as the directors from time to time in their discretion think proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends, or for such other purposes as the directors shall think conducive to the interests of the Corporation and the directors may modify or abolish any such reserve in the manner in which it was created. SECTION 7.5 REGISTERED STOCKHOLDERS. Except as expressly provided by law, the Certificate of Incorporation and these Bylaws, the Corporation shall be entitled to treat registered Stockholders as the only holders and owners in fact of the shares standing in their respective names and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, regardless of whether it shall have express or other notice thereof. 22 23 SECTION 7.6 TRANSFER OF STOCK. Transfers of shares of the capital stock of the Corporation shall be made only on the books of the Corporation by the registered owners thereof, or by their legal representatives or their duly authorized attorneys. Upon any such transfers the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock transfer books and ledgers, by whom they shall be cancelled and new certificates shall thereupon be issued. 23 24 ARTICLE VIII MISCELLANEOUS PROVISIONS SECTION 8.1 CORPORATE SEAL. If one be adopted, the corporate seal shall have inscribed thereon the name of the Corporation and shall be in such form as may be approved by the Board of Directors. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. SECTION 8.2 FISCAL YEAR. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. SECTION 8.3 CHECKS, DRAFTS, NOTES. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner as shall from time to time be determined by resolution (whether general or special) of the Board of Directors or may be prescribed by any officer or officers, or any officer and agent jointly, thereunto duly authorized by the Board of Directors. SECTION 8.4 NOTICE AND WAIVER OF NOTICE. Whenever notice is required to be given to any director or Stockholder under the provisions of applicable law, the Certificate of Incorporation or of these Bylaws it shall not be construed to only mean personal notice, rather, such notice may also be given in writing, by mail, addressed to such director or Stockholder at his address as it appears on the records of the Corporation, with postage thereon prepaid (unless prior to the mailing of such notice he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address in which case, such notice shall be mailed to the address designated in the request), and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram, cable or other form of recorded communication, by personal delivery, by telephone, by facsimile or by electronic mail. Whenever notice is required to be given under any provision of law, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing, by telegraph, cable or other form of recorded communication, signed by the 24 25 person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these Bylaws. SECTION 8.5 EXAMINATION OF BOOKS AND RECORDS. The Board of Directors shall determine from time to time whether, and if allowed, when and under what conditions and regulations the accounts and books of the Corporation (except such as may by statute be specifically opened to inspection) or any of them shall be open to inspection by the Stockholders, and the Stockholders' rights in this respect are and shall be restricted and limited accordingly. SECTION 8.6 VOTING UPON SHARES HELD BY THE CORPORATION. Unless otherwise provided by law or by the Board of Directors, the Chairman of the Board; the Vice Chairman in the absence of the Chairman of the Board; or the President in the absence of the Chairman and the Vice Chairman; acting on behalf of the Corporation, shall have full power and authority to attend and to act and to vote at any meeting of Stockholders of any corporation in which the Corporation may hold stock and, at any such meeting, shall possess and may exercise any and all of the rights and powers incident to the ownership of such stock which, as the owner thereof, the Corporation might have possessed and exercised, if present. The Board of Directors by resolution from time to time may confer like powers upon any person or persons. ARTICLE IX AMENDMENTS SECTION 9.1 AMENDMENT. Except as otherwise expressly provided in the Certificate of Incorporation, the directors, by the affirmative vote of a majority of the entire Board of Directors 25 26 and without the assent or vote of the Stockholders, may at any meeting, provided the substance of the proposed amendment shall have been stated in the notice of the meeting, make, repeal, alter, amend or rescind any of the provisions of these Bylaws. 26 EX-10.Q 3 EMPLOYMENT AGREEMENT EXECUTED BY RICHARD C. WHITE 1 EXHIBIT 10-Q EMPLOYMENT AGREEMENT This Employment Agreement (this "Agreement") is made and entered into by and between Veritas DGC Inc., a Delaware corporation (hereinafter referred to as "Employer"), and Richard C. White, an individual currently resident in Harris County, Texas (hereinafter referred to as "Employee") effective as of January 24, 2000. Attendant to Employee's employment by Employer, Employer and Employee wish for there to be a complete understanding and agreement between Employer and Employee with respect to, among other terms, Employee's duties and responsibilities to Employer; the compensation and benefits owed to Employee; the fiduciary duties owed by Employee to Employer; Employee's obligation to avoid conflicts of interest, disclose pertinent information to Employer, and refrain from using or disclosing Employer's information; and the term of employment. NOW, THEREFORE, in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Employer and Employee agree as follows: Section 1. General Duties of Employer and Employee. a. Employer agrees to employ Employee, and Employee agrees to accept employment by Employer and to serve Employer in an executive capacity as its Chief Executive Officer. At the commencement of this Agreement, Employee shall report to the Chairman of the Board of Employer. The powers, duties and responsibilities of Employee as Chief Executive Officer include those duties that are the usual and customary powers, duties and responsibilities of such office and such other and further duties appropriate to such position as may from time to time be assigned to Employee by the Chairman or the Board of Directors of Employer (hereinafter referred to as the "Board"). b. Employer agrees that Employee shall be nominated as a candidate for election to the Board at the next annual meeting of stockholders of Employer (such annual meeting is expected to be held in December 2000). If elected, Employee shall have all powers and obligations associated with such position as a director, subject to all policies and guidelines as may be established by the Board, Employers certificate of incorporation and By-laws and applicable law. c. While employed hereunder, Employee shall devote substantially all reasonable and necessary time, efforts, skills and attention for the benefit of and with his primary attention to the affairs of Employer in order that he shall faithfully perform his duties and obligations. The preceding sentence shall not, however, be deemed to restrict Employee from attending to matters or engaging in activities not directly related to the business of Employer, provided that (i) such activities or matters are reasonable in scope and time commitment and not otherwise in violation of this Agreement, and (ii) Employee shall not become a director of any corporation or other entity (excluding charitable or other non-profit organizations) without prior written disclosure to, and consent of, Employer. 1 2 d. At the commencement of Employee's employment by Employer, Employee shall be based at Employer's headquarters located at 3701 Kirby Drive, Houston, Texas and upon relocation of Employer's headquarters to western Harris County, Texas, currently scheduled for October or November, 2000, Employee shall be based at such relocated headquarters (Employer's Kirby Drive headquarters and after relocation its western Harris County headquarters are referred to herein as the "Place of Employment). e. Employee agrees and acknowledges that during the term of this Agreement, he owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of Employer and to do no act knowingly which would injure Employer's business, its interests or its reputation. Section 2. Compensation and Benefits. a. Employer shall pay to Employee during the term of this Agreement a base salary of $27,500 per month. The Compensation Committee of the Board will review Employee's base salary at least once each fiscal year and, during the term of this Agreement, may increase, but may not decrease Employee's base salary. The base salary, including any increase thereof, shall be paid to Employee in equal installments every two weeks or on such other schedule as Employer may establish from time to time for its management personnel. b. Employee will be eligible to participate in the fiscal year 2000 (8/01/99 through 7/31/99) Key Contributor Incentive Compensation Plan with a target of 50% of Employee's annual base salary. Any incentive earned in fiscal year 2000 will be prorated based on Employee's actual period of employment during the fiscal year. During each subsequent fiscal year during the term of this Agreement, Employee shall be eligible to participate in that year's Key Contributor Incentive Plan or other replacement incentive or bonus plan Employer establishes for its key executives with at least a target of 50% of Employee's annual base salary, but in no event less than other key executives of Employer. c. Employer shall grant to Employee effective March 11, 2000, an option (the "Stock Option") to purchase such number of shares of Employer's common stock, $.01 par value ("Common Stock") equal to 1.0 times Employee's annual base salary divided by the market price as of the date of grant pursuant to Employer's Non-qualified Employee's Stock Option Plan and the Stock Option Agreements in the form attached hereto as Exhibit A. Employee will be eligible for future option grants under Employer's Key Contributor Incentive Compensation Plan (or other replacement incentive or bonus plan Employer establishes for its key executives) on a basis at least as favorable as grants made to other key executives of Employer. In the event that Employee's employment is terminated at any time prior to January 23, 2002 for any reason other than for Cause (as hereinafter defined), all Stock Options held by Employee on the date of such termination shall automatically be fully vested. d. Employer shall award to Employee, effective as of the date of this Agreement, 25,000 shares of restricted Common Stock of Employer in accordance with the terms of the Restricted Stock Agreement attached hereto as Exhibit B and made a part hereof. 