<PAGE> 1
EXHIBIT 10-R
RABBI TRUST AGREEMENT
VERITAS DGC INC.
DEFERRED COMPENSATION PLAN
<PAGE> 2
TABLE OF
CONTENTS
Section 1. Establishment of Trust .......................................... 1
Section 2. Payments to Plan Participants and their Beneficiaries ........... 2
Section 3. Trustee Responsibility Regarding Payments to the Trust
Beneficiary When the Company is Insolvent ....................... 2
Section 4. Payments to the Company ......................................... 3
Section 5. Investment Authority ............................................ 3
Section 6. Disposition of Income ........................................... 5
Section 7. Accounting by the Trustee ....................................... 6
Section 8. Responsibility of the Trustee ................................... 6
Section 9. Compensation and Expenses of the Trustee ........................ 7
Section 10. Resignation and Removal of the Trustee .......................... 7
Section 11. Appointment of Successor ........................................ 7
Section 12. Amendment or Termination ........................................ 8
Section 13. Miscellaneous ................................................... 8
Section 14. Effective date .................................................. 9
<PAGE> 3
RABBI TRUST UNDER THE
VERITAS DGC INC. DEFERRED COMPENSATION PLAN
This Trust Agreement made this ____ day of ___________, 20___ by and
between Veritas DGC Inc. (hereinafter called the "Company"), with its principal
place of business 10300 Town Park, Houston, Texas 77072 and Austin Trust Company
(hereinafter called the "Trustee"), a trust company organized and existing under
the laws of the State of Texas, as Trustee.
W I T N E S S E T H :
WHEREAS, the Company has adopted the Veritas DGC Inc. Deferred Compensation
Plan ("Plan"), a non-qualified deferred compensation plan; and
WHEREAS, the Company has incurred or expects to incur liability under the
terms of such Plan with respect to the individuals participating in such Plan;
and
WHEREAS, the Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of the Company's creditors in the event of the Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
and
WHEREAS, it is the intention of the Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the trust shall be comprised, held and disposed of as follows:
SECTION 1. ESTABLISHMENT OF TRUST
(a) The Company hereby deposits with the Trustee in trust $100.00, which
shall become the principal of the Trust to be held, administered and disposed of
by the Trustee as provided in this Trust Agreement.
(b) The Trust shall become irrevocable upon execution.
(c) The Trust is intended to be a grantor trust, of which the Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be held
separate and apart from other funds of the Company and shall be used exclusively
for the uses and purposes of Plan participants and general creditors as herein
set forth. Plan participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of the Trust. Any
right created under the Plan and this Trust Agreement shall be mere unsecured
contractual rights of the Plan participants and their beneficiaries against
1
<PAGE> 4
the Company. Any assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.
(e) Within 30 days following the end of the Plan year, ending after the
Trust has become irrevocable pursuant to Section 1(b) hereof, the Company shall
be required to irrevocably deposit additional cash or other property to the
Trust in an amount sufficient to pay each Plan participant or beneficiary the
benefits payable pursuant to the terms of the Plan as of the close of the Plan
year.
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
(a) The Company shall deliver to the Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Plan
participant (and his or her beneficiaries), that provides a formula or other
instructions acceptable to the Trustee for determining the amounts so payable,
the form in which such amount to be paid (as provided for or available under the
Plan), and the time of commencement for payment of such amounts. Except as
otherwise provided herein, the Trustee shall make payments to the Plan
participants and their beneficiaries in accordance with such Payment Schedule.
The Trustee shall make provision for the reporting and withholding of any
federal, state or local taxes that may be required to be withheld with respect
to the payment of benefits pursuant to the terms of the Plan and shall pay
amounts withheld to the appropriate taxing authorities or determine that such
amounts have been reported, withheld and paid by the Company.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plan shall be determined by the Company or such party as it
shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly to Plan participants
or their beneficiaries as they become due under the terms of the Plan. The
Company shall notify the Trustee of its decision to make payment of benefits
directly prior to the time amounts are payable to participants or their
beneficiaries. In addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with the
terms of the Plan, the Company shall make the balance of each such payment as
its falls due. The Trustee shall notify the Company where principal and earnings
are not sufficient.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO THE TRUST BENEFICIARY
WHEN THE COMPANY IS INSOLVENT.
