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SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
VERITAS DGC INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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VERITAS LOGO
VERITAS DGC INC.
3701 KIRBY DRIVE
HOUSTON, TEXAS 77098
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 9, 1997
---------------------
Notice is hereby given that the annual meeting of the holders of common
stock of Veritas DGC Inc. (the "Company") and the holders of exchangeable shares
of Veritas Energy Services Inc., a wholly-owned subsidiary of the Company
("VES"), which holders are collectively referred to herein as "stockholders,"
will be held at the offices of the Company, 3701 Kirby Drive, Houston, Texas
77098, on December 9, 1997, at 10:00 a.m., Houston time, for the following
purposes:
1. To elect a board of ten directors to serve until the next annual
meeting of stockholders or until their successors are elected to
qualify;
2. To consider and act upon a proposal to adopt a 1997 Employee Stock
Purchase Plan;
3. To consider and act upon the proposed amendment to the Company's
Amended and Restated 1992 Employee Nonqualified Stock Option Plan;
and
4. To consider and act upon such other business as may properly be
presented to the meeting.
A record of stockholders has been taken as of the close of business on
October 27, 1997, and only those stockholders of record on that date will be
entitled to notice of and to vote at the meeting. A stockholders' list will be
available commencing November 25, 1997, and may be inspected during normal
business hours prior to the annual meeting at the offices of the Company, 3701
Kirby Drive, Houston, Texas 77098.
If you do not expect to be present at the meeting, please sign and date the
enclosed proxy and return it promptly in the enclosed stamped envelope which has
been provided for your convenience. The prompt return of proxies will ensure a
quorum and save the Company the expense of further solicitation.
By Order of the Board of Directors,
/s/ ALLAN C. POGACH
Allan C. Pogach,
Secretary
November 10, 1997
<PAGE> 3
VERITAS DGC INC.
3701 KIRBY DRIVE
HOUSTON, TEXAS 77098
PROXY STATEMENT
This proxy statement is being mailed to stockholders commencing on or about
November 10, 1997, in connection with the solicitation by the board of directors
of Veritas DGC Inc. (the "Company") of proxies to be voted at the annual meeting
of stockholders to be held in Houston, Texas, on December 9, 1997, and at any
adjournment thereof, for the purposes set forth in the accompanying notice.
Proxies will be voted in accordance with the directions specified thereon
and otherwise in accordance with the judgment of the persons designated as
proxies. Any proxy on which no direction is specified will be voted for the
election of the nominees named herein to the board of directors, for adoption of
the 1997 Employee Stock Purchase Plan (the "Stock Plan") and for adoption of the
amendment to the Amended and Restated 1992 Employee Nonqualified Stock Option
Plan (the "Option Plan"). Abstentions and broker non-votes (i.e., proxies marked
to indicate that the shares are not being voted) will be treated as present for
purposes of determining whether a quorum is present. Abstentions will have the
same legal effect as votes against a proposal and broker non-votes will be
disregarded. Based upon New York Stock Exchange rules, the Company believes that
brokerage firms may not vote on behalf of their clients if instructions are not
furnished by such clients regarding the adoption of the Stock Plan and amendment
of the Option Plan. A stockholder may revoke a proxy by (i) delivering to the
Company written notice of revocation, (ii) delivering to the Company a signed
proxy of a later date, or (iii) appearing at the meeting and voting in person.
Votes will be tabulated and the results will be certified by election inspectors
who are required to resolve impartially any interpretive questions as the
conduct of the vote.
As of October 27, 1997, the record date for the determination of
stockholders entitled to vote at the meeting, there were outstanding and
entitled to vote 20,090,937 shares of the Company's common stock, par value $.01
per share (the "Common Stock"), and 2,367,071 VES exchangeable shares
(collectively, the "Shares"). The Shares vote together as a single class, and
each Share entitles the holder to one vote, on all matters presented at the
meeting. Holders of a majority of the outstanding Shares must be present, in
person or by proxy, to constitute a quorum for the transaction of business.
ELECTION OF DIRECTORS
GENERAL
At the meeting, ten nominees are to be elected, each director to hold
office until the next annual meeting of stockholders or until his successor is
elected and qualifies. The persons named in the accompanying proxy have been
designated by the board of directors, except as otherwise indicated, and unless
authority is withheld, they intend to vote for the election of the nominees
named below to the board of directors. With the exception of Mr. Gibbs, all of
the nominees previously have been elected directors by the stockholders. If any
nominee should become unavailable for election, the proxy may be voted for a
substitute nominee selected by the persons named in the proxy or the board may
be reduced accordingly; however, the board of directors is not aware of any
circumstances likely to render any nominee unavailable.
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NOMINEES
Certain information concerning the nominees is set forth below:
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
OCTOBER 31, 1997(1)
PRINCIPAL POSITION DIRECTOR -------------------
NAME WITH THE COMPANY AGE SINCE NUMBER(2) PERCENT
---- ------------------ --- -------- --------- -------
<S> <C> <C> <C> <C> <C>
Clayton P. Cormier(3)......... Director 65 1991 10,004 *
Ralph M. Eeson(3)(4)(5)....... Director 49 1996 6,220 *
Lawrence C. Fichtner(4)....... Director and executive vice
president 52 1996 184,659 *
James R. Gibbs................ Director nominee 53 -- -- --
Steven J. Gilbert(6).......... Director 50 1991 64,185(7) *
Stephen J. Ludlow............. Director, president and chief
operating officer 47 1994 42,667 *
Brian F. MacNeill(4)(5)(6).... Director 58 1996 14,743 *
David B. Robson(4)............ Chairman of the board and chief
executive officer 58 1996 1,471,263 6.53%
Douglas B. Thompson(5)(6)..... Director 48 1991 192,059(8) *
Jack C. Threet(6)............. Director 69 1991 13,332 *
</TABLE>
- ---------------
* Does not exceed one percent
(1) Each person has sole voting and investment power with respect to the shares
listed and is a United States citizen, except as otherwise specified.
(2) Includes shares of Common Stock which the named individual has the right to
acquire upon exercise of currently exercisable stock options, as follows:
Mr. Cormier -- 6,666; Mr. Fichtner -- 52,903; Mr. Ludlow -- 42,667; Mr.
MacNeill -- 8,667; Mr. Robson -- 66,537; Mr. Thompson -- 13,332; and Mr.
Threet -- 6,666.
(3) Member, audit committee of the board.
(4) Canadian citizen.
(5) Member, nominating committee of the board.
(6) Member, compensation committee of the board.
(7) Includes 62,748 shares of Common Stock held by Quantum Partners LDC
("Quantum") which may be deemed beneficially owned by Mr. Gilbert by virtue
of an investment advisory contract between Mr. Gilbert and Quantum. Mr.
Gilbert disclaims beneficial ownership as to these shares.
(8) Includes 130,085 shares of Common Stock and warrants to purchase 42,000
shares of common stock held by entities affiliated with Jupiter and
Associates ("Jupiter"). Mr. Thompson, by virtue of his affiliation with
Jupiter, may be deemed to beneficially own such shares, but disclaims any
beneficial ownership.
Clayton P. Cormier is currently a financial and insurance consultant. From
1986 to 1991, Mr. Cormier was a senior vice president in the oil and gas
division of Johnson & Higgins, an insurance broker, and previously served as
chairman of the board, president, and chief executive officer of Ancon Insurance
Company, S.A. and as an assistant treasurer of Exxon.
Ralph M. Eeson has been co-owner and chairman of the board of Kids Only
Clothing Club Inc., a manufacturer and direct seller of children's clothing,
since 1991. From 1977 to 1991, he was a senior partner at Code Hunter,
Barristers and Solicitors, Calgary. He remains counsel to Code Hunter.
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Lawrence C. Fichtner became executive vice president -- corporate
communications of the Company in August 1996, upon consummation of the business
combination between the Company and VES (the "Combination"). Prior thereto, he
had been executive vice president of VES or its predecessors since 1978. During
the ten years prior to joining VES, he held various positions as a geophysicist
with Geophysical Services Inc., Texaco Exploration Ltd., and Bow Valley
Exploration Ltd.
James R. Gibbs has been president and chief executive officer of Wainoco
Oil Corporation ("Wainoco"), since 1992 and has been employed by Wainoco for
over fifteen years. Wainoco is a wholesale refining company that operates in the
Rocky Mountains of the United States. Mr. Gibbs is a director of Smith
International and is an advisory director of Frost Bank -- Houston.
Steven J. Gilbert is chairman of Gilbert Global Equity Partners, L.P. From
1992 to 1997 he was managing general partner of Soros Capital L.P., the
principal venture capital and leveraged transaction entity of Quantum Group of
Funds and was a principal advisor to Quantum Industrial Holdings Ltd. He has
also been the managing director of Commonwealth Capital Partners, L.P., a
private equity investment fund. From 1984 to 1988, Mr. Gilbert was the managing
general partner of Chemical Venture Partners, which he founded. Mr. Gilbert is a
director of Katz Media Group, Inc., NFO Worldwide, Inc., The Asian
Infrastructure Fund, Peregrine Indonesia Fund, Inc., Terra Nova (Bermuda)
Holdings Ltd., GTS -- Duratek, Inc., Sydney Harbour Casino Holdings, Ltd. and
UroMed Corporation.
Stephen J. Ludlow became president and chief operating officer of the
Company in August 1996, upon consummation of the Combination. He has been
employed by the Company for 24 years and served as president and chief executive
officer of the Company from 1994 to 1996. Prior to 1994, he served as executive
vice president of the Company for four years following eight years of service in
a variety of progressively more responsible management positions, including
several years of service as the executive responsible for operations in Europe,
Africa and the Middle East.
Brian F. MacNeill has been president and chief executive officer of IPL
Energy Inc., a crude oil and liquids transportation and natural gas distribution
company, formerly Interprovincial Pipe Line, Inc. ("IPL"), since 1991. He was
executive vice president and chief operating officer of IPL from 1990 to 1991
and previously served as chief financial officer of Interhome Energy, Inc. and
Home Oil Company Limited and as vice president and treasurer of Hiram Walker
Resources Ltd.
David B. Robson has been chairman of the board and chief executive officer
of the Company since consummation of the Combination on August 30, 1996. Prior
thereto, he had held similar positions with VES or its predecessors since 1974.
Douglas B. Thompson served as chairman of the board of the Company from May
1994 until consummation of the Combination in August 1996. He is a private
investor and also served as chairman of the board of Welltech, Inc., a privately
held workover drilling company, until its sale in March 1996.
Jack C. Threet was formerly vice president of Shell Oil Company. Prior to
his retirement from Shell Oil Company in 1987, Mr. Threet was also a member of
the boards of directors of several affiliates of Shell Oil Company.
BOARD AND COMMITTEE ACTIVITY, STRUCTURE AND COMPENSATION
During fiscal 1997, the board of directors convened on seven regularly and
specially scheduled occasions, and committees of the board held meetings as
follows: audit committee -- four meetings; compensation committee -- four
meetings; and nominating committee -- none. For information concerning the audit
committee, see "Other Information -- Auditors." The compensation committee
administers the Company's compensation plans and recommends officers'
compensation to the board for approval. The nominating committee recommends to
the board of directors the nominees for election to the board of directors at
each annual meeting; stockholders who may wish to suggest individuals for
possible future consideration for board positions should direct recommendations
to the nominating committee of the board of directors at the Company's principal
offices. Each director attended at least 75% of the meetings held during the
year by the board and each committee on which he served.
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Each director who is not otherwise compensated by the Company is paid an
annual fee of $15,000 plus travel expenses, if any, and a fee of $1,500 per
board meeting and committee meeting attended. The Company maintains a stock
option plan for non-employee directors (the "Director Plan") providing for stock
options to be granted to each non-employee director of the Company. Under the
Director Plan, each eligible director was granted an option to purchase 10,000
shares of the Company's Common Stock ("Option") on March 11, 1997, and
thereafter will be granted an Option on the date of the first meeting of the
board in each odd numbered year (the "Date of Grant"). 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 director for a number of
shares of Common Stock not to exceed 10,000. The exercise price for each option
granted is the closing sale price of a share of Common Stock on the date of
grant. Each option will be exercisable on a cumulative basis as to 25% of the
shares of Common Stock covered by such option after the first through fourth
anniversaries of the date of grant. All options expire ten years after their
date of grant.
In early fiscal 1997, the Company paid Mr. Thompson $150,000 for consulting
services provided in conjunction with the Combination.
APPROVAL
The ten nominees for election as directors at the annual meeting who
receive the greatest number of votes cast for election by the holders of Shares
entitled to vote and present, in person or by proxy, at the annual meeting shall
be the duly elected directors of the Company. The board of directors recommends
a vote FOR all ten nominees to the Company's board of directors.
1997 EMPLOYEE STOCK PURCHASE PLAN
DESCRIPTION OF STOCK PLAN
Background. On September 9, 1997, the board of directors adopted the Stock
Plan, subject to approval by the Company's stockholders. The Stock Plan became
effective November 1, 1997. In the event stockholder approval is not obtained,
the Stock Plan will be terminated.