2 3 e. Employee will be entitled to paid vacation of not less than four weeks each year. Vacation may be taken by Employee at the time and for the periods as may be mutually agreed upon between Employer and Employee. f. Employer will pay or reimburse Employee for all membership fees (other than initiation fees), dues, assessments and expenses relating to Employee's current golf club membership at Willow Fork Country Club, Katy, Texas. g. Employee shall be reimbursed in accordance with Employer's normal expense reimbursement policy for all of the actual and reasonable costs and expenses incurred by him in the performance of his services and duties hereunder, including, but not limited to, travel and entertainment expenses. Employee shall furnish Employer with all invoices and vouchers reflecting amounts for which Employee seeks Employer's reimbursement. h. Employee shall be entitled to participate in all insurance and retirement plans, incentive compensation plans (at a level appropriate to his position) and such other benefit plans or programs as may be in effect from time-to-time for the key management employees of Employer including, without limitation, those related to savings and thrift, retirement, welfare, medical, dental, disability, salary continuance, accidental death, travel accident, life insurance, incentive bonus, membership in business and professional organizations, and reimbursement of business and entertainment expenses. i. In addition to those benefit plans and programs referred to in Section 2.h. above, Employer shall, in the event of Employee's Short-Term Disability, pay to Employee an amount equal to the following: (i) for the first three months of such Short-Term Disability, 100% of the amount Employee would have received as base salary had he been able to work; and (ii) for the next three months of such Short-Term Disability, 66 2/3 % of the amount Employee would have received as base salary had he been able to work. Such payments shall be made to Employee in equal installments every two weeks or on such other schedule as Employer may establish from time to time for payment of salaries to its management personnel. A "Short-Term Disability" as used in this Section 2.i. shall mean any continuous period longer than one day and continuing for a period of up to and including 180 days during which time Employee is unable to perform, due to physical or mental illness, injury or incapacity, the duties assigned to him under this Agreement. j. Employer, during the term of this Agreement and thereafter without limit of time, shall indemnify Employee for claims and expenses to the extent provided in Employer's Certificate of Incorporation and Bylaws. Employer shall also provide Employee coverage under Employer's policies of directors' and officers' liability insurance to the same extent as other executive officers of the Company during the term of this Agreement and for a period of six years thereafter, so long as such coverage is available on a commercially reasonable basis. Employer shall In addition, effective as of the effective date of this Agreement, Employer agrees to enter into that one certain Indemnity Agreement with Employee, a copy of which is attached hereto as Exhibit C. 3 4 k. All salary, bonus and other payments made by Employer to Employee pursuant to this Agreement shall be subject to such payroll and withholding deductions as may be required by law and other deductions applied generally to employees of Employer for insurance and other employee benefit plans in which Employee participates. Section 3. Fiduciary Duty; Confidentiality. a. In keeping with Employee's fiduciary duties to Employer, Employee agrees that he shall not knowingly take any action which would create a conflict of interest with Employer, or upon discovery thereof, allow such a conflict to continue. In the event that Employee discovers that such a conflict exists, Employee agrees that he shall disclose to the Board any facts which might involve a conflict of interest that has not been approved by the Board. b. As part of Employee's fiduciary duties to Employer, Employee agrees to protect and safeguard Employer's information, ideas, concepts, improvements, discoveries, and inventions and any proprietary, confidential and other information relating to Employer or its business (collectively, "Confidential Information") and, except as may be required by Employer, Employee shall not knowingly, either during his employment by Employer or thereafter, directly or indirectly, use for his own benefit or for the benefit of another, or disclose to another, any Confidential Information, except (i) with the prior written consent of the Employer; (ii) in the course of the proper performance of the Employee's duties under this Agreement; (iii) for information that becomes generally available to the public other than as a result of the unauthorized disclosure by the Employee; (iv) for information that becomes available to Employee on a nonconfidential basis from a source other than Employer or its affiliated companies who is not bound by a duty of confidentiality to Employer; or (v) as may be required by any applicable law, rule, regulation or order. c. Upon termination of his employment with Employer, Employee shall immediately deliver to Employer all documents in the possession or under the control of Employee embodying any of Employer's Confidential Information. Section 4. Term and Termination. a. The term of Employee's employment hereunder shall be for a period of two years, commencing January 24, 2000 and ending January 23, 2002, unless earlier terminated in accordance with the terms of this Agreement; provided, that beginning January 24, 2002 and on each January 24th thereafter, such term of employment shall be extended automatically for an additional one-year period unless Employer or Employee gives the other written notice of intent to terminate this Agreement at least thirty days prior to such January 24th. b. Employee's employment under this Agreement shall terminate upon Employee's death. c. Employer may terminate this Agreement by reason of Employee's Disability (as hereinafter defined) after such condition of Disability has existed for at least 180 consecutive days. Employer shall give Employee sixty days notice of its intention to effect such termination pursuant to this Section 4.c. As used in this Agreement, except for Section 2.i., "Disability" shall 4 5 mean a physical or mental illness, injury or incapacity lasting longer than 180 consecutive days which renders Employee unable to perform the duties assigned to him under this Agreement. d. Employer may terminate this Agreement upon the determination by a majority of the entire Board that Cause (as hereinafter defined) exists therefor. As used in this Agreement, "Cause" means (i) the willful and continued failure by Employee substantially to perform his obligations under this Agreement (other than any such failure resulting from his Short Term Disability, as defined in Section 2.i. or his Disability) after a demand for substantial performance has been delivered to him by the Board which specifically identifies the manner in which the Board believes Employee has not substantially performed such provisions, (ii) Employee's willfully engaging in conduct materially and demonstrably injurious to the property or business of Employer, including without limitation, fraud, misappropriation of funds or other property of Employer, other willful misconduct, gross negligence or conviction of a felony or other crime of moral turpitude, or (iii) Employee's material breach of this Agreement which breach has not been remedied by Employee within ten (10) days after receipt by Employee of written notice from Employer that he is in material breach of the Agreement, specifying the particulars of such breach. If the Board determines that Cause exists, Employer may (A) terminate this Agreement effective immediately or at a subsequent date or (B) condition Employee's continued employment upon such considerations or requirements as may be reasonable under the circumstances and place a reasonable limitation upon the time within which Employee shall comply with such considerations or requirements. e. Employee shall have the right to terminate this Agreement and his employment hereunder for "Good Reason," which for purposes of this Agreement means (i) Employer's failure to comply with any of the provisions of Section 2 of this Agreement and which failure is not remedied within ten (10) days after receipt of written notice from Employee specifying the particulars of such breach; (ii) Employer's breach of any other material provision of this Agreement which is not remedied within ten (10) days after receipt by Employer of written notice from Employee specifying the particulars of such breach; (iii) the assignment to Employee of any duties inconsistent with Employee's position (including status, offices, titles, and reporting requirement), duties, functions responsibilities, or authority as contemplated by Section 1 of this Agreement or other action by the Employer that results in a diminution (other than an isolated, inconsequential or insubstantial diminution which is remedied by Employer promptly after receipt of written notice thereof given by Employee) in such position, functions, responsibilities or authority; or (iv) the relocation of the Place of Employment to a location more than fifty miles (50) miles from the Place of Employment. f. Employee shall also have the right to terminate his employment and this Agreement in the event that the stockholders of Employer fail to elect Employee to the Board at the next annual meeting of stockholders of Employer (currently expected to be held in December 2000) or any adjournment thereof. In the event Employee fails to exercise such right to terminate within sixty (60) calendar days after the date such election is held, such right is waived. Any such termination by Employee under this Section 4.f. shall be deemed a termination by Employee for "Good Reason." 