SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-12
[ ] Confidential, for use of the Securities and Exchange Commission only (as
permitted by Rule 14a-6(e)(2))
Veritas DGC Inc.
(Name of Registrant as specified in its charter)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1)
and O-11.
Title of each class of securities to which transaction applies:
Aggregate number of securities to which transaction applies:
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11. (Set forth the amount on which the filing
fee is calculated and state how it was determined.):
Proposed maximum aggregate value of transaction:
Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by Registration Statement No., or the
Form or Schedule and the date of its filing.
Amount Previously Paid:
Form, Schedule or Registration Statement No.:
Filing Party:
Date Filed:
[VERITAS LOGO]
VERITAS DGC INC.
10300 TOWN PARK DRIVE
HOUSTON, TEXAS 77072
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 3, 2002
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We will hold the annual meeting of the holders of common stock of
Veritas DGC Inc. and the holders of exchangeable shares and class A exchangeable
shares series 1 of Veritas Energy Services Inc., a wholly-owned subsidiary of
Veritas DGC (all such holders are collectively referred to in this Notice as
"stockholders") at the offices of Veritas DGC, 10300 Town Park Drive, Houston,
Texas 77072, on Tuesday, December 3, 2002, at 10:00 a.m., Houston time, for the
following purposes:
1) To elect a board of six directors for Veritas DGC to serve until
the next annual meeting of stockholders or until their successors
are elected and qualify;
2) To consider the adoption of the Veritas DGC Inc. Share Incentive
Plan; and
3) To transact any other business as may properly be presented at the
meeting or any adjournment of the meeting.
A record of stockholders has been taken as of the close of business on
October 14, 2002 and only those stockholders of record on that date are entitled
to notice of and to vote at the meeting. A stockholders' list will be available
beginning November 1, 2002, and may be inspected during normal business hours
before the annual meeting at the offices of Veritas DGC, 10300 Town Park Drive,
Houston, Texas.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
Whether or not you plan to attend the meeting, please sign and date the enclosed
proxy and return it promptly in the enclosed envelope. Returning your proxy will
not prevent you from voting in person at the meeting if you wish to do so.
By Order of the Board of Directors,
Larry L. Worden
Vice President, General Counsel
and Secretary
October 23, 2002
VERITAS DGC INC.
10300 TOWN PARK DRIVE
HOUSTON, TEXAS 77072
PROXY STATEMENT
We are furnishing this proxy statement in connection with the
solicitation of proxies by our board of directors for use at our annual meeting
of stockholders to be held December 3, 2002, and at any adjournment of the
meeting. The meeting will be held at the time and place and for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders.
As of October 14, 2002, the record date for determining the
stockholders entitled to vote at the meeting, there were outstanding and
entitled to vote 31,773,481 shares of Veritas DGC common stock, par value $.01
per share, 1,171,261 Veritas Energy Services Inc. exchangeable shares and
274,311 Veritas Energy Services class A exchangeable shares series 1. In this
proxy statement, all such shares are referred to collectively as "shares," and
all holders of shares are referred to collectively as "stockholders." This proxy
statement addresses you if you are a stockholder. All shares vote together as a
single class and each share entitles its holder to one vote on each matter
presented at the meeting. Holders of a majority of the outstanding shares must
be present, in person or by proxy, to constitute a quorum for the transaction of
business. Abstentions will be treated as present for purposes of determining
whether a quorum is present.
The proxy accompanying this proxy statement, when properly signed and
returned, permits you to vote by proxy on all matters to come before the meeting
or any adjournment of the meeting. If you specify your choice on the proxy with
respect to a matter being voted upon, your shares will be voted as you specify.
UNLESS YOU SPECIFY OTHERWISE, YOUR SHARES WILL BE VOTED IN FAVOR OF THE SIX
NOMINEES TO THE BOARD OF DIRECTORS AND IN FAVOR OF THE APPROVAL OF THE VERITAS
DGC INC. SHARE INCENTIVE PLAN IF YOU SIGN, DATE AND RETURN YOUR PROXY.
We are not aware of any business to be acted upon at the meeting other
than what is set forth in the accompanying Notice. If, however, other matters
are properly brought before the meeting, or any adjournment of the meeting, the
persons appointed as proxies will have discretion to vote or abstain from voting
on any such matter according to their best judgment.
You may revoke your proxy by (i) giving written notice to Larry L.
Worden, Vice President, General Counsel and Secretary, Veritas DGC Inc., 10300
Town Park Drive, Houston, Texas 77072, (ii) signing and delivering a later dated
proxy to Mr. Worden at any time before its exercise, or (iii) attending the
meeting and voting in person. Our inspector of election, who is required to
decide impartially any interpretive questions as to the conduct of the vote,
will tabulate the votes at the meeting and certify the results.
We will bear the cost of soliciting proxies in the accompanying form.
In addition to solicitations by mail, our employees may solicit proxies in
person, by telephone, fax or electronic mail.
This proxy statement and form of proxy is first being sent or given to
stockholders on or about October 29, 2002.
ELECTION OF DIRECTORS
The stockholders will elect six directors at the meeting.(1) Each
director elected will hold office until the next annual meeting of stockholders,
until his successor is elected and qualifies or until his earlier death,
resignation or removal. By signing, dating and returning the accompanying proxy,
you will grant your proxy to vote your shares as you direct. Unless you specify
otherwise, your shares will be voted FOR the six nominees to the board of
directors if you sign, date and return your proxy. All nominees previously have
been elected directors by the stockholders. If any nominee becomes unavailable
for election, the proxy may be voted for a substitute nominee selected by the
persons named in the proxy or the board of directors may be reduced accordingly;
however, we are not aware of any circumstances likely to render any nominee
unavailable.
The six nominees who receive a majority of the votes cast will be the
duly elected directors of Veritas DGC. Abstentions and broker non-votes will not
be counted as a vote for or against any nominee, and will not affect the outcome
of the election. Cumulative voting is not allowed.
The board of directors recommends a vote FOR all six nominees.
NOMINEES
The names of the six nominees and certain information concerning each
of them is set forth below:
Principal Position with Director
Name(1) Veritas DGC Age Since Member of
------------------- ------------------------- ----- ----------- ----------------------------------
Clayton P. Cormier Director 69 1991 Audit committee
James R. Gibbs Director 58 1997 Audit; compensation; and
nominating and corporate
governance committees
Stephen J. Ludlow Director, Vice Chairman 52 1994 Health, safety and environment
committee
Brian F. MacNeill Director 63 1996 Compensation; and nominating and
corporate governance committees
Jan Rask Director 47 1998 Audit; health, safety and
environment; and nominating and
corporate governance committees
David B. Robson Director, Chairman and 63 1996
Chief Executive Officer
(1) See "Certain Stockholders" for shares beneficially owned by each nominee as
of September 30, 2002.
