-----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, WW+BXujk9gVLj1CFU+zAQA0hKDk0rL5D5DG1I60r8WsLMmvAyPVoqVruD2QnlC5M ym15UhVYmZO+pz0NVzqw3Q== 0000950129-00-005950.txt : 20001214 0000950129-00-005950.hdr.sgml : 20001214 ACCESSION NUMBER: 0000950129-00-005950 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20001031 FILED AS OF DATE: 20001213 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: 788553 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 h82596e10-q.txt VERITAS DGC INC - PERIOD DATE OCTOBER 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 OCTOBER 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 (the or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) 10300 TOWN PARK HOUSTON, TEXAS 77072 (Address of principal executive offices) (Zip Code) (832) 351-8300 (Registrant's telephone number, including area code) 3701 KIRBY DRIVE, #112 HOUSTON, TEXAS 77098 (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, $.01 par value, outstanding at November 30, 2000 was 30,556,287 (including 1,824,756 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 Months Ended October 31, 2000 and 1999 1 Consolidated Balance Sheets - October 31, 2000 and July 31, 2000 2 Consolidated Statements of Cash Flows - For the Three Months Ended October 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 9 Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk 11 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K 12 Signatures 15 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 OCTOBER 31, --------- --------- 2000 1999 --------- --------- (In thousands) REVENUES $ 111,299 $ 68,677 COSTS AND EXPENSES: Cost of services 76,168 42,741 Research and development 2,169 1,962 Depreciation and amortization 17,105 18,378 Selling, general & administrative 5,503 3,443 Interest expense 3,516 3,491 Other income (1,527) (979) --------- --------- Total costs and expenses 102,934 69,036 Income (loss) before provision for income taxes and equity in loss of joint venture 8,365 (359) Provision (benefit) for income taxes 3,346 (15) Equity in loss of joint venture 11 236 --------- --------- Net income (loss) before extraordinary charge 5,008 (580) Extraordinary loss on debt repurchase (net of tax, $95) 187 --------- --------- Net income (loss) $ 5,008 $ (767) Other comprehensive income (loss) (net of tax - $0 in both periods) Foreign currency translation adjustments (1,904) 572 Unrealized gain (loss) on investments-available for sale 2,337 (1,347) --------- --------- Comprehensive income (loss) $ 5,441 $ (1,542) ========= ========= PER SHARE: BASIC Net income (loss) per common share before extraordinary item .18 $ (.02) Net loss per common share from extraordinary item (.01) --------- --------- Net income (loss) per common share $ .18 $ (.03) ========= ========= Weighted average common shares 27,795 23,633 ========= ========= DILUTED Net income (loss) per common share before extraordinary item $ .18 $ (.02) Net loss per common share from extraordinary item (.01) --------- --------- Net income (loss) per common share $ .18 $ (.03) ========= ========= Weighted average common shares 28,584 24,183 ========= =========
See Notes to Consolidated Financial Statements 1 4 VERITAS DGC INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
OCTOBER 31, JULY 31, 2000 2000 ------------- ---------- Unaudited (In thousands) ASSETS Current assets: Cash and cash equivalents $ 90,391 $ 43,154 Restricted cash investments 208 206 Accounts and notes receivable (net of allowance: October $1,744; July $1,749) 143,604 117,242 Materials and supplies inventory 4,783 5,055 Prepayments and other 13,825 6,435 Investments-available for sale 6,321 3,984 ---------- ---------- Total current assets 259,132 176,076 Property and equipment 402,884 409,284 Less accumulated depreciation 266,722 262,706 ---------- ---------- Property and equipment - net 136,162 146,578 Multi-client data library 251,932 231,274 Investment in and advances to joint venture 1,938 1,949 Goodwill (net of accumulated amortization: October $5,324; July $4,984) 10,528 11,064 Deferred tax asset 34,892 34,064 Long term notes receivable (net of allowance: $1,000 in both periods) 3,576 3,579 Other assets 10,020 7,224 ---------- ---------- Total $ 708,180 $ 611,808 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 82 $ 106 Accounts payable - trade 38,533 37,434 Accrued interest 564 3,856 Other accrued liabilities 39,916 39,620 Income taxes payable 5,637 2,116 ---------- ---------- Total current liabilities 84,732 83,132 Non-current liabilities: Long-term debt - less current maturities 135,000 135,000 Other non-current liabilities 10,845 10,732 ---------- ---------- Total non-current liabilities 145,845 145,732 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: 28,695,597 shares at October and 25,069,834 shares at July (excluding exchangeable shares of 1,825,773 at October and 2,014,205 at July) 287 251 Additional paid-in capital 358,376 269,355 Accumulated earnings (from August 1, 1991 with respect to Digicon Inc.) 126,141 121,133 Accumulated comprehensive income: Cumulative foreign currency translation adjustment (5,675) (3,771) Unrealized gain (loss) on investments-available for sale 722 (1,615) Unearned compensation (436) (597) Treasury stock, at cost: 104,175 shares in both periods (1,812) (1,812) ---------- ---------- Total stockholders' equity 477,603 382,944 ---------- ---------- Total $ 708,180 $ 611,808 ========== ==========
See Notes to Consolidated Financial Statements 2 5 VERITAS DGC INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
THREE MONTHS ENDED OCTOBER 31, ----------------------- 2000 1999 -------- --------- (in thousands) OPERATING ACTIVITIES: Net income (loss) $ 5,008 $ (767) Non-cash items included in net income: Depreciation and amortization 17,105 18,378 Net gain on disposition of property and equipment (733) (2) Equity in loss of joint venture 11 236 Amortization of multi-client data library 297 239 Deferred taxes 12 (1,818) Amortization of unearned compensation 161 153 Change in operating assets/liabilities: Accounts and notes receivable (26,978) (2,612) Materials and supplies inventory 246 (515) Prepayments and other (7,407) (4,153) Multi-client data library (21,566) (34,311) Accounts payable and other accrued liabilities (1,524) (7,283) Income taxes payable 3,459 (4,898) Other non-current liabilities 22 4,225 Other (3,426) 4,669 -------- -------- Total cash used in operating activities (35,313) (28,459) FINANCING ACTIVITIES: Payments of long-term debt (24) (5,679) Senior notes issue costs (25) Net proceeds from sale of common stock 88,210 686 -------- -------- Total cash provided by (used in) financing activities 88,186 (5,018) INVESTING ACTIVITIES: Increase in restricted cash investments (2) (410) Acquisitions, net of cash received 448 Purchase of property and equipment (7,314) (9,238) Sale of property and equipment 1,748 1,757 -------- -------- Total cash used in investing activities (5,568) (7,443) Currency loss on foreign cash (68) (96) -------- -------- Change in cash and cash equivalents 47,237 (41,016) Beginning cash and cash equivalents balance 43,154 73,447 -------- -------- Ending cash and cash equivalents balance $ 90,391 $ 32,431 ======== ========
See Notes to Consolidated Financial Statements 3 6 VERITAS DGC INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULES TO CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
THREE MONTHS ENDED OCTOBER 31, ------------------ 2000 1999 ------- ------- (In thousands) SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Increase in property and equipment for accounts payable - trade $ 444 $ 1,053 Utilization of net operating loss carryforwards existing prior to the quasi-reorganization resulting in an increase (decrease) in: Deferred tax asset valuation allowance (847) Additional paid-in capital 847 Treasury stock issued for future services resulting in an increase (decrease) in: Additional paid-in-capital 17 Unearned compensation 135 Stock and options issued for purchase of Enertec Resource Services Inc. (net of cash received) 25,189 Settlement of and interest payments from investments-available for sale 602 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid (received) for: Interest - Senior notes 6,582 6,827 Equipment purchase obligations 2 1 Other 224 392 Income taxes (172) (6,969)
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 We provide integrated geophysical services to the petroleum industry worldwide. The accompanying consolidated financial statements include our accounts and the accounts of majority-owned domestic and foreign subsidiaries. Investment in an 80% owned joint venture is accounted for on the equity method due to provisions in the joint venture agreement that give minority shareholders the right to exercise control. All material intercompany balances and transactions have been eliminated. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions 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. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This standard, as amended by SFAS No. 138, 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. We adopted this statement in the current quarter. Currently, we neither hold nor have we issued derivative instruments. In addition, we have not engaged in any hedging activities. 2. LONG-TERM DEBT Long-term debt is as follows:
October 31, July 31, 2000 2000 ----------- --------- (In thousands) Senior notes due October 2003, at 9 3/4% $ 135,000 $ 135,000 --------- --------- Equipment purchase obligations maturing through July 2001, at 8.97% 82 106 --------- --------- Total 135,082 135,106 Less current maturities 82 106 --------- --------- Due after one year $ 135,000 $ 135,000 ========= =========
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 all of our secured debt, with respect to the assets securing such debt, and to all debt of our subsidiaries whether secured or unsecured. The indenture relating to the senior notes contains certain covenants that limit our ability to, among other things, incur additional debt, pay dividends and complete mergers, acquisitions and sales of assets. Upon a change in our control, as defined in the indenture, each holder of the senior notes has the right to require us to purchase all or a portion of such holder's senior note at a price equal to 101% of the aggregate principal 5 8 VERITAS DGC INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) UNAUDITED amount. We have the right to redeem the senior notes, in whole or part, on or after October 15, 2000. On September 24, 1999, we repurchased $5.5 million of 9 3/4% senior notes on the open market at a price of $5.7 million, resulting in an extraordinary loss of $0.2 million, net of tax. On December 3, 1999, we reissued $1.0 million of 9 3/4% senior notes at a price of $1.0 million. On December 10, 1999, we reissued $4.6 million of 9 3/4% senior notes at a price of $4.7 million. We maintain a revolving credit agreement due July 2001 with commercial lenders that provides for advances up to $50.0 million. Advances are limited by a borrowing base, which is in excess of the credit limit at October 31, 2000 and bears interest, at our election, at LIBOR plus a margin based on certain financial ratios maintained by us or prime rate. Advances are secured by certain accounts receivable. Covenants in the agreement limit, among other things, our right to take certain actions, including creating indebtedness. In addition, the agreement requires us to maintain certain financial ratios. No advances were outstanding at October 31, 2000 and July 31, 2000, under the credit agreement. At October 31, 2000, $4.1 million in letters of credit were outstanding under the facility. Our equipment purchase obligations represent installment loans and capitalized lease obligations primarily related to computer and geophysical equipment. 3. OTHER ACCRUED LIABILITIES Other accrued liabilities include the following:
October 31, July 31, 2000 2000 ----------- --------- (In thousands) Accrued payroll and benefits $ 11,451 $ 9,942 Deferred revenues $ 10,550 $ 15,370 Accrued taxes other than income $ 4,469 $ 4,255
4. OTHER INCOME Other income consists of the following:
Three Months Ended October 31, ------------------------- 2000 1999 --------- --------- (In thousands) Interest income $ (1,001) $ (1,045) Net gain on disposition of property and equipment (733) (2) Net foreign currency exchange losses 214 68 Other (7) -------- -------- Total $ (1,527) $ (979) ======== ========
6 9 VERITAS DGC INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) UNAUDITED 5. EARNINGS PER COMMON SHARE Earnings (losses) per common share - basic and diluted are computed as follows:
Three Months Ended October 31, ---------------------- (In thousands, except per share amounts) Net income (loss) before extraordinary item $ 5,008 $ (580) Extraordinary loss on debt repurchase 187 -------- -------- Net income (loss) $ 5,008 $ (767) ======== ======== Weighted average common shares 27,795 23,633 Basic Net income (loss) per common share before extraordinary item $ .18 $ (.02) Net loss per common share from extraordinary item (.01) -------- -------- Net income (loss) per common share $ .18 $ (.03) ======== ======== Weighted average common shares - assuming dilution: Weighted average common shares 27,795 23,633 Shares issuable from assumed conversion of: Options 789 550 -------- -------- Total 28,584 24,183 ======== ======== Diluted Net income (loss) per common share before extraordinary item $ .18 $ (.02) Net loss per common share from extraordinary item (.01) -------- -------- Net income (loss) per common share $ .18 $ (.03) ======== ========
VESI exchangeable shares, which were issued in business combinations, and may be exchanged for our common stock and are identical to our common stock in all material respects, are included in the above computations. On October 26, 1999, we filed a prospectus supplement relating to the sale of up to 2.0 million shares of our common stock, from time to time through ordinary brokerage transactions, under a shelf registration. For the three months ended October 31, 2000, we issued approximately 0.1 million shares in connection with these transactions, generating approximately $2.9 million in net proceeds. In October 2000, we completed an offering of 3.1 million shares of common stock under the shelf registration statement, generating $82.4 million in net proceeds. In addition, during the current quarter, 0.2 million options were exercised, generating $2.9 million in net proceeds. 7 10 VERITAS DGC INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) UNAUDITED 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 as of the date the period ended.
Three Months Ended October 31, -------------------------------------- 2000 1999 ------------------- ----------------- Number of options 64,504 811,327 Exercise price range $27 13/16 - $55 1/8 $19 3/8 - $55 1/8 Expiring through August 2008 November 2008
6. UNREALIZED LOSS ON INVESTMENTS-AVAILABLE FOR SALE In fiscal year 1999, we exchanged a $4.7 million account receivable from Miller Exploration Company, a publicly traded company, for a long-term note receivable paying 18% interest. The interest rate changed to 9 3/4%, effective October 15, 2000. For the periods April 15, 1999 to October 14, 2000, interest was paid in common stock warrants, with an exercise price of $0.01 per share, in advance, at six-month intervals. Beginning October 15, 2000, interest will be paid in cash after the six-month intervals and no additional warrants will be issued. In addition, in fiscal year 1999, we exchanged an account receivable from Brigham Exploration Company, a publicly traded company, for 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.
October 31, 2000 July 31, 2000 ---------------------------------- ----------------------------------- Unrealized Unrealized Fair Value Cost Basis gain/(loss) Fair Value Cost Basis gain/(loss) ---------- ----------- ----------- ----------- ----------- ----------- (In thousands) Brigham common stock $ 4,099 $445 $ 4,544 $ 4,099 $(1,411) $ 2,688 Miller warrants 1,500 277 1,777 1,500 (204) 1,296 ------- ---- ------- ------- ------- ------- $ 5,599 $722 $ 6,321 $ 5,599 $(1,615) $ 3,984 ======= ==== ======= ======= ======= =======
7. SEGMENT INFORMATION We have two segments, land and marine operations, both of which provide geophysical products and services to the petroleum industry. The two segments have been aggregated as they are so similar in their economic characteristics and the nature of their products, production processes and customers. A reconciliation of the reportable segments' results to those of the total enterprise is given below.
Three Months Ended Three Months Ended October 31, 2000 October 31, 1999 ------------------------------- ----------------------------- Segments Corporate Total Segments Corporate Total -------- --------- -------- -------- --------- ------- Revenue $111,299 $111,299 $68,677 $68,677 Costs and expenses including joint venture 91,974 10,971 102,945 61,442 7,830 69,272 Net income (loss) before income tax 19,325 (10,971) 8,354 7,235 (7,830) (595)
8 11 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. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors. These factors are more fully described in other reports filed with the Securities and Exchange Commission, including our fiscal year 2000 Form on 10-K, and 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 OCTOBER 31, 2000 COMPARED WITH THREE MONTHS ENDED OCTOBER 31, 1999 Revenues. Revenues increased 62%, from $68.7 million to $111.3 million due a general increase in exploration spending by our customers in the current quarter. Multi-client revenue increased 83%, from $33.5 million to $61.2 million. This is largely due to increased licensing of multi-client surveys in the Gulf of Mexico and Canada. The surveys in Canada are the largest multi-client surveys ever performed in that country. Contract revenue increased 42%, from $35.2 million to $50.1 million, driven by increased activity in Asia Pacific and new surveys in Tunisia and Suriname. Cost of services. Cost of services increased 78%, from $42.7 million to $76.2 million primarily as a result of the increase in revenue. However, cost of services as a percent of revenues increased from 62% to 68%. This is due to an increased proportion of land multi-client revenue versus marine multi-client revenue. The land multi-client business generally earns a lower margin than the more established marine multi-client business. Research and development. Research and development expense increased 10%, from $2.0 million to $2.2 million as a result of increased emphasis on leading edge technologies. Depreciation and amortization. Depreciation and amortization expense decreased 7%, from $18.4 million to $17.1 million. In general, this is the result of delays in capital spending during fiscal year 2000. Net property and equipment decreased by 16%, from $162.5 million to $136.2 million between the comparative income statement periods. Selling, general & administrative. Selling, general and administrative increased 62%, from $3.4 million to $5.5 million. Most of the increase is related to expenses incurred in connection with the relocation of various operations our new headquarters facility in Houston. Other additional expense is due to the expansion of our e-business and heath and safety initiatives in the current quarter. Interest expense. Interest expense remained essentially flat, with long term debt being the same in both quarters. Other income. Other income increased from $1.0 million to $1.5 million as a result of a $0.7 million gain on a sale of assets. This is partially offset by a foreign currency loss of $0.2 million in the current quarter. Income taxes. Income taxes increased from a benefit of $15 thousand to a provision of $3.3 million as a result of our higher earnings in the current quarter. The increase in the effective tax rate from 4% to 40% is primarily attributable to income in the current period versus unbenefitted losses in the prior period. Equity in loss of joint venture. Equity in loss of joint venture, related to the Indonesian joint venture, decreased from a loss of $236,000 to a loss of $11,000. An increase in marine contract work accounts for the increased profitability in the current quarter. 9 12 LIQUIDITY AND CAPITAL RESOURCES SOURCES AND USES Our internal sources of liquidity are cash, cash equivalents and cash flow from operations. External sources include public financing, equity sales, the unutilized portion of a revolving credit facility, equipment financing and trade credit. We believe that these sources of funds are adequate to meet our liquidity needs for fiscal 2001. As of October 31, 2000, we had $135.0 million in senior notes outstanding due in October 2003. These notes contain a change of control provision allowing them to be callable by the holder under certain conditions. We also have a revolving credit facility due July 2001 from commercial lenders that provides advances up to $50.0 million. At October 31, 2000, the borrowing base exceeded the credit limit. Advances bear interest, at our election, at LIBOR plus a margin based on certain financial ratios maintained by us or prime rate. Advances are secured by certain accounts receivable. As of October 31, 2000, there were no outstanding advances under the credit facility, but $4.1 million of the credit facility was utilized for letters of credit. An additional $45.9 million is available for borrowings. We require significant amounts of working capital to support our operations and fund capital spending and research and development programs. Our current capital expenditure forecast for fiscal 2001 is $97.0 million, which includes expenditures of approximately $50 million to expand or upgrade current operating equipment. We are forecasting $9.2 million of research and development spending in fiscal 2001. As demand for our geophysical products and services continues to increase during fiscal 2001, we may increase our expenditures and business investments as we take advantage of expansion opportunities. Currently, we are forecasting $74.7 million of investment in our data library (measured as the change in the balance sheet account) during fiscal year 2001. 