5 6 Section 5. Effect of Termination. a. Upon termination of this Agreement by Employer for Cause; or by Employee other than for Good Reason, all compensation and benefits shall cease upon the date of termination other than: (i) those benefits that are provided by retirement and benefit plans and programs specifically adopted and approved by Employer for Employee that are earned and vested by the date of termination, (ii) the pro rata annual salary through the date of termination; (ii) any incentive compensation due Employee if, under the terms of the relevant incentive compensation arrangement, such incentive compensation was due and payable to Employee on or before the date of termination; and (iii) medical and similar benefits the continuation of which is required by applicable law or provided by the applicable benefit plan. b. Upon termination of this Agreement by Employer due to the death or Disability of Employee, all compensation and benefits shall cease upon the date of termination other than: (i) those benefits that are provided by retirement and benefit plans and programs specifically adopted and approved by Employer for Employee that are earned and vested by the date of termination, (ii) the pro rata annual salary through the date of termination; (ii) any incentive compensation due Employee if, under the terms of the relevant incentive compensation arrangement, such incentive compensation was due and payable to Employee on or before the date of termination; and (iii) medical and similar benefits the continuation of which is required by applicable law or provided by the applicable benefit plan. In addition, Employer shall pay to Employee or, in the event of Employee's death, his surviving spouse or minor child or children, or their legal representative, on a monthly basis an amount equal to the premium payable by Employee, such spouse and/or child or children for health and dental insurance offered by Employer or on its behalf under COBRA. Such payments shall continue for a period of eighteen months. c. Upon termination of (i) this Agreement by Employer by not extending the term of this Agreement upon giving notice to Employee to terminate this Agreement in accordance with Section 4.a.; (ii) Employee's employment by Employer at any time for any reason other than for Cause or due to Employee's death or Disability; or (iii) this Agreement by Employee for Good Reason during the term hereof, the obligations of Employer and Employee under Sections 1 and 2 shall terminate as of the date this Agreement is terminated, and Employer shall pay or provide to Employee: i. Employee's pro rata annual salary through the date of termination; ii. incentive compensation due Employee, if any, under the terms of the relevant incentive compensation arrangement; and iii. within thirty days of said termination, a severance benefit equal to two years of Employee's annual base salary. All other compensation and benefits shall cease upon the date of termination other than the following: (i) those benefits that are provided by retirement and benefit plans and programs specifically adopted and approved by Employer for Employee that are earned and vested by the 6 7 date of termination, (ii) any rights Employee or his survivors may have under the Restricted Stock Agreement or under any grants of options to purchase Employer's Common Stock made in accordance with Section 2.c. hereof; and (iii) medical and similar benefits the continuation of which is required by applicable law or as provided by the applicable benefit plan. The payments and benefits provided under this Section 5 shall be payable without regard to Employee's other income or his ability to obtain other employment and Employee shall be under not duty to mitigate the amount payable under this section. As a condition to making the payments and providing the benefits specified in Section 5.c., Employer will require that Employee execute a release of certain contractual and statutory claims Employee may have against Employer at the time of Employee's termination. Such release shall be in substantially the same form as Exhibit D attached hereto. Section 6. Miscellaneous. a. For a period of one year after the termination of Employee's employment with Employer, Employee shall not, either on his own account or for any person, firm, partnership, corporation, or other entity (i) solicit any employee of Employer or its affiliates to leave his or her employment; or (ii) induce or attempt to induce any such employee to breach her or his employment agreement with Employer; provided, however, that these restrictions shall not apply with respect to any such employee who (i) was personally recruited to the Employer or its affiliate by Employee and (ii) became an employee of Employer or its affiliate on or before January 23, 2001. b. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be delivered by hand or by registered or certified mail, return receipt requested to the addresses set forth below in this Section 6. If to Employer, to: Veritas DGC Inc. 3701 Kirby Drive, Suite 630 Houston, Texas 77098 Attention: David B. Robson If to Employee, to: Mr. Richard C. White 19822 Timberwind Houston, Texas 77094 or to such other names or addresses as Employer or Employee, as the case may be, shall designate by notice to the other party hereto in the manner specified in this Section. 7 8 c. This Agreement shall be binding upon and inure to the benefit of Employer, its successors, legal representatives and permitted assigns, and upon Employee, his heirs, executors, administrators, representatives and permitted assigns. Neither Party may assign its or his rights, duties and obligations hereunder without the express written consent of Employer, which consent may be withheld for any or no reason; provided, however, that Employer may assign this Agreement without Employee's consent in the event of a bona fide corporate reorganization of Employer in which Employer transfers all or substantially all of its assets to a corporation owned by substantially the same shareholders as owned Employer immediately prior to the transaction. d. This Agreement supersedes, replaces and merges all previous agreements and discussions relating to the same or similar subject matters between Employee and Employer and constitutes the entire agreement between Employee and Employer with respect to the subject matter of this Agreement. This Agreement may not be modified in any respect by any verbal statement, representation or agreement made by any employee, officer, or representative of Employer or by any written agreement unless signed by an officer of Employer who is expressly authorized by the Board to execute such document. e. Except as expressly provided herein, the provisions of this Agreement, and any payment or benefits provided for under this Agreement, shall not reduce any amounts or benefits otherwise payable to or due Employee, or exclude or limit Employee's participation in other benefits available to the Employer's executive personnel generally, or in any way diminish the Employee's rights as an employee, whether existing as of the date of this Agreement or thereafter, under any employee benefit plan, program or arrangement or other contract or agreement of the Employer providing benefits to the Employee. f. If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application. In addition, if any provision of this Agreement is held by an arbitration panel or a court of competent jurisdiction to be invalid, unenforceable, unreasonable, unduly restrictive or overly broad, the parties intend that such arbitration panel or court modify said provision so as to render it valid, enforceable, reasonable and not unduly restrictive or overly broad. g. The internal laws of the State of Texas will govern the interpretation, validity, enforcement and effect of this Agreement without regard to the place of execution or the place for performance thereof. Section 7. Arbitration. a. Employer and Employee agree to submit to final and binding arbitration any and all disputes or disagreements concerning the interpretation or application of this Agreement. Any such dispute or disagreement shall be resolved by arbitration in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association (the "AAA Rules"). Arbitration shall take place in Houston, Texas, unless the parties mutually agree to a different location. Within 30 calendar days of the initiation of arbitration hereunder, each 8 9 party shall designate an arbitrator. The appointed arbitrators shall then appoint a third arbitrator. Employee and Employer agree that the decision of the arbitrators shall be final and binding on both parties. Any court having jurisdiction may enter a judgment upon the award rendered by the arbitrators. In the event the arbitration is decided in whole or in part in favor of Employee, Employer shall reimburse Employee for his reasonable costs and expenses of arbitration, including reasonable attorneys' fees. Regardless of the outcome of the arbitration, Employer shall pay all fees and expenses of the arbitrators and all of Employer's costs of arbitration. b. Notwithstanding the provisions of Section 7.a., Employer may, if it so chooses, bring an action in any court of competent jurisdiction for injunctive relief to enforce Employee's obligations under Sections 3.b., 3.c., or 6.a. hereof. IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first written above. EMPLOYER: VERITAS DGC INC. By: ---------------------------------------- David B. Robson Chairman EMPLOYEE: ------------------------------------------- Richard C. White 9 10 EXHIBIT A 10 11 March 12, 2000 Richard C. White 19822 Timberwood Houston, Texas 77094 Dear Richard: Pursuant to the terms and conditions of the company's 1992 Employee Nonqualified (the "Plan"), you have been granted a Non-Qualified Stock Option to purchase ______ shares (the "Option") of stock as outlined below. Granted To: Richard C. White SSN: _____________ Grant Date: March 12, 2000 Options Granted: _____________ Option Price per Share: $____________ Expiration Date: March 12, 2010 Vesting Schedule: 25% on 3/12/2000 (25% vested upon grant) 25% on 3/12/2001 25% on 3/12/2002 25% on 3/12/2003