(a) The Trustee shall cease payment of benefits to Plan participants and
their beneficiaries if the Company is Insolvent. The Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Company under federal and state law as set
forth below.
(1) The Board of Directors and the Chief Executive Officer of the Company
shall have the duty to inform the Trustee in writing of the Company's
Insolvency. If a person claiming to be a creditor of the Company alleges in
writing to the Trustee that the Company has become Insolvent, the Trustee
shall determine whether the Company is Insolvent and, pending such
determination, the Trustee shall discontinue payment of benefits to Plan
participants or their beneficiaries.
2
<PAGE> 5
(2) Unless the Trustee has actual knowledge of the Company's Insolvency, or
has received notice from the Company or a person claiming to be a creditor
alleging that the Company is Insolvent, the Trustee shall have no duty to
inquire whether the Company is Insolvent. The Trustee may in all events
rely on such evidence concerning the Company's solvency as may be
furnished to the Trustee and that provides the Trustee with a reasonable
basis for making a determination concerning the Company's solvency.
(3) If any time the Trustee has determined that the Company is Insolvent,
the Trustee shall discontinue payments to Plan participants or their
beneficiaries and shall hold the assets of the Trust for the benefit of
the Company's general creditors. Nothing in this Trust Agreement shall in
any way diminish any rights of Plan participants or their beneficiaries to
pursue their rights as general creditors of the Company with respect to
benefits due under the Plan or otherwise.
(4) The Trustee shall resume the payment of benefits to Plan participants
or their beneficiaries in accordance with Section 2 of this Trust
Agreement only after the Trustee has determined that the Company is not
Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Trustee discontinues
the payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by the Company in lieu of the payments
provided hereunder during any such period of discontinuance.
SECTION 4. PAYMENTS TO THE COMPANY.
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, the Company shall have no right or power to direct the Trustee to
return to the Company or to divert to others any of the Trust assets before all
payment of benefits have been made to Plan participants and their beneficiaries
pursuant to the terms of the Plan.
SECTION 5. INVESTMENT AUTHORITY
(a) With respect to the Trust Fund, the Trustee shall have the following
powers and rights, in addition to those vested in it elsewhere in this
Agreement or by law:
(1) To invest the Trust Fund in such bonds, notes, debentures, mortgages,
equipment, trust certificates, investment trust certificates, preferred or
common stock, insurance and annuity contracts, common or collective trust
funds, shares of regulated investment companies, shares of open-ended
investment companies registered under the Investment Company Act of 1940,
as amended, or in such other property, real or personal, as the Trustee may
deem advisable, with the case, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity
and familiar with such matters would use in the conduct of an enterprise of
a like character and with like aims; and
(2) The Trustee may temporarily invest and reinvest the funds in any
marketable short- and medium-term fixed income securities (including demand
and short-term notes and commonly known as "Master Notes"), United States
Treasury Bills, other short- and medium-term government obligations,
3
<PAGE> 6
commercial paper, other money market instruments and part interests in any
one or more of the foregoing, or may maintain cash balances consistent with
the liquidity needs of the Plan.
(3) In addition, the Trustee shall have full power and authority to invest
and reinvest all or any part of any investment fund through the medium of
any pooled investment fund or group trust (including one or more of which
it is the Trustee) which is invested principally in the property of the
kind authorized for investment of the respective investment funds. To the
extent of investment funds. To the extent of investment of the Trust's
assets in such a pooled fund or group trust, the terms of the instrument
establishing such pooled fund or group trust are made a part hereof as
fully as if set forth at length herein.
