-----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, Am0/w+x/BdrGZCdHsRCjOahV+I9JjplFT+BFvwVSdiuaURb3bW47/xCm2U1EHk0t 34oQc9oo9cKZIm/nHyWYDg== 0000950129-98-005044.txt : 19981216 0000950129-98-005044.hdr.sgml : 19981216 ACCESSION NUMBER: 0000950129-98-005044 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19981215 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: 98770215 BUSINESS ADDRESS: STREET 1: 3701 KIRBY DR STREET 2: STE 112 CITY: HOUSTON STATE: TX ZIP: 77098 BUSINESS PHONE: 7135128300 MAIL ADDRESS: STREET 1: 3701 KIRBY DRIVE SUITE 112 CITY: HOUSTON STATE: TX ZIP: 77098 FORMER COMPANY: FORMER CONFORMED NAME: DIGICON INC DATE OF NAME CHANGE: 19920703 10-Q 1 VERITAS DGC INC. - DATED 10/31/1998 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES X EXCHANGE ACT OF 1934 - --- FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 - --- FOR THE TRANSITION PERIOD FROM ________ TO ________ COMMISSION FILE NUMBER 1-7427 VERITAS DGC INC. (Exact name of registrant as specified in its charter) DELAWARE 76-0343152 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 3701 KIRBY DRIVE, SUITE #112 HOUSTON, TEXAS 77098 (Address of principal executive offices) (Zip Code) (713) 512-8300 (Registrant's telephone number, including area code) NO CHANGES (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. The number of shares of Veritas DGC Inc.'s common stock (the "Common Stock"), $.01 par value, outstanding at November 30, 1998 was 22,844,407 (including 1,506,863 Veritas Energy Services Inc. exchangeable shares which are identical to the Common Stock in all material respects). ================================================================================ 2 VERITAS DGC INC. AND SUBSIDIARIES INDEX FORM 10-Q ================================================================================
Page Number ----------- PART I. Financial Information Item 1. Financial Statements Consolidated Statements of Income - For the Three Months Ended October 31, 1998 and 1997 1 Consolidated Balance Sheets - October 31, 1998 and July 31, 1998 2 Consolidated Statements of Cash Flows - For the Three Months Ended October 31, 1998 and 1997 3 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K 12 Signatures 14
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VERITAS DGC INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME UNAUDITED (In thousands, except per share amounts)
Three Months Ended October 31, -------------------------- 1998 1997 ----------- ----------- REVENUES $ 146,799 $ 142,186 COSTS AND EXPENSES: Cost of services 103,511 93,253 Depreciation and amortization 16,850 12,514 Selling, general and administrative 4,556 4,539 Other (income) expense: Interest 2,052 2,034 Other 227 (308) ----------- ----------- Total costs and expenses 127,196 112,032 ----------- ----------- Income before provision for income taxes and equity in (earnings) loss of 50% or less-owned companies and joint ventures 19,603 30,154 Provision for income taxes 5,882 9,649 Equity in (earnings) loss of 50% or less-owned companies and joint ventures 99 (814) ----------- ----------- NET INCOME $ 13,622 $ 21,319 =========== =========== PER SHARE: Earnings per common share $ .60 $ .95 =========== =========== Weighted average common shares 22,697 22,424 =========== =========== Earnings per common share - assuming dilution $ .60 $ .94 =========== =========== Weighted average common shares - assuming dilution 22,873 22,795 =========== ===========
See Notes to Consolidated Financial Statements 1 4 VERITAS DGC INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except par value)
October 31, July 31, 1998 1998 ----------- --------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 76,773 $ 40,089 Restricted cash investments 188 186 Accounts and notes receivable (net of allowance for doubtful accounts: October $1,222; July $1,248) 175,211 151,820 Materials and supplies inventory 5,356 4,106 Prepayments and other 13,138 16,290 --------- --------- Total current assets 270,666 212,491 Property and equipment 340,909 326,024 Less accumulated depreciation 165,395 151,104 --------- --------- Property and equipment - net 175,514 174,920 Multi-client data library 69,571 51,143 Investment in and advances to joint ventures 2,158 2,943 Goodwill (net of accumulated amortization: October $3,352; July $3,233) 2,536 2,655 Deferred tax asset 18,335 19,157 Other assets 17,099 15,181 ========= ========= Total $ 555,879 $ 478,490 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 272 $ 289 Accounts payable - trade 48,047 42,493 Accrued interest 466 2,234 Other accrued liabilities 52,936 50,753 Income taxes payable 7,496 10,682 --------- --------- Total current liabilities 109,217 106,451 Non-current liabilities: Long-term debt - less current maturities 135,214 75,272 Other non-current liabilities 5,057 5,071 --------- --------- Total non-current liabilities 140,271 80,343 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: 21,337,544 shares at October and 21,278,653 shares at July (excluding 1,506,863 Exchangeable Shares) 213 213 Additional paid-in capital 207,304 203,631 Accumulated earnings (from August 1, 1991 with respect to Digicon Inc.) 107,980 94,358 Accumulated other comprehensive loss - cumulative foreign currency translation adjustment (4,015) (3,660) Less: Unearned compensation (1,077) (1,119) Less: Treasury stock, at cost; 156,041 shares at October and 50,000 shares at July (4,014) (1,727) --------- --------- Total stockholders' equity 306,391 291,696 ========= ========= Total $ 555,879 $ 478,490 ========= =========
See Notes to Consolidated Financial Statements 2 5 VERITAS DGC INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (Dollars in thousands)
Three Months Ended October 31, ------------------------- 1998 1997 ---------- ---------- OPERATING ACTIVITIES: Net income $ 13,622 $ 21,319 Non-cash items included in net income: Depreciation and amortization 16,850 12,514 Loss on disposition of property and equipment 298 194 Equity in (earnings) loss of 50% or less-owned companies and joint ventures 99 (814) Write-down of multi-client data library to market 336 80 Deferred taxes 3,709 11,648 Unearned compensation 84 Change in operating assets/liabilities: Accounts and notes receivable (23,391) (10,007) Materials and supplies inventory (1,250) (186) Prepayments and other 3,470 1,028 Multi-client data library (18,764) 2,222 Other (515) (5,776) Accounts payable - trade 4,276 (2,562) Accrued interest (1,768) (1,826) Other accrued liabilities 2,183 5,794 Income taxes payable (3,186) (2,411) Other non-current liabilities (14) (102) ---------- ---------- Total cash provided (used) by operating activities (3,961) 31,115 FINANCING ACTIVITIES: Payments of long-term debt (75) (108) Borrowings from senior notes 60,000 Senior notes issue costs (1,597) Net proceeds from sale of common stock 620 751 Purchase of treasury stock (2,287) ---------- ---------- Total cash provided by financing activities 56,661 643 INVESTING ACTIVITIES: Increase in restricted cash investments (2) (7) Decrease (increase) in investment in and advances to joint ventures 686 (272) Purchase of property and equipment (16,345) (16,639) Sale of property and equipment 2 ---------- ---------- Total cash used by investing activities (15,661) (16,916) Currency loss on foreign cash (355) (160) ---------- ---------- Change in cash and cash equivalents 36,684 14,682 Beginning cash and cash equivalents balance 40,089 71,177 ---------- ---------- Ending cash and cash equivalents balance $ 76,773 $ 85,859 ========== ==========
See Notes to Consolidated Financial Statements 3 6 VERITAS DGC INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULES TO CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (Dollars in thousands)
Three Months Ended October 31, ---------------------- 1998 1997 --------- --------- SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Increase in property and equipment for accounts payable - trade $ 1,278 $ 2,443 Utilization of net operating loss carryforwards existing prior to the quasi-reorganization resulting in an increase (decrease) in: Deferred tax asset valuation allowance (2,887) (4,762) Additional paid-in capital 2,887 4,762 Restricted stock issued for future services resulting in an increase in additional paid-in capital 42 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for: Interest - Senior notes 3,656 3,656 Equipment purchase obligations 12 19 Other 110 127 Income taxes 5,332 412
See Notes to Consolidated Financial Statements 4 7 VERITAS DGC INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED OCTOBER 31, 1998 UNAUDITED 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION Veritas DGC Inc. provides seismic data acquisition, data processing, multi-client data sales and exploration and development information services to the petroleum industry in selected markets worldwide. The accompanying consolidated financial statements include the accounts of Veritas DGC Inc., formerly Digicon Inc., and all majority-owned domestic and foreign subsidiaries. Investments in 50% or less-owned companies and joint ventures are accounted for on the equity method. 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 that affect 1) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and 2) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATION OF PRIOR YEAR BALANCES Certain prior year balances have been reclassified for consistent presentation. NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures About Segments of an Enterprise and Related Information," which will supersede SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise." It will require Veritas DGC Inc. to disclose certain financial information in both annual and interim reporting about "operating segments." Operating segments are components of a company that are evaluated regularly by management in deciding how to allocate its resources and in assessing its performance. The statement also requires disclosure about the countries from which Veritas DGC Inc. derives its revenues and in which it employs its long-lived assets. Major customers will continue to be disclosed. Veritas DGC Inc. will be required to implement this statement in fiscal year 1999. Management has not completed its assessment of how the adoption of this statement will affect its existing segment disclosures. In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," which will supersede the disclosure requirements of SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." This statement addresses disclosures only and will require Veritas DGC Inc. to provide a reconciliation of the beginning and ending balances of the benefit obligation and the fair value of plan assets in addition to disclosures already presented. Veritas DGC Inc. will be required to implement this statement in fiscal year 1999. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This standard requires companies to record derivative financial instruments on the balance sheet as assets or liabilities, as appropriate, at fair value. Gains or losses resulting from changes in the fair values of those derivatives are accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. Veritas DGC Inc. will be required to implement this statement in fiscal year 2000. Veritas DGC Inc. believes that the implementation of this standard will not have a material adverse effect on Veritas DGC Inc.'s consolidated financial position, results of operations or liquidity. 5 8 VERITAS DGC INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE THREE MONTHS ENDED OCTOBER 31, 1998 UNAUDITED 2. INVESTMENT IN INDONESIAN JOINT VENTURE Veritas DGC Inc. owns 80% of an Indonesian joint venture (P.T. Digicon Mega Pratama). The joint venture is accounted for under the equity method due to provisions in the joint venture agreement that give minority shareholders the right to exercise control. Summarized financial information is as follows:
October 31, July 31, 1998 1998 ----------- -------- (Dollars in thousands) Current assets $ 1,981 $ 2,740 Property and equipment, net 544 613 -------- -------- Total assets $ 2,525 $ 3,353 ======== ======== Current liabilities $ 367 $ 410 Advances from affiliates 13,161 13,847 Stockholders' deficit: Common stock 2,576 2,576 Accumulated deficit (13,579) (13,480) -------- -------- Total stockholders' deficit (11,003) (10,904) ======== ======== Total liabilities and stockholders' deficit $ 2,525 $ 3,353 ======== ========
Three Months Ended October 31, ------------------------------ 1998 1997 --------- -------- (Dollars in thousands) Revenues $ 398 $ 1,450 Cost and expenses: Cost of services 325 667 Depreciation and amortization 86 78 Other 86 (110) ------- -------- Total 497 635 ------- -------- Net income (loss) $ (99) $ 815 ======= ========
3. LONG-TERM DEBT Veritas DGC Inc.'s long-term debt is as follows:
October 31, July 31, 1998 1998 ----------- -------- (Dollars in thousands) Senior notes due October 2003, at 9 3/4% $135,000 $ 75,000 Equipment purchase obligations maturing through September 2000, at a weighted average rate of 9.29% at October 31, 1998 486 486 -------- -------- Total 135,486 75,561 Less current maturities 272 289 -------- -------- Due after one year $135,214 $ 75,272 ======== ========
The senior notes are due in October 2003 with interest payable semi-annually at 9 3/4%. The senior notes are unsecured and are effectively subordinated to secured debt of Veritas DGC Inc. with respect to the assets securing such debt and to all debt of its subsidiaries whether secured or unsecured. The indenture relating to the senior notes contains certain covenants which limit Veritas DGC Inc.'s ability to, among other things, incur additional debt, pay dividends and complete mergers, acquisitions and sales of assets. Upon a change in control of Veritas DGC Inc., as defined in the indenture, the holders of the senior notes have the right to require Veritas DGC Inc. to purchase all or a portion of such holder's senior note at a price equal to 101% of the aggregate principal amount. Veritas DGC Inc. has the right to redeem the senior notes, in whole or part, on or after October 15, 2000. Under certain conditions, Veritas DGC Inc. may redeem up to $35.0 million in aggregate principal amount of the senior notes prior to October 15, 1999. 6 9 VERITAS DGC INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE THREE MONTHS ENDED OCTOBER 31, 1998 UNAUDITED Veritas DGC Inc. maintains a revolving credit agreement due July 2001 with commercial lenders that provides advances up to $50.0 million. Advances are limited by an unsecured borrowing base and bear interest, at Veritas DGC Inc.'s election, at LIBOR or prime rate (8% at October 31, 1998) plus a margin based on certain ratios maintained by Veritas DGC Inc. Covenants in the agreement limit, among other things, Veritas DGC Inc.'s right to take certain actions, including creating indebtedness. In addition, the agreement requires Veritas DGC Inc. to maintain certain financial ratios. No advances were outstanding at October 31, 1998 and July 31, 1998 under the credit agreement. Veritas DGC Inc.'s equipment purchase obligations represent installment loans and capitalized lease obligations primarily related to computer and seismic equipment. 4. OTHER ACCRUED LIABILITIES Other accrued liabilities include the following:
October 31, July 31, 1998 1998 ----------- -------- (Dollars in thousands) Accrued payroll and benefits $ 7,985 $ 12,216 Deferred revenues 12,590 19,196
5. EMPLOYEE BENEFITS In December 1998, Veritas DGC Inc. amended and restated its employee nonqualified stock option plan to increase the number of authorized common shares which may be issued under the plan to 3,404,550 shares. In December 1998, Veritas DGC Inc. amended and restated its non-employee director stock option plan. Options to purchase 5,000 shares will be granted every year and will vest 25% on the grant date and 25% on each anniversary over the following three years. All other major provisions remain the same. 6. OTHER COSTS AND EXPENSES Other costs and expenses consist of the following:
Three Months Ended October 31, ------------------------------ 1998 1997 -------- -------- (Dollars in thousands) Net foreign currency exchange losses $ 172 $ 595 Net loss on disposition of property and equipment 298 194 Interest income (277) (1,074) Other 34 (23) -------- ------- Total $ 227 $ (308) ======== =======
7 10 VERITAS DGC INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE THREE MONTHS ENDED OCTOBER 31, 1998 UNAUDITED 7. EARNINGS PER COMMON SHARE All per share amounts have been restated in accordance with SFAS No. 128, "Earnings per Share," which became effective for interim and annual reporting periods ending after December 15, 1997. This statement requires the computation of 1) earnings per share based upon weighted average common shares outstanding and 2) earnings per share - assuming dilution based upon weighted average common shares outstanding and additional common shares that would have been outstanding if dilutive potential common shares had been issued utilizing the treasury stock method and average market prices. Earnings per common share and earnings per common share - assuming dilution are computed as follows:
Three Months Ended October 31, ------------------------------ 1998 1997 -------- -------- (In thousands, except per share amounts) Net income $13,622 $21,319 ======= ======= Weighted average common shares 22,697 22,424 ======= ======= Earnings per common share $ .60 $ .95 ======= ======= Weighted average common shares - assuming dilution: Weighted average common shares 22,697 22,424 Shares issuable from assumed conversion of: Options 176 334 Warrants 37 ------- ------- Total 22,873 22,795 ======= ======= Earnings per common share - assuming dilution $ .60 $ .94 ======= =======
Exchangeable stock, which was issued in a business combination and may be exchanged for Veritas DGC Inc. common stock, is included in both computations. Options to purchase 139,931 common shares at exercise prices ranging from $20 1/4 to $56 1/2 expiring through August 2008 have been excluded from the computation assuming dilution for the three months ended October 31, 1998, because the options' exercise prices exceeded the average market price of the underlying common shares. There were no anti-dilutive options for the three months ended October 31, 1997. 8. COMPREHENSIVE INCOME Effective August 1, 1998, Veritas DGC Inc. implemented SFAS No. 130, "Reporting Comprehensive Income." This statement requires disclosure of comprehensive income (changes in equity from non-owner sources), net of the related tax effect. Veritas DGC Inc. will report comprehensive income on the face of the consolidated statement of changes in stockholders' equity and the accumulated balance of other comprehensive income (comprehensive income excluding net income) as a separate component in the stockholders' equity section of the consolidated balance sheet at year end. Classifications included in the accumulated balance will be disclosed on the consolidated statement of changes in stockholders' equity. Veritas DGC Inc.'s sources of comprehensive income include net income and cumulative foreign currency translation adjustments. The following sets forth Veritas DGC Inc.'s comprehensive income for the periods presented:
Three Months Ended October 31, ------------------------------ 1998 1997 -------- -------- (Dollars in thousands) Net income $13,622 $21,319 Foreign currency translation adjustments (355) (289) ------- ------- Comprehensive income $13,267 $21,030 ======= =======
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. Veritas DGC Inc.'s actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors which are more fully described in other reports filed with the Securities and Exchange Commission and which include changes in market conditions in the oil and gas industry as well as declines in prices of oil and gas. RESULTS OF OPERATIONS THREE MONTHS ENDED OCTOBER 31, 1998 COMPARED WITH THREE MONTHS ENDED OCTOBER 31, 1997 Revenues. Revenues increased 3% from $142.2 million to $146.8 million during the current quarter. With the exception of data library sales, revenues increased for all service groups compared to the corresponding period last year. Land and transition zone acquisition revenues increased 27% from $59.3 million to $75.3 million as a result of increased utilization of an expanded base of crews and channels. Major areas of activity were the U.S. highlands and transition zone as well as Argentina and Bolivia in South America. Operations in the Middle East market remained steady under a long-term contract in Oman, and Veritas DGC Inc. completed a seismic acquisition project in Madagascar. Marine acquisition revenues increased 37% from $18.3 million to $25.0 million despite weather disruptions in the Gulf of Mexico and North Atlantic Margin. The increase was primarily due to capacity added by the Veritas Viking, Veritas DGC Inc.'s new 3-D vessel which commenced operations in July 1998. Data processing revenues increased 9% from $22.3 million to $24.4 million as a result of increases in capacity, utilization and improved productivity. Veritas DGC Inc. has substantially upgraded its processing centers, including the addition of a third NEC supercomputer in Singapore, to meet the demand for complex and computer intensive processing products such as pre-stack time and depth migration. Multi-client data library sales decreased 48%, from $42.3 million to $22.1 million primarily due to the higher level of data sales in the first quarter of fiscal year 1998 related to a new data sales program in the Gulf of Mexico. Over the past two years, as oil and gas companies have moved toward multi-client surveys to reduce finding costs, Veritas DGC Inc. has significantly increased its data library. The majority of its library is located in the active deepwater Gulf of Mexico while other library markets include North Atlantic Margin, Asia Pacific, offshore Eastern Canada, and onshore U.S. Operating Expenses. Costs of services increased 11% from $93.3 million to $103.5 million and increased as a percent of revenues from 66% to 71%. The reduction in operating margins is mainly attributable to fewer high margin data sales and a more competitive environment, particularly in the onshore markets, as a result of lower commodity prices. These reductions were partially offset by increases in marine acquisition and data processing operating margins which increased due to improvements in productivity and efficiency. Depreciation and Amortization. Depreciation and amortization expense increased 35% from $12.5 million to $16.9 million due to the large increase in capital expenditures over the past two years. Interest Expense. The $60.0 million senior notes discussed below were not added until the end of this quarter, therefore, interest expense was consistent with the previous year. Other (Income) Expense. Other (income) expense decreased from income of $308,000 to an expense of $227,000 primarily due to a reduction in interest income earned as a result of lower average cash balances. Income Taxes. Provision for income taxes decreased from $9.6 million to $5.9 million as a result of Veritas DGC Inc.'s lower taxable income for the quarter. Equity in (earnings) loss. Equity in loss is related to the Indonesian joint venture. A decrease in marine acquisition surveys accounts for the decreased profitability in the current quarter. 9 12 LIQUIDITY AND CAPITAL RESOURCES SOURCES AND USES Veritas DGC Inc.'s internal sources of liquidity are cash, cash equivalents and cash flow from operations. External sources include public and private financing, the unutilized portion of a revolving credit facility, equipment financing and trade credit. In October 1996, Veritas DGC Inc. completed a $75.0 million public offering of senior notes ("Series A Notes"), and in October 1998, Veritas DGC Inc. completed a $60.0 million private placement of senior notes ("Series B Notes") due in October 2003. The Series B Notes have not been registered under the Securities Act of 1933, as amended and are subject to certain transfer restrictions. The Series B Notes will be registered under the Securities Act of 1933, as amended and exchanged for notes with terms identical in all material respects to those of the Series A Notes. The net proceeds from the Series B Notes will be used for general corporate purposes, including capital expenditures and additions to Veritas DGC Inc.'s data library as discussed below. The indentures relating to the senior notes contain certain covenants, including covenants that limit Veritas DGC Inc.'s ability to, among other things, incur additional debt, pay dividends, and complete mergers, acquisitions and sales of assets. Veritas DGC Inc. is in compliance with all covenants of the indentures as of October 31, 1998. Upon a change in control of Veritas DGC Inc. as defined in the indentures, holders of the senior notes have the right to require Veritas DGC Inc. to purchase all or a portion of such holder's senior note at a price equal to 101% of the aggregate principal amount. Interest is payable semi-annually. In July 1998, Veritas DGC Inc. obtained a new revolving credit facility due July 2001 from commercial lenders that provides advances up to $50.0 million. Advances are limited by an unsecured borrowing base and bear interest, at Veritas DGC Inc.'s election, at LIBOR or prime rate plus a margin based on certain ratios maintained by Veritas DGC Inc. The available borrowing base is approximately $46.0 million as of October 31, 1998. Covenants in the agreement limit, among other