By my signature below, I hereby acknowledge receipt of this Option granted on the date shown above, which has been issued to me under the terms and conditions of the Plan. I further acknowledge receipt of the copy of the Plan and agree to conform to all of the terms and conditions of the Option and the Plan. Signature:________________________________ Date:__________________ Richard C. White Note: If there are any discrepancies in the name or address shown above, please make the appropriate corrections on this form. 11 12 VERITAS DGC INC. FIFTH AMENDED AND RESTATED 1992 EMPLOYEE NONQUALIFIED STOCK OPTION PLAN (AS AMENDED AND RESTATED SEPTEMBER 30, 1999) 1. PURPOSE. The purpose of this 1992 Employee Nonqualified Stock Option Plan (the "Plan") of Veritas DGC Inc. (the "Company") (formerly known as Digicon Inc.) is to provide officers and other key employees with a continuing proprietary interest in the Company. The Plan is intended to advance the interests of the Company by enabling it (i) to increase the interest in the Company's welfare of those employees who share the primary responsibility for the management, growth, and protection of the business of the Company, (ii) to furnish an incentive to such persons to continue their services to the Company, (iii) to provide a means through which the Company may continue to induce able management and operating personnel to enter its employ, and (iv) to provide a means through which the Company may effectively compete with other organizations offering similar incentive benefits in obtaining and retaining the services of competent management and operating personnel. 2. STOCK SUBJECT TO THE PLAN. The Company may grant from time to time options to purchase shares of the Company's authorized but unissued common stock, par value $.01 per share, or treasury shares of the common stock. Subject to adjustment as provided in Section 11 hereof, the aggregate number of shares which may be issued or covered by options pursuant to the Plan is 3,954,550 shares, as adjusted for the one for three reverse stock split effective January 17, 1995. Shares of common stock applicable to options which have expired unexercised or terminated for any reason may again be subject to an option or options under the Plan. 3. ADMINISTRATION. (a) The Plan shall be administered by the Compensation Committee of the Company's board of directors (the "Committee"). The board of directors may, from time to time, remove members from or add members to the Committee. Vacancies in the Committee, however caused, shall be filled by the board of directors. No member of the Committee shall be eligible to receive options under the Plan. The Committee shall select one of its members chairman and shall hold meetings at such times and places as it may determine. The Committee may appoint a secretary and, subject to the provisions of the Plan and to policies determined by the board of directors, may make such rules and regulations for the conduct of its business as it shall deem advisable. A majority of the Committee shall constitute a quorum. All action of the Committee shall be taken by a majority of its members. Any action may be taken by a written instrument signed by a majority of the members, and action so taken shall be fully as effective as if it had been taken by a vote of the majority of the members at a meeting duly called and held. (b) Subject to the express terms and conditions of the Plan, the Committee shall have 12 13 full power to construe or interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to it and to make all other determinations necessary or advisable for its administration. (c) Subject to the provisions of Sections 4 and 5 hereof, the Committee may, from time to time, determine which employees of the Company or subsidiary corporations shall be granted options under the Plan, the number of shares subject to each option, and the time or times at which options shall be granted. (d) The Committee shall report to the board of directors the names of employees granted options, and the number of option shares subject to, and the terms and conditions of, each option; provided, however that no option may be granted to an otherwise eligible employee if, after giving effect to the proposed grant, such employee would then hold options covering more than 500,000 shares of common stock under the Plan. (e) No member of the board of directors or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option. 4. ELIGIBILITY. All full-time salaried employees of the Company and of its majority-owned subsidiaries shall be eligible to participate in the Plan, and options may be granted by the Committee to eligible employees designated by the Committee, either at the Committee's own initiative or upon the recommendation of management. In determining the employees to whom options shall be granted and the number of shares to be covered by each option, the Committee may take into account the nature of the services rendered by the respective employees, their present and potential contributions to the success of the Company, and such other factors as the Committee in its discretion shall deem relevant. The Company shall effect the granting of options under the Plan in accordance with the determination made by the Committee. 5. PRICE OF OPTIONS. The option price per share shall be not less than the lesser of (i) fair market value of the common stock on the date the option is granted or (ii) the average fair market value for the common stock during the thirty trading days ending on the trading day next preceding the date the option is granted. Fair market value on any day shall be deemed to be the last reported sale price of the common stock on the principal stock exchange on which the Company's common stock is traded on that date. If no trading occurred on such date, or, if at the time the common stock shall not be listed for trading, fair market value shall be deemed to be the mean between the quoted bid and asked prices for the common stock on such exchange or in the over-the-counter market, as the case may be, on that date. 6. TERM OF OPTION. No option shall be exercisable after the expiration of ten years from the date the option is granted. 13 14 7. EXERCISE OF OPTIONS. (a) General. Except as provided below, each option may be exercised at such times and in such amounts as the Committee in its discretion may provide. (b) Manner of Exercising Options. Shares of common stock purchased under options shall at the time of purchase be paid for in full. To the extent that the right to purchase shares has accrued hereunder, options may be exercised from time to time by written notice to the Company stating the full number of shares with respect to which the option is being exercised, and the time of delivery thereof, which shall be at least 15 days after the giving of such notice unless an earlier date shall have been mutually agreed upon. At such time, the Company shall, without transfer or issue tax to the optionee (or other person entitled to exercise the option) deliver to the optionee (or to such other person) at the principal office of the Company, or such other place as shall be mutually acceptable, a certificate or certificates for such shares against prior payment of the option price in full on the date of notice of exercise for the number of shares to be delivered by certified or official bank check or the equivalent thereof acceptable to the Company; provided, however, that the time of such issuance and delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any requirements of law, the listing requirements of the New York Stock Exchange or any other exchange on which the common stock may then be listed. If the optionee (or other person entitled to exercise the option) fails to pay for all or any part of the number of shares specified in such notice or to accept delivery of such shares upon tender of delivery thereof, the right to exercise the option with respect to such undelivered shares shall be terminated. 8. NON-ASSIGNABILITY OF OPTION RIGHTS. No option granted under the Plan shall be assignable or transferable otherwise than by will or by the laws of descent and distribution. During the lifetime of an optionee, the option shall be exercisable only by him. 9. TERMINATION OF EMPLOYMENT. Except as otherwise provided in this paragraph, options shall terminate 90 days following the termination of the optionee's employment with the Company for any reason, but shall be exercisable following termination only to the extent that the option had become vested on the termination date. In the event that the optionee retires from the Company (at or after age 65) the optionee shall have the right, subject to the provisions of Section 6, to exercise his option at any time within one year after such termination, to the extent that such option had become vested on the termination date. If, however, the optionee shall die in the employment of the Company, then for the lesser of the maximum period during which such option might have been exercisable or one year after the date of death, his estate, personal representative, or beneficiary shall have the same right to exercise the option of such employee as he would have had if he had survived and remained in the employment of the Company. For purposes of this Section 9, employment by any majority-owned subsidiary corporation of the Company shall be deemed employment by the Company. In the discretion of the Committee, a leave of absence approved in writing by the board of 14 15 directors of the Company shall not be deemed a termination of employment; however, no option may be exercised during such leave of absence. 10. CHANGE OF CONTROL. If, at any time, a person, entity or group (including, in each case, all other persons, entities or groups controlling, controlled by, or under common control with or acting in concert or concurrently with, such person, entity or group) shall hold, purchase or acquire beneficial ownership (including without limitation power to vote) of 50% or more of the then outstanding shares of the Company's common stock, then any portion of the Options which have not yet become exercisable shall thereupon become immediately exercisable. 11. ADJUSTMENT OF OPTIONS ON RECAPITALIZATION OR REORGANIZATION. The aggregate number of shares of common stock on which options may be granted to persons participating under the Plan, the aggregate number of shares of common stock on which options may be granted to any one such person, the number of shares thereof covered by each outstanding option, and the price per share thereof in each such option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of common stock of the Company resulting from the subdivision or combination of shares or other capital adjustments, or the payment of a stock dividend after the effective date of this Plan, or other increase or decrease in such shares effected without receipt of consideration by the Company; provided, however, that no adjustment shall be made unless the aggregate effect of all such increases and decreases occurring in any one fiscal year after the effective date of this Plan will increase or decrease the number of issued shares of common stock of the Company by 5% or more; and, provided, further, that any options to purchase fractional shares resulting from any such adjustment shall be eliminated. Subject to any required action by the stockholders and to Section 10 hereof, if the Company shall be the surviving or resulting corporation in any merger or consolidation, any option granted hereunder shall pertain to and apply to the securities to which a holder of the number of shares of common stock subject to option would have been entitled had such option been exercised immediately preceding such merger or consolidation; but a dissolution or liquidation of the Company, or a merger or consolidation in which the Company is not the surviving or resulting corporation (except for a change in Control as defined in Section 10 hereof in which case Section 10 shall govern then outstanding options) shall cause every option outstanding hereunder to terminate, except that the surviving or resulting corporation may, in its absolute and uncontrolled discretion, tender an option or options to purchase its shares on its terms and conditions, both as to the number of shares and otherwise. Adjustments under this Section shall be made by the Committee, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. 