Clayton P. Cormier is currently a financial and insurance consultant.
Prior to that, Mr. Cormier was a senior vice president in the oil and gas
division of Johnson & Higgins, an insurance broker, from 1986 to 1991 and
previously served as chairman of the board, president, and chief executive
officer of Ancon Insurance Company, S.A. and as an assistant treasurer of Exxon.
James R. Gibbs is chairman, president and chief executive officer of
Frontier Oil Corporation, an
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(1) Effective with the next annual meeting of stockholders, the board has fixed
the number of directors at six, a reduction of two directors from the
previous eight. After the annual meeting, the nominating and corporate
governance committee of the board will begin a search for one to three
additional independent directors. If qualified candidates are identified
who are willing to serve, the board intends to increase the size of the
board and appoint one to three of such candidates to fill the newly created
vacancy or vacancies to serve until the next annual meeting of
stockholders.
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oil refining and marketing company. He has been chairman since January 1999,
chief executive officer since 1992 and president since 1987. He has been
employed there for twenty years. Mr. Gibbs is a director of Frontier Oil
Corporation, Smith International and Gundle/SLT Environmental, Inc. and is an
advisory director of Frost Bank-Houston.
Stephen J. Ludlow became vice chairman of Veritas DGC in January 1999.
From August 1996, upon consummation of the business combination between Veritas
DGC and Veritas Energy Services until January 1999, he was president and chief
operating officer of Veritas DGC. He has been employed by Veritas DGC for 30
years and served as president and chief executive officer of Veritas DGC from
1994 to 1996. Prior to 1994, he served as executive vice president of Veritas
DGC for four years following eight years of service in a variety of
progressively more responsible management positions, including several years of
service as the executive responsible for operations in Europe, Africa and the
Middle East.
Brian F. MacNeill is currently chairman of PetroCanada, an integrated
oil and natural gas energy company. From 1991 until his retirement on January 1,
2001, he was president and chief executive officer of Enbridge Inc., a crude oil
and liquids transportation and natural gas distribution company.
Jan Rask is currently president and chief executive officer of R & B
Falcon and has held that position since July 2002. From September 2001 to July
2002, he was the Managing Director--Acquisitions and Special Projects of Pride
International, Inc. and from July 1996 to September 2001, Mr. Rask was
president, chief executive officer and director of Marine Drilling Companies,
Inc. Mr. Rask served as president and chief executive officer of Arethusa
(Off-Shore) Limited from May 1993 until the acquisition of Arethusa (Off-shore)
Limited by Diamond Offshore Drilling, Inc. in May 1996. Mr. Rask joined Arethusa
(Off-shore) Limited's principal operating subsidiary in 1990 as its president
and chief executive officer.
David B. Robson has been chairman and chief executive officer of
Veritas DGC since consummation of the business combination between Veritas DGC
and Veritas Energy Services in August 1996. Prior thereto, he held similar
positions with Veritas Energy Services or its predecessors since 1974. Mr.
Robson is also a director of Pride International, Inc.
COMMITTEES AND MEETINGS OF DIRECTORS
During fiscal year 2002, the board of directors met on 13 regularly and
specially scheduled occasions. Committees of the board of directors held
meetings as follows: audit -- eight meetings; compensation -- one meeting;
nominating and corporate governance committee -- one meeting; and health, safety
and environment -- two meetings. During fiscal year 2002, all directors attended
at least 75% of the meetings of the board of directors and committees on which
they served.
The audit committee assists the board of directors in assuring that our
accounting and reporting practices are in accordance with all applicable
requirements. The audit committee has reviewed and discussed our audited
financial statements for the year ended July 31, 2002 with management and has
discussed with PricewaterhouseCoopers LLP, the independent accountants for
Veritas DGC, the matters required to be discussed by SAS 61 (Codification of
Statements on Auditing Standards, AU Section 380) with respect to those
statements. The audit committee has received the written disclosures and the
letter from PricewaterhouseCoopers LLP required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), and has discussed with
PricewaterhouseCoopers LLP, its independence in connection with its audit of our
most recent financial statements. The audit committee has reviewed the services
provided by PricewaterhouseCoopers LLP and has determined that the services
provided are compatible with the maintenance of PricewaterhouseCoopers LLP's
independence. Based on this review and these discussions, the audit committee
recommended to the board of directors that these audited financial statements be
included in our Annual Report on Form 10-K for the fiscal year ended July 31,
2002. The
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information in this paragraph shall not be deemed to be soliciting material, or
be filed with the Securities and Exchange Commission or subject to Regulation
14A or 14C or to liabilities of Section 18 of the Securities Act of 1933, nor
shall it be deemed to be incorporated by reference into any filing under the
Securities Act or the Securities Exchange Act of 1934, except to the extent that
we specifically incorporate these paragraphs by reference.
The members of the audit committee are independent, as defined in
Sections 303.01(B)(2)(a) and (3) of the NYSE's listing standards. Clayton P.
Cormier, James R. Gibbs, and Jan Rask are the members of the audit committee.
The board of directors has determined that each member of the audit committee is
financially literate and that Mr. Cormier has the necessary accounting and
financial expertise to serve as chairman. The board adopted a revised charter
for the audit committee on June 12, 2001, a copy of which was provided to
stockholders as an exhibit to the company's Proxy Statement dated October 29,
2001 filed on Schedule 14A.
The compensation committee administers our compensation plans,
including stock option and restricted stock plans, and approves officers'
compensation, including awards of stock options and restricted stock.
The nominating and corporate governance committee (prior to September
26, 2002, the committee was known as the "nominating committee") recommends
nominees for election to the board of directors at each annual meeting and to
fill existing or anticipated vacancies on the board of directors. The nominating
and corporate governance committee will consider nominees recommended by
stockholders. In accordance with the company's audit committee charter, the
committee also recommends nominees for appointment to the company's audit
committee.
The health, safety and environment committee assists the board of
directors by overseeing our environmental and occupational health and safety
policies and programs and monitoring related current and future environmental
and occupational health and safety regulatory issues.