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 contract terms relating to the collection of the proceeds from such sales, our liquidity may be affected. While we seek pre-funding commitments from customers for a portion of the cost of these surveys, pre-funding levels do not generally affect our library spending. We believe that these multi-client surveys have good long-term sales, earnings and cash flow potential, but there is no assurance that we will recover the costs of these surveys. We will require substantial cash flow to continue operations on a satisfactory basis, complete our capital expenditure and research and development programs and meet our principal and interest obligations with respect to outstanding indebtedness. While we believe that we have adequate sources of funds to meet our liquidity needs, our ability to meet our obligations depends on our future performance, which, in turn, is subject to many factors beyond our control. Key internal factors affecting future results include utilization levels of acquisition and processing assets and the level of multi-client data library licensing, all of which are driven by the external factors of exploration spending and, ultimately, underlying commodity prices. To ensure that we have available as many financing options as possible, we filed a shelf registration allowing the issuance of up to $200 million in debt, preferred stock or common stock. On October 26, 1999, we filed a prospectus supplement relating to the sale of up to 2.0 million shares of our common stock, from time to time through ordinary brokerage transactions, under the shelf registration. For the three months ended October 31, 2000, we issued approximately 0.1 million shares in connection with these transactions, generating approximately $2.9 million in net proceeds. In addition, in October 2000, we completed an offering of 3.1 million shares of common stock under the shelf registration statement. 10 13 This offering generated $82.4 million in net proceeds. The total issuance of equity under the shelf registration has been 4.4 million shares generating $112.5 million in net proceeds. OTHER Since our 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 additional 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. For the three months ended October 31, 2000, we recognized $847,000 related to these benefits, due to our U.K. operations increased profitability. We receive some account receivable payments in foreign currency. We currently do not conduct a hedging program because we do not consider our current exposure to foreign currency fluctuations to be significant. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This standard, as amended by SFAS No. 138, 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. We adopted this statement in current quarter. Currently, we neither hold nor have we issued derivative instruments. In addition, we have not engaged in any hedging activities. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK There have been no significant changes that would affect our exposure to market risk since July 31, 2000. 11 14 PART II. OTHER INFORMATION 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 Veritas DGC 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-F) By-laws of Veritas DGC Inc. as amended and restated March 7, 2000. (Exhibit 3-E to Veritas DGC Inc.'s Form 10-Q for the quarter ended January 31, 2000 is incorporated herein by reference.) 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 March 7, 2000. (Exhibit 4-F to Veritas DGC Inc.'s Form 10-Q for the quarter ended April 30, 2000 in 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.) 12 15 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 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. (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. 10-A) Support Agreement dated August 30, 1996 between Digicon Inc. and Veritas Energy Services Inc. (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) 1992 Non-Employee Director Stock Option Plan as amended and restated March 7, 2000. (Exhibit 10-B to Veritas DGC Inc.'s Form 10-Q for the quarter ended April 30, 2000 in incorporated herein by reference.) 10-C) 1992 Employee Nonqualified Stock Option Plan as amended and restated March 7, 2000. (Exhibit 10-C to Veritas DGC Inc.'s Form 10-Q for the quarter ended April 30, 2000 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 dated April 1, 1997 between Veritas DGC Inc. and Anthony Tripodo. (Exhibit 10-O to Veritas DGC Inc.'s Form 10-K 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 agent for the banks, and the banks therein named dated 13 16 November 1, 1999. (Exhibit 10-N to Veritas DGC Inc.'s Form 10-Q for the quarter ended October 31, 1999 is incorporated herein by reference.) 10-L) Sales agency agreement between Veritas DGC Inc. and Paine Webber Incorporated, dated October 26, 1999. (Exhibit 10-N to Veritas DGC Inc.'s Form 10-Q for the quarter ended October 31, 1999 is incorporated herein by reference.) 10-M) Form of Indemnity Agreement between Veritas DGC Inc. and its executive officers and directors as amended and restated March 7, 2000. (Exhibit 10-M to Veritas DGC Inc.'s Form 10-Q for the quarter ended April 30, 2000 is incorporated herein by reference.) 10-N) Employment Agreement executed by Richard C. White. (Exhibit 10-Q to Veritas DGC Inc's Form 10-Q for the quarter ended January 31, 2000 is incorporated herein by reference.) 10-O) Indemnity Agreement between Veritas DGC Inc. and Richard C. White. (Exhibit 10-Q to Veritas DGC Inc.'s Form 10-Q for the quarter ended April 30, 2000 is incorporated herein by reference.) *10-P) Settlement Agreement between Veritas DGC Inc. and Richard C. White. *10-Q) Deferred Compensation Plan effective January 1, 2001. *10-R) Rabbi Trust Agreement between Veritas DGC Inc. and Austin Trust Company relating to the Deferred Compensation Plan. *27) Financial Data Schedule. * Filed herewith B) REPORTS ON FORM 8-K On October 5, 2000, we filed a Form 8-K reporting under Item 5 an underwritten public offering of shares of our common stock 14 17 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 13th day of December 2000. VERITAS DGC INC. By: /s/ DAVID B. ROBSON -------------------------------------------------- DAVID B. ROBSON Chairman of the Board and Chief Executive Officer /s/ ANTHONY TRIPODO -------------------------------------------------- ANTHONY TRIPODO Executive Vice President, Chief Financial Officer and Treasurer 15 18 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION 10-P) Settlement Agreement between Veritas DGC Inc. and Richard C. White 10-Q) Deferred Compensation Plan effective January 1, 2001 10-R) Rabbi Trust Agreement between Veritas DGC Inc. and Austin Trust Company relating to the Deferred Compensation Plan 27) Financial Data Schedule
EX-10.P 2 h82596ex10-p.txt SETTLEMENT AGREEMENT - RICHARD C WHITE 1 EXHIBIT 10-P 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. Within thirty days of the Effective Date, as defined below, Veritas shall pay Employee the following amounts: o A lump sum equal to $660,000 (This amount represents two years of Employee's annual base salary); o A lump sum equal to $50,000 [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. 2 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 July 24, 2000. 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 Code Section 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); -2- 3 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; 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); -3- 4 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. 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 Bylaws 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 -4- 5 against Employee in connection with his employment by Veritas or his position with Veritas whether as a director, officer, employee or agent. Section 7. This Agreement has been delivered to Employee on July 24, 2000. Employee shall have twenty-one (21) calendar days from July 24, 2000 or until the close of business on August 14, 2000 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, 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. -5- 6 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 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 -6- 7 the arbitration, Veritas shall pay all fees and expenses of the arbitrators and all of Veritas' costs of arbitration. [THIS SPACE INTENTIONALLY LEFT BLANK] -7- 8 IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the Effective Date. VERITAS: VERITAS DGC INC. and subsidiaries By: _______________________________ Larry L. Worden Vice President & Legal Counsel 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:______________________________ -8- EX-10.Q 3 h82596ex10-q.txt DEFERRED COMPENSATION PLAN 1 EXHIBIT 10-Q VERITAS DGC INC. DEFERRED COMPENSATION PLAN REV. 2/25/00 2 VERITAS DGC INC. DEFERRED COMPENSATION PLAN TABLE OF CONTENTS Section ARTICLE I -- DEFINITIONS Account........................................................1.1 Beneficiary....................................................1.2 Board of Directors.............................................1.3 Code...........................................................1.4 Company........................................................1.5 Company Discretionary Accrual..................................1.6 Company Discretionary Match....................................1.7 Compensation...................................................1.8 Committee......................................................1.9 Deferral......................................................1.10 Deferred Compensation Ledger..................................1.11 Disability....................................................1.12 ERISA.........................................................1.13 Investment Fund...............................................1.14 Participant...................................................1.15 Plan..........................................................1.16 Plan Year.....................................................1.17 Retirement....................................................1.18 Trust.........................................................1.19 Valuation Date................................................1.20 ARTICLE II - ELIGIBILITY ARTICLE III - DEFERRALS AND BENEFIT ACCRUALS Deferral Election..............................................3.1 Company Discretionary Match Accrual............................3.2 Company Discretionary Accrual..................................3.3 i 3 ARTICLE IV - ACCOUNT Establishing a Participant's Account...............................4.1 Deferral