The purpose of the Stock Plan is to provide an incentive for employees of
the Company to acquire or increase their proprietary interests in the Company
through the purchase of shares of Common Stock of the Company. The Stock Plan is
designed to achieve such purposes by allowing eligible employees to acquire
shares of the Common Stock at a discount from the market price of the Common
Stock, through payroll deductions under the terms set forth in the Stock Plan.
Unless the context otherwise requires, references to the Company herein
include reference to the Company's majority-owned subsidiaries. Employees of the
Company eligible to participate in the Plan are referred to herein as "Eligible
Employees" and Eligible Employees who elect to participate in the Plan are
referred to herein as "Participants."
Number of Shares. The shares of the Company's Common Stock subject to the
Stock Plan consist of 500,000 authorized but unissued shares of Common Stock,
previously issued shares of Common Stock reacquired and held by the Company, or
shares of Common Stock bought in the market or any combination thereof. The
number of shares of Common Stock subject to the Stock Plan will be adjusted
appropriately in the event of any stock dividend, stock split, stock exchange,
combination, recapitalization, or other change in the capital structure of the
Company, merger, consolidation, spin-off of assets, reorganization, partial or
complete liquidation, issuance of rights or warrants to purchase securities, or
any other corporate transaction or event having an effect similar to any of the
foregoing.
Duration. Except with respect to options then outstanding, no further
options shall be granted under the Stock Plan at the earlier of (i) October 31,
2007, or (ii) the point in time when no shares of Common Stock reserved for
issuance are available. However, the board of directors shall retain authority
to terminate the Stock Plan.
Administration. The Stock Plan is administered by the compensation
committee of the board of directors (the "Committee"). The Committee is
appointed by the board of directors who may remove such members
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and appoint their successors. Members of the Committee are not eligible to
participate in the Stock Plan. The current members of the Committee are Brian F.
MacNeill -- Chairman, Jack C. Threet, Steven J. Gilbert, and Douglas B.
Thompson. Messrs. MacNeill, Threet, Gilbert and Thompson each are members of the
board of directors.
Subject to the provisions of the Stock Plan, the Committee shall have
authority to (a) interpret the Stock Plan and all options granted under the
Stock Plan, (b) make such rules as it deems necessary for the proper
administration of the Stock Plan, (c) make all other determinations necessary or
advisable for the administration of the Stock Plan, and (d) correct any defect
or supply any omission or reconcile any inconsistency in the Stock Plan or in
any option granted under the Stock Plan in the manner and to the extent that the
Committee deems advisable. The Committee may delegate the authority and
responsibility for the day-to-day administrative or ministerial tasks of the
Stock Plan to the employee benefits department of the Company or a third party
engaged for such purpose ("Benefits Representative"). Upon the recommendation of
management, the Committee has selected Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") to act as Benefits Representative under a
one-year contract which automatically renews for an additional year, unless
terminated by 90 days prior written notice. The Committee may remove Merrill
Lynch as Benefits Representative at any time during this contract upon 90 days
prior written notice.
Eligibility. Participation under the Stock Plan is voluntary. Any salaried
or hourly employee of the Company who has reached the age of majority in the
jurisdiction of his legal residency, except those described below, is eligible
to participate in the Stock Plan after having been in the continuous employ of
the Company for at least six consecutive months. Ineligible employees are
employees who own stock, and/or hold outstanding options to purchase stock,
representing 5% or more of the total combined voting power or value of all
classes of stock of the Company or of any subsidiary.
Enrollment. An employee shall be eligible to participate in the Stock Plan
as of the later of November 1, 1997 or the first day of the fiscal quarter
following such employee's satisfaction of the eligibility requirements (the
"Entry Date"). The fiscal quarters begin on the first day of November, February,
May and August of each year. At least 10 days prior to the first Entry Date as
of which an employee is eligible to participate in the Stock Plan, the employee
shall execute and deliver to the Benefits Representative, on the form prescribed
for such purpose, an authorization for payroll deductions which specifies his
chosen rate of payroll deduction contributions. Each Participant shall be
required to open a stock brokerage account with Merrill Lynch, which has been
engaged to administer the purchase of Common Stock under the Stock Plan.
Participant Contributions. All shares of Common Stock purchased by a
Participant pursuant to the Stock Plan are purchased with amounts withheld from
the Participant's Base Pay. "Base Pay" means the Participant's regular
straight-time earnings or base salary, excluding payments for overtime, shift
differentials, incentive compensation, bonuses, and other special payments,
fees, allowances or extraordinary compensation. In his payroll deduction
authorization form, the Participant will elect to have deductions made from his
Base Pay for each payroll period such authorization is in effect in whole
percentages at the rate of not less than 1% nor more than 15% of his Base Pay.
All payroll deductions made for a Participant will be credited to a non-interest
bearing account maintained by the Company in the name of the Participating
Employee ("Account"). A Participant may not make any separate cash payment into
his Account. Each Participant will receive a statement quarterly from Merrill
Lynch summarizing the transactions with respect to such Participant's Account
during the Stock Plan year through the date of such statement.
A Participant may increase, decrease, suspend, or resume payroll deductions
under the Stock Plan by giving written notice to the Benefits Representative at
such time and in such form as the Committee or Benefits Representative may
prescribe from time to time. Such increase, decrease, suspension or resumption
will be effective as of the first day of the payroll period as soon as
administratively practicable after receipt of the Participant's written notice,
but not earlier than the first day of the payroll period of the fiscal quarter
next following receipt of such form. A Participant may completely discontinue
payroll deductions at any time, effective as of the first day of the payroll
period as soon as administratively practicable following receipt of a written
discontinuance notice from the Participant. Following a discontinuance of
contributions, a Participant
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cannot authorize any payroll contributions to his Account for the remainder of
the fiscal quarter in which the discontinuance was effective.
Granting of Option to Purchase Stock. For each fiscal quarter, a
Participant will be deemed to have been granted an option to purchase, on the
first day of the fiscal quarter, as many whole and fractional shares of Common
Stock as may be purchased with the payroll deductions credited to his Account
during the fiscal quarter. The "Option Price" of the Common Stock purchased with
the amount credited to the Participant's Account during each fiscal quarter will
be the lower of: (i) 85% of the closing sales price of the Common Stock on the
New York Stock Exchange (the "Market Price") on the first business day of the
fiscal quarter; or (ii) 85% of the Market Price of a share of Common Stock on
the last business day of the fiscal quarter. No Participant will be permitted to
purchase Common Stock (i) with a total Market Price (determined as of the last
day of the fiscal quarter in which purchased) that exceeds $25,000 in any
calendar year, or (ii) which results in such Participant owning Common Stock
representing 5% or more of the combined voting power or value of all classes of
stock of the Company.
Exercise of Option. Unless a Participant has elected to withdraw his
payroll deduction authorization, the Participant's option for the purchase of
Common Stock will be deemed to have been exercised automatically on the last day
of the fiscal quarter for the purchase of the number of whole and fractional
shares of Common Stock which the accumulated payroll deductions in the
Participant's Account will purchase, as determined by dividing the Account
balance as of such date by the Option Price.
Termination of Employment. If a Participant's termination of employment is
due to retirement from employment on or after his attainment of age 65, death or
disability, the Participant (or the Participant's personal representative or
legal guardian in the event of disability, or the Participant's beneficiary, or
the administrator of his will or executor of his estate in the event of death),
will have the right to elect, within 30 days, either to (i) withdraw all of the
cash and shares of Common Stock credited to the Participant's Account as of his
termination date, or (ii) exercise the Participant's option for the purchase of
Common Stock on the last day of the fiscal quarter (in which the termination of
employment occurs) for the purchase of the number of shares of Common Stock
which the cash balance credited to his Account as of the date of his termination
of employment will purchase at the applicable Option Price. This election must
be in writing to the Benefits Representative, at such time and in such manner as
prescribed from time to time by the Committee or Benefits Representative.
Failure to make such election within 30 days of the Participant's termination,
shall be deemed to be an election to withdraw the Participant's Account balance
as described in (i) above. Thereafter, any accumulated cash and shares of Common
Stock credited to the Participant's Account as of his termination of employment
date will be delivered to or on behalf of the Participant as soon as
administratively practicable.
Upon termination of a Participant's employment for any other reason other
than retirement, death, or disability pursuant to the terms above, the
participation of the Participant in the Stock Plan will immediately terminate.
Thereafter, any accumulated cash and shares of Common Stock credited to the
Participant's Account as of his termination of employment date will be delivered
to the Participant as soon as administratively practicable.
Transferability. No amounts credited to a Participant's Account, whether
cash or Common Stock, nor any rights with regard to the exercise of an option or
to receive Common Stock under the Stock Plan, may be assigned, transferred,
pledged or otherwise disposed of in any way by the Participant other than by
will or the laws of descent and distribution. Any such attempted assignment,
transfer, pledge, or other disposition will be void and without effect.
Withdrawal of Payroll Deduction Authorization. At any time during a fiscal
quarter, but in no event later than 15 days (or such shorter period prescribed
by the Committee or a Benefits Representative) prior to the last day of the
fiscal quarter, a Participant may elect to abandon his election to purchase
Common Stock under the Stock Plan. By written notice to the designated Benefits
Representative on a form provided for such purpose, the Participant may thus
elect to withdraw all of the accumulated cash balance in his Account being held
for the purchase of Common Stock. Partial withdrawals will not be permitted. All
such amounts will be paid to the Participant as soon as administratively
practical after receipt of his notice of withdrawal. After
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receipt and acceptance of such withdrawal notice, no such further payroll
deductions will be made from the Participant's Base Pay beginning as of the next
payroll period during the fiscal quarter in which the withdrawal notice is
received. The Committee, in its discretion, may determine that amounts otherwise
withdrawable hereunder by Participants shall be offset by an amount that the
Committee, in its discretion, determines to be reasonable to help defray the
administrative costs of effecting the withdrawal. After a withdrawal, the
Participant may resume payroll deductions as of the first day of a fiscal
quarter following his delivery of a payroll deduction authorization to a
Benefits Representative.
Termination and Amendments. The board of directors shall have the authority
to terminate or amend the Stock Plan; provided, however, that the board shall
not, without the approval of the stockholders of the Company, (a) increase the
maximum number of shares which may be issued under the Stock Plan, (b) amend the
requirements as to the class of employees eligible to purchase Common Stock
under the Stock Plan, or (c) permit the members of the Committee to purchase
Common Stock under the Stock Plan. No termination, modification, or amendment of
the Stock Plan shall adversely affect the rights of a Participant with respect
to an option previously granted to him under such option without his written
consent.
Resale Restrictions. Common Stock acquired pursuant to the Stock Plan is
not restricted and may be resold through normal securities market channels.
United States Income Tax Consequences. The following is a brief summary of
certain of the U.S. income tax consequences of certain transactions under the
Stock Plan based on federal income tax laws in effect on October 15, 1997, as
required by U.S. Federal Securities laws. This summary applies to the Stock Plan
as normally operated and is not intended to provide or supplement tax advice to
Eligible Employees. The summary contains general statements based on current
federal income tax statutes, regulations and current available interpretations
thereof and thus cannot encompass all factors which may affect the tax
consequences to an individual Participant. Each Participant is advised to
address specific inquiries to his personal tax advisor or the Company's local
Stock Plan representative with respect to any tax questions that may arise in
connection with the purchase of shares under the Stock Plan, including any state
or foreign tax consequences and the effect, if any, of gift, estate, and
inheritance taxes. The Stock Plan is not qualified under Section 401 of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The Stock
Plan is intended to be a qualified employee stock purchase plan under Sections
421 and 423 of the Code. The discussion below only applies to Participants who
are U.S. employees subject to U.S. income tax laws. Section references are to
the Code unless otherwise noted.
Recognition of Taxable Income. A Participant's payroll deductions to
purchase Common Stock under the Stock Plan are made on an after-tax basis. Upon
receipt of an option to purchase Common Stock under the Stock Plan, the
Participant does not report any income, even though the Option Price is less
than the Market Price of the Common Stock at the time; nor will the Participant
recognize income on the exercise of the option and acquisition of the Common
Stock at a subsequent date. Only on the sale or other disposition of the Common
Stock will the Participant recognize taxable income.
Sale or Disposition of Common Stock Two Years After Option Grant. Under
Section 421(a), as long as the disposition occurs two years or more after the
date the option is granted to the Participant, and the Participant has held the
Common Stock at least 12 months after exercising the option, a portion of any
profit will be capital gain (see discussion of Section 423(c) below). Further,
the Participant must be an employee continuously during the period from the
granting of the option until three months before the option is exercised. Under
Section 421(c)(1)(A), upon the death of the Participant, the option may be
exercised by the estate of the Participant or the person to whom it passes under
the laws of descent and distribution to the same extent that it was exercisable
by the Participant.