(4) To retain, manage, improve, repair, operate and control all property,
real or personal, at any time comprising part of the Trust Fund; and
(5) To manage, sell, contract to sell, grant options to purchase, convey,
exchange, partition, lease for any term (even though such term commences in
the future or may extend beyond the duration of the Trust), and otherwise
dispose of the Trust Fund from time to time in such a manner, for such
consideration, and upon such terms and conditions as the Trustee in its
discretion shall determine; and
(6) To vote any corporate stock either in person or by proxy for any
purpose; to exercise or sell any stock subscription or conversion right; to
participate in voting trusts; to consent to, take any action in connection
with, and receive and retain any securities resulting from any merger,
consolidation, reorganization, readjustment of the financial structure,
liquidation, sale, lease, or other disposition of the assets of any
corporation or other organization the securities of which may constitute a
portion of the Trust Fund; and
(7) To keep any property in the name of a nominee with or without
disclosure of any fiduciary relationship; and
(8) To take any action with respect to conserving or realizing upon the
value of any property in the Trust Fund; to collect, pay, contest,
compromise, or abandon demands of or against the Trust Fund; to pay any
tax, assessment for other charge attributable to the interest of such
beneficiary; and
(9) To purchase, hold and sell interest or units of participation in any
collective or common trust fund established by the Trustee, including any
such funds which may be established in the future;
(10) To deposit securities in a security depository and permit the
securities so deposited to be held in the name of the depository's nominee,
and to deposit securities issued or guaranteed by the U.S. government or
any agency or instrumentality thereof, including securities evidenced by
book entry rather than by certificate, with the U.S. Department of the
Treasury, a Federal Reserve Bank or other appropriate custodial entity, in
the same account as the Trustee's own property, provided the Trustee's
records and accounts show that such securities are assets of the Trust
Fund; and
(11) Generally, to do all acts, whether or not expressly authorized, which
the Trustee deems necessary or desirable, but acting at all times according
the principles expressed in Section 8.
(b) The Trustee is authorized to contract or make other arrangements with
any other organizations affiliated with or subsidiaries of the Trustee or
related entities, for the provisions of services to the Trust or Plan, except
where such arrangements are prohibited by law or regulation.
(c) The Trustee is directed to place securities orders, settle securities
trades, hold securities in custody, and other related activities on behalf of
the Trust through or by any broker/dealer Trustee selects, unless an
4
<PAGE> 7
Investment Advisor appointed by the Company and approved by the Trustee to act
as Investment Advisor (so called) specifically instructs the use of a specific
broker/dealer. Trades (and related activities) conducted through any
broker/dealer shall be subject to fees and commissions established by the
broker/dealer, which may be paid from the Trust or netted from the proceeds of
trades.
The Trustee is authorized to disclose such information as is necessary to
the operation and administration of the Trust to such persons or organizations
that the Trustee determines have a legitimate business purpose for obtaining
such information.
(d) The Company may appoint an Investment Advisor subject to the approval
of the Trustee. Any such appointment shall be in writing and shall delineate
the duties, responsibilities and liabilities of the Investment Advisor with
respect to any part of the assets of the trust under the control of the
Investment Advisor. Any such Investment Advisor appointed by the Company shall
be an independent person or entity.
If the Company shall appoint an Investment Advisor to whom discretion is
given to invest all or any part of the assets of the Trust, the Trustee shall
segregate each such part into a separate account to be invested by the Trustee
upon the direction of the Investment Advisor. The Trustee shall be under no
duty to question, or make inquiries as to, any action or direction of any
Investment Advisor as provided herein, or any failure to give directions, or to
review the securities subject to the investment direction of any Investment
Advisor, or to make any suggestions to an Investment Advisor with respect to
investment and reinvestment of, or disposing of investments in, any part of the
assets of the Trust subject to the investment discretion of any Investment
Advisor, unless the Trustee knows that by such action or failure to act it will
be participating in a breach of fiduciary duty by the Investment Advisor.