Account...................................................4.2 Company Discretionary Match Account................................4.3 Company Discretionary Accrual Account..............................4.4 Crediting of Interest..............................................4.5 ARTICLE V - VESTING Deferrals..........................................................5.1 Company Discretionary Match and Company Discretionary Accruals.....5.2 ARTICLE VI - DISTRIBUTIONS Death..............................................................6.1 Disability.........................................................6.2 Retirement.........................................................6.3 Termination Prior to Death, Disability or Retirement...............6.4 Responsibility for Distributions and Withholding of Taxes.............................................6.5 Distribution Determination Date....................................6.6 ARTICLE VII - ADMINISTRATION Committee Appointment..............................................7.1 Committee Organization and Voting..................................7.2 Powers of the Committee............................................7.3 Committee Discretion...............................................7.4 Annual Statements..................................................7.5 Reimbursement of Expenses..........................................7.6 ARTICLE VIII - AMENDMENT AND/OR TERMINATION Amendment or Termination of the Plan...............................8.1 No Retroactive Effect on Awarded Benefits..........................8.2 Effect of Termination..............................................8.3 ii 4 ARTICLE IX - PAYMENT Payments Under This Agreement Are the Obligation of the Company..................................................9.1 Payments May Be Made to a Rabbi Trust.............................9.2 Participants Must Rely Only on General Credit of the Company..........................................9.3 Plan Unfunded.....................................................9.4 ARTICLE X - MISCELLANEOUS Limitation of Rights.............................................10.1 Distributions to Incompetents or Minors..........................10.2 Nonalienation of Benefits........................................10.3 Reliance Upon Information .......................................10.4 Severability.....................................................10.5 Notice...........................................................10.6 Gender and Number................................................10.7 Governing Law....................................................10.8 Effective Date...................................................10.9 iii 5 VERITAS DGC INC. DEFERRED COMPENSATION PLAN WHEREAS, Veritas DGC Inc. desires to adopt a deferred compensation plan for a select group of management and highly compensated employees; NOW, THEREFORE, Veritas DGC Inc. hereby establishes the Veritas DGC Inc. Deferred Compensation Plan effective on January 1, 2001, the terms of which are set forth in this document as it may be amended from time to time. ARTICLE I DEFINITIONS 1.1 "ACCOUNT" means all ledger accounts pertaining to a Participant which are maintained by the Committee to reflect the amount of deferred compensation due the Participant. The Committee shall establish the following Accounts and any additional Accounts that the Committee considers necessary. (a) Deferral Account - The Participant's deferral, if any, between one percent and 50 percent of his base Compensation and the Participant's deferral, if any, between one percent and 100 percent of any incentive bonus or commission paid to the Participant. (b) Company Discretionary Match Account - The Company's discretionary match, if any, equal to a percentage of the Participant's Deferral. (c) Company Discretionary Accrual Account - The Company's discretionary contribution, if any, equal to a percentage of the Participant's Compensation. 1.2 "BENEFICIARY" means a person or entity designated by the Participant under the terms of the Plan to receive a payment under the Plan upon the death of the Participant. 1.3 "BOARD OF DIRECTORS" means the Board of Directors of the Company. 1.4 "CODE" means the Internal Revenue Code of 1986, as amended from time to time. 1.5 "COMPANY" means Veritas DGC Inc. 1.6 "COMPANY DISCRETIONARY ACCRUAL" means the discretionary accrual, if any, which the Company accrues with respect to the Participant's Compensation during a Plan Year. 1.7 "COMPANY DISCRETIONARY MATCH" means the discretionary match, if any, which the Company accrues with respect to the amount deferred during a Plan Year by a Participant under the Plan. -1 6 1.8 "COMPENSATION" means remuneration paid to a Participant by the Company during the portion of the Plan Year in which he is eligible to participate in the Plan, or that would have been paid to a Participant during the Plan Year by the Company but for the Participant's election to make a Deferral under the Plan or his deferrals under a cash or deferred arrangement described in section 401(k) of the Code or a cafeteria plan described in section 125 of the Code, including and limited to regular base pay as determined by the Committee in its sole discretion, commissions, merit and incentive bonuses (other than bonuses paid by the Company with respect to services for a predecessor employer that has not adopted the Plan or with respect to services performed by the Participant prior to his employment by the Company, as determined by the Committee in its sole discretion), excluding however, car allowance payments, and short-term disability pay. 1.9 "COMMITTEE" means the persons who are from time to time serving as members of the committee administering the Plan. 1.10 "DEFERRAL" means the amount of Compensation deferred under a deferral election made by a Participant under Section 3.1. 1.11 "DEFERRED COMPENSATION LEDGER" means the ledger maintained by the Committee for each Participant which reflects the amount of Compensation deferred by the Participant under the Plan, Company Discretionary Match and the Company Discretionary Accrual provided under the Plan, and the amount of earnings and losses credited on each of these amounts. -2 7 1.12 "DISABILITY" means a physical or mental condition that in the discretion of the Committee would entitle the Participant to payment of disability income payments under the Company's disability programs. The Committee's determination of a Participant's Disability shall be in its sole discretion and shall be final. 1.13 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 1.14 "INVESTMENT FUND" means a mutual fund or other investment option that is designated by the Committee for purposes of determining the amount of the Company's deferred compensation obligation to a Participant under the Plan. 1.15 "PARTICIPANT" means an employee of a Company who is eligible to participate in the Plan. 1.16 "PLAN" means the Veritas DGC Inc. Deferred Compensation Plan set out in this document, as amended from time to time. 1.17 "PLAN YEAR" means a one-year period which coincides with the calendar year. 1.18 "RETIREMENT" means the voluntary termination of employment with the Company at or after attaining age 62 with at least 10 years of service with the Company. 1.19 "TRUST" means the Veritas DGC Inc. Deferred Compensation Trust. 1.20 "VALUATION DATE" means the end of each calendar quarter unless the Committee selects another date. ARTICLE II ELIGIBILITY The employees eligible to participate in the Plan include the key employees of the Company, who are in a select group of management or are highly compensated employees, as determined by the Committee. The Committee shall notify each Participant of his eligibility to participate in the Plan. Each Participant in the Plan during a Plan Year shall continue to participate in the Plan unless the Committee shall have notified the Participant that he will not be eligible to participate in the Plan. A former Participant who has been notified that he will no longer participate in the Plan, but who remains in the employ of the Company, shall retain the balance in his Accounts under the terms of the Plan, but he shall not make additional deferrals under Section 3.1 and no additional amounts shall be credited to his Accounts under Sections 4.3 and 4.4 during the periods in which he is not a Participant. ARTICLE III DEFERRALS AND ACCRUALS 3.1 DEFERRAL ELECTION. A Participant may elect, within 30 days of notification that he is eligible to participate in the Plan, the percentage, if any, of his Compensation to be earned during the ensuing Plan Year, that is to be deferred under the Plan. A Participant may defer a -3 8 minimum of one percent but not more than 50 percent of his base Compensation for the Plan Year and may defer a minimum of one percent and a maximum of 100 percent of any incentive bonus or commissions to be paid to the Participant for the Plan Year. Prior to the election period the Committee shall notify all eligible Participants of their right to make a deferral election. Once an election has been made as to the percentage to be deferred, it becomes irrevocable for the Plan Year. The election to defer a percentage of Compensation shall be effective only upon the timely receipt by the Committee of the Participant's percentage deferral election on such form as will be determined by the Committee from time to time. Except with respect to the election by a newly eligible Participant as described above, if the Committee fails to receive a properly filed election form on or prior to the beginning of the Plan Year or Years to which the election applies, revoking or modifying a prior election, the prior election shall remain in effect. If a timely election form is not received, the Participant shall be deemed to have elected not to defer any part of his Compensation for that Plan Year. An election to defer for one Plan Year shall remain effective for subsequent Plan Years until modified or revoked in accordance with this Section 3.1. 3.2 COMPANY DISCRETIONARY MATCH ACCRUAL. Each Plan Year the Company may, in its sole discretion, credit the Company Discretionary Match Account of each Participant who elects to defer a portion of his Compensation under the Plan with an amount to be determined by the Company. 3.3 COMPANY DISCRETIONARY ACCRUAL. Each Plan Year the Company may, in its sole discretion, credit the Company Discretionary Accrual Account of each Participant in the Plan with an amount equal to a percentage of the Participant's Compensation. ARTICLE IV ACCOUNT 4.1 ESTABLISHING A PARTICIPANT'S ACCOUNT. The Committee shall establish an Account for each Participant in a special Deferred Compensation Ledger which shall be maintained by the Company. The Account shall reflect the amount of the Company's obligation to the Participant at any given time. 4.2 DEFERRAL ACCOUNT. The amount deferred by a Participant, if any, shall be credited to each Participant's Deferral Account as of the last day of each month in which the Participant would have received the amount deferred but for his election to defer. 