things, Veritas DGC Inc.'s right to take certain actions, including creating indebtedness. In addition, the agreement requires Veritas DGC Inc. to maintain certain financial ratios. Veritas DGC Inc. is in compliance with all covenants of the agreement, and there were no outstanding advances as of October 31, 1998. Veritas DGC Inc. requires significant amounts of working capital to support its operations and to fund capital spending and research and development programs. Veritas DGC Inc.'s foreign operations require greater amounts of working capital than similar domestic activities, as the average collection period for foreign receivables is generally longer than for comparable domestic accounts. In addition, receivables denominated in foreign currencies are subject to fluctuations in foreign money markets. Approximately 47% of revenues for the quarter ended October 31, 1998 were attributable to Veritas DGC Inc.'s foreign operations. Veritas DGC Inc. has also increased its participation in multi-client data surveys and has significantly expanded its multi-client data library. Because of the lead-time between survey execution and sale, partially funded multi-client data surveys generally require greater amounts of working capital than contract work. Depending on the timing of future sales of the data and the collection of the proceeds from such sales, Veritas DGC Inc.'s liquidity will be affected; however, Veritas DGC Inc. believes that these non-exclusive surveys have good long-term sales, earnings and cash flow potential. Veritas DGC Inc.'s capital budget for fiscal 1999 is $95.2 million which includes expenditures of $30.0 million to maintain or replace Veritas DGC Inc.'s current operating equipment and $65.2 million to expand capacity, including the outfitting of a new marine seismic vessel which will not be placed in service until May 1999. Research and development costs are estimated at $8.2 million in fiscal 1999. Veritas DGC Inc. will require substantial cash flow to continue operations on a satisfactory basis, complete its capital expenditure and research and development programs and meet its principal and interest obligations with respect to outstanding indebtedness. Veritas DGC Inc. anticipates that cash and cash equivalents, cash flow from operations, the unutilized portion of the revolving credit facility and borrowings permitted under the indentures and revolving credit facility will provide sufficient liquidity to fund these requirements through fiscal 1999. However, Veritas DGC Inc.'s ability to meet its obligations depends on its future performance, which, in turn, is subject to general economic conditions, business and 10 13 other factors beyond Veritas DGC Inc.'s control. For example, due to the continuing low price levels of crude oil, exploration and production expenditures may experience some contraction during 1999, which may affect exploration budgets allocated to seismic expenditures. Current market conditions indicate a declining trend in land acquisition and a reduction in funding levels for multi-client surveys. If Veritas DGC Inc. is unable to generate sufficient cash flow from operations or otherwise to comply with the terms of the revolving credit facility or the indentures, it may be required to refinance all or a portion of its existing debt or obtain additional financing. Veritas DGC Inc. cannot assure that it would be able to obtain such refinancing or financing, or that any refinancing or financing would result in a level of net proceeds required. OTHER Veritas DGC Inc. has prepared a formal plan to address Year 2000 issues as they relate to Veritas DGC Inc.'s business and its operations. In accordance with that plan, Veritas DGC Inc. has evaluated all internal hardware and software used in its operations, including those used to support Veritas DGC Inc.'s activities, such as seismic data acquisition and processing equipment and accounting and payroll systems. In the ordinary course of business, Veritas DGC Inc. has replaced a significant amount of its hardware and software with Year 2000 compliant systems. A replacement schedule has been prepared for its remaining non-compliant systems and an ongoing monitoring program and contingency procedures in the event of unanticipated non-compliance problems have been established. Veritas DGC Inc. has also identified all external relationships, mainly suppliers and customers, and mailed each entity an internally prepared questionnaire regarding Year 2000 issues. Approximately 95% of the questionnaires have been returned and indicate a state of readiness. The remaining 5% do not pertain to critical systems. As of October 31, 1998, Veritas DGC Inc. estimates that approximately 80% of its plan has been implemented and that it will complete its plan, including remedial actions, by June 30, 1999. Veritas DGC Inc. is not aware of any material contingencies or costs that will be incurred. Since Veritas DGC Inc.'s quasi-reorganization with respect to Digicon Inc. on July 31, 1991, the tax benefits of net operating loss carryforwards existing at the date of the quasi-reorganization have been recognized through a direct addition to paid-in capital, when realization is more likely than not. Additionally, the utilization of the net operating loss carryforwards existing at the date of the quasi-reorganization is subject to certain limitations. During the quarter ended October 31, 1998, Veritas DGC Inc. recognized $2.9 million related to these benefits, due to increased profitability and anticipated profitability of Veritas DGC Inc. Veritas DGC Inc. maintains operations in Europe, which are predominately conducted from its U.K. offices. Although the U.K. has not currently elected to convert to the new "euro" currency, Veritas DGC Inc. does have transactions with companies in countries that will adopt the new currency. Veritas DGC Inc. has made a preliminary assessment and does not anticipate any material effect to the consolidated financial statements as a result of the new currency. See Note 1 of Notes to Consolidated Financial Statements regarding new accounting pronouncements not yet adopted. 11 14 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) EXHIBITS FILED WITH THIS REPORT: Exhibit ------- 2) Combination Agreement between Digicon Inc. and Veritas Energy Services Inc. dated as of May 10, 1996. (Refer to Exhibit 2.1 to Digicon Inc.'s Current Report on Form 8-K dated May 10, 1996.) 3-A) Restated Certificate of Incorporation with amendments of Digicon Inc. dated August 30, 1996. (Refer to Exhibit 3.1 to Veritas DGC Inc.'s Current Report on Form 8-K dated September 16, 1996.) 3-B) Certificate of Ownership and Merger of New Digicon Inc. and Digicon Inc. (Refer to Exhibit 3-B to Digicon Inc.'s Registration Statement No. 33-43873 dated November 12, 1991.) 3-C) By-laws of New Digicon Inc. dated June 24, 1991. (Refer to Exhibit 3-C to Digicon Inc.'s Registration Statement No. 33-43873 dated November 12, 1991.) 4-A) Specimen certificate for Senior Notes. (Refer to Section 2.2 of Exhibit 4-B to Veritas DGC Inc.'s Registration Statement No. 333-12481 dated September 20, 1996.) 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. (Refer to Exhibit 4-B to Veritas DGC Inc.'s Registration Statement No. 333-12481 dated September 20, 1996.) 4-C) Specimen Veritas DGC Inc. Common Stock certificate. (Refer to Exhibit 4-C to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1996.) 4-D) Rights Agreement between Veritas DGC Inc. and ChaseMellon Shareholder Services, L.L.C. dated May 15, 1997. (Refer to Exhibit 4.1 to Veritas DGC Inc.'s Current Report on Form 8-K filed May 27, 1997.) 4-E) Form S-8 Restricted Stock Grant Agreement. (Refer to Exhibit 4.8 to Veritas DGC Inc.'s Registration Statement No. 333-48953 dated March 31, 1998.) 4-F) Restricted Stock Plan. (Refer to Exhibit 4.1 to Veritas DGC Inc.'s Registration Statement No. 333-57603 dated June 24, 1998.) *4-G) Key Contributor Incentive Plan as Amended and Restated dated December 9, 1998. 4-H) Purchase Agreement relating to the 9 3/4% Senior Notes due 2003, Series B of Veritas DGC Inc. between Veritas DGC Inc. and Warburg Dillon Read L.L.C. dated October 23, 1998. (Refer to Exhibit 4.1 to Veritas DGC Inc.'s Current Report on Form 8-K November 12, 1998.) 4-I) Registration Rights Agreement relating to the 9 3/4% Senior Notes due 2003, Series B of Veritas DGC Inc. between Veritas DGC Inc. and Warburg Dillon Read L.L.C. dated as of October 28, 1998. (Refer to Exhibit 4.2 to Veritas DGC Inc.'s Current Report on Form 8-K dated November 12, 1998.) 4-J) Indenture 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. (Refer to Exhibit 4.3 to Veritas DGC Inc.'s Current Report on Form 8-K dated November 12, 1998.) 9) Voting and Exchange Trust Agreement among Digicon Inc., Veritas Energy Services Inc. and the R-M Trust Company dated August 30, 1996. (Refer to Exhibit 9.1 to Veritas DGC Inc.'s Current Report on Form 8-K dated September 16, 1996.) 10-A) Support Agreement between Digicon Inc. and Veritas Energy Services Inc. dated August 30, 1996. (Refer to Exhibit 10.1 to Veritas DGC Inc.'s Current Report on Form 8-K dated August 30, 1996.) *10-B) 1992 Non-Employee Director Stock Option Plan as Amended and Restated dated December 9, 1998. 12 15 *10-C) Third Amended and Restated 1992 Employee Nonqualified Stock Option Plan as amended and restated dated December 9, 1998. 10-D) 1997 Employee Stock Purchase Plan. (Refer to Exhibit 4.1 to Veritas DGC Inc.'s Registration Statement No. 333-38377 dated October 21, 1997.) 10-E) Restricted Stock Agreement between Veritas DGC Inc. and Anthony Tripodo dated April 1, 1997. (Refer to Exhibit 10-O to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1997.) 10-F) Employment Agreement executed by David B. Robson. (Refer to Exhibit 10-L to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1997.) 10-G) Employment Agreement executed by Stephen J. Ludlow. (Refer to Exhibit 10-B to Veritas DGC Inc.'s Form 10-Q for the quarter ended April 30, 1997.) 10-H) Employment Agreement executed by Lawrence C. Fichtner. (Refer to Exhibit 10-M to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1997.) 10-I) 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.) 10-J) Employment Agreement executed by Rene M.J. VandenBrand. (Refer to Exhibit 10-N to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1997.) 10-K) Credit Agreement among Veritas DGC Inc., as borrower, and Bank One, Texas, N.A., as issuing bank, as a bank and as agent for the banks, and the banks named therein dated July 27, 1998. (Refer to Exhibit 10-K to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1998.) *10-L) First Amendment to Credit Agreement among Veritas DGC Inc., as borrower, and Bank One, Texas, N.A., as issuing bank, as a bank and as agent for the banks, and the banks named therein dated October 23, 1998. *10-M) Second Amendment to Credit Agreement among Veritas DGC Inc., as borrower, and Bank One, Texas, N.A., as issuing bank, as a bank and as agent for the banks, and the banks named therein dated November 20, 1998. *27-A) Financial Data Schedule for the three months ended October 31, 1998. (Filed electronically herewith.) *27-B) Financial Data Schedule for the three months ended October 31, 1997 as restated. (Filed electronically herewith.) * Filed herewith b) REPORTS ON FORM 8-K No Form 8-K reports were filed during the quarter ended October 31, 1998. 13 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned; thereunto duly authorized, on the 15th day of December, 1998. 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 and Accounting Officer and Treasurer 14 17 INDEX TO EXHIBITS