(e) The Trustee may invest in securities (including stock or rights to
acquire stock) or obligations issued by the Company. All rights associated with
assets of the Trust shall be exercised by the Trustee or the person designated
by the Trustee, and shall in no event be exercisable by or rest with Plan
participants, except that voting rights with respect to Trust assets with be
exercised by the Company.
(f) The Company shall have the right at anytime, and from time to time in
its sole discretion, to substitute assets of equal fair market value for any
asset held by the Trust. This right is exercisable by the Company in a
nonfiduciary capacity without the approval or consent of any person in a
fiduciary capacity.
SECTION 6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
SECTION 7. ACCOUNTING BY THE TRUSTEE.
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and the Trustee. Within 60 days following the close of each calendar
year and within 60 days after the removal or resignation of the Trustee, the
Trustee shall deliver to the Company a written account of its administration of
the Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued interest paid
or receivable being shown
5
<PAGE> 8
separately), and showing all cash, securities and other property held in the
Trust at the end of such year or as of the date of such removal or resignation,
as the case may be.
SECTION 8. RESPONSIBILITY OF THE TRUSTEE.
(a) The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company which is contemplated by,
and in conformity, the terms of the Plan or this Trust and is given in writing
by the Company. In the event of a dispute between the Company and a party, the
Trustee may apply to a court of competent jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
the Trustee's costs, expenses and liability (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments. If the Company does not pay such costs, expenses and liabilities
in a reasonably timely manner, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel (who may also be counsel for
the Company generally) with respect to any of its duties or obligations
hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred on the
Trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if any insurance policy is held as an asset of the
Trust, the Trustee shall have no power to name a beneficiary of the policy other
than the Trust, to assign the policy (as distinct from conversion of the policy
to a different form) other than to a successor Trustee, or to loan to any person
the proceeds of any borrowings against such policy.
(f) Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
(g) The Trustee shall not be liable for any mistake or error in judgment
but shall be liable only for willful misconduct or gross negligence.
(h) No Trustee shall be required to furnish bond or other security except
as herein expressly provided or except if required to do so under applicable
federal law.
(i) In the event of a garnishment, attachment, levy or other legal process
by a creditor of the Company of any of the assets of the Trust under
circumstances set out in Section 3.(b) hereof where Trustee cannot ascertain the
Insolvency of the Company, the Trustee may interplead the assets of the Trust
into the court where the creditor has brought such action. The Trustee shall
have no liability to the Company for making such interpleader.
6
<PAGE> 9
SECTION 9. COMPENSATION AND EXPENSES OF THE TRUSTEE.
The Company shall pay all administration and Trustee's fees and expenses.
If not so paid, the fees and expenses shall be paid from the Trust.
SECTION 10. RESIGNATION AND REMOVAL OF THE TRUSTEE.
(a) The Trustee may resign at any time by written notice to the Company,
which shall be effective 60 days after receipt of such notice unless the
Company and the Trustee agree otherwise.
(b) The Trustee may be removed by the Company on 60 days notice or upon
shorter notice accepted by the Trustee.
(c) Upon a Change of Control, as defined in Section 13 below, the Trustee
may not be removed by the Company for two (2) years.
(d) If the Trustee resigns or is removed within five (5) years of a Change
of Control, as defined herein, the Company shall apply to a court of competent
jurisdiction for the appointment of a successor trustee or for instructions.
(e) Upon the resignation or removal of the Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed with 90 days after receipt
of notice of the resignations, removal or transfer, unless the Company extends
the time limit.
(f) If the Trustee resigns or is removed, a successor shall be appointed,
in accordance with Section 11 hereof, by the effective date or resignation or
removal under paragraph(s) (a) [or (b)] of this section. If no such appointment
has been made, the Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of the Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.
SECTION 11. APPOINTMENT OF SUCCESSOR.
(a) If the Trustee resigns or is removed in accordance with Section 10(a)
or 10(b) hereof, the Company may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers under
state law, as a successor to replace the Trustee upon resignation or removal.