DIRECTOR COMPENSATION
Each of our directors who is not also an employee is paid an annual fee
of $15,000 plus travel expenses, a fee of $1,500 per regular or special board of
directors meeting, $750 per telephonic board of directors meeting and $750 per
regular, special or telephonic committee meeting attended. Effective on the date
of the annual meeting of stockholders, the annual fee of each director will be
increased to $25,000, the fee for attendance at board and committee meetings
(other than telephonic meetings) will be $1500 per meeting and the fees for
attendance at telephonic board and committee meetings will be $750 per meeting.
Also effective on the date of the annual meeting of stockholders, the chairman
of the audit committee will be paid a fee of $10,000 annually in addition to the
other fees paid non-employee directors.
We maintain a stock option plan for non-employee directors providing
for stock options to be granted to each non-employee director. Under the current
stock option plan for non-employee directors, each eligible director is granted
options to purchase 5,000 shares on the date of the first meeting of the board
of directors each calendar year. If a director is initially elected or appointed
to the board of directors other than at the first meeting of the calendar year,
the board of directors may grant an option to such director for a number of
shares not to exceed 5,000. The exercise price for each option granted is the
fair market value of the underlying shares, defined as the closing sale price of
a share of common stock on the day immediately before the date of grant. Each
option is exercisable as follows: 25% of the options are immediately exercisable
on the date of grant and an additional 25% become exercisable on each succeeding
anniversary of the date of grant until all are exercisable on the third
anniversary of the date of grant. All options granted to non-employee directors
expire ten years after the date of grant.
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In the event stockholders approve the Veritas DGC Inc. Share Incentive
Plan, non-employee directors will be eligible to receive (1) nonqualified
options, (2) share appreciation rights, (3) deferred share units, (4) restricted
shares, and (5) performance shares. The committee appointed under that plan will
determine the type of awards granted and the terms of each grant. If
stockholders approve the Share Incentive Plan, no further options will be
granted under the current non-employee director stock option plan. For a
description of the Share Incentive Plan, see the section of this proxy statement
entitled "Description of Veritas DGC Inc. Share Incentive Plan."
APPROVAL OF THE VERITAS DGC SHARE INCENTIVE PLAN
In September 2002, the board of directors approved the Veritas DGC Inc.
Share Incentive Plan. We seek stockholder approval of the plan.
We currently have six different plans under which non-qualified stock
options and restricted stock are granted to employees, including officers, and
non-employee directors. Each of our current plans is described generally in Note
8 "Employee Benefits" to our financial statements included in our Form 10-K for
the fiscal year ended July 31, 2002, which description is incorporated in this
proxy statement by reference. In the event the Share Incentive Plan is approved,
no further grants would be made under those existing plans, thus reducing the
number of active plans from six to one. In addition, the Share Incentive Plan
would allow us the future flexibility to offer employees incentives other than
non-qualified options and restricted stock, such as incentive stock options,
share appreciation rights, deferred share units, and performance shares. We
believe that the granting of stock based awards provides employees with the
incentive to exert maximum effort for the success of the Company and to
participate in its success. In addition, such awards help us retain and attract
high quality employees.
VOTE REQUIRED
By signing, dating and returning the accompanying proxy, you will grant
your proxy to vote your shares as you direct. Unless you specify otherwise, your
shares will be voted FOR the approval of the Share Incentive Plan if you sign,
date and return your proxy. The affirmative vote of a majority of the votes cast
will be required to approve the Share Incentive Plan. Abstentions and broker
non-votes will not be counted as a vote for or against the approval of the plan,
and will not affect the outcome of the vote. Cumulative voting is not allowed.
The board of directors recommends a vote FOR the approval of the Share
Incentive Plan.
DESCRIPTION OF THE VERITAS DGC INC. SHARE INCENTIVE PLAN
The following summary of the Share Incentive Plan, which was adopted by
our board of directors subject to the approval of our stockholders, is qualified
by reference to the full text of the plan, which is attached to this proxy
statement as Annex A.
GENERAL PROVISIONS
The plan provides that the following types of awards may be granted
under the plan or in any combination: (1) nonqualified options to purchase our
common stock, $.01 par value per share, ("Veritas DGC Shares"), (2) incentive
stock options to purchase Veritas DGC Shares, (3) Veritas DGC Share appreciation
rights ("SARs"), (4) deferred Veritas DGC Share units, (5) restricted Veritas
DGC Shares and (6) performance shares to persons (including officers, directors,
employees, consultants and advisors) who have substantial responsibility for the
management and growth of Veritas DGC or any of its affiliates as determined by
the committee (described below) that administers the plan.
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Administration. A committee of at least two persons who are members of
and appointed by the compensation committee of our board of directors or to the
extent it chooses to operate as the committee, the compensation committee of our
board of directors will administer the plan. The committee will designate the
persons to be granted awards and the type and amount of awards to be granted and
will have authority to interpret the plan, adopt, alter and repeal
administrative regulations, accelerate the time at which awards may be exercised
or will vest, and determine and amend the terms of the awards.
Plan Term. The plan is effective as of the date our stockholders
approve it. No award will be granted under the plan after July 31, 2012.
Eligibility. The committee may make awards under the plan to persons,
including our officers, directors, employees, consultants and advisors who have
substantial responsibility for the management and growth of Veritas DGC or any
of its affiliates. The plan provides that options intended to qualify as
incentive stock options may only be granted to key employees of Veritas DGC or
its parent or subsidiary corporations. The committee, in its sole discretion,
will select the persons eligible to participate in the plan. The approximate
number of individuals who are eligible to participate in the plan is 300.
Limitations on Awards. Subject to certain adjustment provisions in the
plan, the committee may grant as awards an aggregate maximum of the sum of the
following numbers of Veritas DGC Shares to eligible persons during the plan
term: (i) 1,200,000 (no more than 300,000 of which may be granted in a form
other than options), (ii) the number of shares available for issuance under the
Veritas DGC Inc. Restricted Stock Agreements, Veritas DGC Inc. Restricted Stock
Plan, Veritas DGC Inc. 2001 Key Employee Restricted Stock Plan, Veritas DGC Inc.