Sale or Disposition of Common Stock Within Two Years After Option
Grant. Under Section 421(b), a disposition of Common Stock acquired under the
Stock Plan during the two years following the option grant or the one year
following exercise of the option removes the tax-favored status of the purchase.
As a result of such a "disqualifying disposition," the Participant recognizes
ordinary compensation income in the year of the disposition equal to the
difference between the Market Price of the Common Stock on the date the option
was exercised and the Option Price. Subject to Section 423(c), any additional
appreciation is taxable to the Participant as capital gain.
7
<PAGE> 10
Option Price Discount -- Ordinary Compensation Income. Under Section
423(c), because options will be granted under the Stock Plan at an Option Price
discounted from the Market Price, the Participant must include in his taxable
income as ordinary compensation income at time of the sale or other taxable
disposition of the Common Stock acquired under the Stock Plan, or upon the
Participant's death while still holding the Common Stock, the lesser of:
1. the amount, if any, by which the Market Price of the Common Stock
when the option was granted exceeds the Option Price; or
2. the amount, if any, by which the Common Stock's Market Price at
the time of such disposition or death exceeds the Option Price.
The tax basis of the Common Stock will be increased by the amount of the
ordinary compensation income recognized in this respect. This applies regardless
of whether the Participant has held the stock for the full two-year statutory
holding period.
Employer's Tax Deduction. The Company may not deduct the difference between
the Market Price of the Common Stock and the Option Price unless there is a
disqualifying disposition. If the Participant disposes of Common Stock acquired
under the Stock Plan in a disqualifying disposition, i.e., a failure to meet the
two-year statutory holding period requirement, the Company is entitled to a
deduction in the year of the disposition equal to the ordinary compensation
income recognized by the Participant.
APPROVAL
Approval of the proposed Stock Plan requires the affirmative vote of the
holders of a majority of the Shares represented in person or by proxy at the
annual meeting. The board of directors recommends a vote FOR approval of the
proposed Stock Plan.
PROPOSED APPROVAL OF AMENDMENT TO THE AMENDED
AND RESTATED 1992 EMPLOYEE NONQUALIFIED STOCK OPTION PLAN
The Option Plan was originally approved by the Company's stockholders in
December 1992 and amended in December 1995. The Option Plan entitles officers
and other key employees of the Company and its subsidiaries to receive
nonqualified options to purchase up to an aggregate of 1,158,333 shares of
Common Stock. Effective in March 1997, the board of directors approved an
amendment to the Option Plan that would increase the aggregate number of shares
of Common Stock which may be issued or covered by nonqualified options pursuant
to the Option Plan. The board of directors adopted this amendment as a means to
provide officers and other key employees with a continuing proprietary interest
in the Company.
DESCRIPTION OF AMENDMENTS
The proposed amendment would increase the number of shares of Common Stock
which may be issued or covered by options pursuant to the Option Plan by
1,041,667. Of the 1,158,333 shares authorized for grant under the Employee Plan
none remain available for grant as of October 31, 1997, and during fiscal 1997
options covering 523,254 shares of Common Stock were granted subject to
stockholder approval. If the proposed amendment is approved, the aggregate
number of shares of Common Stock which may be issued or covered by options
pursuant to the Option Plan would be 2,200,000.
APPROVAL
Approval of the proposed amendment to the Option Plan requires the
affirmative vote of the holders of a majority of the Shares represented in
person or by proxy at the annual meeting. The board of directors recommends a
vote FOR approval of the proposed amendment to the Option Plan.
8
<PAGE> 11
OTHER INFORMATION
CERTAIN STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Shares at October 31, 1997, by (i) each person who is
known by the Company to own beneficially more than 5% of the outstanding Shares,
(ii) all directors and the director nominee of the Company, (iii) the chief
executive officer and each of the other executive officers and (iv) all
directors, director nominee and executive officers, as a group.
<TABLE>
<CAPTION>
NAME OF PERSON PERCENT
OR IDENTITY OF GROUP(1) NUMBER(2)(3) OF CLASS
----------------------- ------------ --------
<S> <C> <C>
David B. Robson............................................. 1,471,263 6.53%
Clayton P. Cormier.......................................... 10,004 *
Ralph M. Eeson.............................................. 6,220 *
Lawrence C. Fichtner........................................ 184,659 *
James R. Gibbs.............................................. -- --
Steven J. Gilbert........................................... 64,185 *
Stephen J. Ludlow........................................... 42,667 *
Brian F. MacNeill........................................... 14,743 *
Douglas B. Thompson......................................... 192,059 *
Jack C. Threet.............................................. 13,332 *
Anthony Tripodo............................................. 10,000 *
Rene M.J. VandenBrand....................................... 18,000(4) *
All directors, nominee and executive officers as a group (12
persons named above)...................................... 2,027,132 8.94%
</TABLE>
- ---------------
* Does not exceed one percent.
(1) The address of all persons listed is 3701 Kirby Drive, Houston, Texas 77098,
c/o the Company.
(2) Includes, in each case, shares of Common Stock underlying currently
exercisable outstanding options and warrants (see footnotes 2 and 8 under
the caption "Election of Directors").
(3) For information concerning shareholdings attributed to the named
individuals, but as to which beneficial ownership is disclaimed, see
footnotes 7 and 8 under the caption "Election of Directors."
(4) Represents shares of Common Stock which Mr. VandenBrand has the right to
acquire upon the exercise of currently exercisable stock options.
EXECUTIVE OFFICER TENURE AND IDENTIFICATION
The executive officers of the Company serve at the pleasure of the board of
directors and are subject to annual appointment by the board at its first
meeting following the annual meeting of stockholders. In addition to Messrs.
Robson, Ludlow and Fichtner, who are listed under "Election of
Directors -- Nominees," the Company's executive officers are as follows:
Anthony Tripodo, age 45, was appointed executive vice president, chief
financial officer, and treasurer of the Company in April 1997. Prior to
joining the Company, he was employed by Baker Hughes for sixteen years in
various financial management capacities, most recently as vice president of
finance and administration for its Baker Performance Chemicals Incorporated
unit. Prior to his service with Baker Hughes, Mr. Tripodo was employed by
the accounting firm of Price Waterhouse from 1974 to 1980.
Rene M.J. VandenBrand, age 39, became vice president -- business
development of the Company in August 1996 upon consummation of the
Combination. Prior thereto, he had been vice president -- finance and
secretary of VES since November 1995, following two years of service in
comparable positions with Taro Industries Limited. He was previously a
partner of Coopers & Lybrand Chartered Accountants in Calgary.
9
<PAGE> 12
EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for services to the
Company for the years ended July 31, 1997, 1996, and 1995 of those individuals
who served as (i) the chief executive officer of the Company during fiscal year
1997, or (ii) an executive officer of the Company during fiscal year 1997 and
was compensated at an annual rate exceeding $100,000, (collectively, the
"Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
---------------------------------- ----------------------------
AWARDS
OTHER ----------------------------
FISCAL ANNUAL RESTRICTED STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION STOCK AWARDS (SHARES) COMPENSATION(1)
- --------------------------- ------ -------- -------- ------------ ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
David B. Robson............. 1997 $239,583 $ 31,196(3) -- -- 25,806 --
Chief executive officer(2)
Stephen J. Ludlow........... 1997 $208,312 $158,444(3) -- -- 40,273 $ 4,000
President and chief 1996 190,142 -- -- -- 16,000 4,000
operating officer, 1995 181,392 15,000 -- -- -- 4,000
former chief executive
officer
Lawrence C. Fichtner........ 1997 $109,520 $ 17,296(3) -- -- 17,032 --
Executive vice
president -- corporate
communications(2)
Anthony Tripodo............. 1997 $ 60,000 $ 60,000 -- $202,500(5) 17,778 --
Executive vice president,
chief financial officer
and treasurer(4)
Rene M.J. VandenBrand....... 1997 $117,500 $ 15,302(3) $31,250(6) -- 12,387 $ 3,463
Vice president -- business
development(2)
Richard W. McNairy.......... 1997 $101,344 $111,250(3) -- -- 13,333 $285,654(8)
Former vice president, 1996 152,000 -- -- -- 13,000 4,000
chief financial 1995 140,000 -- -- -- 13,333 --
officer, and
treasurer(7)
</TABLE>
- ---------------
(1) Except as otherwise noted, represents Company contributions to the Executive
Officer's account pursuant to the Company's 401(k) Plan.
(2) Commenced employment with the Company on August 30, 1996.
(3) Includes a bonus awarded during the prior fiscal year and paid during fiscal
1997 in the following amounts: Mr. Robson -- $7,081; Mr. Ludlow -- $139,500;
Mr. Fichtner -- $5,590; Mr. VandenBrand -- $3,727; and Mr. McNairy --
$111,250.
(4) Commenced employment with the Company on April 1, 1997.
(5) Represents valuation of 10,000 shares of restricted Common Stock granted to
Mr. Tripodo on April 1, 1997. As of July 31, 1997, these shares had an
aggregate value of $251,250. In general, 1/3 of these shares vest on April
1st of each of 1998, 1999 and 2000, if he is continuously employed by the
Company through such dates. Dividends, if any, declared by the Company are
payable to Mr. Tripodo on these 10,000 shares.
(6) Includes a $10,000 relocation bonus and a domestic allowance for temporary
living expenses of $21,250 incurred during Mr. VandenBrand's relocation from
Calgary to Houston.
(7) Served in these capacities until April 1, 1997.
(8) Includes $283,654 paid in connection with Mr. McNairy's severance from the
Company.
10
<PAGE> 13
Option Grants in Last Fiscal Year. The following table provides information
concerning stock options granted to the Executive Officers during the year ended
July 31, 1997:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS(1) OPTION TERM
---------------------------------------------------- -----------------------
NUMBER OF
SHARES % OF TOTAL
UNDERLYING OPTIONS GRANTED
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
---- ---------- --------------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
David B. Robson........... 25,806 3.32% 19 3/8 03/10/07 $314,442 $ 796,858
Stephen J. Ludlow......... 40,273 5.18% 19 3/8 03/10/07 490,720 1,243,580
Lawrence C. Fichtner...... 17,032 2.19% 19 3/8 03/10/07 207,533 525,928
Anthony Tripodo........... 17,778 2.29% 19 3/8 03/10/07 216,622 548,963
Rene M.J. VandenBrand..... 12,387 1.59% 19 3/8 03/10/07 150,934 382,496
Richard W. McNairy(2)..... 13,333 1.72% 19 3/8 06/29/98 12,917 25,833
</TABLE>
- ---------------
(1) Except as otherwise noted, all options granted in fiscal 1997 vest on a
cumulative basis as to 1/4 of the shares covered on the first through fourth
anniversaries of the date of grant.
(2) In connection with Mr. McNairy's severance arrangements, nonvested options
granted in fiscal 1997 covering 13,333 shares of Common Stock were deemed to
be fully vested.
Option Exercises and Year-End Option Values. The following table sets forth
information with respect to the unexercised options to purchase shares of Common
Stock which have been granted under the Employee Stock Plan to the Executive
Officers and held by them at July 31, 1997.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS HELD AT FISCAL HELD AT
YEAR END FISCAL YEAR END(1)
SHARES ACQUIRED --------------------------- ---------------------------
ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David B. Robson.......... -- -- 66,537 25,806 $1,227,463 $148,385
Stephen J. Ludlow........ -- -- 42,667 40,273 628,004 231,570
Lawrence C. Fichtner..... -- -- 52,903 17,032 978,516 97,934
Anthony Tripodo.......... -- -- -- 17,778 -- 102,224
Rene M.J. VandenBrand.... 30,000 $444,150 18,000 12,387 347,490 71,226
Richard W. McNairy....... 8,000 121,625 31,666 -- 437,033 --
</TABLE>
- ---------------
(1) Value of in-the-money options calculated based on the closing price per
share of the Common Stock on July 31, 1997 ($25 1/8 per share) as reported
by the New York Stock Exchange.
COMPENSATION COMMITTEE REPORT
The compensation committee of the board of directors (the "Committee") has
furnished the following report on executive compensation for fiscal 1997:
Under the supervision of the Committee, the Company seeks to relate a
significant portion of potential total executive compensation to the
Company's financial performance. In general, executive financial rewards
may be segregated into the following significant components: base
compensation, bonus and stock-based benefits.
Base compensation for the Executive Officers is intended to afford a
reasonable degree of financial security and flexibility to those
individuals who were regarded by the Committee as acceptably
11
<PAGE> 14
discharging the levels and types of responsibility implicit in the various
executive positions. Based on these criteria, the Committee awarded Mr.
Robson a raise of $25,000 (effective March 1, 1997) in recognition of the
Company's improving operating performance. In the case of all other
Executive Officers, base compensation for fiscal 1997 was set by the
Committee based upon the recommendation of Mr. Robson; base pay increases
of approximately $30,000 were authorized for Mr. Ludlow (effective March 1,
1997) and Mr. VandenBrand (effective May 1, 1997) by the Committee and the
base compensation of other Executive Officers remained unchanged.