The appointment shall be effective when accepted in writing by the new Trustee,
who shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall execute any
instrument necessary or reasonably requested by the Company or the successor
Trustee to evidence the transfer.
(b) The Successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 7, and 8 hereof. The successor Trustee shall not be responsible for
and the Company shall indemnify and defend the successor Trustee from any claim
or liability resulting from any action or inaction of any prior Trustee or from
any other past event, or any condition existing at the time it becomes successor
Trustee.
7
<PAGE> 10
SECTION 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written instrument executed by
Trustee and the Company. Notwithstanding the foregoing, no such amendment shall
conflict with the terms of the Plan or shall make the Trust revocable after it
has become irrevocable in accordance with Section 1(b) hereof.
(b) The Trust shall not terminate until the date on which Plan participants
and their beneficiaries are no longer entitled to benefits pursuant to the terms
of the Plan. Upon termination of the Trust, any assets remaining in the Trust
shall be returned to the Company.
(c) Sections 10, 11 and 2 of this Trust Agreement may not be amended by the
Company for five (5) years following a Change of Control, as defined herein.
SECTION 13. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in accordance
with laws of the State of Texas.
(d) For purposes of this Trust, Change of Control shall mean the purchase
or other acquisition by any person,entity or group of persons, within the
meaning of section 13(d) or 14(d) of the Securities Exchange Act of 1934
("Act"), or any comparable successor provisions, of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Act) of 30 percent or more of
either the outstanding shares of common stock or the combined vetoing power of
the Company's then outstanding voting securities entitled to vote generally, or
the approval by the stockholders of the Company of a reorganization, merger, or
consolidation, in each case, with respect to which persons who were
stockholders of the Company immediately prior to such reorganization, merger or
consolidation do not immediately thereafter, own more than 50 percent of the
combined voting power entitled to vote generally in the election of directors
of the reorganized, merged or consolidated Company's then outstanding
securities, or a liquidation or dissolution of the Company or the of the sale
of all substantially all of the Company's assets.
(e) Until further notice from either party hereto, any notices delivered
pursuant to this Agreement and all other communications shall be in writing and
shall be delivered or sent to the persons at the addresses set forth hereunder.
All notices and other communications shall be effective when received. The
party seeking to rely on notice having been given under this paragraph shall be
responsible for ascertaining its receipt.
For Company:
Veritas DGC Inc.
10300 Town Park
Houston, Texas 77072
Attention: Liz Foreman
8
<PAGE> 11
For Trustee:
Austin Trust Company
100 Congress Avenue, Suite 700
Austin, Texas 78701
Attention: Dan Remick
(f) This Agreement between the Company and the Trustee contains the entire
understanding between the parties with respect to its subject matter, and, as
of the effective date of this Agreement, it supersedes and entirely replaces any
and all prior agreements between the Company and the Trustee with respect to
the subject matter of this agreement.
(g) This Agreement shall be binding upon and inure to the benefit of the
parties hereof and their heirs, successors and assignees. This Agreement is not
assignable by any party without the expressed written consent of the other
party.
(h) Titles and captions used in this Agreement are included for
convenience of reference only and in no way define or delimit any provisions or
otherwise alter the construction or effect.
(i) Where the context permits, words in the masculine gender shall include
the feminine and neuter genders, the singular shall include the plural, and
the plural shall include the singular.
(j) Each of the parties to this Agreement hereby represents and warrants
that it is duly authorized and empowered to execute, deliver and perform this
Agreement.
(k) This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all counterparts shall, together,
constitute only one Agreement.
SECTION 14. EFFECTIVE DATE.
The effective date of this Trust Agreement shall be ____________, 20 _____.
IN WITNESS WHEREOF, this Agreement is executed as of the day and year
first written above.
COMPANY
VERITAS DGC INC.
----------------------------------------
Title:
----------------------------------
TRUSTEE
AUSTIN TRUST COMPANY
----------------------------------------
Title:
----------------------------------
9