4.3 COMPANY DISCRETIONARY MATCH ACCOUNT. The Company Discretionary Match, if any, shall be credited to each Participant's Company Discretionary Match Account coincident with the crediting of the Participant's Deferral to the Participant's Deferral Account. 4.4 COMPANY DISCRETIONARY ACCRUAL ACCOUNT. The Company Discretionary Accrual, if any, shall be credited to each Participant's Company Discretionary Accrual Account as of the last day of the Plan Year for the accrual attributable to Compensation paid during that Plan Year. -4 9 4.5 CREDITING OF INTEREST. As part of a Participant's total benefit under the Plan, each Participant's Account shall be credited with earnings (or losses) equal to the amount which is deemed to be earned on his bookkeeping Account established to enable the Company to determine its obligations under the Plan. Each Valuation Date the Committee or its delegate will determine the amount of earnings (or losses) to be allocated to a Participant's Account and will credit that amount to the Participant's Account. For the purpose of determining the earnings (or losses) to be credited to the Participant's Account, the Committee shall assume that the Participant's Account is invested in units or shares of the Investment Funds in the proportions selected by the Participant in accordance with procedures established by the Committee. This amount accrued by the Committee as additional deferred compensation shall be a part of the Company's obligation to the Participant and payment of it shall be a general obligation of the Company. Earnings (or losses) will continue to be credited to a Participant's Account each Valuation Date until his entire benefit due under the Plan has been paid in full. The determination of interest based on the income and appreciation of the Participant's Account shall in no way affect the ability of the general creditors of the Company to reach the assets of the Company in the event of the insolvency or bankruptcy of the Company or place the Participants in a secured position ahead of the general creditors of the Company. Although a Participant's investment selections made in accordance with the terms of the Plan and such procedures as may be established by the Committee shall be relevant for purposes of determining the Company's obligation to the Participant under the Plan, there is no requirement that any assets of the Company shall be invested in accordance with the Participant's investment selections. ARTICLE V VESTING 5.1 DEFERRALS. A Participant shall have a 100 percent nonforfeitable interest in his Deferrals under the Plan at all times. A Participant will also have a 100 percent nonforfeitable interest in any increase in the Deferral as a result of the crediting of interest in accordance with Section 4.5 after his Deferral has been initially credited. 5.2 COMPANY DISCRETIONARY MATCH AND COMPANY DISCRETIONARY ACCRUAL. Upon his termination of employment, Retirement, death or Disability while employed with the Company, a Participant will have a 100 percent nonforfeitable interest in the Company Discretionary Match and Company Discretionary Accrual credited to his Account together with any increase in the accruals as a result of the crediting of interest in accordance with Section 4.5 after they have been initially credited. ARTICLE VI DISTRIBUTIONS 6.1 DEATH. Upon the death of a Participant, his Beneficiary or Beneficiaries shall receive the value of the amounts credited to the Participant's Accounts in the Deferred Compensation Ledger determined under Section 6.6, the distribution shall be made in one lump sum payment in cash. The distribution shall be made within 30 days after the Participant's death. -5 10 Each Participant, upon notification of his participation in the Plan, shall file with the Committee a designation of a Beneficiary or Beneficiaries to whom distributions otherwise due the Participant shall be made in the event of his death prior to the distribution of the amount credited to his Accounts in the Deferred Compensation Ledger. The designation will be effective upon receipt by the Committee of a properly executed form which the Committee has approved for that purpose. The Participant may from time to time revoke or change any designation of Beneficiary by filing another approved Beneficiary designation form with the Committee. If there is no valid designation of Beneficiary on file with the Committee at the time of the Participant's death, or if all of the Beneficiaries designated in the last Beneficiary designation have predeceased the Participant or otherwise ceased to exist, the Beneficiary will be the Participant's spouse, if the spouse survives the Participant, or otherwise the Participant's estate. Any Beneficiary designation which designates any person or entity other than the Participant's spouse must be consented to in writing by the spouse in a form acceptable to the Committee in order to be effective. 6.2 DISABILITY. Upon the Disability of a Participant, the Participant shall receive the value of the amounts credited to the Participant's Accounts in the Deferred Compensation Ledger determined under Section 6.6, and the distribution shall be made in one lump sum payment in cash. The distribution shall be made within 30 days after the Participant becomes disabled. 6.3 RETIREMENT. Upon the Retirement of a Participant as defined in Section 1.18, the Participant shall receive the value of the amounts credited to his Accounts in the Deferred Compensation Ledger determined under Section 6.6, and the distribution shall be made in one lump sum payment or over a 3- or 5-year period, according to the Participant's retirement distribution election form completed upon entry into the Plan. If a lump sum payment is made, the distribution shall be made within 30 days after the Participant's Retirement. 6.4 TERMINATION PRIOR TO DEATH, DISABILITY OR RETIREMENT. Upon a Participant's termination from the employ of the Company prior to his death, Disability or Retirement, the Participant shall receive the portion of the amount credited to his Accounts in the Deferred Compensation Ledger, determined under Section 6.6, which is vested under Sections 5.1 and 5.2, and the distribution shall be made in one lump sum payment in cash. The distribution shall be made within 30 days after the Participant's termination. Any amounts not then vested shall be forfeited. 6.5 RESPONSIBILITY FOR DISTRIBUTIONS AND WITHHOLDING OF TAXES. The Committee shall furnish information to the Company concerning the amount and form of distribution to any Participant entitled to a distribution so that the Company may make or cause the Trust to make the distribution required. It will also calculate the deductions from the amount of the benefit paid under the Plan for any taxes required to be withheld by federal, state or local government and will cause them to be withheld and paid to the appropriate authority. 6.6 DISTRIBUTION DETERMINATION DATE. For purposes of all distributions described in this Article VI, the determination date for valuing the amounts credited to a Participant's Accounts shall be the Valuation Date immediately preceding the event which triggers the beginning of the period described in Section 6.1, 6.2, 6.3 or 6.4, as applicable. -6 11 ARTICLE VII ADMINISTRATION 7.1 COMMITTEE APPOINTMENT. The Committee which shall consist of not less than three members shall be appointed by the Board of Directors. Each Committee member shall serve until his resignation or removal. The Board of Directors shall have the sole discretion to remove any one or more Committee members and appoint one or more replacement or additional Committee members from time to time. 7.2 COMMITTEE ORGANIZATION AND VOTING. The Committee shall select from among its members a chairman who shall preside at all of its meetings and shall elect a secretary without regard to whether that person is a member of the Committee. The secretary shall keep all records, documents and data pertaining to the Committee's supervision and administration of the Plan. A majority of the members of the Committee shall constitute a quorum for the transaction of business and the vote of a majority of the members present at any meeting shall decide any question brought before the meeting. In addition, the Committee may decide any question by a vote, taken without a meeting, of a majority of its members. A member of the Committee who is also a Participant shall not vote or act on any matter relating solely to himself. 7.3 POWERS OF THE COMMITTEE. The Committee shall have the exclusive responsibility for the general administration of the Plan according to the terms and provisions of the Plan and shall have all powers necessary to accomplish those purposes, including but not by way of limitation the right, power and authority: (a) to make rules and regulations for the administration of the Plan; (b) to construe all terms, provisions, conditions and limitations of the Plan; (c) to correct any defect, supply any omission or reconcile any inconsistency that may appear in the Plan in the manner and to the extent it deems expedient to carry the Plan into effect; (d) to designate the persons eligible to become Participants; (e) to determine all controversies relating to the administration of the Plan, including but not limited to: (1) differences of opinion arising between the Company and a Participant; and -7 12 (2) any question it deems advisable to determine in order to promote the uniform administration of the Plan for the benefit of all parties at interest; and (f) to delegate by written notice those clerical and recordation duties of the Committee, as it deems necessary or advisable for the proper and efficient administration of the Plan. 7.4 COMMITTEE DISCRETION. The Committee in exercising any power or authority granted under the Plan or in making any determination under the Plan shall perform or refrain from performing those acts using its sole discretion and judgment. Any decision made by the Committee or any refraining to act or any act taken by the Committee in good faith shall be final and binding on all parties and shall not be subject to de novo review. 7.5 ANNUAL STATEMENTS. The Committee shall cause each Participant to receive an annual statement as soon as administratively feasible after the conclusion of each Plan Year containing a statement of the Participant's Accounts in the Deferred Compensation Ledger through the end of that Plan Year. The statement shall include a report of the Participant Deferral, Company Discretionary Match, if any, and Company Discretionary Accrual, if any, and the number of units credited to each Participant's Accounts for that Plan Year. 7.6 REIMBURSEMENT OF EXPENSES. The Committee shall serve without compensation for its services but shall be reimbursed by the Company for all expenses properly and actually incurred in the performance of its duties under the Plan. ARTICLE VIII AMENDMENT AND/OR TERMINATION 8.1 AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors may amend or terminate the Plan at any time by an instrument in writing without the consent of any Participant. 