In setting the base pay for Executive Officers, little consideration
was given to the compensation plans of executives in other seismic
companies because some of the Company's principal competitors are
subsidiaries of larger, more diversified oilfield service concerns, and
compensation data was not publicly available for the comparable executive
positions in those subsidiaries. Moreover, the few other publicly-held
seismic operators had such disparate operating and financial
characteristics and were of such dissimilar sizes, that the Committee found
little basis for reliable comparison. In setting Mr. Robson's salary and
the salaries of the other Executive Officers, the Committee considered the
salary histories of each executive, and his past performance, credentials,
age and experience with the Company, as well as his perceived future
utility to the Company.
Annual bonuses are intended to reflect a policy of requiring a minimum
level of Company financial performance before any bonuses are earned by the
Executive Officers, with bonuses for achieving higher levels of performance
directly tied to the level achieved. For fiscal 1997, the Committee
recommended and the board of directors adopted, an incentive compensation
program (the "Incentive Plan") pursuant to which some 200 managerial
personnel (including the Executive Officers) became eligible to earn
semi-annual bonuses based upon the Company's results of operations as a
percentage of those anticipated in the annual budget approved by the board
at the beginning of the year. The following bonuses were awarded and paid
under the Incentive Plan at mid-year to Executive Officers for their
performance during the first half of fiscal 1997: Mr. Robson -- $24,115;
Mr. Ludlow -- $18,944; Mr. Fichtner -- $11,706; and Mr.
VandenBrand -- $11,575. In addition, bonuses of approximately $7,081,
$5,590 and $3,727 were paid to Messrs. Robson, Fichtner and VandenBrand,
respectively, during fiscal 1997 in respect of their 1996 performance under
a since discontinued VES bonus plan. In connection with his acceptance of
employment with the Company and as consideration for benefits and
compensation foregone at his former employer, Mr. Tripodo was awarded a
bonus consisting of $60,000 and 10,000 restricted shares of the Company's
Common Stock in April 1997.
The board of directors is of the view that the periodic grant of
significant blocks of stock options to the Executive Officers is calculated
to align the executive's economic interests with those of stockholders and
to provide a direct and continuing focus upon the goal of increasing
stockholder value. The Company granted options covering an aggregate of
113,276 shares of the Company's Common Stock to Executive Officers during
fiscal 1997 at 100% of the market price for the Common Stock on the date of
grant, as follows: Mr. Robson -- 25,806 shares; Mr. Ludlow -- 40,273
shares; Mr. Fichtner -- 17,032 shares; Mr. Tripodo -- 17,778 shares; and
Mr. VandenBrand -- 12,387 shares. The Committee presently anticipates that
such grants will be considered only every other year.
The Compensation Committee
Brian F. MacNeill, Chairman
Steven J. Gilbert
Douglas B. Thompson
Jack C. Threet
12
<PAGE> 15
EMPLOYMENT AND SEVERANCE AGREEMENTS
In connection with the Combination, the Company assumed the obligation of
the employment agreements previously established between VES and Messrs. Robson
and Fichtner. These agreements were for one-year terms ending October 31, 1996.
In August 1996, the Company also entered into an employment agreement with Mr.
VandenBrand that was effective through August 1997. In April 1997, the Company
entered into employment agreements with Messrs. Ludlow and Tripodo that are
effective through March 1999. All of these agreements automatically renew for
successive one-year periods unless terminated by prior written notice of either
party. None of these employment agreements have been terminated. As of July 31,
1997, the Executive Officers are entitled to annual salaries under their
employment agreements as follows: Mr. Robson -- $275,000; Mr.
Fichtner -- $119,477; Mr. Ludlow -- $225,000; Mr. Tripodo -- $180,000; and Mr.
VandenBrand -- $150,000. Within 30 days of termination without cause, each
Executive Officer is entitled to a one-time payment under his employment
agreement equal to several months of his salary as follows: Messrs. Robson,
Fichtner and Ludlow -- 24 months; Mr. Tripodo -- 18 months; and Mr.
VandenBrand -- 12 months. With the exception of Mr. Tripodo, all of the
Executive Officers are subject to noncompete agreements.
Mr. Richard W. McNairy, who served as vice president, chief financial
officer and treasurer of the Company, resigned effective April 1, 1997. Under a
severance agreement with the Company, Mr. McNairy was paid a one-time sum of
$283,654. On April 1, 1997, Mr. McNairy held stock options which were not yet
exercisable for 29,023 shares of Common Stock at an exercise price of $19.375
per share. Under the terms of his severance agreement with the Company,
nonvested stock options covering 13,333 shares of Common Stock were deemed to be
fully vested and the remaining nonvested stock options covering 15,690 shares of
Common Stock were revoked. On July 31, 1997, he also held stock options
exercisable for 5,333 and 13,000 shares of Common Stock at exercise prices of
$6.00 per share and $5.25 per share, respectively. Mr. McNairy may exercise his
stock options at any time through June 29, 1998.
13
<PAGE> 16
COMMON STOCK PERFORMANCE GRAPH
The following graph illustrates the performance of the Company's Common
Stock, compared with the cumulative total return on (i) the Standard & Poor's
500 Stock Index and (ii) two indexes of peer companies selected by the Company,
for the period beginning July 31, 1992, and ending July 31, 1997. The graph
assumes that the value of the investment in the Company's Common Stock and each
index was $100 at July 31, 1992. In all cases the cumulative total return
assumes, as contemplated by Securities and Exchange Commission Rules, that any
cash dividends on the Common Stock of each entity included in the data presented
above were reinvested in that security.
VERITAS DGC INC.
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD VERITAS DGC OLD PEER NEW PEER
(FISCAL YEAR COVERED) INC. S&P 500 INDEX GROUP 1 GROUP 2
<S> <C> <C> <C> <C>
JULY 31, 1992 100 100 100 100
JULY 31, 1993 51.38 108.73 67.66 97.26
JULY 31, 1994 27.78 114.34 116.05 93.68
JULY 31, 1995 42.12 144.19 148.85 106.57
JULY 31, 1996 85.18 168.08 159.50 128.76
JULY 31, 1997 186.10 255.72 290.74 241.58
</TABLE>
- ---------------
(1) Consists of Seitel, Inc., Dawson Geophysical Company, Universal Seismic
Associates, Inc., Grant Geophysical, Inc. and Petroleum Geo-Services, Inc.
(the "Old Peers").
(2) Consists of Old Peers, with the following exceptions: Universal Seismic
Associates, Inc. and Grant Geophysical, Inc. have been deleted and Western
Atlas Inc. (a geophysical service provider) and Schlumberger Limited (a
diversified oilfield service company that provides geophysical services)
have been added (collectively, the "New Peers"). The deleted companies are
no longer comparable to the Company in terms of revenues. All companies in
the New Peer group are providers of geophysical services to the petroleum
industry.
This graph depicts the past performance of the Common Stock and in no way
should be used to predict future performance. The Company does not make or
endorse any predictions as to future share performance.
The foregoing price performance comparisons shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or under the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this graph by reference, and
shall not otherwise be deemed filed under such acts.
14
<PAGE> 17
CERTAIN TRANSACTIONS
In early fiscal 1997, the Company paid Mr. Thompson $150,000 for consulting
services provided in conjunction with the Combination.
AUDITORS
Price Waterhouse LLP ("Price Waterhouse"), certified public accountants,
have served as the independent auditors of the Company since November 1996. It
is not proposed that any formal action be taken at the meeting with respect to
the continued employment of Price Waterhouse, inasmuch as no such action is
legally required. Representatives of Price Waterhouse plan to attend the annual
meeting and will be available to answer questions. Its representatives will also
have a opportunity to make a statement at the meetings if they so desire,
although it is not expected that any such statement will be made.
On November 20, 1996, the board of directors of the Company determined to
replace Deloitte & Touche LLP ("D&T") as its principal accountant with Price
Waterhouse. Price Waterhouse was the principal independent accountant for VES,
which was combined into the Company on August 30, 1996. The report of D&T on the
Company's financial statements for the last two fiscal years did not contain an
adverse opinion or a disclaimer of opinion, nor was such opinion qualified or
modified as to uncertainty, audit scope, or accounting principles. During the
Company's two most recent fiscal years and subsequent interim periods preceding
the replacement of D&T, the Company had no disagreements with D&T on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure. During the Company's two most recent fiscal years
and subsequent interim periods preceding the retention of Price Waterhouse,
neither the Company nor anyone on the Company's behalf, consulted Price
Waterhouse regarding any matter. D&T has furnished the Company with a letter
addressed to the Securities and Exchange Commission stating that it agrees with
the foregoing statements.
The audit committee assists the board in assuring that the accounting and
reporting practices of the Company are in accordance with all applicable
requirements. The committee reviews with the auditors the scope of proposed
audit work and meets with the auditors to discuss matters pertaining to the
audit and any other matters which the committee or the auditors may wish to
discuss. In addition, the audit committee would recommend the appointment of new
auditors to the board of directors in the event future circumstances were to
indicate that such action is desirable.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and changes of ownership with the Securities and
Exchange Commission (the "Commission"). With respect to the fiscal year ended
July 31, 1997, Mr. Anthony Tripodo -- Executive Vice-President, Chief Financial
Officer, and Treasurer, was delayed in filing his Form 3 report and Mr. Doug
Thompson -- Director, was delayed in filing four Form 4 reports regarding twelve
transactions as required by Section 16(a). The Company believes that all other
filing requirements applicable to the Company's officers, directors and greater
than 10% stockholders have been met.
AVAILABILITY OF FORM 10-K
The Company will provide a copy of the Company's annual report on Form 10-K
for the fiscal year ended July 31, 1997, without charge to any stockholder
making written request to Allan C. Pogach, Corporate Secretary, 3701 Kirby
Drive, Houston, Texas 77098.
15
<PAGE> 18
OTHER MATTERS
The annual report to stockholders covering the fiscal year ended July 31,
1997, has been mailed to each stockholder entitled to vote at the annual
meeting.
Any stockholder who wishes to submit a proposal for action to be included
in the proxy statement and form or proxy relating to the Company's 1998 annual
meeting of stockholders is required to submit such proposals to the Company on
or before July 10, 1998.
The cost of soliciting proxies in the accompanying form will be borne by
the Company. In addition to solicitations by mail, a number of regular employees
of the Company may, if necessary to assure the presence of a quorum, solicit
proxies by telephone.
The persons designated to vote shares covered by board of directors'
proxies intend to exercise their judgment in voting such shares on other matters
that may properly come before the meeting. Management does not expect that any
matters other than those referred to in this proxy statement will be presented
for action at the meeting.
By Order of the Board of Directors,
/s/ ALLAN C. POGACH
Allan C. Pogach,
Secretary
November 10, 1997
16
<PAGE> 19
PROXY
FOR
ANNUAL
MEETING
OF
STOCKHOLDERS
DECEMBER 9,
1997
VERITAS DGC INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS OF VERITAS DGC INC.
TO BE HELD ON DECEMBER 9, 1997
The undersigned hereby appoints David B. Robson, Stephen J.
Ludlow, Anthony Tripodo and Allan C. Pogach, or any of them,
each with power of substitution, attorneys and proxies of the
undersigned to vote all Exchangeable Shares of Veritas Energy
Services Inc. which the undersigned is entitled to vote at the
annual meeting of stockholders of Veritas DGC Inc. ("Company")
to be held on December 9, 1997 at the offices of the Company,
3701 Kirby Drive, Houston, Texas 77098 at 10:00 a.m., Houston
time, and at any adjournments (the "Annual Meeting").
1. [ ] FOR the election (except as indicated below) as
directors of Clayton P. Cormier, Ralph M. Eeson, Lawrence
C. Fichtner, James R. Gibbs, Steven J. Gilbert, Stephen
J. Ludlow, Brian F. MacNeill, David B. Robson, Douglas B.
Thompson and Jack C. Threet.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
NOMINEE, WRITE THAT NOMINEE'S NAME BELOW:
------------------------------------------------------------
[ ] WITHHOLD authority to vote for all nominees listed
above.