Exhibit Description ------- ----------- 2) Combination Agreement between Digicon Inc. and Veritas Energy Services Inc. dated as of May 10, 1996. (Refer to Exhibit 2.1 to Digicon Inc.'s Current Report on Form 8-K dated May 10, 1996.) 3-A) Restated Certificate of Incorporation with amendments of Digicon Inc. dated August 30, 1996. (Refer to Exhibit 3.1 to Veritas DGC Inc.'s Current Report on Form 8-K dated September 16, 1996.) 3-B) Certificate of Ownership and Merger of New Digicon Inc. and Digicon Inc. (Refer to Exhibit 3-B to Digicon Inc.'s Registration Statement No. 33-43873 dated November 12, 1991.) 3-C) By-laws of New Digicon Inc. dated June 24, 1991. (Refer to Exhibit 3-C to Digicon Inc.'s Registration Statement No. 33-43873 dated November 12, 1991.) 4-A) Specimen certificate for Senior Notes. (Refer to Section 2.2 of Exhibit 4-B to Veritas DGC Inc.'s Registration Statement No. 333-12481 dated September 20, 1996.) 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. (Refer to Exhibit 4-B to Veritas DGC Inc.'s Registration Statement No. 333-12481 dated September 20, 1996.) 4-C) Specimen Veritas DGC Inc. Common Stock certificate. (Refer to Exhibit 4-C to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1996.) 4-D) Rights Agreement between Veritas DGC Inc. and ChaseMellon Shareholder Services, L.L.C. dated May 15, 1997. (Refer to Exhibit 4.1 to Veritas DGC Inc.'s Current Report on Form 8-K filed May 27, 1997.) 4-E) Form S-8 Restricted Stock Grant Agreement. (Refer to Exhibit 4.8 to Veritas DGC Inc.'s Registration Statement No. 333-48953 dated March 31, 1998.) 4-F) Restricted Stock Plan. (Refer to Exhibit 4.1 to Veritas DGC Inc.'s Registration Statement No. 333-57603 dated June 24, 1998.) *4-G) Key Contributor Incentive Plan as Amended and Restated dated December 9, 1998. 4-H) Purchase Agreement relating to the 9 3/4% Senior Notes due 2003, Series B of Veritas DGC Inc. between Veritas DGC Inc. and Warburg Dillon Read L.L.C. dated October 23, 1998. (Refer to Exhibit 4.1 to Veritas DGC Inc.'s Current Report on Form 8-K November 12, 1998.) 4-I) Registration Rights Agreement relating to the 9 3/4% Senior Notes due 2003, Series B of Veritas DGC Inc. between Veritas DGC Inc. and Warburg Dillon Read L.L.C. dated as of October 28, 1998. (Refer to Exhibit 4.2 to Veritas DGC Inc.'s Current Report on Form 8-K dated November 12, 1998.) 4-J) Indenture 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. (Refer to Exhibit 4.3 to Veritas DGC Inc.'s Current Report on Form 8-K dated November 12, 1998.) 9) Voting and Exchange Trust Agreement among Digicon Inc., Veritas Energy Services Inc. and the R-M Trust Company dated August 30, 1996. (Refer to Exhibit 9.1 to Veritas DGC Inc.'s Current Report on Form 8-K dated September 16, 1996.) 10-A) Support Agreement between Digicon Inc. and Veritas Energy Services Inc. dated August 30, 1996. (Refer to Exhibit 10.1 to Veritas DGC Inc.'s Current Report on Form 8-K dated August 30, 1996.) *10-B) 1992 Non-Employee Director Stock Option Plan as Amended and Restated dated December 9, 1998.
18
Exhibit Description ------- ----------- *10-C) Third Amended and Restated 1992 Employee Nonqualified Stock Option Plan as amended and restated dated December 9, 1998. 10-D) 1997 Employee Stock Purchase Plan. (Refer to Exhibit 4.1 to Veritas DGC Inc.'s Registration Statement No. 333-38377 dated October 21, 1997.) 10-E) Restricted Stock Agreement between Veritas DGC Inc. and Anthony Tripodo dated April 1, 1997. (Refer to Exhibit 10-O to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1997.) 10-F) Employment Agreement executed by David B. Robson. (Refer to Exhibit 10-L to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1997.) 10-G) Employment Agreement executed by Stephen J. Ludlow. (Refer to Exhibit 10-B to Veritas DGC Inc.'s Form 10-Q for the quarter ended April 30, 1997.) 10-H) Employment Agreement executed by Lawrence C. Fichtner. (Refer to Exhibit 10-M to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1997.) 10-I) 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.) 10-J) Employment Agreement executed by Rene M.J. VandenBrand. (Refer to Exhibit 10-N to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1997.) 10-K) Credit Agreement among Veritas DGC Inc., as borrower, and Bank One, Texas, N.A., as issuing bank, as a bank and as agent for the banks, and the banks named therein dated July 27, 1998. (Refer to Exhibit 10-K to Veritas DGC Inc.'s Form 10-K for the year ended July 31, 1998.) *10-L) First Amendment to Credit Agreement among Veritas DGC Inc., as borrower, and Bank One, Texas, N.A., as issuing bank, as a bank and as agent for the banks, and the banks named therein dated October 23, 1998. *10-M) Second Amendment to Credit Agreement among Veritas DGC Inc., as borrower, and Bank One, Texas, N.A., as issuing bank, as a bank and as agent for the banks, and the banks named therein dated November 20, 1998. *27-A) Financial Data Schedule for the three months ended October 31, 1998. (Filed electronically herewith.) *27-B) Financial Data Schedule for the three months ended October 31, 1997 as restated. (Filed electronically herewith.)
* Filed herewith EX-4.G 2 KEY CONTRIBUTOR INCENTIVE PLAN - DATED 12/9/1998 1 EXHIBIT 4-G VERITAS DGC INC. KEY CONTRIBUTOR INCENTIVE PLAN (AS AMENDED AND RESTATED DECEMBER 9, 1998) A. PLAN OBJECTIVES The overall objective of the Key Contributor Incentive Plan (herein after referred to as the "Plan") is to provide short-term rewards paid as incentives to designated Key Contributors. Key Contributors are those individuals who have the responsibility of leading a diverse or complex team or function. The work produced from that team or function significantly impacts the operations of the Company up to and including bottom line results. Within the overall objectives, the following are the specific goals of the Plan: o Reward Key Contributors for achieving Veritas DGC Inc.'s business strategies in the area of net income before taxes (NIBT) o Focus participants on key business goals that they can directly impact o Create payout opportunities that balance the appropriate return to the Company with reward to the participants B. ELIGIBILITY Eligibility for participation in the Plan is recommended by managers and approved by the respective division executive. Plan participants must meet the following eligibility criteria: o A minimum annual base salary of $50,000 o Job responsibilities that have a major impact on the accomplishment of Veritas DGC Inc.'s business strategies o Regular full-time employment with Veritas DGC Inc. Variations from the guidelines may be made for individuals as recommended by Corporate or Division executives and approved by the CEO. C. PLAN YEAR The Plan year for the Key Contributor Incentive Plan coincides with the Veritas DGC Inc. fiscal year: August 1 through July 31. 2 D. PERFORMANCE MEASURES AND PAYOUT TARGETS PERFORMANCE MEASURES AND WEIGHTS Seventy-five percent (75%) of the payment will be based upon attainment of net income before taxes (hereinafter referred to as "NIBT"). NIBT is based on the profit plan for VDGC Consolidated and for each division as approved by Veritas DGC Inc.'s Board of Directors. Twenty-five percent (25%) of the award will be based on equally weighted strategic individual objectives as determined by the participant's immediate supervisor. These individual objectives are to be in addition to the participant's day-to-day responsibilities and shall present a challenge to the participant. The following incentive weights apply for both Corporate and Division participants:
----------------------------------------------------------------- VDGC CONSOLIDATED DIVISION INDIVIDUAL NIBT NIBT OBJECTIVES ------------ -------- ---------- Corporate 75% 25% Division 25% 50% 25% -----------------------------------------------------------------
The impact level of the participant's position determines incentive target payout percentage as follows:
----------------------------------------------------------------- IMPACT TARGET BASE SALARY (IN THOUSANDS) LEVEL PAYOUT* -------------------------- ------- ------- CEO - 50% $150+ (Corporate leadership and Division A 40% Sr. Executive Mgt. Only) $100+ B 30% $75-$99 C 20% $50-$74 D 10% -----------------------------------------------------------------
*Target payout is the percentage of base salary that the Plan intends to pay to the participant assuming that the profit and strategic individual objectives are met for the corporation and his/her division. E. AWARD CALCULATION The actual incentive award calculation will be comprised of the following components: Page 2 3 o FINANCIAL RESULTS: Incentive payouts will increase or decrease from target as dictated by NIBT results without minimum or cap. o INDIVIDUAL OBJECTIVES: This portion of the incentive award will be increased or decreased from target as determined by financial results. NOTE: If the annual NIBT plan as submitted to and approved by the Board (either Veritas DGC Inc. or a division plan) generates an NIBT plan of $0 or less, the following then applies: a) If planned negative NIBT is attained, a maximum of target incentive will be earned. EMPLOYMENT STATUS Participants must be actively employed on the dates that the award payments are made; otherwise the award is forfeited. In addition, if the participant leaves before the award payment date, all moneys previously paid will be retained by the participant; however, no additional bonuses will be calculated or paid. The CEO must approve any exceptions to this rule. F. METHOD OF PAYMENT Incentive awards will be paid in cash unless otherwise recommended by the Compensation Committee of the Board of Directors. STOCK IN LIEU OF INCENTIVE AWARD Prior to payment of the year-end incentive, the Compensation Committee may offer to some or all participants in the Plan the opportunity to receive all or a portion of their year-end incentive award in shares of Veritas DGC common stock. Participants who elect to receive all or a specified portion of the year-end incentive award in Common Stock rather than cash will receive their shares on a date following the year-end incentive payment. Numbers of shares will be calculated as follows: ------------------------------------------------------------------------- Portion of incentive used to purchase stock ($) = # of shares ---------------------------------------------------------- Fair market value per share ($) ------------------------------------------------------------------------- For the purposes of this Plan, "fair market value" is the closing price for the Common Stock on the New York Stock Exchange on the date of year-end incentive payment. Only treasury shares will be used for the payment of annual incentive distributions in Common Stock. If the number of shares of treasury shares necessary to fund the requests of electing Participants in any year exceeds the number of shares then available, all stock awards will be pro-rated to the extent necessary, and the balance of year end incentive distributions will be made in cash. Page 3 4 G. AWARD FREQUENCY Incentive awards will be made semi-annually. The mid-year award will be based solely on the achievement of the applicable NIBT plan. The award at the end of the fiscal year will be based on both achievement of applicable NIBT plan and the attainment of individual objectives. H. PLAN ADMINISTRATION The Plan is administered by the CEO and Corporate Vice President of Human Resources in accordance with the Key Contributor Incentive Plan Administration Document. Any exceptions to the Plan must be approved by the Board of Directors and/or the Compensation Committee of the Board of Directors of Veritas DGC Inc. At any time, the Board of Directors (and/or the Compensation Committee of the Board of Directors) may, in its discretion, adjust, amend or terminate the plan. This Plan is a voluntary incentive program and continuance of the Plan is not assumed as an obligation of Veritas DGC Inc. Veritas DGC Inc. reserves the right to terminate the Plan or to amend the Plan at any time and in any respect. Participation in this Plan shall not impose upon the Company any obligation whatsoever to employ or to continue to employ any Plan participant, and the right of the Company to terminate the employment of any officer or other employee shall not be diminished or affected by reason of the fact that the employee is a Plan participant. Page 4 EX-10.B 3 1992 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN 1 EXHIBIT 10-B VERITAS DGC INC. (FORMERLY DIGICON INC.) 1992 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN (AS AMENDED AND RESTATED DECEMBER 9, 1998) 1. Purpose of the Plan. The purpose of the Veritas DGC Inc. 1992 Non-Employee Director Stock Option Plan ("Plan") is to attract the services of experienced and knowledgeable non-employee directors and provide an opportunity for ownership by such non-employee directors of the common stock, $.01 par value ("Common Stock"), of Veritas DGC Inc., a Delaware corporation ("Company"). 2. Administration of the Plan. The Plan shall be administered by the Board of Directors of the Company or any committee duly appointed thereby ("Board"). Subject to the terms of the Plan, the Board shall have the power to interpret the provisions and supervise the administration of the Plan. All decisions made by the Board pursuant to the provisions of the Plan shall be made by a majority of its members at a duly held regular or special meeting or by written consent in lieu of any such meeting. 