1992 Employee Nonqualified Stock Option Plan, Veritas DGC Inc. 1992 Non-Employee
Director Stock Option Plan and Veritas DGC Inc. 2001 Key Employee Nonqualified
Stock Option Plan (collectively, "Existing Stock Plans") which are not the
subject of an option or restricted stock award granted under one of the Existing
Stock Plans as of the date our stockholders approve the Share Incentive Plan;
and (iii) the number of shares subject to unexercised options or unvested
restricted stock awards granted under the Existing Stock Plans prior to the date
the Share Incentive Plan is approved by our stockholders that expire or are
canceled, terminated or forfeited after the date our stockholders approve the
Share Incentive Plan. Of those dedicated Veritas DGC Shares, the maximum number
of shares with respect to which options characterized by the Company as
incentive stock options may be granted under the Share Incentive Plan is
2,000,000; the maximum number with respect to which options and SARs may be
granted to any person under the Share Incentive Plan during any three
consecutive calendar years is 500,000; and the maximum number with respect to
which performance shares may be granted to any person under the Share Incentive
Plan during any three consecutive calendar years cannot exceed 250,000. Should
an outstanding award granted under the Share Incentive Plan expire, terminate,
be settled in cash in lieu of Veritas DGC Shares or be surrendered for any
reason, the shares allocated to any unexercised portion of that award may again
be subject to award under the Share Incentive Plan.
If the exercise price of an option is paid in Veritas DGC Shares or if
Veritas DGC Shares are withheld from payment of an award to satisfy tax
obligations with respect to the award, such Veritas DGC Shares also will not
count against any of the above limits.
Award Transferability. Except as specified in the applicable award
agreement or in a domestic relations court order, an award may not be
transferred other than by will or under the laws of descent and distribution. In
the discretion of the committee, any attempt to transfer an award other than
under the terms of the plan and the applicable agreement may terminate that
award. During the recipient's lifetime, only the recipient may exercise any
award under the plan.
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AWARDS
The plan authorizes the committee to grant options, share appreciation
rights, deferred share units, restricted shares and performance shares. A
description of each type of award follows:
Options
General. The plan provides that the committee is authorized to grant
incentive and nonqualified options to purchase Veritas DGC Shares subject to
such terms and conditions as the committee may determine in its sole discretion.
Option Price. The price for which Veritas DGC Shares may be purchased
shall not be less than the fair market value of the Veritas DGC Shares on the
date the option is granted; provided, however, that the price for which Veritas
DGC Shares may be purchased shall not be less than 110 percent of the fair
market value of the Veritas DGC Shares on the date an option characterized as an
incentive stock option is granted if such option is granted to a person who, at
the time of the grant, owns (or is deemed to own under section 424(d) of the
Code) shares of outstanding stock possessing more than 10% of the total combined
voting power of all classes of stock of Veritas DGC or of Veritas DGC's parent,
if any, or subsidiary corporations (a "10% Owner").
Duration of Options. Unless the option agreement specifies a shorter
term, an option expires on the tenth anniversary of the date the option is
granted (fifth anniversary of the date an option characterized as an incentive
stock option is granted to a 10% Owner). Unless the option agreement specifies
otherwise, an option shall not continue to vest after the termination of the
option holder's employment or affiliation relationship with Veritas DGC and its
affiliates for any reason other than death, disability or retirement. The plan
gives the committee discretion to accelerate the vesting of an option on a
case-by-case basis at any time.
Except as otherwise provided in an option agreement, an option granted
to a person other than a non-employee director terminates on the earlier of the
date of the expiration of the general term of the option or 90 days after the
date of the termination of the option holder's employment or affiliation
relationship with Veritas DGC and all its affiliates for any reason other than
death, disability or retirement.
In the case of an option granted to a person other than a non-employee
director, unless the option agreement specifies otherwise, if the employment or
affiliation relationship between Veritas DGC and all affiliates and an option
holder terminates due to death before the date of expiration of the general term
of the option, the option will terminate on the earlier of the date of
expiration of the general term of the option or the first anniversary of the
option holder's death.
In the case of an option granted to a person other than a non-employee
director, unless the option agreement specifies otherwise, if the employment or
affiliation relationship between Veritas DGC and all affiliates and the option
holder terminates due to disability before the date of the expiration of the
general term of the option, the option shall terminate on the earlier of the
expiration of the general term of the option or the first anniversary of the
date of the termination of the employment or affiliation relationship due to
disability.
Unless the option agreement specifies otherwise, if the option holder
is an employee of Veritas DGC or an affiliate and the employee retires, the
option shall terminate on the earlier of the expiration of the general term of
the option or three years (one day less than three months in the case of an
option characterized as an incentive stock option) after the date of the option
holder's retirement.
Unless the option agreement specifies otherwise, an option granted to a
non-employee director
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shall terminate on the earlier of the expiration of the general term of the
option or three years after his cessation of services as a director of Veritas
DGC.
Exercise of Options. An option may be exercised at the time, in the
manner, and subject to the conditions the committee specifies in the option
agreement in its sole discretion. Payment of the exercise price of an option may
be made in such manner as the committee may provide, including cash, delivery of
Veritas DGC Shares already held for at least six months, a broker-assisted
cashless exercise. No option holder will have any rights as a stockholder with
respect to Veritas DGC Shares covered by an option.
Share Appreciation Rights
The committee shall specify in a SAR award agreement the term of a SAR
as well as vesting and termination provisions. Upon the exercise of a SAR, the
award holder is entitled to receive, for each Veritas DGC Share with respect to
which a SAR is exercised, an amount (the "appreciation") equal to the excess of
the fair market value of a Veritas DGC Share on the exercise date over the grant
price of the SAR which may not be less than the fair market value of a Veritas
DGC Share on the date of the grant of the SAR and in no event less than par
value of one share. The committee, in its sole discretion and subject to
applicable law, determines the form in which to pay the appreciation -- solely
in cash, solely in Veritas DGC Shares (valued at fair market value on the date
of the exercise of the SAR) or partly in cash and partly in Veritas DGC Shares.
Only the actual number of Veritas DGC Shares delivered pursuant to the exercise
of SARs will be charged against the aggregate maximum number of Veritas DGC
Shares available for awards under the plan. However, the number of Veritas DGC
Shares subject to the SAR shall be reduced by the number of underlying Veritas
DGC Shares as to which the exercise related unless the SAR Agreement provides
otherwise. The plan gives the committee discretion to accelerate the vesting of
an SAR on a case-by-case basis at any time.