12. AGREEMENTS BY OPTIONEE. Each individual optionee shall agree: 15 16 (a) If requested by the Company, at the time of exercise of any option, to execute an agreement stating that he is purchasing the shares subject to option for investment purposes and not with a view to the resale or distribution thereof; (b) To authorize the Company to withhold from his gross pay any tax which it believes is required to be withheld with respect to any benefit under the Plan, and to hold as security for the amount to be withheld any property otherwise distributable to the optionee under the Plan until the amounts required to be withheld have been so withheld. 13. RIGHTS AS A SHAREHOLDER. The optionee shall have no rights as a stockholder with respect to any shares of common stock of the Company held under option until the date of issuance of the stock certificates to him for such shares. 14. EFFECTIVE DATE. The Plan was effective as of September 1, 1992, upon approval by the holders of a majority of the shares of outstanding capital stock present at the December 17, 1992 annual meeting of the Company's stockholders. The Plan was amended by the board of directors on August 29, 1997, amended and restated by the board of directors on March 10, 1997, and December 9, 1998, and amended by the board of directors on March 9, 1999. 15. AMENDMENTS. (a) The board of directors may, from time to time, alter, suspend or terminate the Plan, or alter or amend any and all option agreements granted thereunder but only for one or more of the following purposes: (1) To modify the administrative provisions of the Plan or options; (2) To make any other amendment which does not materially alter the intent or benefits of the Plan; or (3) Increase the maximum number of shares as to which options may be granted under the Plan either to all persons participating in the Plan or to any one such person. (b) It is expressly provided that no such action of the board of directors may, without the approval of the stockholders, alter the provisions of the Plan or option agreements granted thereunder so as to: (1) Decrease the option price applicable to any options granted under the Plan, provided, however, that the provisions of this clause (1) shall not prevent the granting, to any person holding an option under the Plan, of additional options under the Plan 16 17 exercisable at a lower option price; or (2) Alter any outstanding option agreement to the detriment of the optionee, without his consent. 16. EMPLOYMENT OBLIGATION. The granting of any option under this Plan shall not impose upon the Company any obligation whatsoever to employ or to continue to employ any optionee, and the right of the Company to terminate the employment of any officer or other employee shall not be diminished or affected by reason of the fact that an option has been granted to him under the Plan. 17. VES OPTIONS. In order to carry out the terms of (i) the Combination Agreement dated May 10, 1996, between the Company and Veritas Energy Services Inc. ("VES") which was approved by the Company's stockholders at a special meeting held on August 20, 1996 and (ii) the Plan of Arrangement under Part 15 of the Business Corporations Act (Alberta) relating to the combination of the Company and VES which, pursuant to an interim order of the Court of Queen's Bench of Alberta date July 18, 1996, was approved at special meetings of VES optionholders and shareholders held August 20, 1996, this Plan shall include under its terms each of the options (the "VES Options") outstanding on the Effective Date (as defined in the Combination Agreement) (which includes all outstanding options granted under VES' Stock Option Plan for Directors, Officers and Key Employees (the "VES Option Plan")) without any further action on the part of any holder thereof (each a "VES Optionholder"). Effective as of the Effective Time, each VES Option will be exercisable to purchase that number of shares of the Company's common stock determined by multiplying the number of VES common shares (the "VES Common Shares") subject to such VES Option at the Effective Time by the Exchange Ratio (as defined in the Combination Agreement), at an exercise price per share of such VES Option immediately prior to the Effective Time, divided by the Exchange Ratio. On the Effective Date (as defined in the Combination Agreement), such option price shall be converted into a United States dollar equivalent based on the noon spot rate of exchange of the Bank of Canada on such date. If the foregoing calculation results in an exchanged VES Option being exercisable for a fractional share of the Company's common stock, then the number of shares of the Company's common stock subject to such option will be rounded down to the nearest whole number of shares and the total exercise price for the option will be reduced by the exercise price of the fractional share. The term, exercisability, vesting schedule and all other terms and conditions of the VES Options will otherwise be unchanged and shall operate in accordance with their terms, notwithstanding anything to the contrary contained herein. 18. ENERTEC OPTIONS In order to carry out the terms of (i) the Combination Agreement dated as of March 30, 1999, which was approved by the Company's stockholders at a special meeting held on September 21, 1999, and (ii) the Plan of Arrangement under Part 15 of the Business Corporations Act (Alberta) relating to the combination of the Company and Enertec Resource Services Inc., 17 18 which, pursuant to an amended interim order of the Court of Queen's Bench of Alberta dated August 11, 1999, was approved at special meetings of Enertec option holders and shareholders held September 22, 1999, this Plan shall include under its terms each of the options (the "Enertec Options") outstanding on the Effective Date (as defined in the Combination Agreement)(which includes all outstanding options granted under Enertec's stock option plans for directors, officers and employees (collectively, the "Enertec Option Plan")) without any further action on the part of any holder thereof (each a "Enertec Optionholder"). Effective as of the Effective Time, each Enertec Option will be exercisable to purchase that number of shares of the Company's common stock determined by multiplying the number of Enertec common shares (the "Enertec Common Shares") subject to such Enertec Option at the Effective Time by the Exchange Ratio (as defined in the Combination Agreement), at an exercise price per share of the Company's common stock equal to the exercise price per share of such Enertec Option immediately prior the Effective Time, divided by the Exchange Ratio. On the Effective Date (as defined in the Combination Agreement), such option price shall be converted into a United States dollar equivalent based on the rate of exchange as stated in The Wall Street Journal next published after the Effective Time. If the foregoing calculation results in an exchanged Enertec Option being exercisable for a fractional share of the Company's common stock, then the number of shares of the Company's common stock subject to such option will be rounded down to the nearest whole number of shares and the total exercise price for the option will be reduced by the exercise price of the fractional share. Each exchanged Enertec Option shall be: (a) fully vested immediately after the Effective Time; and (b) for a term commencing at the Effective Time and ending as follows: (1) for each optionholder who: (i) is an Enertec director, officer or employee as at the Effective Time (a "Current Optionholder"); and (ii) after the Effective Time is employed or retained by the Company, Enertec or one of their Subsidiaries, on the date as set forth in subsections 5(b) and (d) of the Enertec Option Plan; (2) for each Current Optionholder who at the Effective Time is not retained as a director, officer or employee of the Company, Enertec or one of their subsidiaries, on the date that is the first business day on or immediately after the date that is 90 days after the later of the Effective Date and the date such director, officer or employee is terminated; or (3) notwithstanding the provisions of (1) and (2) above, the Enertec Option Plan or the Plan, for each Current Optionholder with an Executive Termination Contract (as defined in the Combination Agreement), on the current expiry date of such option (the sixth anniversary date). The term, exerciseability, and all other terms and conditions of the Enertec Options will otherwise be unchanged and shall operate in accordance with their terms, notwithstanding anything to the contrary contained herein." 18 19 EXHIBIT B 19 20 RESTRICTED STOCK AGREEMENT THIS RESTRICTED STOCK AGREEMENT (the "AGREEMENT") is made and entered into by and between Veritas DGC Inc., a Delaware corporation (the "COMPANY") and Richard C. White, an employee of the Company ("EMPLOYEE") on this 24th day of January, 2000 pursuant to the Company's Restricted Stock Plan (the "PLAN"), which is incorporated by reference herein in its entirety. WHEREAS, Employee is employed by Veritas DGC Inc., and in connection with such employment as part of Employee's compensation, the Company desires to grant to Employee twenty-five thousand (25,000) shares of the Company's common stock, par value $.01 per share (the "COMMON STOCK"), subject to the terms and conditions of this Agreement, with a view to increasing Employee's equity interest in the Company and WHEREAS, Employee desires to have the opportunity to hold shares of Common Stock subject to the terms and conditions of this Agreement; NOW, THEREFORE, in consideration of the premises, mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms shall have the meanings indicated: a. "Forfeiture Restrictions" shall mean any prohibitions and restrictions set forth herein with respect to the sale or other disposition of shares of Common Stock issued to Employee hereunder and the obligation to forfeit and surrender such shares to the Company. b. "Restricted Shares" shall mean shares of Common Stock that are subject to the Forfeiture Restrictions under this Agreement. Capitalized terms not otherwise defined in this Agreement shall have the meanings given to such terms in the Plan. 2. GRANT OF RESTRICTED SHARES. On the date of this Agreement, the Company shall cause to be issued in Employee's name twenty-five thousand (25,000) shares of Common Stock as Restricted Shares. A certificate evidencing the Restricted Shares shall be issued by Company in Employee's name, pursuant to which Employee shall have, except for the Forfeiture Restrictions, all of the rights of a stockholder of Company with respect to such Restricted Shares, including, without limitation, the right to receive any dividends or distributions allocable thereto. The certificate shall be delivered upon issuance to the Secretary of Company or to such other depository as may be designated by the Committee under the Plan as a depository for safekeeping until the forfeiture of such Restricted Shares occurs or the Forfeiture Restrictions lapse. On the date of this Agreement, Employee shall deliver to the Company all stock powers, endorsed in blank, relating to the Restricted Shares. Upon the lapse of the Forfeiture Restrictions 20 21 without forfeiture, the Company shall cause a new certificate or certificates to be issued without legend in the name of Employee in exchange for the certificate evidencing the Restricted Shares. 