3. Stock Reserved for the Plan. The maximum number of shares of Common Stock which may at any time be subject to outstanding options issued under the Plan is 600,000. The Company shall reserve for issuance pursuant to the Plan such number of shares of Common Stock as may from time to time be subject to options granted pursuant to the Plan. Should any option expire or be canceled prior to its exercise in full, the shares theretofore subject to such option may again be made subject to an option under the Plan. 4. Grant of Options. Each director of the Company who is not otherwise an employee of the Company or any of the Company's subsidiaries (as defined in Section 425(f) of the Internal Revenue Code of 1986, as amended) (hereinafter referred to as an "Eligible Director") and who is a member of the Board after December 31, 1996 (the "Effective Date") shall be granted on each Date of Grant (as defined below) (provided that on such Date of Grant such Eligible Director is a member of the Board) one option to acquire 5,000 shares of Common Stock (the "Option"). The exercise price per share of Common Stock of the Option granted to an Eligible Director shall be the Fair Market Value of the Common Stock on the Date of Grant. Special Provision for Newly-Elected Directors. In the case of a director who is initially elected or appointed to the Board between Dates of Grant, the Board may in its discretion grant an option to such newly elected or appointed director for a number of shares of Common Stock not to exceed 5,000; provided that any such option shall have an exercise price of at least equal to the fair market value of the Common Stock on its date of grant. For the purposes of this paragraph 4, the following terms shall have the following meanings: Page 1 2 (x) "Date of Grant" means March 11, 1997, and thereafter the date of the first meeting of the Board in each year after the Effective Date on which an Eligible Director is a member of the Board. (y) "Fair Market Value" of a share of Common Stock on any date shall be (i) the closing sales price on the Date of Grant of a share of Common Stock as reported on the principal securities exchange on which shares of the Common Stock have been listed or admitted to trading or (ii) if not so reported, the average of the average closing bid and asked prices for a share of Common Stock on the Date of Grant as quoted on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or (iii) if not quoted on the NASDAQ, the average of the average closing bid and asked prices for a share of Common Stock on the Date of Grant as quoted by the National Association of Securities Dealers' OTC Bulletin Board System. If the price of a share of Common Stock shall not be so reported, the Fair Market Value of a share of Common Stock shall be determined by the Board in its absolute discretion. 5. Option Agreement. Each Option granted under the Plan shall be evidenced by an agreement, in a form approved by the Board, which shall be subject to the terms and conditions of the Plan. Any agreement may contain such other terms, provisions and conditions as may be determined by the Board and that are not inconsistent with the Plan. 6. Term of Options. Each Option granted will be exercisable as to 25% of the shares of Common Stock covered by such Option at any time after the Date of Grant and as to an additional 25% on each anniversary thereafter until the third anniversary of the Date of Grant, following which the Option will be exercisable in full; provided, however, that no Option shall be exercisable after the expiration of ten years from the Date of Grant; and, provided further, that each Option shall be subject to earlier termination, expiration or cancellation as provided in the Plan. 7. Procedure for Exercise. Options shall be exercised by written notice to the Company setting forth the number of shares of Common Stock with respect to which the Option is to be exercised and specifying the address to which the certificates for such shares are to be mailed. Such notice shall be accompanied by cash or certified check, bank draft, or postal or express money order payable to the order of the Company in an amount equal to the product obtained by multiplying the Option exercise price times the number of shares of the Common Stock with respect to which the Option is then being exercised. As promptly as practicable after receipt of such written notification and payment, the Company shall deliver to the optionee a certificate or certificates for the number of shares with respect to which such Option has been so exercised, issued in the optionee's name; provided, however, that such delivery shall be deemed effected for all purposes when a stock transfer agent of the Company shall have Page 2 3 deposited such certificates in the United States mail, addressed to the optionee, at the address specified pursuant to this paragraph 7. 8. Assignability. An Option shall not be assignable or otherwise transferable except by will, by the laws of descent and distribution or pursuant to a qualified domestic relations order ("QDRO") as defined by the Internal Revenue Code of 1986, as amended, and the rules and regulations in effect from time to time thereunder and Title I of the Employee Retirement Income Security Act, as amended, and the rules and regulations in effect from time to time thereunder. During an optionee's lifetime an Option shall be exercisable only by the optionee. 9. Effect of Termination. i. In the event of the death of an optionee, the Options granted to him may be exercised (to the extent he would have been entitled to do so at the date of his death) at any time and from time to time by the executor or administrator of his estate or by the person or persons to whom his rights under the Options shall pass by will or the laws of descent and distribution, but in no event may the Option be exercised after the earlier of (i) one year from the optionee's death or (ii) its expiration. ii. If an optionee ceases to be a director of the Company, the Options granted to him may be exercised (to the extent he would have been entitled to do so at the date that he ceases to be a director) at any time and from time to time thereafter prior to the earlier of (i) one year from the optionee's cessation of service as a director or (ii) expiration of the Option. iii. No transfer of an Option by an optionee by will or by the laws of descent and distribution or pursuant to a QDRO shall be effective to bind the Company unless the Company shall have been furnished with written notice of the same and an authenticated copy of the will, the QDRO and such other evidence as the Board may deem necessary to establish the validity of the transfer and the acceptance of the transferee or transferees of the terms and conditions of such Option and the terms and provisions of the Plan. 10. No Rights as Stockholder. No optionee shall have any rights as a stockholder with respect to shares covered by an Option until the date of issuance of a stock certificate or certificates for such shares of Common Stock. 11. Extraordinary Corporate Transactions. New options may be substituted for the Options granted under the Plan, or the Company's duties as to Options outstanding under the Plan may be assumed, by a corporation other than the Company, or by a parent or subsidiary of the Company, or such corporation, in connection with any merger, consolidation, acquisition, separation, reorganization, liquidation or like occurrence in which the Company is involved. Notwithstanding the foregoing or the provisions of paragraph 15 hereof, in the event such corporation, or parent or Page 3 4 subsidiary of the Company or such corporation, does not substitute new Options for, and substantially equivalent to, the Options granted hereunder, or assume the Options granted hereunder, the Options granted hereunder shall be canceled, immediately prior to the effective date of such event, and, in full consideration of such cancellation, and the optionee to whom the Option was granted shall be paid an amount in cash equal to the excess of (i) the value, as determined by the Board in its absolute discretion, of the property (including cash) received by the holder of a share of Common Stock as a result of such event less (ii) the exercise price of the Option. 12. Change of Control. If, at any time, a person, entity or group (including, in each case, all other persons, entities or groups controlling, controlled by, or under common control with or acting in concert or concurrently with, such person, entity or group) shall hold, purchase or acquire beneficial ownership (including without limitation power to vote) of 50% or more of the then outstanding shares of the Company's Common Stock, then any portion of the Options which have not yet become exercisable shall thereupon become immediately exercisable, and, except with respect to the limitations set forth in paragraph 6 hereof, the limitations set forth above as to the earliest date at which an option may be exercised shall thereupon become null and void and of no further effect whatsoever. 13. Investment Representation. Each option agreement shall contain an agreement that, upon demand by the Board for such a representation, the optionee (or any person acting under paragraph (9(i)) shall deliver to the Company at the time of any exercise of an option a written representation that the shares to be acquired upon such exercise are to be acquired for investment and not for resale or with a view to the distribution thereof or such other representation as the Board deems advisable. Upon such demand, delivery of such representation, prior to the delivery of any shares issued upon exercise of an Option and prior to the expiration of the option period, shall be a condition precedent to the right of the optionee or such other person to purchase any shares. 14. Amendments or Termination. The Board may amend, alter or discontinue the Plan; provided, however, that, without the approval of the Company's stockholders, no amendment shall (i) increase the number of shares subject to the Plan; (ii) modify the requirements as to eligibility for participation in the Plan; or (iii) modify the number or time at which Options may be granted. 15. Changes in Company's Capital Structure. The existence of outstanding Options shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issuance of Common Stock or any bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any reorganization or other corporate act or proceeding, whether of a similar character or otherwise; provided, however, that if the Page 4 5 outstanding shares of Common Stock of the Company shall at any time be changed or exchanged by declaration of a stock dividend, stock split, combination of shares, or recapitalization, the number and kind of shares then subject to any outstanding Option shall be appropriately and equitably adjusted so as to maintain the proportionate number of shares without changing the aggregate option price of any outstanding Option. 16. Compliance with Other Laws and Regulations. The Plan, the grant and exercise of Options thereunder, and the obligation of the Company to sell and deliver shares under such Options, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any governmental or regulatory agency or national securities exchange as may be required. The Company shall not be required to issue or deliver any certificates for shares of Common Stock prior to the completion of any registration or qualification of such shares under any federal or state law, or any ruling or regulation of any government body or national securities exchange which the Company shall, in its sole discretion, determine to be necessary or advisable. 17. Effective Date and Term of the Plan. The Plan was adopted by the Board of Directors on October 29, 1992, and approved by the stockholders of the Company at the annual meeting on December 17, 1992, and amended and restated by the Board on February 17, 1997, and on December 9, 1998. Page 5 EX-10.C 4 3RD AMENDED - EMPLOYEE NONQUALIFIED STOCK OPTION 1 EXHIBIT 10-C VERITAS DGC INC. THIRD AMENDED AND RESTATED 1992 EMPLOYEE NONQUALIFIED STOCK OPTION PLAN (AS AMENDED AND RESTATED DECEMBER 9, 1998) 1. PURPOSE. The purpose of this 1992 Employee Nonqualified Stock Option Plan (the "Plan") of Veritas DGC Inc. (the "Company") (formerly known as Digicon Inc.) is to provide officers and other key employees with a continuing proprietary interest in the Company. The Plan is intended to advance the interests of the Company by enabling it (i) to increase the interest in the Company's welfare of those employees who share the primary responsibility for the management, growth, and protection of the business of the Company, (ii) to furnish an incentive to such persons to continue their services to the Company, (iii) to provide a means through which the Company may continue to induce able management and operating personnel to enter its employ, and (iv) to provide a means through which the Company may effectively compete with other organizations offering similar incentive benefits in obtaining and retaining the services of competent management and operating personnel. 