Deferred Share Units
The committee is authorized to award deferred Veritas DGC Share units
subject to such terms and conditions as the committee may determine in its sole
discretion. The committee shall maintain a bookkeeping ledger account that
reflects the number of deferred share units credited under the plan for the
benefit of a holder. Deferred Veritas DGC Share units shall be similar to
restricted Veritas DGC Shares (described below) except that no Veritas DGC
Shares are actually transferred to the recipient until a later date specified in
the recipient's award agreement. Each deferred share unit shall have a value
equal to the fair market value of a Veritas DGC Share on the date the Veritas
DGC Share is actually transferred to the recipient. The plan gives the committee
discretion to credit the holder's bookkeeping account with dividend units with
respect to dividends declared on Veritas DGC Shares, subject to the same vesting
and payout restrictions as applicable to the holder's deferred Veritas DGC Share
units, and to accelerate the vesting of deferred Veritas DGC Share units on a
case by case basis at any time.
Restricted Veritas DGC Shares
The committee is authorized to award restricted Veritas DGC Shares
subject to such terms and conditions as the committee may determine in its sole
discretion. The committee has authority to determine the number of restricted
Veritas DGC Shares to be awarded, the price, if any, to be paid by the recipient
of the restricted Veritas DGC Shares, the date or dates on which the restricted
Veritas DGC Shares will vest, and the transferability restrictions on a holder's
rights with respect to restricted shares. The plan gives the committee
discretion to accelerate the vesting of restricted Veritas DGC Shares on a
case-by-case basis at any time.
Subject to the terms and conditions of the plan, holders of restricted
shares shall have all the rights of a stockholder including, without limitation,
the right to vote such shares if holders of unrestricted Veritas DGC Shares of
the same class have the right to vote during any period in which such shares are
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subject to forfeiture and restrictions on transfer. Dividends paid with respect
to restricted shares in Veritas DGC Shares or rights to acquire Veritas DGC
Shares will be added to and become a part of the restricted shares; dividends
paid in other property or in cash will be paid to the holder currently.
Performance Shares
The committee is authorized to award performance shares, which are
subject to the attainment of one or more performance goals, to eligible persons
selected by it.
A performance share consists of a grant of Veritas DGC Shares upon or
subject to the attainment of one or more objective performance goals. A
performance share will be paid, vested or otherwise deliverable solely upon the
attainment of one or more pre-established, objective performance goals
established by the committee. The committee must establish objective goals
within the first 90 days of the performance period or within the first 25% of
the performance period, whichever is earlier, and in any event, while the
outcome is substantially uncertain. A performance goal is objective if a third
party having knowledge of the relevant facts could determine whether the goal
has been met. A performance goal may be based upon one or more business criteria
that apply to the individual, one or more of business units of Veritas DGC or
Veritas DGC as a whole, and may include any of the following: earnings per
share; earnings per share growth; total stockholder return; economic value
added; cash return on capitalization; increased revenue; revenue ratios (per
employee or per customer); net income; stock price; market share; return on
equity; return on assets; return on capital; return on capital compared to cost
of capital; return on capital employed; return on invested capital; stockholder
value; net cash flow; operating income; earnings before interest and taxes; cash
flow; cash flow from operations; cost reductions; cost ratios (per employee or
per customer); proceeds from dispositions; project completion time and budget
goals; net cash flow before financing activities; customer growth; and total
market value. Goals may also be based on performance relative to a peer group of
companies. Unless otherwise provided, performance goals need not be based upon
an increase or positive result and could include, for example, maintaining the
status quo or limiting economic losses (measured by reference to the specific
business criteria). In interpreting plan provisions applicable to performance
and performance share awards, it is intended that the plan will conform with the
standards of section 162(m) of the Code and Treasury Regulations Section
1.162-27(e)(2)(i), and the committee in establishing such goals and interpreting
the plan shall be guided by such provisions. Prior to the payment of any
compensation based on the achievement of performance goals, the committee must
certify in writing that applicable performance goals and any of the material
terms thereof were, in fact, satisfied. Subject to the foregoing provisions, the
committee shall determine the terms, conditions and limitations applicable to
any performance share awards made pursuant to the plan.
Subject to the terms and conditions of the plan, holders of performance
shares shall not have the rights of a stockholder until such shares have been
earned and distributed.
PROVISIONS RELATING TO A CHANGE OF CONTROL
As a general matter, upon the occurrence of a change of control as
defined in the plan all outstanding Veritas DGC Share options, SARs, deferred
Veritas DGC Share units, restricted Veritas DGC Shares and performance shares
will become fully exercisable and vested.
OTHER PROVISIONS
Cancellation of Options. Without the prior approval of stockholders,
the committee may not cancel any option that has an exercise price on the date
of cancellation that exceeds the fair market value of the Shares that may be
purchased under the option.
Tax Withholding. The plan permits employees to satisfy all or a portion
of their federal, state,
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local, foreign or other tax liabilities with respect to awards under the plan by
delivering previously-owned shares (that have been owned by the holder for a
least six months) or by having Veritas DGC withhold from the shares otherwise
deliverable to such holder shares having a value not to exceed the required
employer's minimum statutory withholding tax obligations.
Adjustments. In the event of specified changes in Veritas DGC's capital
structure, the committee will have the power to adjust the number and kind of
shares authorized by the plan (including any limitations on individual awards),
and the number, option price and kinds of shares covered by outstanding awards.
Amendments. The committee may amend or terminate the plan at any time
in its sole discretion, provided that no amendment may change the aggregate
number of Veritas DGC Shares that may be issued or the class of employees
eligible to receive incentive stock options under the plan without prior
stockholder approval.
Persons Residing Outside of the United States. Notwithstanding any
provision of the plan to the contrary, the committee, in its sole discretion,
may take the action necessary to ensure that the plan complies with the laws of
other countries in which Veritas DGC or its affiliates operate or have
employees. Such action may be taken either before or after an award is made, and
may include, without limitation, determining plan coverage and eligibility,
amending the plan or the terms of any award, establishing subplans and modifying
exercise or other procedures.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
Nonqualified Stock Options. The grant of nonqualified stock options
under the plan will not result in the recognition of any U.S. federal taxable
income by the option holder. The option holder will recognize ordinary income on
the date of exercise of the nonqualified stock option equal to the difference
between (1) the fair market value on the date of exercise and (2) the exercise
price. The tax basis of these Veritas DGC Shares for the purpose of a subsequent
sale includes the option price paid and the ordinary income reported on exercise
of the nonqualified stock option. To the extent it is subject to federal income
taxation, Veritas DGC or one of the subsidiaries will be entitled to a deduction
in the amount reportable as income by the option holder on the exercise of a
nonqualified stock option.