3. TRANSFER RESTRICTIONS. The Restricted Shares may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of to the extent then subject to the Forfeiture Restrictions. Further, the Restricted Shares may not be sold or otherwise disposed of in any manner which would constitute a violation of any applicable federal or state securities laws. Employee also agrees (i) that Company may refuse to register the transfer of the Restricted Shares on the stock transfer records of Company if such proposed transfer would in the opinion of counsel satisfactory to the Company constitute a violation of any applicable securities law and (ii) that the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of the Restricted Shares. The Forfeiture Restrictions shall be binding upon and enforceable against any transferee of the Restricted Shares. Certificates representing the Restricted Shares shall be legended as follows to reflect the Forfeiture Restrictions and to assure compliance with any applicable federal or state securities laws: THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS, TERMS AND CONDITIONS (INCLUDING FORFEITURE AND RESTRICTIONS AGAINST TRANSFER) CONTAINED IN THE VERITAS DGC INC. RESTRICTED STOCK PLAN AND A RESTRICTED STOCK AGREEMENT DATED JANUARY 24, 2000 BETWEEN THE REGISTERED OWNER OF SUCH SHARES AND VERITAS DGC INC. RESTRICTIONS ON THE RIGHT TO OWN OR TRANSFER THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN IMPOSED PURSUANT TO SAID RESTRICTED STOCK AGREEMENT. A COPY OF THE RESTRICTED STOCK AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF THIS CERTIFICATE UPON RECEIPT BY THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE OF A WRITTEN REQUEST FROM THE HOLDER REQUESTING SUCH COPY. 4. VESTING. The Forfeiture Restrictions shall lapse as to the Restricted Shares in accordance with the following schedule provided that Employee has been employed, as defined in the plan, from the date of this Agreement through the lapse date:
NUMBER OF RESTRICTED SHARES AS TO WHICH FORFEITURE LAPSE DATE RESTRICTIONS LAPSE ---------- ------------------------- January 24, 2001 8,333 January 24, 2002 8,333 January 24, 2003 8,334
Notwithstanding the foregoing provisions of this Section 4, in the event Employee's employment with Company is terminated prior to the lapse dates (i) by Company without Cause, as defined in the employment agreement dated January 24, 2000 between Employee and the Company (the "Employee Agreement"), (ii) due to the death or Disability, as defined in the Employment Agreement, of Employee, or (iii) due to a Change in Control of the Company, as defined in Section 3.7 of the Plan, then, in any such event, all remaining Forfeiture Restrictions shall immediately lapse and the Restricted Shares shall then be transferable free of restrictions. 21 22 5. CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The existence of the Restricted Shares shall not affect in any way the right or power of Company to make or authorize any adjustment, recapitalization, reorganization or other change in Company's capital structure or its business, any merger or consolidation of Company, any issue of debt or equity securities, the dissolution or liquidation of Company, or any sale, lease, exchange or other disposition of all or any part of its assets or business, or any other corporate act or proceeding. The prohibitions of this Section 5 shall not apply to the transfer of Restricted Shares pursuant to a plan of reorganization of Company, but the stock, securities or other property received in exchange therefor shall also become subject to the Forfeiture Restrictions and provisions governing the lapsing of such Forfeiture Restrictions applicable to the original Restricted Shares for all purposes of this Agreement and the certificates representing such stock, securities or other property shall be legended to show such restrictions. 6. TAX WITHHOLDING. To the extent that the receipt of the Restricted Shares or the lapse of any Forfeiture Restrictions results in compensation income to Employee for federal, state or local income tax purposes, Employee shall deliver to Company at the time of such receipt or lapse, as the case may be, such amount of money as Company may require to meet its obligation under applicable tax laws or regulations, and, if such Employee fails to do so, Company is authorized to withhold from any cash or stock remuneration then or thereafter payable to Employee any tax required to be withheld by reason of such resulting compensation income. 7. CONSIDERATION PAID FOR SHARES. As consideration for the issuance of the Restricted Shares, Employee shall pay Company the par value of such Restricted Shares. 8. EMPLOYMENT RELATIONSHIP. For purposes of this Agreement, Employee shall be considered to be in the employment of Company as long as Employee remains in Employment (as defined in the Plan). The Committee shall determine any questions as to whether and when there has been a termination of such Employment, and the cause of such termination, under the Plan and its determination shall be final. In each case, however, the cause of termination shall be treated the same under the Plan and under the Employment Agreement. 9. CERTAIN TRANSFERS VOID. Any purported transfer of shares of Restricted Shares in breach of any provision of this Agreement shall be void and ineffectual, and shall not operate to transfer any interest or title in the purported transferee. 10. NO FRACTIONAL SHARES. All provisions of this Agreement concern whole shares of Common Stock. If the application of any provision hereunder would yield a fractional share, such fractional share shall be rounded down to the next whole share if it is less than 0.5 and rounded up to the next whole share if it is 0.5 or more. 11. NOT AN EMPLOYMENT AGREEMENT. This Agreement is not an employment agreement, and no provision of this Agreement shall be construed or interpreted to create an employment relationship between Employee and the Company, or otherwise effect any at-will employment relationship between Employee and the Company or guarantee the right to Employment for any specified term. 12. NOTICES. Any notice, instruction, authorization, request or demand required hereunder shall be in writing, and shall be delivered either by personal delivery, by telegram, telex, telecopy or similar 22 23 facsimile means, by certified or registered mail, return receipt requested, or by courier or delivery service, addressed to the Company at the address indicated beneath its signature on the execution page of this Agreement, and to Employee at Employee's address indicated on the Company's stock records, or at such other address and number as a party shall have previously designated by written notice given to the other party in the manner hereinabove set forth. Notices shall be deemed given when received. 13. AMENDMENT AND WAIVER. This Agreement may be amended, modified or superseded only by written instrument executed by the Company and Employee. Only a written instrument executed and delivered by the party waiving compliance hereof shall make any waiver of the terms or conditions. Any waiver granted by the Company shall be effective only if executed and delivered by a duly authorized executive officer of the Company other than Employee. The failure of any party at any time or times to require performance of any provisions hereof shall in no manner effect the right to enforce the same. No waiver by any party of any term or condition, or the breach of any term or condition contained in this Agreement, in one or more instances, shall be construed as a continuing waiver of any such condition or breach, a waiver of any other condition, or the breach of any other term or condition. 14. GOVERNING LAW AND SEVERABILITY. This Agreement shall be governed by the laws of the State of Texas without regard to its conflicts of law provisions. The invalidity of any provision of this Agreement shall not affect any other provision of this Agreement, which shall remain in full force and effect. 15. SUCCESSORS AND ASSIGNS. Subject to the limitations which this Agreement imposes upon transferability of shares of Common Stock, this Agreement shall bind, be enforceable by and inure to the benefit of the Company and its successors and assigns, and to Employee, his permitted assigns and upon his death, his estate and beneficiaries thereof (whether by will or the laws of descent and distribution), executors, administrators, agents, legal and personal representatives. 16. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be an original for all purposes but all of which taken together shall constitute but one and the same instrument. 