2. STOCK SUBJECT TO THE PLAN. The Company may grant from time to time options to purchase shares of the Company's authorized but unissued common stock, par value $.01 per share, or treasury shares of the common stock. Subject to adjustment as provided in Section 11 hereof, the aggregate number of shares which may be issued or covered by options pursuant to the Plan is 3,404,550 shares, as adjusted for the one for three reverse stock split effective January 17, 1995. Shares of common stock applicable to options which have expired unexercised or terminated for any reason may again be subject to an option or options under the Plan. Page 1 2 3. ADMINISTRATION. (a) The Plan shall be administered by the Compensation Committee of the Company's board of directors (the "Committee"). The board of directors may, from time to time, remove members from or add members to the Committee. Vacancies in the Committee, however caused, shall be filled by the board of directors. No member of the Committee shall be eligible to receive options under the Plan. The Committee shall select one of its members chairman and shall hold meetings at such times and places as it may determine. The Committee may appoint a secretary and, subject to the provisions of the Plan and to policies determined by the board of directors, may make such rules and regulations for the conduct of its business as it shall deem advisable. A majority of the Committee shall constitute a quorum. All action of the Committee shall be taken by a majority of its members. Any action may be taken by a written instrument signed by a majority of the members, and action so taken shall be fully as effective as if it had been taken by a vote of the majority of the members at a meeting duly called and held. (b) Subject to the express terms and conditions of the Plan, the Committee shall have full power to construe or interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to it and to make all other determinations necessary or advisable for its administration. (c) Subject to the provisions of Sections 4 and 5 hereof, the Committee may, from time to time, determine which employees of the Company or subsidiary corporations shall be granted options under the Plan, the number of shares subject to each option, and the time or times at which options shall be granted. (d) The Committee shall report to the board of directors the names of employees granted options, and the number of option shares subject to, and the terms and conditions of, each option; provided, however that no option may be granted to an otherwise eligible employee if, after giving effect to the proposed grant, such employee would then hold options covering more than 500,000 shares of common stock under the Plan. (e) No member of the board of directors or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option. Page 2 3 4. ELIGIBILITY. All full-time salaried employees of the Company and of its majority-owned subsidiaries shall be eligible to participate in the Plan, and options may be granted by the Committee to eligible employees designated by the Committee, either at the Committee's own initiative or upon the recommendation of management. In determining the employees to whom options shall be granted and the number of shares to be covered by each option, the Committee may take into account the nature of the services rendered by the respective employees, their present and potential contributions to the success of the Company, and such other factors as the Committee in its discretion shall deem relevant. The Company shall effect the granting of options under the Plan in accordance with the determination made by the Committee. 5. PRICE OF OPTIONS. The option price per share shall be not less than the lesser of (i) fair market value of the common stock on the date the option is granted or (ii) the average fair market value for the common stock during the thirty trading days ending on the trading day next preceding the date the option is granted. Fair market value on any day shall be deemed to be the last reported sale price of the common stock on the principal stock exchange on which the Company's common stock is traded on that date. If no trading occurred on such date, or, if at the time the common stock shall not be listed for trading, fair market value shall be deemed to be the mean between the quoted bid and asked prices for the common stock on such exchange or in the over-the-counter market, as the case may be, on that date. 6. TERM OF OPTION. No option shall be exercisable after the expiration of ten years from the date the option is granted. 7. EXERCISE OF OPTIONS. (a) General. Except as provided below, each option may be exercised at such times and in such amounts as the Committee in its discretion may provide. (b) Manner of Exercising Options. Shares of common stock purchased under options shall at the time of purchase be paid for in full. To the extent that the right to purchase shares has accrued hereunder, options may be exercised from time to time by written notice to the Company stating the full number of shares with respect to which the option is being exercised, and the time of delivery thereof, which shall be at least 15 days after the giving of such notice unless an earlier date shall have been mutually agreed upon. At such time, the Company shall, without transfer or issue tax to the optionee (or other person entitled to exercise the option) deliver Page 3 4 to the optionee (or to such other person) at the principal office of the Company, or such other place as shall be mutually acceptable, a certificate or certificates for such shares against prior payment of the option price in full on the date of notice of exercise for the number of shares to be delivered by certified or official bank check or the equivalent thereof acceptable to the Company; provided, however, that the time of such issuance and delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any requirements of law, the listing requirements of the New York Stock Exchange or any other exchange on which the common stock may then be listed. If the optionee (or other person entitled to exercise the option) fails to pay for all or any part of the number of shares specified in such notice or to accept delivery of such shares upon tender of delivery thereof, the right to exercise the option with respect to such undelivered shares shall be terminated. Page 4 5 8. NON-ASSIGNABILITY OF OPTION RIGHTS. No option granted under the Plan shall be assignable or transferable otherwise than by will or by the laws of descent and distribution. During the lifetime of an optionee, the option shall be exercisable only by him. 9. TERMINATION OF EMPLOYMENT. Except as otherwise provided in this paragraph, options shall terminate 90 days following the termination of the optionee's employment with the Company for any reason, but shall be exercisable following termination only to the extent that the option had become vested on the termination date. In the event that the optionee retires from the Company (at or after age 65) the optionee shall have the right, subject to the provisions of Section 6, to exercise his option at any time within one year after such termination, to the extent that such option had become vested on the termination date. If, however, the optionee shall die in the employment of the Company, then for the lesser of the maximum period during which such option might have been exercisable or one year after the date of death, his estate, personal representative, or beneficiary shall have the same right to exercise the option of such employee as he would have had if he had survived and remained in the employment of the Company. For purposes of this Section 9, employment by any majority-owned subsidiary corporation of the Company shall be deemed employment by the Company. In the discretion of the Committee, a leave of absence approved in writing by the board of directors of the Company shall not be deemed a termination of employment; however, no option may be exercised during such leave of absence. 10. CHANGE OF CONTROL. If, at any time, a person, entity or group (including, in each case, all other persons, entities or groups controlling, controlled by, or under common control with or acting in concert or concurrently with, such person, entity or group) shall hold, purchase or acquire beneficial ownership (including without limitation power to vote) of 50% or more of the then outstanding shares of the Company's Common Stock, then any portion of the Options which have not yet become exercisable shall thereupon become immediately exercisable. 11. ADJUSTMENT OF OPTIONS ON RECAPITALIZATION OR REORGANIZATION. The aggregate number of shares of common stock on which options may be granted to persons participating under the Plan, the aggregate number of shares of common stock on which options may be granted to any one such person, the number of shares thereof covered by each outstanding option, and the price per share thereof in each such option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of common stock of the Company resulting from the subdivision or combination of shares or other capital adjustments, or the payment of a stock dividend Page 5 6 after the effective date of this Plan, or other increase or decrease in such shares effected without receipt of consideration by the Company; provided, however, that no adjustment shall be made unless the aggregate effect of all such increases and decreases occurring in any one fiscal year after the effective date of this Plan will increase or decrease the number of issued shares of common stock of the Company by 5% or more; and, provided, further, that any options to purchase fractional shares resulting from any such adjustment shall be eliminated. Subject to any required action by the stockholders and to Section 10 hereof, if the Company shall be the surviving or resulting corporation in any merger or consolidation, any option granted hereunder shall pertain to and apply to the securities to which a holder of the number of shares of common stock subject to option would have been entitled had such option been exercised immediately preceding such merger or consolidation; but a dissolution or liquidation of the Company, or a merger or consolidation in which the Company is not the surviving or resulting corporation (except for a change in Control as defined in Section 10 hereof in which case Section 10 shall govern then outstanding options) shall cause every option outstanding hereunder to terminate, except that the surviving or resulting corporation may, in its absolute and uncontrolled discretion, tender an option or options to purchase its shares on its terms and conditions, both as to the number of shares and otherwise. Adjustments under this Section shall be made by the Committee, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. 12. AGREEMENTS BY OPTIONEE. Each individual optionee shall agree: (a) If requested by the Company, at the time of exercise of any option, to execute an agreement stating that he is purchasing the shares subject to option for investment purposes and not with a view to the resale or distribution thereof; (b) To authorize the Company to withhold from his gross pay any tax which it believes is required to be withheld with respect to any benefit under the Plan, and to hold as security for the amount to be withheld any property otherwise distributable to the optionee under the Plan until the amounts required to be withheld have been so withheld. Page 6 7 13. RIGHTS AS A SHAREHOLDER. The optionee shall have no rights as a stockholder with respect to any shares of common stock of the Company held under option until the date of issuance of the stock certificates to him for such shares. 14. EFFECTIVE DATE. The Plan was effective as of September 1, 1992, upon approval by the holders of a majority of the shares of outstanding capital stock present at the December 17, 1992 annual meeting of the Company's stockholders. The Plan was amended by the board of directors on August 29, 1997, and amended and restated by the board of directors on March 10, 1997, and December 9, 1998. 