8.2 NO RETROACTIVE EFFECT ON AWARDED BENEFITS. No amendment shall affect the rights of any Participant to the amounts and/or units then standing to his credit in his Accounts in the Deferred Compensation Ledger. However, the Board of Directors shall retain the right to change at any time and in any manner the method of calculating all amounts deferred by a Participant, all amounts matched by the Company and all Company Discretionary Accruals to be accrued in the future and the gauge to be used to determine future increases or decreases in amounts accrued or deferred after the date of the amendment. 8.3 EFFECT OF TERMINATION. If the Plan is terminated, all amounts deferred by Participants and matched or accrued by the Company and credited to a Participant's Accounts shall immediately vest as if the Participant were entitled to and did retire on the date the Plan terminated. -8 13 Distributions would then commence in accordance with Section 6.3. However, the forfeiture provisions of Section 6.5 would continue to apply until the actual date of distribution. ARTICLE IX PAYMENT 9.1 PAYMENTS UNDER THIS AGREEMENT ARE THE OBLIGATION OF THE COMPANY. The Company shall be liable for all benefits due the Participants under the Plan. 9.2 PAYMENTS MAY BE MADE TO A RABBI TRUST. Under all circumstances, the rights of the Participants to the assets held in any rabbi trust created with respect to the Plan shall be no greater than the rights expressed in this agreement. Nothing contained in the trust agreement which creates any such rabbi trust shall constitute a guarantee by any Company that the amounts transferred by it to the trust shall be sufficient to pay any benefits under the Plan or would place the Participant in a secured position ahead of judgment and/or general creditors should the Company become insolvent or bankrupt. Any trust agreement established with respect to a Plan must specifically set out these principles so it is clear in the trust agreement that the Participants are only unsecured general creditors of the Company with respect to their benefits under the Plan. 9.3 PARTICIPANTS MUST RELY ONLY ON GENERAL CREDIT OF THE COMPANY. The Plan is only a general corporate commitment and each Participant must rely upon the general credit of the Company for the fulfillment of its obligations under the Plan. Under all circumstances the rights of Participants to any asset held by the Company shall be no greater than the rights expressed in this agreement. Nothing contained in this agreement shall constitute a guarantee by the Company that the assets of the Company will be sufficient to pay any benefits under the Plan or would place the Participant in a secured position ahead of general creditors and judgment creditors of the Company. Though the Company may establish or become a signatory to a rabbi trust to accumulate assets to help fulfill its obligations, the Plan and any trust created, shall not create any lien, claim, encumbrance, right, title or other interest of any kind in any Participant in any asset held by the Company, contributed to any trust created, or otherwise be designated to be used for payment of any of its obligations created in this agreement. No specific assets of the Company have been or will be set aside, or will be transferred to a trust or will be pledged for the performance of the Company's obligations under the Plan which would remove those assets from being subject to the general creditors and judgment creditors of the Company. 9.4 PLAN UNFUNDED. It is intended that the Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA. ARTICLE X -9 14 MISCELLANEOUS 10.1 LIMITATION OF RIGHTS. Nothing in the Plan will be construed: (a) to give any employee of any Company any right to be designated a Participant in the Plan; (b) to give a Participant any right with respect to the Deferral, the Company Discretionary Match accrued or Company Discretionary Accrual accrued except in accordance with the terms of the Plan; (c) to limit in any way the right of the Company to terminate a Participant's employment with the Company at any time; (d) to evidence any agreement or understanding, expressed or implied, that the Company will employ a Participant in any particular position or for any particular remuneration; or (e) to give a Participant or any other person claiming through him any interest or right under the Plan other than that of any unsecured general creditor of the Company. 10.2 DISTRIBUTIONS TO INCOMPETENTS OR MINORS. Should a Participant become incompetent or should a Participant designate a Beneficiary who is a minor or incompetent, the Committee is authorized to pay the amounts due to the parent of the minor or to the guardian of the minor or incompetent or directly to the minor or to apply those amounts for the benefit of the minor or incompetent in any manner the Committee determines in its sole discretion. 10.3 NONALIENATION OF BENEFITS. No right or benefit provided in the Plan shall be transferable by the Participant except, upon his death, to a named Beneficiary as provided in the Plan. No right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge the same shall be void. No right or benefit under the Plan shall in any manner be liable for or subject to any debts, contracts, liabilities or torts of the person entitled to such benefits. If any Participant or any Beneficiary becomes bankrupt or attempts to anticipate, alienate, sell, assign, pledge, encumber or charge any right or benefit under the Plan, that right or benefit shall, in the discretion of the Committee, cease. In that event, the Committee may have the Company hold or apply the right or benefit or any part of it to the benefit of the Participant or Beneficiary, his or her spouse, children or other dependents or any of them in any manner and in any proportion the Committee believes to be proper in its sole and absolute discretion, but is not required to do so. 10.4 RELIANCE UPON INFORMATION. The Committee shall not be liable for any decision or action taken in good faith in connection with the administration of the Plan. Without -10 15 limiting the generality of the foregoing, any decision or action taken by the Committee when it relies upon information supplied it by any officer of the Company, the Company's legal counsel, the Company's independent accountants or other advisors in connection with the administration of the Plan shall be deemed to have been taken in good faith. 10.5 SEVERABILITY. If any term, provision, covenant or condition of the Plan is held to be invalid, void or otherwise unenforceable, the rest of the Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 10.6 NOTICE. Any notice or filing required or permitted to be given to the Committee or a Participant shall be sufficient if in writing and hand delivered or sent by U.S. mail to the principal office of the Company or to the residential mailing address of the Participant. Notice shall be deemed to be given as of the date of hand delivery or if delivery is by mail, as of the date shown on the postmark. 10.7 GENDER AND NUMBER. If the context requires it, words of one gender when used in the Plan will include the other genders, and words used in the singular or plural will include the other. 10.8 GOVERNING LAW. The Plan will be construed, administered and governed in all respects by the laws of the State of Texas. 11.9 EFFECTIVE DATE. The Plan will be operative and effective on the 1st day of January 2001. IN WITNESS WHEREOF, the Company has executed this document on this 8th day of December, 2000. VERITAS DGC INC. By ___________________________________ Title ________________________________ -11 EX-10.R 4 h82596ex10-r.txt RABBI TRUST AGREEMENT 1 EXHIBIT 10-R RABBI TRUST AGREEMENT VERITAS DGC INC. DEFERRED COMPENSATION PLAN 2 TABLE OF CONTENTS Section 1. Establishment of Trust .......................................... 1 Section 2. Payments to Plan Participants and their Beneficiaries ........... 2 Section 3. Trustee Responsibility Regarding Payments to the Trust Beneficiary When the Company is Insolvent ....................... 2 Section 4. Payments to the Company ......................................... 3 Section 5. Investment Authority ............................................ 3 Section 6. Disposition of Income ........................................... 5 Section 7. Accounting by the Trustee ....................................... 6 Section 8. Responsibility of the Trustee ................................... 6 Section 9. Compensation and Expenses of the Trustee ........................ 7 Section 10. Resignation and Removal of the Trustee .......................... 7 Section 11. Appointment of Successor ........................................ 7 Section 12. Amendment or Termination ........................................ 8 Section 13. Miscellaneous ................................................... 8 Section 14. Effective date .................................................. 9 3 RABBI TRUST UNDER THE VERITAS DGC INC. DEFERRED COMPENSATION PLAN This Trust Agreement made this ____ day of ___________, 20___ by and between Veritas DGC Inc. (hereinafter called the "Company"), with its principal place of business 10300 Town Park, Houston, Texas 77072 and Austin Trust Company (hereinafter called the "Trustee"), a trust company organized and existing under the laws of the State of Texas, as Trustee. W I T N E S S E T H : WHEREAS, the Company has adopted the Veritas DGC Inc. Deferred Compensation Plan ("Plan"), a non-qualified deferred compensation plan; and WHEREAS, the Company has incurred or expects to incur liability under the terms of such Plan with respect to the individuals participating in such Plan; and WHEREAS, the Company wishes to establish a trust (hereinafter called "Trust") and to contribute to the Trust assets that shall be held therein, subject to the claims of the Company's creditors in the event of the Company's Insolvency, as herein defined, until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan; and WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974; and WHEREAS, it is the intention of the Company to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plan; NOW, THEREFORE, the parties do hereby establish the Trust and agree that the trust shall be comprised, held and disposed of as follows: SECTION 1. ESTABLISHMENT OF TRUST (a) The Company hereby deposits with the Trustee in trust $100.00, which shall become the principal of the Trust to be held, administered and disposed of by the Trustee as provided in this Trust Agreement. (b) The Trust shall become irrevocable upon execution. (c) The Trust is intended to be a grantor trust, of which the Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. (d) The principal of the Trust, and any earnings thereon, shall be held separate