23 24 IN WITNESS WHEREOF, Company has caused this Agreement to be duly executed by an officer thereunto duly authorized, and the Employee has executed this Agreement, all as of the date first above written. COMPANY: VERITAS DGC INC. By: ------------------------------------- THOMAS SCOTT SMITH Corporate Vice President of Human Resources 3701 Kirby Drive, Suite 112 Houston, Texas 77098-3982 EMPLOYEE: --------------------------------------------- Richard C. White Address: 19822 Timberwind Houston, Texas 77094 24 25 IRREVOCABLE STOCK POWER KNOW ALL MEN BY THESE PRESENTS, THAT the undersigned, FOR VALUE RECEIVED, has bargained, sold, assigned and transferred and by these presents does bargain, sell, assign and transfer unto Veritas DGC Inc., a Delaware Corporation (the "Company"), twenty-five thousand (25,000) shares of common stock, $.01 par value, of the Company, Standing in the undersigned's name on the books of the Company represented by Certificate No. _____; AND subject to and in accordance with The Restricted Stock Agreement dated January 24, 2000 between the undersigned and the Company, the undersigned does hereby constitute and appoint _____________________________________ its true and lawful attorney, IRREVOCABLY, for the undersigned and in its name and stead, to sell assign, transfer, hypothecate, pledge and make over all or any part of the said stock and for that purpose to make and execute all necessary acts of assignment and transfer thereof, and to substitute one or more persons with like full power, hereby ratifying and confirming all that said Attorney or his substitutes shall lawfully do by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set its hand on this 24th day of January, 2000. ---------------------------------------- Richard C. White 25 26 EXHIBIT C 26 27 INDEMNITY AGREEMENT THIS AGREEMENT made this 24th day of January, 2000, between Veritas DGC Inc., a Delaware corporation ("Company"), and Richard C. White, ("Indemnitee") WHEREAS, the Company and Indemnitee desire that Indemnitee continue to serve as a director and/or executive officer of the Company; and WHEREAS, the Company desires and intends hereby to provide indemnification (including advancement of expenses) against any and all liabilities asserted against Indemnitee to the fullest extent permitted by the General Corporation Law of the State of Delaware, NOW, THEREFORE, W I T N E S S E T H: THAT for and in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows: 1. Continued Service. Indemnitee will continue to serve, at the will of the Company and under separate contract, if such exists, as a director and/or executive officer so long as he is duly elected and qualified in accordance with the Bylaws of the Company or until he tenders his resignation. 2. Indemnification. The Company shall indemnify Indemnitee as follows: (a) The Company shall indemnify Indemnitee when he is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that he is or was a director, executive officer, employee or 27 28 agent of the Company, or is or was serving at the request of the Company as a director, executive officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, executive officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee failed to act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) The Company shall indemnify Indemnitee when he is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that he is or was a director, executive officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, executive officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and except that no indemnification shall be made in 28 29 respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification for such expenses which the Court of Chancery or such other court shall deem proper. (c) Any indemnification under paragraphs (a) and (b) of this Section 2 (unless ordered by a court) shall be made by the Company only as authorized in the specific case upon a determination (in accordance with Section 3 hereof) that indemnification of Indemnitee is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (a) and (b) of this Section 2. Such determination shall be made (1) by a majority vote of the board of directors who were not parties to such action, suit or proceeding, even though less than a quorum, or (2) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (3) by the stockholders. (d) Expenses (including attorneys' fees) incurred by Indemnitee in defending a civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding as authorized (in accordance with Section 4 hereof) by the board of directors in the specific case upon receipt of an undertaking by or on behalf of Indemnitee to repay such amount if it is ultimately determined that he is not entitled to be indemnified by the Company under this Agreement or otherwise. (e) The indemnification and advancement of expenses provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may be 29 30 entitled under any statute, bylaw, insurance policy, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue after Indemnitee has ceased to be a director, executive officer, employee or agent and shall inure to the benefit of his heirs, executors and administrators. 3. Determination of Right to Indemnification. For purposes of making the determination in a specific case under paragraph (c) of Section 2 hereof whether to make indemnification, the board of directors, independent legal counsel, or stockholders, as the case may be, shall make such determination in accordance with the following procedure: (a) Indemnitee may submit to the board of directors a sworn statement of request for indemnification substantially in the form of Exhibit 1 attached hereto and made a part hereof ("Indemnification Statement") averring that he has met the applicable standard of conduct set forth in paragraphs (a) and (b) of Section 2 hereof; (b) Submission of the Indemnification Statement to the board of directors shall create a rebuttable presumption that Indemnitee is entitled to indemnification under this Agreement, and the board of directors, independent legal counsel, or stockholders, as the case may be, shall within 60 days after submission of the Indemnification Statement specifically determine that Indemnitee is so entitled, unless it or they shall possess sufficient evidence to rebut the presumption that Indemnitee has met the applicable standard of conduct set forth in paragraph (a) or (b) of Section 2 hereof, which evidence shall be disclosed to Indemnitee with particularity in a sworn written statement signed by all persons who participated in the determination and voted to deny indemnification. 30 31 4. Authorization of Advancement of Expenses. For purpose of determining whether to authorize advancement of expenses in a specific case pursuant to paragraph (d) of Section 2 hereof, the board of directors shall make such determination in accordance with the following procedure: (a) Indemnitee may submit to the board of directors a sworn statement of request for advancement of expenses substantially in the form of Exhibit 2 attached hereto and made a part hereof ("Undertaking"), averring that (i) he has reasonably incurred or will reasonably incur actual expenses in defending a civil or criminal action, suit or proceedings, and (ii) he undertakes to repay such amount if it is ultimately determined that he is not entitled to be indemnified by the Company under this Agreement or otherwise; (b) Upon receipt of the Undertaking the board of directors shall within 14 days authorize immediate payment of the expenses stated in the Undertaking. 5. Merger, Consolidation or Change in Control. In the event that the Company shall be a constituent corporation in a consolidation or merger, whether the Company is the resulting or surviving corporation or is absorbed, or if there is a change in control of the Company as defined in Section 6 hereof, Indemnitee shall stand in the same position under this Agreement with respect to the resulting, surviving or changed corporation as he would have with respect to the Company if its separate existence had continued or if there had been no change in the control of the Company. 6. Certain Definitions. For purposes of this Agreement, the following definitions apply herein: 31 32 "other enterprises" shall include employee benefit plans, and civic, non-profit, or charitable organizations, whether or not incorporated; "fines" shall include any excise taxes assessed on Indemnitee with respect to any employee benefit plan; "serving at the request of the Company" shall include any service at the request or with the express or implied authorization of the Company, as a director, executive officer, employee or agent of the Company which imposes duties on, or involves services by, Indemnitee with respect to a corporation or "other enterprises," its participants or beneficiaries; and if Indemnitee acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of such "other enterprises," he shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Agreement; and "change of control" shall include any change in the ownership of a majority of the capital stock of the Company or in the composition of a majority of the members of the board of directors of the Company. 7. Attorneys' Fees. In the event that Indemnitee institutes any legal action to enforce his rights under, or to recover damages for breach of this Agreement, Indemnitee, if he prevails in whole or in part, shall be entitled to recover from the Company all attorneys' fees and disbursements incurred by him. 8. Severability. If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected. 32 33 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to its conflict of laws rules. 10. Modification; Survival. This Agreement contains the entire agreement of the parties relating to the subject matter hereof. This Agreement may be modified only by an instrument in writing signed by both parties hereto. The provisions of this Agreement shall survive the termination of Indemnitee's service as a director and/or executive officer of the Company. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement and the Company has set its seal as of the date first above written. Veritas DGC Inc. By: ------------------------ David B. Robson Chairman (Corporate Seal) 33 34 EXHIBIT 1 STATEMENT OF REQUEST FOR INDEMNIFICATION STATE OF TEXAS ) ) COUNTY OF HARRIS ) I, _________________, being first duly sworn do depose and say as follows: 1. This Statement is submitted pursuant to the Indemnity Agreement dated ________________, between Veritas DGC Inc., a Delaware corporation ("Company"), and the undersigned. 2. I am requesting indemnification against expenses (including attorneys' fees) and, with respect to any action not by or in the right of the Company, judgments, fines and amounts paid in settlement, all of which have been actually and reasonably incurred by me in connection with a certain action, suit or proceeding to which I am a party or am threatened to be made a party by reason of the fact that I am or was a director and/or executive officer of the Company. 3. With respect to all matters related to any such action, suit or proceeding, I acted in good faith and in a manner I reasonably believed to be or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, I had no reason to believe that my conduct was unlawful. 4. I am requesting indemnification against the following liabilities ________________________________________________________________________________ ----------------------------------- Subscribed and sworn to before me this ___ day of _____________, 20__. ------------------------------------------- Notary Public in and for the State of Texas My Commission expires: --------------------- 34 35 EXHIBIT 2 STATEMENT OF UNDERTAKING STATE OF TEXAS ) ) COUNTY OF HARRIS ) I, _______________, being first duly sworn do depose and say as follows: 1. This Statement is submitted pursuant to the Indemnity Agreement dated ________________, between Veritas DGC Inc., a Delaware corporation ("Company"), and the undersigned. 