Incentive Stock Options. We believe that certain options granted under
the plan may qualify as "incentive stock options" within the meaning of section
422(d) of the Code. The grant of options under the plan that are characterized
as incentive stock options will not result in the recognition of any U.S.
federal taxable income by the option holder. To the extent that an option
granted under the plan qualifies as an incentive stock option under section 422
of the Code, generally, the exercise of such option will also not result in the
recognition of any U.S. federal income tax, but the difference between the
exercise price and the fair market value of the Veritas DGC Shares at the time
of exercise is an item of tax preference which may require payment of an
alternative minimum tax. On the sale of the Veritas DGC Shares acquired through
exercise of an option granted under the plan that qualifies as an incentive
stock option under section 422(d) of the Code (assuming such sale does not occur
within two years of the date of grant of the option or within one year from the
date of exercise), any gain (or loss) will be taxed as long term capital gain
(or loss) and Veritas DGC will not be entitled to any deduction in connection
with the sale (or the grant or exercise of the option). However, if a holder
sells the Veritas DGC Shares acquired upon exercise of such an option before the
later of (i) two years from the date of grant and (ii) one year from the date of
exercise, the holder will be treated as having received, a the time of sale,
compensation taxable as ordinary income, and Veritas DGC will be entitled to a
corresponding deduction, subject to the compensation deduction limitation
(described below). The amount treated as compensation income in the excess of
the fair market value of the Veritas DGC Shares at the time of exercise over the
exercise price, and any amount realized in excess of the fair market value of
the Veritas DGC Shares at the time of exercise would be treated as long or short
term capital gain, depending on how long such shares were held.
-10-
Share Appreciation Rights. The grant of SARs under the plan will not
result in the recognition of any taxable income by the recipient. The recipient
will recognize ordinary income in the year of exercise in an amount equal to the
amount of appreciation paid to him upon the exercise of a SAR. Upon the exercise
of a SAR, Veritas DGC or one of its subsidiaries will be entitled to a deduction
in the amount equal to the income recognized by the recipient.
Restricted Veritas DGC Shares. A recipient of restricted Veritas DGC
Shares under the plan will not recognize taxable income at the time of grant,
and neither Veritas DGC nor any of its subsidiaries will be entitled to a
deduction at that time, assuming that the restrictions constitute a substantial
risk of forfeiture for federal income tax purposes. Upon the expiration of the
forfeiture restrictions, the recipient will recognize ordinary income in an
amount equal to the excess of the fair market value of the shares at such time
over the amount, if any, paid for such shares. Veritas DGC or one of its
subsidiaries will be entitled to a corresponding deduction. Dividends paid
during the period that the forfeiture restrictions apply will also be treated as
compensation income to the recipient and deductible as such by Veritas DGC or
one of its subsidiaries.
However, a recipient of restricted Veritas DGC Shares may elect,
pursuant to the terms of the grant agreement, to be taxed at the time of grant
of the restricted Veritas DGC Shares based on the fair market value of the
shares on the date of the grant. If this election is made, (1) Veritas DGC or
one of its subsidiaries will be entitled to a deduction at the time of grant of
the restricted Veritas DGC Shares based on the fair market value of the shares
on the date of the grant, (2) dividends paid during the period the forfeiture
restrictions apply will be taxable as dividends and will not be deductible by
Veritas DGC or any of its subsidiaries, and (3) there will be no further federal
income tax consequences when the forfeiture restrictions lapse.
Deferred Share Units. The grant of deferred Veritas DGC Share units
under the plan will not result in the recognition of any taxable income by the
recipient. At the time deferred Veritas DGC Share units are settled in Veritas
DGC Shares, the recipient will recognize ordinary income, and the Company or one
of its subsidiaries will be entitled to a corresponding deduction. Generally,
the measure of the income and deduction will be the fair market value of the
Veritas DGC Shares at the time the deferred Veritas DGC Shares are settled.
Performance Shares. The recipient of performance shares will recognize
ordinary income and Veritas DGC or one if its subsidiaries will be entitled to a
corresponding deduction when the shares are earned and distributed.
Compensation Deduction Limitation. Under section 162(m) of the Code,
Veritas DGC's federal income tax deductions for certain compensation paid to
designated executives is limited to $1 million per year. These executives
include Veritas DGC's Chief Executive Officer and Veritas DGC's next four
highest compensated officers. Section 162(m) of the Code provides an exception
to this deduction for certain "performance based" compensation approved by a
committee consisting solely of at least two "outside directors". Veritas DGC
believes that options to purchase Veritas DGC Shares, SARs and performance
shares granted under the plan should qualify as performance based compensation
for purposes of section 162(m) of the Code.
CURRENT EQUITY COMPENSATION PLANS
Currently we have six equity compensation plans in effect -- three
non-qualified stock option plans and three restricted stock plans.
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Since our fiscal year ended July 31, 1999, we have granted our key
employees and non-employee directors non-qualified stock options or restricted
stock once each fiscal year in March. However, we did not make grants to key
employees in the fiscal year ended July 31, 2002 and instead made them in August
2002. For that reason, we have presented the following tables containing
information for our fiscal year ended July 31, 2002, before we granted these
options and restricted shares in August, and as of September 30, 2002, after the
grants. Both of the following tables present data related to all of our
equity-based compensation plans for both non-employee directors and key
employees -- the first as of July 31, 2002 and the second as of September 30,
2002 -- and provide information related to potential ownership dilution as of
those dates:
EQUITY COMPENSATION PLAN INFORMATION AS OF JULY 31, 2002
NUMBER OF NUMBER OF SECURITIES
SECURITIES TO BE AVAILABLE FOR FUTURE
ISSUED UPON WEIGHTED ISSUANCE EXCLUDING THOSE
EXERCISE OF AVERAGE RELATED TO CURRENTLY
OUTSTANDING OPTIONS EXERCISE PRICE OF OUTSTANDING
AND VESTING OF OUTSTANDING OPTIONS AND UNVESTED
EQUITY-BASED COMPENSATION PLANS RESTRICTED SHARES OPTIONS RESTRICTED SHARES
----------------------------------------- ------------------- ------------------ ------------------------
Stock option plans approved by
stockholders (1) ...................... 1,465,879 $20.17 1,063,762
Stock option plans not approved by
stockholders .......................... 418,786 $32.68 1,519,020
Restricted stock plans not approved by
stockholders .......................... 48,561 -(2) 232,953
(1) The 1992 employee non-qualified stock option plan and the 1992 non-employee
director non-qualified stock option plan were both initially approved by
stockholders and amendments to those plans effected through calendar
year 1997 were also approved by stockholders. Both plans have been amended
since 1997 without stockholder approval, including amendments to the 1992
employee non-qualified stock option plan that added an additional 1,754,550
shares authorized for issuance under the plan.