(PLEASE DATE AND SIGN ON REVERSE SIDE)
<PAGE> 20
2. Proposal FOR adoption of the 1997 Employee Stock Purchase Plan;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal FOR amendment of the Amended and Restated 1992 Employee
Nonqualified Stock Option Plan;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. [ ] In their discretion, upon such other matters (including procedural
and other matters relating to the conduct of the meeting) as properly
come before the Annual Meeting;
as described in the Notice of Annual Meeting of Stockholders and Proxy
Statement, receipt of which is hereby acknowledged.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE HEREON
ONLY IF THIS PROXY IS COMPLETED, RETURNED TO AND RECEIVED BY CIBC MELLON TRUST
("CIBC"), VOTING TRUSTEE, NOT LATER THAN 10:00 A.M., CALGARY TIME, ON MONDAY,
DECEMBER 8, 1997. IN ALL OTHER EVENTS, THE EXCHANGEABLE SHARES REPRESENTED BY
THIS PROXY WILL NOT BE VOTED AT THE ANNUAL MEETING. IN THE EVENT YOU WISH TO
ATTEND THE ANNUAL MEETING IN PERSON AND VOTE YOUR SHARES DIRECTLY, PLEASE CHECK
THE FOLLOWING BOX [ ] , IN WHICH CASE CIBC WILL ISSUE A PROXY TO YOU FOR YOUR
SHARES; HOWEVER, CIBC ACCEPTS NO RESPONSIBILITY FOR TIMELY FORWARDING OF A PROXY
AUTHORIZING YOU TO VOTE YOUR SHARES DIRECTLY IF SUCH INSTRUCTION IS NOT RECEIVED
BY IT PRIOR TO 5:00 P.M., CALGARY TIME, ON MONDAY, DECEMBER 1, 1997. IN ALL
EVENTS, THE RISK OF DELIVERY OF SUCH A PROXY REMAINS WITH THE STOCKHOLDER.
Dated this
-------------------------------------------------------
day of
----------------------------------------------------------------,
1997
-------------------------------
-------------------------------
Signature(s) of Stockholder
Please sign exactly as your
name appears on your stock
certificate. When signing as
executor, administrator,
trustee or other
representative, please give
your full title. All joint
owners should sign.
PLEASE DATE, SIGN AND MAIL YOUR PROXY PROMPTLY. PLEASE DO NOT FOLD THIS PROXY.
<PAGE> 21
PROXY
FOR
ANNUAL
MEETING
OF
STOCKHOLDERS
DECEMBER 9,
1997
VERITAS DGC INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF
STOCKHOLDERS TO BE HELD ON DECEMBER 9, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints David B. Robson, Stephen J.
Ludlow, Anthony Tripodo and Allan C. Pogach, or any of them,
attorneys and proxies, with power of substitution and
revocation, to vote, as designated on the reverse side, all
shares of stock which the undersigned is entitled to vote, with
all powers which the undersigned would possess if personally
present, at the Annual Meeting (including all adjournments
thereof) of Stockholders of Veritas DGC Inc. to be held on
Tuesday, December 9, 1997 at 10:00 a.m. at the offices of the
Company, 3701 Kirby Drive, Houston, Texas 77098.
1. [ ] FOR all nominees (except as specified hereon) as
nominees of Clayton P. Cormier, Ralph M. Eeson, Lawrence
C. Fichtner, James R. Gibbs, Steven J. Gilbert, Stephen
J. Ludlow, Brian F. MacNeill, David B. Robson, Douglas B.
Thompson and Jack C. Threet.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN
INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME ON THE
SPACE PROVIDED BELOW:
------------------------------------------------------------
[ ] WITHHOLD authority to vote for all nominees listed
above.
2. Proposal FOR adoption of the 1997 Employee Stock Purchase
Plan;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(THIS PROXY CONTINUES AND MUST BE SIGNED ON THE REVERSE SIDE)
<PAGE> 22
3. Proposal FOR amendment of the Amended and Restated 1992 Employee
Nonqualified Stock Option Plan;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. [ ] As such proxies, may in their discretion determine, upon such other
business (including procedural and other matters relating to the
conduct of the meeting) that may properly come before the meeting and
any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IN THE ABSENCE OF SUCH INSTRUCTIONS THIS PROXY WILL
BE VOTED FOR THE NOMINEES LISTED IN ITEM 1 AND FOR THE PROPOSALS IN ITEMS 2 AND
3.
The undersigned hereby
acknowledges receipt of the
Notice of Annual Meeting of
Stockholders and the Proxy
Statement furnished therewith.
Dated this
-------------------------------------------------------
day of
----------------------------------------------------------------,
1997
-------------------------------
-------------------------------
Signature(s) of Stockholder
(Sign exactly as name(s)
appears on your stock
certificate. If shares are held
jointly each holder should
sign. If signing for estate,
trust or corporation, title or
capacity should be stated.)
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED BUSINESS ENVELOPE.
<PAGE> 23
APPENDIX A
VERITAS DGC INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
(EFFECTIVE NOVEMBER 1, 1997)
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<PAGE> 24
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C> <C>
1. Purpose.......................................................... A-4
2. Definitions...................................................... A-4
(a) Account..................................................... A-4
(b) Base Pay.................................................... A-4
(c) Benefits Representative..................................... A-4
(d) Board....................................................... A-4
(e) Code........................................................ A-4
(f) Committee................................................... A-4
(g) Common Stock................................................ A-4
(h) Company..................................................... A-4
(i) Disability.................................................. A-4
(j) Effective Date.............................................. A-4
(k) Employee.................................................... A-4
(l) Employer.................................................... A-4
(m) Employment.................................................. A-4
(n) Entry Date.................................................. A-5
(o) Fiscal Quarter.............................................. A-5
(p) Market Price................................................ A-5
(q) Participant................................................. A-5
(r) Plan........................................................ A-5
(s) Stock....................................................... A-5
(t) Subsidiary.................................................. A-5
3. Eligibility...................................................... A-5
(a) Eligibility Requirements.................................... A-5
(b) Limitations on Eligibility.................................. A-6
4. Shares Subject to the Plan....................................... A-6
5. Participation.................................................... A-6
(a) Payroll Deduction Authorization............................. A-6
(b) Continuing Effect of Payroll Deduction Authorization........ A-7
(c) Employment and Stockholders Rights.......................... A-7
6. Payroll Deductions............................................... A-7
(a) Participant Contributions by Payroll Deductions............. A-7
(b) No Other Participant Contributions Permitted................ A-7
(c) Changes in Participant Contributions........................ A-7
7. Granting of Option to Purchase Stock............................. A-7
(a) Quarterly Grant of Options.................................. A-7
(b) Option Price................................................ A-7
8. Exercise of Option............................................... A-8
(a) Automatic Exercise of Options............................... A-8
(b) Dividends Generally......................................... A-8
(c) Pro-rata Allocation of Available Shares..................... A-8
9. Ownership and Delivery of Shares................................. A-8
(a) Beneficial Ownership........................................ A-8
(b) Registration of Stock....................................... A-8
(c) Delivery of Stock Certificates.............................. A-8
(d) Regulatory Approval......................................... A-8
10. Withdrawal of Payroll Deductions................................. A-9
</TABLE>
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<PAGE> 25
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C> <C>
11. Termination of Employment........................................ A-9
(a) General Rule................................................ A-9
(b) Termination Due to Retirement, Death or Disability.......... A-9
(c) Termination Other Than for Retirement, Death or
Disability.................................................. A-9
(d) Rehired Employees........................................... A-9
12. Interest......................................................... A-9
13. Administration of the Plan....................................... A-10
(a) No Participation in Plan by Committee Members............... A-10
(b) Authority of the Committee.................................. A-10
(c) Meetings.................................................... A-10
(d) Decisions Binding........................................... A-10
(e) Expenses of Committee....................................... A-10
(f) Indemnification............................................. A-10
14. Designation of Beneficiary....................................... A-10
15. Transferability.................................................. A-11
16. No Rights of Stockholder Until Certificate Issued................ A-11
17. Changes in the Company's Capital Structure....................... A-11
18. Plan Expenses; Use of Funds; No Interest Paid.................... A-12
19. Term of the Plan................................................. A-12
20. Amendment or Termination of the Plan............................. A-12
21. Securities Laws Restrictions on Exercise......................... A-12
22. Section 16 Compliance............................................ A-13
23. Withholding Taxes for Disqualifying Disposition.................. A-13
24. No Restriction on Corporate Action............................... A-13
25. Use of Funds..................................................... A-13
26. Miscellaneous.................................................... A-13
(a) Options Carry Same Rights and Privileges.................... A-13
(b) Headings.................................................... A-13
(c) Gender and Tense............................................ A-13
(d) Governing Law............................................... A-13
(e) Regulatory Approvals and Compliance......................... A-13
(f) Severability................................................ A-13
(g) Refund of Contributions on Noncompliance with Tax Law....... A-13
(h) No Guarantee of Tax Consequences............................ A-14
(i) Company as Agent for the Employers.......................... A-14
</TABLE>
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<PAGE> 26
VERITAS DGC INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The Veritas DGC Inc. 1997 Employee Stock Purchase Plan (the
"Plan") is intended to provide an incentive for employees of Veritas DGC Inc.
(the "Company") and its participating subsidiaries to acquire or increase their
proprietary interests in the Company through the purchase of shares of Common
Stock of the Company. The Plan is intended to qualify as an "Employee Stock
Purchase Plan" under Sections 421 and 423 of the Internal Revenue Code of 1986,
as amended (the "Code"). The provisions of the Plan will be construed in a
manner consistent with the requirements of such sections of the Code and the
regulations issued thereunder.
2. DEFINITIONS. As used in this Plan,
(a) "Account" means the account recorded in the records of the Company
established on behalf of a Participant to which the amount of the Participant's
payroll deductions authorized under Section 6 and purchases of Common Stock
under Section 8 shall be credited, and any distributions of shares of Common
Stock under Section 9 and withdrawals under Section 10 shall be charged.
(b) "Base Pay" means regular straight-time earnings or base salary,
excluding payments for overtime, shift differentials, incentive compensation,
bonuses, and other special payments, fees, allowances or extraordinary
compensation.
(c) "Benefits Representative" means the employee benefits department of the
Company or any such other person, regardless of whether employed by an Employer,
who has been formally, or by operation or practice, designated by the Committee
to assist the Committee with the day-to-day administration of the Plan.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, or any successor
thereto, as amended and in effect from time to time. Reference in the Plan to
any Section of the Code shall be deemed to include any amendments or successor
provisions to any Section and any treasury regulations thereunder.
(f) "Committee" means the Compensation Committee of the Board. The Board
shall have the power to fill vacancies on the Committee arising by resignation,
death, removal or otherwise. The Board, in its sole discretion, may bifurcate
the powers and duties of the Committee among one or more separate Committees, or
retain all powers and duties of the Committee in a single Committee. The members
of the Committee shall serve at the discretion of the Board.
(g) "Common Stock" or "Stock" means the common stock, $.01 par value per
share, of the Company.
(h) "Company" means Veritas DGC Inc., a Delaware corporation, and any
successor thereto.
(i) "Disability" means any complete and permanent disability as defined in
Section 22(e)(3) of the Code.
(j) "Effective Date" means November 1, 1997, the inception date of the
Plan.
(k) "Employee" means any employee who is currently in Employment with an
Employer.
(l) "Employer" means the Company, its successors, any future parent (as
defined in Section 424(e) of the Code) and each current or future Subsidiary
which has been designated by the Board or the Committee as a participating
employer in the Plan.
(m) "Employment" means Employment as an employee or officer by the Company
or a Subsidiary as designated in such entity's payroll records, or by any
corporation issuing or assuming rights or obligations under the Plan in any
transaction described in Section 424(a) of the Code or by a parent corporation
or a subsidiary corporation of such corporation. In this regard, neither the
transfer of a Participant from Employment by the Company to Employment by a
Subsidiary, nor the transfer of a Participant from Employment by a Subsidiary to
Employment by the Company, shall be deemed to be a termination of
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<PAGE> 27
Employment of the Participant. Moreover, the Employment of a Participant shall
not be deemed to have been terminated because of absence from active Employment
on account of temporary illness or during authorized vacation, temporary leaves
of absence from active Employment granted by Company or a Subsidiary for reasons
of professional advancement, education, health, or government service, or during
military leave for any period if the Participant returns to active Employment
within 90 days after the termination of military leave, or during any period
required to be treated as a leave of absence which, by virtue of any valid law
or agreement, does not result in a termination of Employment.
Any worker treated as an independent contractor by the Employer who is
later re-classified as a common-law employee shall not be in Employment during
any period in which such worker was treated by the Employer as an independent
contractor. Any "leased employee", as described in Section 414(n) of the Code,
shall not be deemed an Employee hereunder.
(n) "Entry Date" means the first day of each Fiscal Quarter.
(o) "Fiscal Quarter" means a three-consecutive-month period beginning on
each November 1, February 1, May 1, and August 1, during the period beginning on
the Effective Date until the Plan is terminated.
(p) "Market Price" means, subject to the next paragraph, the market value
of a share of Stock on any date, which shall be determined as (i) the closing
sales price on the immediately preceding business day of a share of Stock as
reported on the New York Stock Exchange or other principal securities exchange
on which shares of Stock are then listed or admitted to trading or (ii) if not
so reported, the average of the closing bid and asked prices for a share of
Stock on the immediately preceding business day as quoted on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), or
(iii) if not quoted on NASDAQ, the average of the closing bid and asked prices
for a share of Stock as quoted by the National Quotation Bureau's "Pink Sheets"
or the National Association of Securities Dealers' OTC Bulletin Board System. If
the price of a share of Stock shall not be so reported pursuant to the previous
sentence, the fair market value of a share of Stock shall be determined by the
Committee in its discretion provided that such method is appropriate for
purposes of an employee stock purchase plan under Section 423 of the Code.
