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