(2) Restricted stock vests upon completion of specified years of service. No
payment is required from the recipient.
EQUITY COMPENSATION PLAN INFORMATION AS OF SEPTEMBER 30, 2002
NUMBER OF SECURITIES
NUMBER OF SECURITIES AVAILABLE FOR FUTURE
TO BE ISSUED UPON WEIGHTED ISSUANCE EXCLUDING THOSE
EXERCISE OF AVERAGE RELATED TO CURRENTLY
OUTSTANDING OPTIONS EXERCISE PRICE OF OUTSTANDING
AND VESTING OF OUTSTANDING OPTIONS AND UNVESTED
EQUITY-BASED COMPENSATION PLANS RESTRICTED SHARES OPTIONS RESTRICTED SHARES
----------------------------------------- -------------------- ------------------ ------------------------
Stock option plans approved by
stockholders (1) ....................... 1,799,334 $18.41 729,241
Stock option plans not approved by
stockholders ........................... 1,823,065 $15.86 109,439
Restricted stock plans not approved by
stockholders ........................... 66,668 -(2) 205,289
(1) The 1992 employee non-qualified stock option plan and the 1992 non-employee
director non-qualified stock option plan were both initially approved by
stockholders and amendments to those plans effected through calendar
year 1997 were also approved by stockholders. Both plans have been amended
since 1997 without stockholder approval, including amendments to the 1992
employee non-qualified stock option plan that added an additional 1,754,550
shares authorized for issuance under the plan.
(2) Restricted stock vests upon completion of specified years of service. No
payment is required from the recipient.
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The following table contains additional information concerning
non-qualified options previously granted and outstanding as of September 30,
2002 (including grants made in August 2002) under all of our current option
plans:
ADDITIONAL OPTION GRANT INFORMATION AS OF SEPTEMBER 30, 2002
GRANT GRANT OPTIONS EXPIRATION GRANT GRANT OPTIONS EXPIRATION
DATE PRICE OUTSTANDING DATE DATE PRICE OUTSTANDING DATE
------------ ------- --------------- ----------- ---------- -------- ------------- ------------
11/15/93 $7.30 31,960 11/15/03 5/1/98 $55.13 1,474 5/1/08
11/28/94 $7.30 19,346 11/28/04 6/15/98 $43.13 493 6/15/08
9/8/95 $5.25 8,333 9/8/05 8/1/98 $33.94 2,943 8/1/08
11/21/95 $5.82 28,000 11/21/05 8/3/98 $33.94 791 8/3/08
12/11/96 $11.61 3,910 12/11/02 8/10/98 $31.50 556 8/10/08
3/11/97 $19.38 254,422 3/11/07 8/17/98 $27.81 1,618 8/17/08
4/1/97 $20.25 17,778 4/1/07 9/1/98 $16.31 106 9/1/08
7/1/97 $23.50 854 7/1/07 10/1/98 $15.63 2,950 10/1/08
8/1/97 $26.00 4,234 8/1/07 10/12/98 $12.00 382 10/12/08
9/2/97 $26.79 19,228 9/2/03 11/1/98 $11.42 2,627 10/31/08
10/15/97 $19.38 2,230 3/11/07 11/6/98 $21.69 484 11/6/08
10/15/97 $20.00 413 3/11/07 11/9/98 $20.94 1,433 11/9/08
10/15/97 $23.50 1,152 3/11/07 11/16/98 $17.31 666 11/16/08
10/15/97 $26.00 3,926 3/11/07 11/23/98 $17.50 258 11/23/08
10/15/97 $38.56 535 3/11/07 12/9/98 $14.56 1,500 12/9/08
10/15/97 $43.56 914 3/11/07 12/10/98 $10.78 18,360 12/10/04
10/20/97 $41.50 578 3/11/07 3/11/99 $10.71 379,205 3/11/09
11/12/97 $45.31 4,828 3/11/07 3/11/99 $12.56 23,800 3/11/09
12/9/97 $44.25 6,250 12/9/07 7/1/99 $22.84 2,189 7/1/09
12/11/97 $29.08 234 12/11/07 9/1/99 $22.84 6,567 8/31/09
12/30/97 $38.13 24,719 3/11/07 12/1/99 $22.84 32,321 12/1/09
1/12/98 $26.63 750 3/11/07 1/1/00 $27.41 26,705 1/1/10
1/19/98 $26.00 731 3/11/07 3/7/00 $24.44 28,750 3/7/10
1/23/98 $36.06 468 3/11/07 3/13/00 $26.19 375,782 3/13/10
1/29/98 $42.88 1,017 3/11/07 3/6/01 $34.40 472,027 3/6/11
2/1/98 $36.31 2,900 3/11/07 3/9/01 $37.00 9,122 3/9/11
3/2/98 $42.00 393 3/11/07 3/5/02 $15.09 30,000 3/5/12
4/1/98 $52.81 239 4/1/08 8/6/02 $10.96 1,758,948 8/6/07
(Table continued at right) ----------------------------------------------------------
TOTAL OPTIONS 3,622,399
OUTSTANDING
The following table contains additional information concerning
restricted stock outstanding as of September 30, 2002 (including grants made in
August 2002) under all of our current restricted stock plans:
ADDITIONAL RESTRICTED STOCK GRANT INFORMATION AS OF SEPTEMBER 30, 2002
GRANT SHARES GRANT SHARES DATE
DATE OUTSTANDING DATE VESTED DATE OUTSTANDING VESTED
------------- ----------------- ------------- ----------- ----------------- -----------
9/7/99 2,000 9/7/04 2/2/01 3,408 2/2/04
3/7/00 333 3/7/03 3/9/01 10,631 3/9/04
6/30/00 500 6/30/03 5/29/01 1,333 5/29/04
8/21/00 500 8/21/03 8/13/01 800 8/13/04
9/11/00 1,667 9/11/03 8/27/01 9,524 8/27/04
9/15/00 333 9/15/03 10/15/01 1,500 10/15/04
11/1/00 2,666 11/1/03 10/15/01 3,000 10/15/04
2/2/01 1,704 2/2/04 8/6/02 17,769 8/6/03
(Table continued at right) 9/19/02 9,000 9/19/05
----------------------------------------------------
TOTAL RESTRICTED SHARES 66,668
The terms of our existing stock option and restricted stock plans are
described further in Item 8, "Employee Benefits," in our Form 10-K for the
fiscal year ended July 31, 2002, which description is
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incorporated in this proxy statement by reference.