Notwithstanding the previous paragraph of this definition, the Market Price
of a share of Stock solely for purposes of determining the option price on the
first or last day of the Fiscal Quarter in accordance with Section 7(b) shall be
based on the Market Price on the first or last day of the Fiscal Quarter, as
applicable, and not on the immediately preceding business day. For example, if
the Stock is traded on the New York Stock Exchange, when determining the option
price under Section 7(b) at which shares of Stock are purchased, the Market
Price for determining this option price shall be based on the lower of (i) the
closing sales price of a share of Stock on the first business day of the Fiscal
Quarter or (ii) the closing sales price of a share of Stock on the last business
day of the Fiscal Quarter.
(q) "Participant" means any Employee who meets the eligibility requirements
of Section 3 and who has elected to and is participating in the Plan.
(r) "Plan" means the Veritas DGC Inc. 1997 Employee Stock Purchase Plan, as
set forth herein, and all amendments hereto.
(s) "Stock" means the Common Stock (as defined above).
(t) "Subsidiary" means any domestic or foreign corporation (other than the
Company) (i) which, pursuant to Section 424(f) of the Code, is included in an
unbroken chain of corporations beginning with the Company if, at the time of the
granting of the option, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of capital stock in one of the other
corporations in such chain and (ii) which has been designated by the Board or
the Committee as a corporation whose Employees are eligible to participate in
the Plan.
3. ELIGIBILITY.
(a) Eligibility Requirements. Participation in the Plan is voluntary. Each
Employee who has completed at least six (6) consecutive months of continuous
Employment with an Employer (calculated from his last date of hire to the
termination of his Employment for any reason) and has reached the age of
majority in the jurisdiction of his legal residency, will be eligible to
participate in the Plan on the first day of the payroll period
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<PAGE> 28
commencing on or after the earlier of (i) the Effective Date or (ii) the Entry
Date on which the Employee satisfies the aforementioned eligibility
requirements. Each Employee whose Employment terminates and who is rehired by an
Employer shall be treated as a new Employee for eligibility purposes under the
Plan.
(b) Limitations on Eligibility. Any provision of the Plan to the contrary
notwithstanding, no Employee will be granted an option under the Plan:
(i) if, immediately after the grant, the Employee would own stock,
and/or hold outstanding options to purchase stock, possessing five percent
(5%) or more of the total combined voting power or value of all classes of
stock of the Company or of any Subsidiary; or
(ii) which permits the Employee's rights to purchase stock under this
Plan and all other employee stock purchase plans (within the meaning of
Section 423 of the Code) of the Company and its Subsidiaries to accrue at a
rate which exceeds $25,000 of the fair market value of the stock
(determined at the time such option is granted) for each Fiscal year in
which such option is outstanding at any time, all as determined in
accordance with Section 423(b)(8) of the Code.
For purposes of Section 3(b)(i) above, pursuant to Section 424(d) of the Code,
(i) the Employee with respect to whom such limitation is being determined shall
be considered as owning the stock owned, directly or indirectly, by or for his
brothers and sisters (whether by the whole or half blood), spouse, ancestors,
and lineal descendants; and (ii) stock owned, directly or indirectly, by or for
a corporation, partnership, estate, or trust, shall be considered as being owned
proportionately by or for its shareholders, partners, or beneficiaries. In
addition, for purposes of Section 3(b)(ii) above, pursuant to Section 423(b)(8)
of the Code, (i) the right to purchase stock under an option accrues when the
option (or any portion thereof) first becomes exercisable during the calendar
year, (ii) the right to purchase stock under an option accrues at the rate
provided in the option but in no case may such rate exceed $25,000 of fair
market value of such stock (determined at the time such option is granted) for
any one calendar year, and (iii) a right to purchase stock which has accrued
under one option granted pursuant to the Plan may not be carried over to any
other option.
4. SHARES SUBJECT TO THE PLAN. The total number of shares of Common Stock
that upon the exercise of options granted under the Plan will not exceed Five
Hundred Thousand (500,000) shares (subject to adjustment as provided in Section
17), and such shares may be originally issued shares, treasury shares,
reacquired shares, shares bought in the market, or any combination of the
foregoing. If any option which has been granted expires or terminates for any
reason without having been exercised in full, the unpurchased shares will again
become available for purposes of the Plan. Any shares which are not subject to
outstanding options upon the termination of the Plan shall cease to be subject
to the Plan.
5. PARTICIPATION.
(a) Payroll Deduction Authorization. An Employee shall be eligible to
participate in the Plan as of the first Entry Date following such Employee's
satisfaction of the eligibility requirements of Section 3, or, if later, the
first Entry Date following the date on which the Employee's Employer adopted the
Plan. At least 10 days (or such other period as may be prescribed by the
Committee or a Benefits Representative) prior to the first Entry Date as of
which an Employee is eligible to participate in the Plan, the Employee shall
execute and deliver to the Benefits Representative, on the form prescribed for
such purpose, an authorization for payroll deductions which specifies his chosen
rate of payroll deduction contributions pursuant to Section 6, and such other
information as is required to be provided by the Employee on such enrollment
form. The enrollment form shall authorize the Employer to reduce the Employee's
Base Pay by the amount of such authorized contributions. To the extent provided
by the Committee or a Benefits Representative, each Participant shall also be
required to open a stock brokerage account with a brokerage firm which has been
engaged to administer the purchase, holding and sale of Common Stock for
Accounts under the Plan and, as a condition of participation hereunder, the
Participant shall be required to execute any form required by the brokerage firm
to open and maintain such brokerage account.
(b) Continuing Effect of Payroll Deduction Authorization. Payroll
deductions for a Participant will commence with the first payroll period
beginning after the Participant's authorization for payroll deductions
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<PAGE> 29
becomes effective, and will end with the payroll period that ends when
terminated by the Participant in accordance with Section 6(c) or due to his
termination of Employment in accordance with Section 11. Payroll deductions will
also cease when the Participant is suspended from participation due to a
withdrawal of payroll deductions in accordance with Section 10. When applicable
with respect to Employees who are paid on a hourly wage basis, the authorized
payroll deductions shall be withheld from wages when actually paid following the
period in which the compensatory services were rendered. Only payroll deductions
that are credited to the Participant's Account during the Fiscal Quarter will be
used to purchase Common Stock pursuant to Section 8 regardless of when the work
was performed.
(c) Employment and Stockholders Rights. Nothing in the Plan will confer on
a Participant the right to continue in the employ of the Employer or will limit
or restrict the right of the Employer to terminate the Employment of a
Participant at any time with or without cause. A Participant will have no
interest in any Common Stock to be purchased under the Plan or any rights as a
stockholder with respect to such Stock until the Stock has been purchased and
credited to the Participant's Account.
6. PAYROLL DEDUCTIONS.
(a) Participant Contributions by Payroll Deductions. At the time a
Participant files his payroll deduction authorization form, the Participant will
elect to have deductions made from the Participant's Base Pay for each payroll
period such authorization is in effect in whole percentages at the rate of not
less than 1% nor more than 15% of the Participant's Base Pay.
(b) No Other Participant Contributions Permitted. All payroll deductions
made for a Participant will be credited to the Participant's Account under the
Plan. A Participant may not make any separate cash payment into such Account.
(c) Changes in Participant Contributions. Subject to Sections 10 and 22, a
Participant may increase, decrease, suspend, or resume payroll deductions under
the Plan by giving written notice to a designated Benefits Representative at
such time and in such form as the Committee or Benefits Representative may
prescribe from time to time. Such increase, decrease, suspension or resumption
will be effective as of the first day of the payroll period as soon as
administratively practicable after receipt of the Participant's written notice,
but not earlier than the first day of the payroll period of the Fiscal Quarter
next following receipt and acceptance of such form. Notwithstanding the previous
sentence, a Participant may completely discontinue contributions at any time
during a Fiscal Quarter, effective as of the first day of the payroll period as
soon as administratively practicable following receipt of a written
discontinuance notice from the Participant on a form provided by a designated
Benefits Representative. Following a discontinuance of contributions, a
Participant cannot authorize any payroll contributions to his Account for the
remainder of the Fiscal Quarter in which the discontinuance was effective.
7. GRANTING OF OPTION TO PURCHASE STOCK.
(a) Quarterly Grant of Options. For each Fiscal Quarter, a Participant will
be deemed to have been granted an option to purchase, on the first day of the
Fiscal Quarter, as many whole and fractional shares as may be purchased with the
payroll deductions (and any cash dividends as provided in Section 8) credited to
the Participant's Account during the Fiscal Quarter.
(b) Option Price. The option price of the Common Stock purchased with the
amount credited to the Participant's Account during each Fiscal Quarter will be
the lower of:
(i) 85% of the Market Price of a share of Stock on the first day of
the Fiscal Quarter; or
(ii) 85% of the Market Price of a share of Stock on the last day of
the Fiscal Quarter.
Only the Market Price as of the first day of the Fiscal Quarter and the
last day of the Fiscal Quarter shall be considered for purposes of determining
the option purchase price; interim fluctuations during the Fiscal Quarter shall
not be considered.
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8. EXERCISE OF OPTION.
(a) Automatic Exercise of Options. Unless a Participant has elected to
withdraw payroll deductions in accordance with Section 10, the Participant's
option for the purchase of Common Stock will be deemed to have been exercised
automatically as of the last day of the Fiscal Quarter for the purchase of the
number of whole and fractional shares of Common Stock which the accumulated
payroll deductions (and cash dividends on the Common Stock as provided in
Section 8(b)) in the Participant's Account at that time will purchase at the
applicable option price. Fractional shares may be issued under the Plan. As of
the last day of each Fiscal Quarter, the balance of each Participant's Account
shall be applied to purchase the number of whole and fractional shares of Stock
as determined by dividing the balance of such Participant's Account as of such
date by the option price determined pursuant to Section 7(b). The Participant's
Account shall be debited accordingly. The Committee or its delegate shall make
all determinations with respect to applicable currency exchange rates when
applicable.
(b) Dividends Generally. Cash dividends paid on shares of Common Stock
which have not been delivered to the Participant pending the Participant's
request for delivery pursuant to Section 9(c), will be combined with the
Participant's payroll deductions and applied to the purchase of Common Stock at
the end of the Fiscal Quarter in which the cash dividends are received, subject
to the Participant's withdrawal rights set forth in Section 10. Dividends paid
in the form of shares of Common Stock or other securities with respect to shares
that have been purchased under the Plan, but which have not been delivered to
the Participant, will be credited to the shares that are credited to the
Participant's Account.
(c) Pro-rata Allocation of Available Shares. If the total number of shares
to be purchased under option by all Participants exceeds the number of shares
authorized under Section 4, a pro-rata allocation of the available shares will
be made among all Participants authorizing such payroll deductions based on the
amount of their respective payroll deductions through the last day of the Fiscal
Quarter.
9. OWNERSHIP AND DELIVERY OF SHARES.
(a) Beneficial Ownership. A Participant will be the beneficial owner of the
shares of Common Stock purchased under the Plan on exercise of his option and
will have all rights of beneficial ownership in such shares. Any dividends paid
with respect to such shares will be credited to the Participant's Account and
applied as provided in Section 8 until the shares are delivered to the
Participant.
(b) Registration of Stock. Stock to be delivered to a Participant under the
Plan will be registered in the name of the Participant, or if the Participant so
directs by written notice to the designated Benefits Representative or brokerage
firm, if any, prior to the purchase of Stock hereunder, in the names of the
Participant and one such other person as may be designated by the Participant,
as joint tenants with rights of survivorship or as tenants by the entireties, to
the extent permitted by applicable law. Any such designation shall not apply to
shares purchased after a Participant's death by the Participant's beneficiary or
estate, as the case may be, pursuant to Section 11(b). If a brokerage firm is
engaged by the Company to administer Accounts under the Plan, such firm shall
provide such account registration forms as are necessary for each Participant to
open and maintain a brokerage account with such firm.
(c) Delivery of Stock Certificates. The Company, or a brokerage firm or
other entity selected by the Company, shall deliver to each Participant a
certificate for the number of shares of Common Stock purchased by the
Participant hereunder as soon as practicable after the close of each Fiscal
Quarter. Alternatively, in the discretion of the Committee, the stock
certificate may be delivered to a designated stock brokerage account maintained
for the Participant and held in "street name" in order to facilitate the
subsequent sale of the purchased shares.
(d) Regulatory Approval. In the event the Company is required to obtain
from any commission or agency the authority to issue any stock certificate
hereunder, the Company shall seek to obtain such authority. The inability of the
Company to obtain from any such commission or agency the authority which counsel
for the Company deems necessary for the lawful issuance of any such certificate
shall relieve the Company from liability to any Participant, except to return to
the Participant the amount of his Account balance used to exercise the option to
purchase the affected shares.