and apart from other funds of the Company and shall be used exclusively for the uses and purposes of Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any right created under the Plan and this Trust Agreement shall be mere unsecured contractual rights of the Plan participants and their beneficiaries against 1 4 the Company. Any assets held by the Trust will be subject to the claims of the Company's general creditors under federal and state law in the event of Insolvency, as defined in Section 3(a) herein. (e) Within 30 days following the end of the Plan year, ending after the Trust has become irrevocable pursuant to Section 1(b) hereof, the Company shall be required to irrevocably deposit additional cash or other property to the Trust in an amount sufficient to pay each Plan participant or beneficiary the benefits payable pursuant to the terms of the Plan as of the close of the Plan year. SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES. (a) The Company shall deliver to the Trustee a schedule (the "Payment Schedule") that indicates the amounts payable in respect of each Plan participant (and his or her beneficiaries), that provides a formula or other instructions acceptable to the Trustee for determining the amounts so payable, the form in which such amount to be paid (as provided for or available under the Plan), and the time of commencement for payment of such amounts. Except as otherwise provided herein, the Trustee shall make payments to the Plan participants and their beneficiaries in accordance with such Payment Schedule. The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plan and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by the Company. (b) The entitlement of a Plan participant or his or her beneficiaries to benefits under the Plan shall be determined by the Company or such party as it shall designate under the Plan, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plan. (c) The Company may make payment of benefits directly to Plan participants or their beneficiaries as they become due under the terms of the Plan. The Company shall notify the Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to participants or their beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plan, the Company shall make the balance of each such payment as its falls due. The Trustee shall notify the Company where principal and earnings are not sufficient. SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO THE TRUST BENEFICIARY WHEN THE COMPANY IS INSOLVENT. (a) The Trustee shall cease payment of benefits to Plan participants and their beneficiaries if the Company is Insolvent. The Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) the Company is unable to pay its debts as they become due, or (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. (b) At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of the Company under federal and state law as set forth below. (1) The Board of Directors and the Chief Executive Officer of the Company shall have the duty to inform the Trustee in writing of the Company's Insolvency. If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, the Trustee shall determine whether the Company is Insolvent and, pending such determination, the Trustee shall discontinue payment of benefits to Plan participants or their beneficiaries. 2 5 (2) Unless the Trustee has actual knowledge of the Company's Insolvency, or has received notice from the Company or a person claiming to be a creditor alleging that the Company is Insolvent, the Trustee shall have no duty to inquire whether the Company is Insolvent. The Trustee may in all events rely on such evidence concerning the Company's solvency as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination concerning the Company's solvency. (3) If any time the Trustee has determined that the Company is Insolvent, the Trustee shall discontinue payments to Plan participants or their beneficiaries and shall hold the assets of the Trust for the benefit of the Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Plan participants or their beneficiaries to pursue their rights as general creditors of the Company with respect to benefits due under the Plan or otherwise. (4) The Trustee shall resume the payment of benefits to Plan participants or their beneficiaries in accordance with Section 2 of this Trust Agreement only after the Trustee has determined that the Company is not Insolvent (or is no longer Insolvent). (c) Provided that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Plan participants or their beneficiaries under the terms of the Plan for the period of such discontinuance, less the aggregate amount of any payments made to Plan participants or their beneficiaries by the Company in lieu of the payments provided hereunder during any such period of discontinuance. SECTION 4. PAYMENTS TO THE COMPANY. Except as provided in Section 3 hereof, after the Trust has become irrevocable, the Company shall have no right or power to direct the Trustee to return to the Company or to divert to others any of the Trust assets before all payment of benefits have been made to Plan participants and their beneficiaries pursuant to the terms of the Plan. SECTION 5. INVESTMENT AUTHORITY (a) With respect to the Trust Fund, the Trustee shall have the following powers and rights, in addition to those vested in it elsewhere in this Agreement or by law: (1) To invest the Trust Fund in such bonds, notes, debentures, mortgages, equipment, trust certificates, investment trust certificates, preferred or common stock, insurance and annuity contracts, common or collective trust funds, shares of regulated investment companies, shares of open-ended investment companies registered under the Investment Company Act of 1940, as amended, or in such other property, real or personal, as the Trustee may deem advisable, with the case, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; and (2) The Trustee may temporarily invest and reinvest the funds in any marketable short- and medium-term fixed income securities (including demand and short-term notes and commonly known as "Master Notes"), United States Treasury Bills, other short- and medium-term government obligations, 3 6 commercial paper, other money market instruments and part interests in any one or more of the foregoing, or may maintain cash balances consistent with the liquidity needs of the Plan. (3) In addition, the Trustee shall have full power and authority to invest and reinvest all or any part of any investment fund through the medium of any pooled investment fund or group trust (including one or more of which it is the Trustee) which is invested principally in the property of the kind authorized for investment of the respective investment funds. To the extent of investment funds. To the extent of investment of the Trust's assets in such a pooled fund or group trust, the terms of the instrument establishing such pooled fund or group trust are made a part hereof as fully as if set forth at length herein. (4) To retain, manage, improve, repair, operate and control all property, real or personal, at any time comprising part of the Trust Fund; and (5) To manage, sell, contract to sell, grant options to purchase, convey, exchange, partition, lease for any term (even though such term commences in the future or may extend beyond the duration of the Trust), and otherwise dispose of the Trust Fund from time to time in such a manner, for such consideration, and upon such terms and conditions as the Trustee in its discretion shall determine; and (6) To vote any corporate stock either in person or by proxy for any purpose; to exercise or sell any stock subscription or conversion right; to participate in voting trusts; to consent to, take any action in connection with, and receive and retain any securities resulting from any merger, consolidation, reorganization, readjustment of the financial structure, liquidation, sale, lease, or other disposition of the assets of any corporation or other organization the securities of which may constitute a portion of the Trust Fund; and (7) To keep any property in the name of a nominee with or without disclosure of any fiduciary relationship; and (8) To take any action with respect to conserving or realizing upon the value of any property in the Trust Fund; to collect, pay, contest, compromise, or abandon demands of or against the Trust Fund; to pay any tax, assessment for other charge attributable to the interest of such beneficiary; and (9) To purchase, hold and sell interest or units of participation in any collective or common trust fund established by the Trustee, including any such funds which may be established in the future; (10) To deposit securities in a security depository and permit the securities so deposited to be held in the name of the depository's nominee, and to deposit securities issued or guaranteed by the U.S. government or any agency or instrumentality thereof, including securities evidenced by book entry rather than by certificate, with the U.S. Department of the Treasury, a Federal Reserve Bank or other appropriate custodial entity, in the same account as the Trustee's own property, provided the Trustee's records and accounts show that such securities are assets of the Trust Fund; and (11) Generally, to do all acts, whether or not expressly authorized, which the Trustee deems necessary or desirable, but acting at all times according the principles expressed in Section 8. (b) The Trustee is authorized to contract or make other arrangements with any other organizations affiliated with or subsidiaries of the Trustee or related entities, for the provisions of services to the Trust or Plan, except where such arrangements are prohibited by law or regulation. (c) The Trustee is directed to place securities orders, settle securities trades, hold securities in custody, and other related activities on behalf of the Trust through or by any broker/dealer Trustee selects, unless an 4 7 Investment Advisor appointed by the Company and approved by the Trustee to act as Investment Advisor (so called) specifically instructs the use of a specific broker/dealer. Trades (and related activities) conducted through any broker/dealer shall be subject to fees and commissions established by the broker/dealer, which may be paid from the Trust or netted from the proceeds of trades. The Trustee is authorized to disclose such information as is necessary to the operation and administration of the Trust to such persons or organizations that the Trustee determines have a legitimate business purpose for obtaining such information. (d) The Company may appoint an Investment Advisor subject to the approval of the Trustee. Any such appointment shall be in writing and shall delineate the duties, responsibilities and liabilities of the Investment Advisor with respect to any part of the assets of the trust under the control of the Investment Advisor. Any such Investment Advisor appointed by the Company shall be an independent person