2. I am requesting advancement of certain actual expenses which I have reasonably incurred or will reasonably incur in defending a civil, criminal, administrative or investigative action, suit or proceeding. 3. I hereby undertake to repay this advancement of expenses if it is ultimately determined that I am not entitled to be indemnified by the Company. 4. The expenses for which advancement is requested are as follows: ___________________________________________________________________________. ----------------------------------- Subscribed and sworn to before me this ___ day of _____________, 20__. ------------------------------------------- Notary Public in and for the State of Texas My Commission expires: --------------------- 35 36 EXHIBIT D 36 37 AGREEMENT AND RELEASE OF ALL CLAIMS This Agreement, entered into as of the date written by Employee's signature below, is by and between Veritas DGC Inc. ("Veritas"), a Delaware corporation, and Richard C. White ("Employee"). (As used in this Agreement, the term "Veritas" includes Veritas DGC Inc. and its subsidiaries). Veritas and Employee agree as follows: Section 1. On the Effective Date, as defined below, Veritas shall pay Employee the following amounts: o a lump sum equal to __________ (This amount represents two years of Employee's annual base salary); o a lump sum equal to ___________ [This amount represents the incentive compensation due Employee, if any, in accordance with Section 5.c.ii of the Employment Agreement between Veritas and Employee effective January 24, 2000 (the "Employment Agreement")] ; o Employee's regular base salary prorated through the Effective Date; o Employee's vacation pay accrued as of the Effective Date; and o any expense reimbursement owed to Employee under Section 2.g. of the Employment Agreement. All of the above amounts shall be REDUCED by applicable taxes and withholding. Section 2. Employee's termination from employment shall be effective at the close of business on the Effective Date. The EFFECTIVE DATE as used in this Agreement means _________. 37 38 Section 3. Employee agrees to release Veritas from certain claims he has or may have against Veritas as of the date he signs this Agreement. The claims he is releasing are the following: o any claims under any bonus or incentive plans except as otherwise provided in Section 1 of this Agreement; o any claims arising under the Age Discrimination in Employment Act of 1967 as amended (29 U.S.C. Section 621, et seq.) (the Age Discrimination in Employment Act of 1967 prohibits, in general, discrimination against employees on the basis of age); o any claims arising under Title VII of the Civil Rights Act of 1964 as amended (42 U.S.C. Section 2000e, et seq.), or the Texas Commission on Human Rights Act (Texas Labor Codess.21.001, et seq.) (both of these statutes, in general, prohibit discrimination in employment on the basis of race, religion, national origin or gender); o any claims arising under the Americans with Disabilities Act of 1990, as amended (42 U.S.C. Section 12101, et seq.) (the Americans with Disabilities Act of 1990 prohibits, in general, discrimination in employment on the basis of an employee's or applicant's disability); o any claims arising under Texas Labor Code Sections 451.001, et seq. for retaliation or discrimination in connection with a claim for workers' compensation benefits; 38 39 o any claims for breach of contract by Veritas under the Employment Agreement, wrongful discharge or constructive discharge; and o any claims under any other statutes prohibiting discrimination on the basis of age, sex, national origin, citizenship, religion, veteran status, or disability arising prior to the Effective Date. The release contained in this Section 3 SHALL NOT affect any of the following: o Employee's rights or benefits under Veritas' 401(k) retirement savings plan, Veritas' Employee Stock Purchase Plan, or any pension or retirement plan in which Employee is a participant on the Effective Date (Employee's rights and benefits shall be determined by the applicable plan documents); o Employee's right to elect continued health and/or dental benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"); o Employee's rights to exercise any options to purchase Veritas DGC Inc. common stock in accordance with the terms of the applicable stock option grant; o Employee's rights under the Restricted Stock Agreement (as defined in the Employment Agreement) or any subsequent agreement granting Employee restricted stock; o Any other benefit to which Employee may be entitled under any other health or benefit plan (in accordance with the applicable plan documents); o Employee's rights under any workers' compensation statue (except as otherwise specifically provided in this Section 3); under the Jones Act, 46 U.S.C. Appx. 39 40 Section 688, as amended; general maritime law or similar laws; and any other right Employee may have with respect to personal injury; o Employee's rights with respect to any claims for tortious action or inaction of any sort, including but not limited to, negligence, fraud, libel or slander, except as specifically provided in this Section 3; or o Any rights to indemnity to which Employee, as a former director, officer or employee of Veritas, may be entitled under the Certificate of Incorporation or By-laws of Employer, any policy of officers' and directors' liability insurance or any contract with Veritas. Section 4. Veritas and Employee agree that this Agreement is a binding contract. The purpose of the Agreement is to compromise certain doubtful or disputed claims, avoid litigation, and buy peace with respect to those claims. Employee agrees that although Veritas is making payment to Employee in exchange for a release of claims, Veritas does not admit any wrongdoing of any kind. Section 5. Employee agrees to assist Veritas in defending any legal proceedings against Veritas arising out of matters which occurred prior to the Effective Date and Veritas agrees to reimburse Employee for his time and expense or costs he may incur in that regard. Section 6. Veritas agrees to release Employee from claims it has against Employee as of the date of this Agreement in connection with his Employment Agreement (other than any claims arising under Sections 3 and 6(a) of such Agreement), or any other claim it may have against Employee in connection with his employment by Veritas or his position with Veritas whether as a director, officer, employee or agent. 40 41 Section 7. This Agreement has been delivered to Employee on _____________. Employee shall have twenty-one (21) calendar days from ___________ or until the close of business on ___________ to decide whether to sign the Agreement and be bound by its terms. In the event Employee has not signed and returned this Agreement to Veritas on or before that date, this Agreement shall become null and void. In addition, the parties agree that even after signing this Agreement, Employee shall have the right to revoke or cancel it within seven (7) calendar days after signing it. In the event Employee revokes his acceptance of this Agreement, this Agreement shall become null and void. Section 8. Employee acknowledges that he has read this Agreement. He understands that, except for the exceptions enumerated in Section 3 above, this Agreement will have the effect of waiving any contractual claim under his Employment Agreement he may pursue against Veritas. This waiver also includes claims for wrongful discharge, breach of the Employment Agreement, and statutory claims (as set forth in Section 3 hereof) for discrimination on the basis of age, race, sex, national origin, citizenship, religion, veteran status, or disability or any other similar claims arising prior to the Effective Date. Section 9. Employee acknowledges that he makes this Release knowingly and voluntarily. Section 10. This Agreement constitutes the entire understanding between Veritas and Employee with respect to the subject matter hereof. Section 11. This Agreement shall benefit and be binding upon Veritas and its successors and assigns and Employee and his successors and legal representatives. Employee shall not assign or attempt to assign any of his rights under this Agreement. Section 12. If a court determines that any provision of this Agreement is invalid, the 41 42 other provisions shall remain in effect. Section 13. This Agreement shall be governed by, construed under, and enforced in accordance with the laws of the State of Texas, not including, however, its conflicts of law rules that might otherwise refer to the law of another forum or jurisdiction. THIS AGREEMENT IS SUBJECT TO ARBITRATION IN ACCORDANCE WITH THE FOLLOWING SECTION Section 14. Veritas and Employee agree to submit to final and binding arbitration any and all disputes or disagreements concerning the interpretation or application of this Agreement. Any such dispute or disagreement shall be resolved by arbitration in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association (the "AAA Rules"). Arbitration shall take place in Houston, Texas, unless the parties mutually agree to a different location. Within 30 calendar days of the initiation of arbitration hereunder, each party shall designate an arbitrator. The appointed arbitrators shall then appoint a third arbitrator. Employee and Veritas agree that the decision of the arbitrators shall be final and binding on both parties. Any court having jurisdiction may enter a judgment upon the award rendered by the arbitrators. In the event the arbitration is decided in whole or in part in favor of Employee, Veritas shall reimburse Employee for his reasonable costs and expenses of arbitration, including reasonable attorneys' fees. Regardless of the outcome of the arbitration, Veritas shall pay all fees and expenses of the arbitrators and all of Veritas' costs of arbitration. 42 43 [THIS SPACE INTENTIONALLY LEFT BLANK] 43 44 IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the Effective Date. VERITAS: VERITAS DGC INC. and subsidiaries By: ---------------------------- NOTICE TO EMPLOYEE BY SIGNING THIS DOCUMENT, YOU MAY BE GIVING UP IMPORTANT LEGAL RIGHTS. YOU ARE ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO SIGNING AND RETURNING THIS DOCUMENT TO VERITAS. EMPLOYEE: ------------------------------- Richard C. White Date: -------------------------- 44 EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS JUL-31-2000 AUG-01-1999 JAN-31-2000 31,259 0 124,262 3,339 4,040 172,868 388,767 239,795 586,309 92,688 0 0 0 233 347,589 586,309 0 159,700 0 173,365 0 0 6,990 1,972 1,063 590 0 187 0 403 .02 .02
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