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10. WITHDRAWAL OF PAYROLL DEDUCTIONS. At any time during a Fiscal Quarter,
but in no event later than 15 days (or such shorter prescribed by the Committee
or a Benefits Representative) prior to the last day of the Fiscal Quarter, a
Participant may elect to abandon his election to purchase Common Stock under the
Plan. By written notice to the designated Benefits Representative on a form
provided for such purpose, the Participant may thus elect to withdraw all of the
accumulated balance in his Account being held for the purchase of Common Stock
in accordance with Section 8(b). Partial withdrawals will not be permitted. All
such amounts will be paid to the Participant as soon as administratively
practical after receipt of his notice of withdrawal. After receipt and
acceptance of such withdrawal notice, no further payroll deductions will be made
from the Participant's Base Pay beginning as of the next payroll period during
the Fiscal Quarter in which the withdrawal notice is received. The Committee, in
its discretion, may determine that amounts otherwise withdrawable hereunder by
Participants shall be offset by an amount that the Committee, in its discretion,
determines to be reasonable to help defray the administrative costs of effecting
the withdrawal, including, without limitation, fees imposed by any brokerage
firm which administers such Participant's Account. After a withdrawal, an
otherwise eligible Participant may resume participation in the Plan as of the
first day of the Fiscal Quarter next following his delivery of a payroll
deduction authorization pursuant to the procedures prescribed in Section 5(a).
11. TERMINATION OF EMPLOYMENT.
(a) General Rule. Upon termination of a Participant's Employment for any
reason, his participation in the Plan will immediately terminate.
(b) Termination Due to Retirement, Death or Disability. If the
Participant's termination of Employment is due to (i) retirement from Employment
on or after his attainment of age 65, (ii) death or (iii) Disability, the
Participant (or the Participant's personal representative or legal guardian in
the event of Disability, or the Participant's beneficiary (as defined in Section
14) or the administrator of his will or executor of his estate in the event of
death), will have the right to elect, either to:
(a) Withdraw all of the cash and shares of Common Stock credited to
the Participant's Account as of his termination date; or
(b) Exercise the Participant's option for the purchase of Common Stock
on the last day of the Fiscal Quarter (in which termination of Employment
occurs) for the purchase of the number of shares of Common Stock which the
cash balance credited to the Participant's Account as of the date of the
Participant's termination of Employment will purchase at the applicable
option price.
The Participant (or, if applicable, such other person designated in the
first paragraph of this Section 11(b)) must make such election by giving written
notice to the Benefits Representative at such time and in such manner as
prescribed from time to time by the Committee or Benefits Representative. In the
event that no such written notice of election is received by the Benefits
Representative within 30 days of the Participant's termination of Employment
date, the Participant (or such other designated person) will automatically be
deemed to have elected to withdraw the balance in the Participant's Account as
of his termination date. Thereafter, any accumulated cash and shares of Common
Stock credited to the Participant's Account as of his termination of Employment
date will be delivered to or on behalf of the Participant as soon as
administratively practicable.
(c) Termination Other Than for Retirement, Death or Disability. Upon
termination of a Participant's Employment for any reason other than retirement,
death, or Disability pursuant to Section 11(b), the participation of the
Participant in the Plan will immediately terminate. Thereafter, any accumulated
cash and shares of Common Stock credited to the Participant's Account as of his
termination of Employment date will be delivered to the Participant as soon as
administratively practicable.
(d) Rehired Employees. Any Employee whose Employment terminates and who is
subsequently rehired by an Employer shall be treated as a new Employee for
purposes of eligibility to participate in the Plan.
12. INTEREST. No interest will be paid or allowed on any money paid into
the Plan or credited to the Account of any Participant.
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13. ADMINISTRATION OF THE PLAN.
(a) No Participation in Plan by Committee Members. No options may be
granted under the Plan to any member of the Committee during the term of his
membership on the Committee.
(b) Authority of the Committee. Subject to the provisions of the Plan, the
Committee shall have the plenary authority to (a) interpret the Plan and all
options granted under the Plan, (b) make such rules as it deems necessary for
the proper administration of the Plan, (c) make all other determinations
necessary or advisable for the administration of the Plan, and (d) correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any option granted under the Plan in the manner and to the extent that the
Committee deems advisable. Any action taken or determination made by the
Committee pursuant to this and the other provisions of the Plan shall be
conclusive on all parties. The act or determination of a majority of the
Committee shall be deemed to be the act or determination of the Committee. By
express written direction, or by the day-to-day operation of Plan
administration, the Committee may delegate the authority and responsibility for
the day-to-day administrative or ministerial tasks of the Plan to a Benefits
Representative, including a brokerage firm or other third party engaged for such
purpose.
(c) Meetings. The Committee shall designate a chairman from among its
members to preside at its meetings, and may designate a secretary, without
regard to whether that person is a member of the Committee, who shall keep the
minutes of the proceedings. Meetings shall be held at such times and places as
shall be determined by the Committee, and the Committee may hold telephonic
meetings. The Committee may take any action otherwise proper under the Plan by
the affirmative vote of a majority of its members, taken at a meeting, or by the
affirmative vote of all of its members taken without a meeting. The Committee
may authorize any one or more of their members or any officer of the Company to
execute and deliver documents on behalf of the Committee.
(d) Decisions Binding. All determinations and decisions made by the
Committee shall be made in its discretion pursuant to the provisions of the
Plan, and shall be final, conclusive and binding on all persons including the
Company, Participants, and their estates and beneficiaries.
(e) Expenses of Committee. The Committee may employ legal counsel,
including, without limitation, independent legal counsel and counsel regularly
employed by the Company, consultants and agents as the Committee may deem
appropriate for the administration of the Plan. The Committee may rely upon any
opinion or computation received from any such counsel, consultant or agent. All
expenses incurred by the Committee in interpreting and administering the Plan,
including, without limitation, meeting expenses and professional fees, shall be
paid by the Company.
(f) Indemnification. Each person who is or was a member of the Committee
shall be indemnified by the Company against and from any damage, loss,
liability, cost and expense that may be imposed upon or reasonably incurred by
him in connection with or resulting from any claim, action, suit, or proceeding
to which he may be a party or in which he may be involved by reason of any
action taken or failure to act under the Plan, except for any such act or
omission constituting willful misconduct or gross negligence. Such person shall
be indemnified by the Company for all amounts paid by him in settlement thereof,
with the Company's approval, or paid by him in satisfaction of any judgment in
any such action, suit, or proceeding against him, provided he shall give the
Company an opportunity, at its own expense, to handle and defend the same before
he undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Articles of Incorporation
or Bylaws, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
14. DESIGNATION OF BENEFICIARY. At such time, in such manner, and using
such form as shall be prescribed from time to time by the Committee or a
Benefits Representative, a Participant may file a written designation of a
beneficiary who is to receive any Common Stock and/or cash credited to the
Participant's Account at the Participant's death. Such designation of
beneficiary may be changed by the Participant at any time by giving written
notice to the Benefits Representative at such time and in such form as
prescribed. Upon the death of a Participant, and receipt by the Benefits
Representative of proof of the identity at the
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Participant's death of a beneficiary validly designated under the Plan, the
Benefits Representative will take appropriate action to ensure delivery of such
Common Stock and/or cash to such beneficiary. In the event of the death of a
Participant and the absence of a beneficiary validly designated under the Plan
who is living at the time of such Participant's death, the Benefits
Representative will take appropriate action to ensure delivery of such Common
Stock and/or cash to the executor or administrator of the estate of the
Participant, or if no such executor or administrator has been appointed (to the
knowledge of the Benefits Representative), the Committee, in its discretion, may
direct delivery of such Common Stock and/or cash to the spouse or to any one or
more dependents of the Participant as the Committee may designate in its
discretion. No beneficiary will, prior to the death of the Participant, acquire
any interest in any Common Stock or cash credited to the Participant's Account.
15. TRANSFERABILITY. No amounts credited to a Participant's Account,
whether cash or Common Stock, nor any rights with regard to the exercise of an
option or to receive Common Stock under the Plan, may be assigned, transferred,
pledged, or otherwise disposed of in any way by the Participant other than by
will or the laws of descent and distribution. Any such attempted assignment,
transfer, pledge, or other disposition will be void and without effect.
Each option shall be exercisable, during the Participant's lifetime, only
by the Employee to whom the option was granted. The Company shall not recognize,
and shall be under no duty to recognize, any assignment or purported assignment
by an employee of his option or of any rights under his option.
16. NO RIGHTS OF STOCKHOLDER UNTIL CERTIFICATE ISSUED. With respect to
shares of Stock subject to an option, an optionee shall not be deemed to be a
stockholder, and the optionee shall not have any of the rights or privileges of
a stockholder. An optionee shall have the rights and privileges of a stockholder
when, but not until, a certificate for shares has been issued to the optionee
following exercise of his option.
17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The Board shall make or
provide for such adjustments in the maximum number of shares specified in
Section 4 and the number and option price of shares subject to options
outstanding under the Plan as the Board shall determine is appropriate to
prevent dilution or enlargement of the rights of Participants that otherwise
would result from any stock dividend, stock split, stock exchange, combination
of shares, recapitalization or other change in the capital structure of the
Company, merger, consolidation, spin-off of assets, reorganization, partial or
complete liquidation, issuance of rights or warrants to purchase securities, any
other corporate transaction or event having an effect similar to any of the
foregoing.
In the event of a merger of one or more corporations into the Company, or a
consolidation of the Company and one or more corporations in which the Company
shall be the surviving corporation, each Participant, at no additional cost,
shall be entitled, upon his payment for all or part of the Common Stock
purchasable by him under the Plan, to receive (subject to any required action by
shareholders) in lieu of the number of shares of Common Stock which he was
entitled to purchase, the number and class of shares of stock or other
securities to which such holder would have been entitled pursuant to the terms
of the agreement of merger or consolidation if, immediately prior to such merger
or consolidation, such holder had been the holder of record of the number of
shares of Common Stock equal to the number of shares purchasable by the
Participant hereunder.
If the Company shall not be the surviving corporation in any
reorganization, merger or consolidation (or survives only as a subsidiary of an
entity other than a previously wholly-owned subsidiary of the Company), or if
the Company is to be dissolved or liquidated or sell substantially all of its
assets or stock to another corporation or other entity , then, unless a
surviving corporation assumes or substitutes new options (within the meaning of
Section 424(a) of the Code) for all options then outstanding, (i) the date of
exercise for all options then outstanding shall be accelerated to dates fixed by
the Committee prior to the effective date of such corporate event, (ii) a
Participant may, at his election by written notice to the Company, either (x)
withdraw from the Plan pursuant to Section 10 and receive a refund from the
Company in the amount of the accumulated cash and Stock balance in the
Participant's Account, (y) exercise a portion of his outstanding options as of
such exercise date to purchase shares of Stock, at the option price, to the
extent of the balance in the Participant's Account, or (z) exercise in full his
outstanding options as of such exercise date
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to purchase shares of Stock, at the option price, which exercise shall require
such Participant to pay the related option price, and (iii) after such effective
date any unexercised option shall expire. The date the Committee selects for the
exercise date under the preceding sentence shall be deemed to be the exercise
date for purposes of computing the option price per share of Stock. If the
Participant elects to exercise all or any portion of the options, the Company
shall deliver to such Participant a stock certificate issued pursuant to Section
9(d) for the number of shares of Stock with respect to which such options were
exercised and for which such Participant has paid the option price. If the
Participant fails to provide the notice set forth above within three days after
the exercise date selected by the Committee under this Section 17, the
Participant shall be conclusively presumed to have requested to withdraw from
the Plan and receive payment of the accumulated balance of his Account. The
Committee shall take such steps in connection with such transactions as the
Committee shall deem necessary or appropriate to assure that the provisions of
this Section 17 are effectuated for the benefit of the Participants.
Except as expressly provided in this Section 17, the issue by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, for cash or property, or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Stock then available
for purchase under the Plan.
18. PLAN EXPENSES; USE OF FUNDS; NO INTEREST PAID. The expenses of the Plan
shall be paid by the Company except as otherwise provided herein or under the
terms and conditions of any agreement entered into between the Participant and
any brokerage firm engaged to administer Accounts. All funds received or held by
the Company under the Plan shall be included in the general funds of the Company
free of any trust or other restriction, and may be used for any corporate
purpose. No interest shall be paid to any Participant or credited to his Account
under the Plan.
19. TERM OF THE PLAN. The Plan shall become effective as of November 1,
1997, subject to approval by the holders of the majority of the Common Stock
present and represented at a special or annual meeting of the Company's
stockholders held on or before 12 months from November 1, 1997.
Except with respect to options then outstanding, if not terminated sooner
under the provisions of Section 20, no further options shall be granted under
the Plan at the earlier of (i) October 31, 2007, or (ii) the point in time when
no shares of Stock reserved for issuance under Section 4 are available.