or entity. If the Company shall appoint an Investment Advisor to whom discretion is given to invest all or any part of the assets of the Trust, the Trustee shall segregate each such part into a separate account to be invested by the Trustee upon the direction of the Investment Advisor. The Trustee shall be under no duty to question, or make inquiries as to, any action or direction of any Investment Advisor as provided herein, or any failure to give directions, or to review the securities subject to the investment direction of any Investment Advisor, or to make any suggestions to an Investment Advisor with respect to investment and reinvestment of, or disposing of investments in, any part of the assets of the Trust subject to the investment discretion of any Investment Advisor, unless the Trustee knows that by such action or failure to act it will be participating in a breach of fiduciary duty by the Investment Advisor. (e) The Trustee may invest in securities (including stock or rights to acquire stock) or obligations issued by the Company. All rights associated with assets of the Trust shall be exercised by the Trustee or the person designated by the Trustee, and shall in no event be exercisable by or rest with Plan participants, except that voting rights with respect to Trust assets with be exercised by the Company. (f) The Company shall have the right at anytime, and from time to time in its sole discretion, to substitute assets of equal fair market value for any asset held by the Trust. This right is exercisable by the Company in a nonfiduciary capacity without the approval or consent of any person in a fiduciary capacity. SECTION 6. DISPOSITION OF INCOME. During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested. SECTION 7. ACCOUNTING BY THE TRUSTEE. The Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between the Company and the Trustee. Within 60 days following the close of each calendar year and within 60 days after the removal or resignation of the Trustee, the Trustee shall deliver to the Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown 5 8 separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. SECTION 8. RESPONSIBILITY OF THE TRUSTEE. (a) The Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that the Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by the Company which is contemplated by, and in conformity, the terms of the Plan or this Trust and is given in writing by the Company. In the event of a dispute between the Company and a party, the Trustee may apply to a court of competent jurisdiction to resolve the dispute. (b) If the Trustee undertakes or defends any litigation arising in connection with this Trust, the Company agrees to indemnify the Trustee against the Trustee's costs, expenses and liability (including, without limitation, attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. If the Company does not pay such costs, expenses and liabilities in a reasonably timely manner, the Trustee may obtain payment from the Trust. (c) The Trustee may consult with legal counsel (who may also be counsel for the Company generally) with respect to any of its duties or obligations hereunder. (d) The Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder. (e) The Trustee shall have, without exclusion, all powers conferred on the Trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if any insurance policy is held as an asset of the Trust, the Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowings against such policy. (f) Notwithstanding any powers granted to the Trustee pursuant to this Trust Agreement or to applicable law, the Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. (g) The Trustee shall not be liable for any mistake or error in judgment but shall be liable only for willful misconduct or gross negligence. (h) No Trustee shall be required to furnish bond or other security except as herein expressly provided or except if required to do so under applicable federal law. (i) In the event of a garnishment, attachment, levy or other legal process by a creditor of the Company of any of the assets of the Trust under circumstances set out in Section 3.(b) hereof where Trustee cannot ascertain the Insolvency of the Company, the Trustee may interplead the assets of the Trust into the court where the creditor has brought such action. The Trustee shall have no liability to the Company for making such interpleader. 6 9 SECTION 9. COMPENSATION AND EXPENSES OF THE TRUSTEE. The Company shall pay all administration and Trustee's fees and expenses. If not so paid, the fees and expenses shall be paid from the Trust. SECTION 10. RESIGNATION AND REMOVAL OF THE TRUSTEE. (a) The Trustee may resign at any time by written notice to the Company, which shall be effective 60 days after receipt of such notice unless the Company and the Trustee agree otherwise. (b) The Trustee may be removed by the Company on 60 days notice or upon shorter notice accepted by the Trustee. (c) Upon a Change of Control, as defined in Section 13 below, the Trustee may not be removed by the Company for two (2) years. (d) If the Trustee resigns or is removed within five (5) years of a Change of Control, as defined herein, the Company shall apply to a court of competent jurisdiction for the appointment of a successor trustee or for instructions. (e) Upon the resignation or removal of the Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed with 90 days after receipt of notice of the resignations, removal or transfer, unless the Company extends the time limit. (f) If the Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 11 hereof, by the effective date or resignation or removal under paragraph(s) (a) [or (b)] of this section. If no such appointment has been made, the Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. SECTION 11. APPOINTMENT OF SUCCESSOR. (a) If the Trustee resigns or is removed in accordance with Section 10(a) or 10(b) hereof, the Company may appoint any third party, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace the Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the Company or the successor Trustee to evidence the transfer. (b) The Successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to Sections 7, and 8 hereof. The successor Trustee shall not be responsible for and the Company shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee. 7 10 SECTION 12. AMENDMENT OR TERMINATION. (a) This Trust Agreement may be amended by a written instrument executed by Trustee and the Company. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plan or shall make the Trust revocable after it has become irrevocable in accordance with Section 1(b) hereof. (b) The Trust shall not terminate until the date on which Plan participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plan. Upon termination of the Trust, any assets remaining in the Trust shall be returned to the Company. (c) Sections 10, 11 and 2 of this Trust Agreement may not be amended by the Company for five (5) years following a Change of Control, as defined herein. SECTION 13. MISCELLANEOUS. (a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. (b) Benefits payable to Plan participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, levy, execution or other legal or equitable process. (c) This Trust Agreement shall be governed by and construed in accordance with laws of the State of Texas. (d) For purposes of this Trust, Change of Control shall mean the purchase or other acquisition by any person,entity or group of persons, within the meaning of section 13(d) or 14(d) of the Securities Exchange Act of 1934 ("Act"), or any comparable successor provisions, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 30 percent or more of either the outstanding shares of common stock or the combined vetoing power of the Company's then outstanding voting securities entitled to vote generally, or the approval by the stockholders of the Company of a reorganization, merger, or consolidation, in each case, with respect to which persons who were stockholders of the Company immediately prior to such reorganization, merger or consolidation do not immediately thereafter, own more than 50 percent of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated Company's then outstanding securities, or a liquidation or dissolution of the Company or the of the sale of all substantially all of the Company's assets. (e) Until further notice from either party hereto, any notices delivered pursuant to this Agreement and all other communications shall be in writing and shall be delivered or sent to the persons at the addresses set forth hereunder. All notices and other communications shall be effective when received. The party seeking to rely on notice having been given under this paragraph shall be responsible for ascertaining its receipt. For Company: Veritas DGC Inc. 10300 Town Park Houston, Texas 77072 Attention: Liz Foreman 8 11 For Trustee: Austin Trust Company 100 Congress Avenue, Suite 700 Austin, Texas 78701 Attention: Dan Remick (f) This Agreement between the Company and the Trustee contains the entire understanding between the parties with respect to its subject matter, and, as of the effective date of this Agreement, it supersedes and entirely replaces any and all prior agreements between the Company and the Trustee with respect to the subject matter of this agreement. (g) This Agreement shall be binding upon and inure to the benefit of the parties hereof and their heirs, successors and assignees. This Agreement is not assignable by any party without the expressed written consent of the other party. (h) Titles and captions used in this Agreement are included for convenience of reference only and in no way define or delimit any provisions or otherwise alter the construction or effect. (i) Where the context permits, words in the masculine gender shall include the feminine and neuter genders, the singular shall include the plural, and the plural shall include the singular. (j) Each of the parties to this Agreement hereby represents and warrants that it is duly authorized and empowered to execute, deliver and perform this Agreement. (k) This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all counterparts shall, together, constitute only one Agreement. SECTION 14. EFFECTIVE DATE. The effective date of this Trust Agreement shall be ____________, 20 _____. IN WITNESS WHEREOF, this Agreement is executed as of the day and year first written above. COMPANY VERITAS DGC INC. ---------------------------------------- Title: ---------------------------------- TRUSTEE AUSTIN TRUST COMPANY ---------------------------------------- Title: ---------------------------------- 9 EX-27 5 h82596ex27.txt FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JUL-31-2001 AUG-01-2000 OCT-31-2000 90,391 6,321 143,604 1,744 4,783 259,132 402,884 266,722 708,180 84,732 0 0 0 287 477,316 708,180 0 0 0 76,168 0 0 0 8,365 3,346 0 0 0 0 5,008 .18 .18
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