15. AMENDMENTS. (a) The board of directors may, from time to time, alter, suspend or terminate the Plan, or alter or amend any and all option agreements granted thereunder but only for one or more of the following purposes: (1) To modify the administrative provisions of the Plan or options; (2) To make any other amendment which does not materially alter the intent or benefits of the Plan; or (3) Increase the maximum number of shares as to which options may be granted under the Plan either to all persons participating in the Plan or to any one such person. (b) It is expressly provided that no such action of the board of directors may, without the approval of the stockholders, alter the provisions of the Plan or option agreements granted thereunder so as to: (1) Decrease the option price applicable to any options granted under the Plan, provided, however, that the provisions of this clause (1) shall not prevent the granting, to any person holding an option under the Plan, of additional options under the Plan exercisable at a lower option price; or (2) alter any outstanding option agreement to the detriment of the optionee, without his consent. Page 7 8 16. EMPLOYMENT OBLIGATION. The granting of any option under this Plan shall not impose upon the Company any obligation whatsoever to employ or to continue to employ any optionee, and the right of the Company to terminate the employment of any officer or other employee shall not be diminished or affected by reason of the fact that an option has been granted to him under the Plan. 17. VES OPTIONS. In order to carry out the terms of (i) the Combination Agreement dated May 10, 1996, between the Company and Veritas Energy Services Inc. ("VES") which was approved by the Company's stockholders at a special meeting held on August 20, 1996 and (ii) the Plan of Arrangement under Part 15 of the Business Corporations Act (Alberta) relating to the combination of the Company and VES which, pursuant to an interim order of the Court of Queen's Bench of Alberta date July 18, 1996, was approved at special meetings of VES optionholders and shareholders held August 20, 1996, this Plan shall include under its terms each of the options (the "VES Options") outstanding on the Effective Date (as defined in the Combination Agreement) (which includes all outstanding options granted under VES' Stock Option Plan for Directors, Officers and Key Employees (the "VES Option Plan")) without any further action on the part of any holder thereof (each a "VES Optionholder"). Effective as of the Effective Time, each VES Option will be exercisable to purchase that number of shares of the Company's common stock determined by multiplying the number of VES common shares (the "VES Common Shares") subject to such VES Option at the Effective Time by the Exchange Ratio (as defined in the Combination Agreement), at an exercise price per share of such VES Option immediately prior to the Effective Time, divided by the Exchange Ratio. On the Effective Date (as defined in the Combination Agreement), such option price shall be converted into a United States dollar equivalent based on the noon spot rate of exchange of the Bank of Canada on such date. If the foregoing calculation results in an exchanged VES Option being exercisable for a fractional share of the Company's common stock, then the number of shares of the Company's common stock subject to such option will be rounded down to the nearest whole number of shares and the total exercise price for the option will be reduced by the exercise price of the fractional share. The term, exercisability, vesting schedule and all other terms and conditions of the VES Options will otherwise be unchanged and shall operate in accordance with their terms, notwithstanding anything to the contrary contained herein. Page 8 EX-10.L 5 FIRST AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 10-L FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of October 23, 1998, is between VERITAS DGC INC., a Delaware corporation ("Borrower"), each of the banks or other lending institutions which are or from time to time may become parties to the Agreement [hereinafter defined] (such banks and financial institutions, together with their respective successors and assigns, the "Banks"), and BANK ONE, TEXAS, N.A. (the "Agent"). RECITALS: A. The Borrower, the Agent and the Banks entered into that certain Credit Agreement dated as of July 27, 1998 (the "Agreement"). B. Pursuant to the Agreement, Veritas DGC Asia Pacific, Ltd., Digicon (Malaysia) Sdn. Bhd., Euroseis, Inc., Digicon Geophysical Corp., Veritas DGC, Ltd., Veritas DCG Land Inc., and Veritas Energy Services Partnership ("Guarantors") executed those certain General Continuing Guaranty agreements dated as of July 27, 1998 (the "Guaranties") pursuant to which the Guarantors guaranteed to the Agent and the Banks the payment and performance of the obligations (as defined in the Agreement). C. The Borrower, the Agent and the Banks now desire to amend the Agreement as herein set forth. NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I Definitions Section 1.01. Definitions. Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the meanings given to such terms in the Agreement, as amended hereby. 2 ARTICLE II Amendments Section 2.01. Amendments to Section 10.1. Effective as of the date hereof, Section 10.1 of the Agreement is amended as follows: (a) The phrase "clauses (b), (c) and (d) above" contained in paragraph (d) of Section 10.1 of the Agreement is amended to read "clauses (b) and (c) above". (b) The phrase "in an aggregate principal amount not to exceed $50,000,000.00" contained in paragraph (f) of Section 10.1 of the Agreement is amended to read "in an aggregate principal amount not to exceed $60,000,000.00". ARTICLE III Conditions Precedent Section 3.01. Conditions. The effectiveness of this Amendment is subject to the receipt by the Agent of the following in form and substance satisfactory to the Agent: (a) Resolutions - Borrower. Resolutions of the Board of Directors of the Borrower certified by its Secretary or an Assistant Secretary which authorize the execution, delivery and performance by the Borrower of this Amendment and the other Loan Documents to which the Borrower is or is to be a party hereunder. (b) Incumbency Certificate - Borrower. A certificate of incumbency certified by the Secretary or an Assistant Secretary of the Borrower certifying the names and signatures of the officers of the Borrower authorized to sign this Amendment and each of the other Loan Documents to which the Borrower is or is to be a party hereunder. (c) Additional Information. Such additional documents, instruments and information as the Agent or any Bank may reasonably request. Section 3.02. Additional Conditions. The effectiveness of this Amendment is also subject to the satisfaction of the additional conditions precedent that (a) the representations and warranties contained herein and in all other Loan Documents, as amended hereby, shall be true and correct as of the date hereof as if made on the date hereof, (b) all proceedings, corporate or otherwise, taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to the Agent and -2- 3 each Bank, and (c) no Event of Default shall have occurred and be continuing and no event or condition shall have occurred that with the giving of notice or lapse of time or both would be an Event of Default. ARTICLE IV Ratifications, Representations, and Warranties Section 4.01. Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Agreement and except as expressly modified and superseded by this Amendment, the terms and provisions of the Agreement are ratified and confirmed and shall continue in full force and effect. The Borrower, the Agent and each Bank agree that the Agreement as amended hereby shall continue to be the legal, valid and binding obligation of such Persons enforceable against such Persons in accordance with its terms. Section 4.02. Representations, Warranties and Agreements. The Borrower hereby represents and warrants to the Agent and the Banks that (a) the execution, delivery, and performance of this Amendment and any and all other Loan Documents executed or delivered in connection herewith have been authorized by all requisite corporate action on the part of the Borrower and will not violate the certificate of incorporation or bylaws of the Borrower, (b) the representations and warranties contained in the Agreement as amended hereby, and all other Loan Documents are true and correct on and as of the date hereof as though made on and as of the date hereof, (c) no Event of Default has occurred and is continuing and no event or condition has occurred that with the giving of notice or lapse of time or both would be an Event of Default, (d) the Borrower is in full compliance with all covenants and agreements contained in the Agreement as amended hereby, (e) the Borrower is indebted to the Banks pursuant to the terms of the Revolving Credit Notes, (f) the liens, security interests, encumbrances and assignments created and evidenced by the Loan Documents are, respectively, valid and subsisting liens, security interests, encumbrances and assignments and secure the Revolving Credit Notes, and (g) the Borrower has no claims, credits, offsets, defenses or counterclaims arising from the Loan Documents or the Agent's or any Bank's performance under the Loan Documents. ARTICLE V Miscellaneous Section 5.01. Survival of Representations and Warranties. All representations and warranties made in this Amendment or any other Loan Documents including any Loan Document furnished in -3- 4 connection with this Amendment shall fully survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by the Agent or any Bank or any closing shall affect the representations and warranties or the right of the Agent or any Bank to rely on them. Section 5.02. Reference to Agreement. Each of the Loan Documents, including the Agreement and any and all other agreements, documents, or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Agreement, as amended hereby, are hereby amended so that any reference in such Loan Documents to the Agreement shall mean a reference to the Agreement, as amended hereby. Section 5.03. Expenses of the Agent and the Banks. As provided in the Agreement, the Borrower agrees to pay on demand all costs and expenses incurred by the Agent and the Banks in connection with the preparation, negotiation and execution of this Amendment and the other documents and instruments executed pursuant hereto and any and all amendments, modifications and supplements thereto, including, without limitation, the reasonable costs and fees of the Agent's and the Banks' legal counsel, and all costs and expenses incurred by the Agent and the Banks in connection with the enforcement or preservation of any rights under the Agreement, as amended hereby, or any other Loan Document, including, without limitation, the reasonable costs and fees of the Agent's and the Banks' legal counsel. Section 5.04. Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. Section 5.05. Applicable Law. This Amendment and all other Loan Documents executed pursuant hereto shall be deemed to have been made and to be performable in Houston, Harris County, Texas and shall be governed by and construed in accordance with the laws of the State of Texas. Section 5.06. Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of the Agent, the Banks and the Borrower and their respective successors and assigns. Section 5.07. Counterparts. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. Section 5.08. Effect of Waiver. No consent or waiver, express or implied, by the Agent or any Bank to or for any breach of or deviation from any covenant, condition or duty by Borrower -4- 5 shall be deemed a consent or waiver to or of any other breach of the same or any other covenant, condition or duty. Section 5.09. Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment. Section 5.10. ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS, DOCUMENTS, AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT AND THE OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. Executed as of the date first written above. BORROWER: VERITAS DGC INC. By: /s/ ANTHONY TRIPODO ----------------------------------- Anthony Tripodo Executive Vice President and Chief Financial Officer AGENT: BANK ONE, TEXAS, N.A. By: /s/ MARC A. DUNMIRE ------------------------------------ Marc A. Dunmire Vice President -5- 6 BANKS: ----- BANK ONE, TEXAS, N.A. By: /s/ MARC A. DUNMIRE ------------------------------------ Marc A. Dunmire Vice President COMERICA BANK By: /s/ REGINALD M. GOLDSMITH, III ------------------------------------ Reginald M. Goldsmith, III Vice President BANQUE NATIONALE DE PARIS By: /s/ WARREN ROSS ------------------------------------ Warren Ross Vice President Each of the undersigned Guarantors hereby consents and agrees to this Amendment and agrees that the General Continuing Guaranty executed by such party is in full force and effect and shall remain in full force and effect and shall continue to be the legal, valid and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms and shall evidence such Guarantor's guaranty of the Revolving Credit Notes. DIGICON GEOPHYSICAL CORP. By: /s/ ANTHONY TRIPODO ------------------------------------ Anthony Tripodo Vice President -6- 7 DIGICON (MALAYSIA) SDN. BHD. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- EUROSEIS, INC. By: /s/ ANTHONY TRIPODO ------------------------------------ Anthony Tripodo Vice President VERITAS DGC ASIA PACIFIC, LTD. By: /s/ ANTHONY TRIPODO ------------------------------------ Anthony Tripodo Vice President VERITAS DGC LAND INC. By: /s/ ANTHONY TRIPODO ------------------------------------ Anthony Tripodo Vice President VERITAS DGC, LTD. By: ----------------------------------- Nicholas A.C. Bright Director -7- 8 VERITAS ENERGY SERVICES PARTNERSHIP, by its partners: VERITAS DGC LAND LTD. Per: ----------------------------------- Lawrence C. Fichtner Director VERITAS GEOSERVICES LTD. Per: ----------------------------------- Lawrence C. Fichtner Director CANEX INFORMATION SERVICES LTD. Per: ----------------------------------- Lawrence C. Fichtner Director -8- EX-10.M 6 SECOND AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 10-M SECOND AMENDMENT TO CREDIT AGREEMENT THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of November 20, 1998, is between VERITAS DGC INC., a Delaware corporation ("Borrower"), each of the banks or other lending institutions which are or from time to time may become parties to the Agreement [hereinafter defined] (such banks and financial institutions, together with their respective successors and assigns, the "Banks"), and BANK ONE, TEXAS, N.A. (the "Agent"). RECITALS: A. The Borrower, the Agent and the Banks entered into that certain Credit Agreement dated as of July 27, 1998, as amended by First Amendment to Credit Agreement dated October 23, 1998 (collectively, the "Agreement"). B. Pursuant to the Agreement, Veritas DGC Asia Pacific Ltd., Digicon (Malaysia) Sdn. Bhd., Euroseis, Inc., Digicon Geophysical Corp., Veritas DGC, Ltd., Veritas DCG Land Inc., and Veritas Energy Services Partnership ("Guarantors") executed those certain General Continuing Guaranty agreements dated as of July 27, 1998 (the "Guaranties") pursuant to which the Guarantors guaranteed to the Agent and the Banks the payment and performance of the Obligations (as defined in the Agreement). C. The Borrower, the Agent and the Banks now desire to amend the Agreement as herein set forth. NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I Definitions Section 1.01. Definitions. Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the meanings given to such terms in the Agreement, as amended hereby. 2 ARTICLE II Amendments Section 2.01. Amendment to Recitals. Effective as of the date hereof the phrase "(subject to a $15,000,000.00 sublimit)" contained in the first recital to the Agreement is amended to read "(subject to a $25,000,000.00 sublimit)". Section 2.02. Amendment to Section 3.1(a). Effective as of the date hereof, the first sentence of Section 3.1(a) of the Agreement shall be amended to read in its entirety as follows: Subject to, and upon the terms, conditions, covenants and agreements contained herein and in the Letter of Credit Agreements, prior to the Revolving Credit Termination Date, the Issuing Bank agrees to issue irrevocable standby letters of credit ("Letters of Credit"), in form satisfactory to the Issuing Bank, for the account of the Borrower or any Guarantor; provided, however, that the outstanding Letter of Credit Liabilities shall not at any time exceed the least of (a) $25,000,000, (b) an amount equal to the aggregate amount of the Revolving Credit Commitments minus the outstanding Advances, and (c) the Borrowing Base minus the outstanding Advances. ARTICLE III Conditions Precedent Section 3.01. Conditions. The effectiveness of this Amendment is subject to the receipt by the Agent of the following in form and substance satisfactory to the Agent: (a) Resolutions - Borrower. Resolutions of the Board of Directors of the Borrower certified by its Secretary or an Assistant Secretary which authorize the execution, delivery and performance by the Borrower of this Amendment and the other Loan Documents to which the Borrower is or is to be a party hereunder. (b) Incumbency Certificate - Borrower. A certificate of incumbency certified by the Secretary or an Assistant Secretary of the Borrower certifying the names and signatures of the officers of the Borrower authorized to sign this Amendment and each of the other Loan Documents to which the Borrower is or is to be a party hereunder. (c) Additional Information. Such additional documents, instruments and information as the Agent or any Bank may reasonably request. -2- 3 Section 3.02. Additional Conditions. The effectiveness of this Amendment is also subject to the satisfaction of the additional conditions precedent that (a) the representations and warranties contained herein and in all other Loan Documents, as amended hereby, shall be true and correct as of the date hereof as if made on the date hereof, (b) all proceedings, corporate or otherwise, taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to the Agent and each Bank, and (c) no Event of Default shall have occurred and be continuing and no event or condition shall have occurred that with the giving of notice or lapse of time or both would be an Event of Default. ARTICLE IV Ratifications, Representations, and Warranties Section 4.01. Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Agreement and except as expressly modified and superseded by this Amendment, the terms and provisions of the Agreement are ratified and confirmed and shall continue in full force and effect. The Borrower, the Agent and each Bank agree that the Agreement as amended hereby shall continue to be the legal, valid and binding obligation of such Persons enforceable against such Persons in accordance with its terms. Section 4.02. Representations, Warranties and Agreements. The Borrower hereby represents and warrants to the Agent and the Banks that (a) the execution, delivery, and performance of this Amendment and any and all other Loan Documents executed or delivered in connection herewith have been authorized by all requisite corporate action on the part of the Borrower and will not violate the certificate of incorporation or bylaws of the Borrower, (b) the representations and warranties contained in the Agreement as amended hereby, and all other Loan Documents are true and correct on and as of the date hereof as though made on and as of the date hereof, (c) no Event of Default has occurred and is continuing and no event or condition has occurred that with the giving of notice or lapse of time or both would be an Event of Default, (d) the Borrower is in full compliance with all covenants and agreements contained in the Agreement as amended hereby, (e) the Borrower is indebted to the Banks pursuant to the terms of the Revolving Credit Notes, (f) the liens, security interests, encumbrances and assignments created and evidenced by the Loan Documents are, respectively, valid and subsisting liens, security interests, encumbrances and assignments and secure the Revolving Credit Notes, and (g) the Borrower has no claims, credits, offsets, defenses or counterclaims arising from the Loan Documents or the Agent's or any Bank's performance under the Loan Documents. -3- 4 ARTICLE V Miscellaneous Section 5.01. Survival of Representations and Warranties. All representations and warranties made in this Amendment or any other Loan Documents including any Loan Document furnished in connection with this Amendment shall fully survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by the Agent or any Bank or any closing shall affect the representations and warranties or the right of the Agent or any Bank to rely on them. Section 5.02. Reference to Agreement. Each of the Loan Documents, including the Agreement and any and all other agreements, documents, or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Agreement, as amended hereby, are hereby amended so that any reference in such Loan Documents to the Agreement shall mean a reference to the Agreement, as amended hereby. Section 5.03. Expenses of the Agent and the Banks. As provided in the Agreement, the Borrower agrees to pay on demand all costs and expenses incurred by the Agent and the Banks in connection with the preparation, negotiation and execution of this Amendment and the other documents and instruments executed pursuant hereto and any and all amendments, modifications and supplements thereto, including, without limitation, the reasonable costs and fees of the Agent's and the Banks' legal counsel, and all costs and expenses incurred by the Agent and the Banks in connection with the enforcement or preservation of any rights under the Agreement, as amended hereby, or any other Loan Document, including, without limitation, the reasonable costs and fees of the Agent's and the Banks' legal counsel. Section 5.04. Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. Section 5.05. Applicable Law. This Amendment and all other Loan Documents executed pursuant hereto shall be deemed to have been made and to be performable in Houston, Harris County, Texas and shall be governed by and construed in accordance with the laws of the State of Texas. Section 5.06. Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of the Agent, the Banks and the Borrower and their respective successors and assigns. -4- 5 Section 5.07. Counterparts. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. Section 5.08. Effect of Waiver. No consent or waiver, express or implied, by the Agent or any Bank to or for any breach of or deviation from any covenant, condition or duty by Borrower shall be deemed a consent or waiver to or of any other breach of the same or any other covenant, condition or duty. Section 5.09. Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment. Section 5.10. ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS, DOCUMENTS, AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT AND THE OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. Executed as of the date first written above. BORROWER: VERITAS DGC INC. By: /s/ ANTHONY TRIPODO -------------------------------- Anthony Tripodo Executive Vice President and Chief Financial Officer -5- 6 AGENT: ------ BANK ONE, TEXAS, N.A. By: /s/ MARC A. DUNMIRE ----------------------------------- Marc A. Dunmire Vice President BANKS: ------ BANK ONE, TEXAS, N.A. By: /s/ MARC A. DUNMIRE ------------------------------------- Marc A. Dunmire Vice President COMERICA BANK By: /s/ REGINALD M. GOLDSMITH, III ------------------------------------ Reginald M. Goldsmith, III Vice President BANQUE NATIONALE DE PARIS By: /s/ WARREN ROSS ------------------------------------- Warren Ross Vice President -6- 7 Each of the undersigned Guarantors hereby consents and agrees to this Amendment and agrees that the General Continuing Guaranty executed by such party is in full force and effect and shall remain in full force and effect and shall continue to be the legal, valid and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms and shall evidence such Guarantor's guaranty of the Revolving Credit Notes. DIGICON GEOPHYSICAL CORP. By: /s/ ANTHONY TRIPODO -------------------------------------- Anthony Tripodo Vice President DIGICON (MALAYSIA) SDN. BHD. By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- EUROSEIS, INC. By: /s/ ANTHONY TRIPODO -------------------------------------- Anthony Tripodo Vice President VERITAS DGC ASIA PACIFIC, LTD. By: /s/ ANTHONY TRIPODO -------------------------------------- Anthony Tripodo Vice President VERITAS DGC LAND INC. By: /s/ ANTHONY TRIPODO -------------------------------------- Anthony Tripodo Vice President -7- 8 VERITAS DGC, LTD. By: -------------------------------------- Nicholas A.C. Bright Director VERITAS ENERGY SERVICES PARTNERSHIP, by its partners: VERITAS DGC LAND LTD. Per: -------------------------------------- Lawrence C. Fichtner Director VERITAS GEOSERVICES LTD. Per: -------------------------------------- Lawrence C. Fichtner Director CANEX INFORMATION SERVICES LTD. Per: -------------------------------------- Lawrence C. Fichtner Director -8- EX-27.A 7 FINANCIAL DATA SCHEDULE - 10/31/1998
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VERITAS DGC INC.'S FORM 10-Q FOR THE THREE MONTHS ENDED OCTOBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q. 1,000 3-MOS JUL-31-1999 AUG-01-1998 OCT-31-1998 188 0 175,211 1,222 5,356 270,666 340,909 165,395 555,879 109,217 135,214 0 0 213 306,178 555,879 0 146,799 0 103,511 0 0 2,052 19,603 5,882 13,622 0 0 0 13,622 0.60 0.60
EX-27.B 8 FINANCIAL DATA SCHEDULE - DATED 10/31/1997
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VERITAS DGC INC.'S FORM 10-Q FOR THE THREE MONTHS ENDED OCTOBER 31, 1997 (THREE MONTHS ENDED OCTOBER 31, 1997 RESTATED FOR SFAS NO. 128) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q. 1,000 3-MOS JUL-31-1998 AUG-01-1997 OCT-31-1997 557 0 130,953 1,062 2,519 229,289 256,145 116,892 409,533 85,077 75,472 0 0 200 247,644 409,533 0 142,186 0 93,253 0 0 2,034 30,154 9,649 21,319 0 0 0 21,319 0.95 0.94
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