20. AMENDMENT OR TERMINATION OF THE PLAN. The Board shall have the plenary
authority to terminate or amend the Plan; provided, however, that the Board
shall not, without the approval of the stockholders of the Company, (a) increase
the maximum number of shares which may be issued under the Plan pursuant to
Section 4, (b) amend the requirements as to the class of employees eligible to
purchase Stock under the Plan, or (c) permit the members of the Committee to
purchase Stock under the Plan. No termination, modification, or amendment of the
Plan shall adversely affect the rights of a Participant with respect to an
option previously granted to him under such option without his written consent.
In addition, to the extent that the Committee determines that, in the
opinion of counsel, (a) the listing for qualification requirements of any
national securities exchange or quotation system on which the Company's Common
Stock is then listed or quoted, or (b) the Code or Treasury regulations issued
thereunder, require stockholder approval in order to maintain compliance with
such listing or qualification requirements or to maintain any favorable tax
advantages or qualifications, then the Plan shall not be amended by the Board in
such respect without first obtaining such required approval of the Company's
stockholders.
21. SECURITIES LAWS RESTRICTIONS ON EXERCISE. The Committee may, in its
discretion, require as conditions to the exercise of any option that the shares
of Common Stock reserved for issuance upon the exercise of the option shall have
been duly listed, upon official notice of issuance, upon a stock exchange, and
that either:
(a) a Registration Statement under the Securities Act of 1933, as
amended, with respect to said shares shall be effective; or
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(b) the participant shall have represented at the time of purchase, in
form and substance satisfactory to the Company, that it is his intention to
purchase the Stock for investment and not for resale or distribution.
22. SECTION 16 COMPLIANCE. The Plan, and transactions hereunder by persons
subject to Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), are intended to comply with all applicable conditions of Rule
16b-3 or any successor exemption provision promulgated under the Exchange Act.
To the extent that any provision of the Plan or any action by the Committee or
the Board fails, or is deemed to fail, to so comply, such provision or action
shall be null and void but only to the extent permitted by law and deemed
advisable by the Committee in its discretion.
23. WITHHOLDING TAXES FOR DISQUALIFYING DISPOSITION. Whenever shares of
Stock that were received upon the exercise of an option granted under the Plan
are disposed of within two years after the date of grant of such option or one
year from the date of exercise of such option (within the meaning of Section
423(a)(1)), the Company shall have the right to require the Participant to remit
to the Company in cash an amount sufficient to satisfy federal, state and local
withholding and payroll tax requirements, if any, attributable to such
disposition prior to authorizing such disposition or permitting the delivery of
any certificate or certificates with respect thereto.
24. NO RESTRICTION ON CORPORATE ACTION. Subject to Section 20, nothing
contained in the Plan shall be construed to prevent the Board or any Employer
from taking any corporate action which is deemed by the Employer to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any option granted under the Plan. No Employee,
beneficiary or other person shall have any claim against any Employer as a
result of any such action.
25. USE OF FUNDS. The Employers shall promptly transfer all amounts
withheld under Section 6 to the Company or to any brokerage firm engaged to
administer Accounts, as directed by the Company. All payroll deductions received
or held by the Company under the Plan may be used by the Company for any
corporate purpose, and the Company will not be obligated to segregate such
payroll deductions.
26. MISCELLANEOUS.
(a) Options Carry Same Rights and Privileges. To the extent required to
comply with the requirements of Section 423 of the Code, all Employees granted
options under the Plan to purchase Common Stock shall have the same rights and
privileges hereunder.
(b) Headings. Any headings or subheadings in this Plan are inserted for
convenience of reference only and are to be ignored in the construction or
interpretation of any provisions hereof.
(c) Gender and Tense. Any words herein used in the masculine shall be read
and construed in the feminine when appropriate. Words in the singular shall be
read and construed as though in the plural, and vice-versa, when appropriate.
(d) Governing Law. This Plan shall be governed and construed in accordance
with the laws of the State of Delaware to the extent not preempted by federal
law.
(e) Regulatory Approvals and Compliance. The Company's obligation to sell
and deliver Common Stock under the Plan is at all times subject to all approvals
of and compliance with the (i) regulations of any applicable stock exchanges and
(ii) any governmental authorities required in connection with the authorization,
issuance, sale or delivery of such Stock, as well as federal, state and foreign
securities laws.
(f) Severability. In the event that any provision of this Plan shall be
held illegal, invalid, or unenforceable for any reason, such provision shall be
fully severable, but shall not affect the remaining provisions of the Plan, and
the Plan shall be construed and enforced as if the illegal, invalid, or
unenforceable provision had not been included herein.
(g) Refund of Contributions on Noncompliance with Tax Law. In the event the
Company should receive notice that this Plan fails to qualify as an "employee
stock purchase plan" under Section 423 of the
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<PAGE> 36
Code, all then-existing Account balances will be paid to the Participants and
the Plan shall immediately terminate.
(h) No Guarantee of Tax Consequences. The Board, Employer and the Committee
do not make any commitment or guarantee that any tax treatment will apply or be
available to any person participating or eligible to participate in the Plan,
including, without limitation, any tax imposed by the United States or any state
thereof, any estate tax, or any tax imposed by a foreign government.
(i) Company as Agent for the Employers. Each Employer, by adopting the
Plan, appoints the Company and the Board as its agents to exercise on its behalf
all of the powers and authorities hereby conferred upon the Company and the
Board by the terms of the Plan, including, but not by way of limitation, the
power to amend and terminate the Plan.
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APPENDIX B
VERITAS DGC INC.
SECOND AMENDED AND RESTATED
1992 EMPLOYEE NONQUALIFIED STOCK OPTION PLAN
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 members of management 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 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 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 2,200,000 shares, as adjusted for the one for
three reverse stock split effective January 17, 1995. Shares of common stock
applicable to options which have expired unexercised or terminated for any
reason may again be subject to an option or options under the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Compensation Committee of the
Company's board of directors (the "Committee"). The board of directors may, from
time to time, remove members from or add members to the Committee. Vacancies in
the Committee, however caused, shall be filled by the board of directors. No
member of the Committee shall be eligible to receive options under the Plan. The
Committee shall select one of its members chairman and shall hold meetings at
such times and places as it may determine. The Committee may appoint a secretary
and, subject to the provisions of the Plan and to policies determined by the
board of directors, may make such rules and regulations for the conduct of its
business as it shall deem advisable. A majority of the Committee shall
constitute a quorum. All action of the Committee shall be taken by a majority of
its members. Any action may be taken by a written instrument signed by a
majority of the members, and action so taken shall be fully as effective as if
it had been taken by a vote of the majority of the members at a meeting duly
called and held.
(b) Subject to the express terms and conditions of the Plan, the
Committee shall have 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.
<PAGE> 38
(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.
(e) No member of the board of directors or of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any option.
4. ELIGIBILITY.
Only full-time salaried officers and other key personnel of the Company
and of its majority-owned subsidiaries shall be eligible to participate in the
Plan. 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.
No option may be exercised prior to six months from the date of grant.
(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
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accrued hereunder, options may be exercised from time to time by written notice
to the Company stating the full number of shares with respect to which the
option is being exercised, and the time of delivery thereof, which shall be at
least 15 days after the giving of such notice unless an earlier date shall have
been mutually agreed upon. At such time, the Company shall, without transfer or
issue tax to the optionee (or other person entitled to exercise the option)
deliver to the optionee (or to such other person) at the principal office of the
Company, or such other place as shall be mutually acceptable, a certificate or
certificates for such shares against prior payment of the option price in full
on the date of notice of exercise for the number of shares to be delivered by
certified or official bank check or the equivalent thereof acceptable to the
Company; provided, however, that the time of such issuance and delivery may be
postponed by the Company for such period as may be required for it with
reasonable diligence to comply with any requirements of law, the listing
requirements of the New York Stock Exchange or any other exchange on which the
common stock may then be listed. If the optionee (or other person entitled to
exercise the option) fails to pay for all or any part of the number of shares
specified in such notice or to accept delivery of such shares upon tender of
delivery thereof, the right to exercise the option with respect to such
undelivered shares shall be terminated.
8. NON-ASSIGNABILITY OF OPTION RIGHTS.
No option granted under the Plan shall be assignable or transferable
otherwise than by will or by the laws of descent and distribution. During the
lifetime of an optionee, the option shall be exercisable only by him.
9. TERMINATION OF EMPLOYMENT.
Except as otherwise provided in this paragraph, options shall terminate
90 days following the termination of the optionee's employment with the Company
for any reason, but shall be exercisable following termination only to the
extent that the option had become vested on the termination date. In the event
that the optionee retires from the Company (at or after normal retirement age)
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.
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10. CHANGE OF CONTROL.
Subject to the provisions of Section 17 hereof as to VES Options (as
defined in Section 17), with respect to options granted prior to March 11, 1997,
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 of (including, without
limitation, power to vote) 50% or more of the then outstanding shares of the
Company's common stock (a "Change in Control"), any portion of such options
which have not yet become exercisable shall thereupon become immediately
exercisable, and, except with respect to the limitations set forth in Section 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. With respect to options granted on or after March 11, 1997,
if a Change in Control occurs, then the Committee may, in its sole discretion,
declare that all or 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 Section 6 hereof, upon such a
declaration, 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 with respect to the options subject to such declaration. In
addition, the Committee may, in its sole discretion, provide in any option
agreement relating to a grant of options on or after March 11, 1997 pursuant to
the Plan that, upon such a Change in Control, all or any portion of the options
subject to said option agreement which have not yet become exercisable shall
thereupon become immediately exercisable.
11. ADJUSTMENT OF OPTIONS ON RECAPITALIZATION OR REORGANIZATION.
The aggregate number of shares of common stock on which options may be
granted to persons participating under the Plan, the aggregate number of shares
of common stock on which options may be granted to any one such person, the
number of shares thereof covered by each outstanding option, and the price per
share thereof in each such option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of common stock of the
Company resulting from the subdivision or combination of shares or other capital
adjustments, or the payment of a stock dividend after the effective date of this
Plan, or other increase or decrease in such shares effected without receipt of
consideration by the Company; provided, however, that no adjustment shall be
made unless the aggregate effect of all such increases and decreases occurring
in any one fiscal year after the effective date of this Plan will increase or
decrease the number of issued shares of common stock of the Company by 5% or
more; and, provided, further, that any options to purchase fractional shares
resulting from any such adjustment shall be eliminated.
Subject to any required action by the stockholders, 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, shall cause every option outstanding hereunder to terminate, except
that the surviving or resulting corporation may, in its absolute and
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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.
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.
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; or
(2) to make any other amendment which does not materially
alter the intent or benefits of the Plan.
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(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) 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;
(2) decrease the option price applicable to any options
granted under the Plan, provided, however, that the provisions of this
clause (2) 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
(3) alter any outstanding option agreement to the detriment of
the optionee, without his consent.
16. EMPLOYMENT OBLIGATION.
The granting of any option under this Plan shall not impose upon the
Company any obligation whatsoever to employ or to continue to employ any
optionee, and the right of the Company to terminate the employment of any
officer or other employee shall not be diminished or affected by reason of the
fact that an option has been granted to him under the Plan.
17. VES OPTIONS.
In order to carry out the terms of (i) the Combination Agreement dated
May 10, 1996, between the Company and Veritas Energy Services Inc. ("VES") which
was approved by the Company's stockholders at a special meeting held on August
20, 1996 and (ii) the Plan of Arrangement under Part 15 of the Business
Corporations Act (Alberta) relating to the combination of the Company and VES
which, pursuant to an interim order of the Court of Queen's Bench of Alberta
date July 18, 1996, was approved at special meetings of VES optionholders and
shareholders held August 20, 1996, this Plan shall include under its terms each
of the options (the "VES Options") outstanding on the Effective Date (as defined
in the Combination Agreement) (which includes all outstanding options granted
under VES' Stock Option Plan for Directors, Officers and Key Employees (the "VES
Option Plan")) without any further action on the part of any holder thereof
(each a "VES Optionholder"). Effective as of the Effective Time, each VES Option
will be exercisable to purchase that number of shares of the Company's common
stock determined by multiplying the number of VES common shares (the "VES Common
Shares") subject to such VES Option at the Effective Time by the Exchange Ratio
(as defined in the Combination Agreement), at an exercise price per share of
such VES Option immediately prior to the Effective Time, divided by the Exchange
Ratio. On the Effective Date (as defined in the Combination Agreement), such
option price shall be converted into a United States dollar equivalent based on
the noon spot rate of exchange of the Bank of Canada on such date. If the
foregoing calculation results in an exchanged VES Option being exercisable for a
fractional share of the Company's common stock, then the number of shares of the
Company's common stock subject to such option will be rounded down to the
nearest whole number of shares and the total exercise price for the option will
be reduced by the exercise price of the fractional share. The term,
exercisability, vesting schedule and all other terms
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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.
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