MANAGEMENT
EXECUTIVE OFFICERS
Except as described under "Employment Agreements", our executive
officers serve at the pleasure of the board of directors and are subject to
annual appointment by the board of directors at its first meeting following each
annual meeting of stockholders. In addition to Messrs. Robson and Ludlow, who
are listed under "Nominees" with their biographical information, our executive
officers include the following individuals:
Timothy L. Wells, age 49, was appointed president and chief operating
officer of Veritas DGC in January 1999. He has been employed by Veritas DGC for
eighteen years, having served as president of Veritas DGC's Asia Pacific
division, regional manager of North and South American processing, manager of
research and programming and in various other capacities in North and South
America.
Matthew D. Fitzgerald, age 44, was appointed executive vice president,
chief financial officer and treasurer of Veritas DGC in March 2001. Prior to
that, he served as controller of BJ Services Company (oilfield services) since
1989 and vice president and controller since 1998. Mr. Fitzgerald was also a
senior manager with the accounting firm of Ernst & Whinney.
Anthony Tripodo, age 50, has been an executive vice president since
1997, and in August 2002, became executive vice president, special projects. In
March 2001, Mr. Tripodo transferred from his role as chief financial officer and
treasurer of Veritas DGC to assume the position as president of the NASA group.
Prior to 1997, he was employed by Baker Hughes Incorporated for sixteen years in
various financial management capacities. Prior to his service with Baker Hughes,
Mr. Tripodo was employed by the accounting firm of Price Waterhouse from 1974 to
1980.
Rene M.J. VandenBrand, age 44, became vice president -- business
development of Veritas DGC in August 1996 upon consummation of the business
combination between Veritas Digicon and Veritas Energy Services. Prior to that,
he served as vice president -- finance and secretary of Veritas Energy Services
since November 1995, following two years of service in comparable positions with
Taro Industries Limited. He was previously a partner of Coopers & Lybrand
Chartered Accountants in Calgary, Alberta.
Larry L. Worden, age 50, was appointed vice president, general counsel
and secretary in December 1998. For ten years prior to that, Mr. Worden served
as vice president, general counsel and secretary of King Ranch, Inc., a
privately held Texas corporation. Prior to that he held positions at National
Gypsum Company and two private law firms.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with each of Messrs. Robson,
Ludlow, Wells, Fitzgerald, Tripodo, VandenBrand and Worden. Our agreement with
Mr. Robson continues until terminated by prior written notice of either party.
Our agreements with Messrs. Ludlow, Wells, Fitzgerald, Tripodo, VandenBrand and
Worden continue until the employee reaches age 65 unless the agreement is
earlier terminated by prior written notice of either party. As of July 31, 2002,
the executive officers are entitled to annual salaries under their employment
agreements as follows: Mr. Robson -- $415,000; Mr. Ludlow -- $265,021; Mr. Wells
-- $260,000; Mr. Tripodo -- $240,000; Mr. Fitzgerald -- $225,000; Mr.
VandenBrand -- $168,000; and Mr. Worden -- $190,000. In the event of a
termination without cause (other than in connection with a change of control of
Veritas DGC), each executive officer
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is entitled to payment under his employment agreement equal to one or more years
of annual base salary as follows: Mr. Robson -- three years; Messrs. Ludlow,
Wells, Tripodo and Fitzgerald -- two years; and Messrs. VandenBrand and Worden
-- one year. Payment of these amounts will be made over the specified period
unless we exercise our option to pay them in a lump sum. Within thirty days
after a change in control of Veritas DGC, each executive officer is entitled to
a lump sum payment under his employment agreement calculated by multiplying the
following number times the sum of his annual base salary and his annual bonus:
Messrs. Robson, Ludlow, Wells, Tripodo and Fitzgerald -- three; and Messrs.
VandenBrand and Worden -- two.
EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for services to
us for the years ended July 31, 2002, 2001 and 2000 of those individuals who (i)
served as our chief executive officer during fiscal 2002, or (ii) were among our
four most highly compensated executive officers at July 31, 2002, other than the
chief executive officer and whose annual salary and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards
--------------------------------------- ----------------------------
Restricted Stock All Other
Name and Principal Fiscal Stock Options(2) Compen-
Position Year Salary Bonus(1) Other Awards (Shares) sation(3)
------------------------- ---------- ---------- ------------ ------------ ----------- ------------- -----------
David B. Robson(4) 2002 $415,000 $298,369 -- -- -- --
Chairman and chief 2001 399,134 300,216 -- -- 30,130 --
executive officer 2000 338,397 122,337 -- -- 36,993 --
Stephen J. Ludlow 2002 $265,021 $ 90,100 $ 3,000(5) -- -- $ 4,000
Vice chairman 2001 265,021 182,320 -- -- 11,555 3,355
2000 265,021 83,740 -- -- 15,179 4,000
Timothy L. Wells 2002 $260,000 $ 88,400 $ 11,586(6) -- -- $ 4,000
President and chief 2001 248,077 170,853 -- -- 11,337 3,058
operating officer 2000 228,308 63,457 -- -- 13,747 4,000
Anthony Tripodo 2002 $240,000 $ 95,040 -- -- -- $ 4,000
Executive vice president, 2001 228,077 142,693 -- -- 10,465 3,231
special projects 2000 202,470 63,990 -- -- 12,601 4,000
Matthew D. Fitzgerald 2002 $225,000 $ 76,500 -- -- -- $ 711
Executive vice president, 2001 87,404 70,000 -- $589,720(8) 9,122 --
chief financial 2000 0 0 -- -- -- --
officer and treasurer
(7)
(1) Includes bonuses earned in the reported fiscal year and paid in the
following fiscal year.
(2) All options granted were options to purchase Veritas DGC shares.
(3) Represents company matching contributions to officers' accounts pursuant
to our 401(k) Plan.
(4) Mr. Robson's compensation is paid in Canadian dollars -- amounts shown
have been converted to U.S. dollars.
(5) Service award for 30 years of employment with the Company.
(6) Repatriation expense reimbursement for previous relocation from Singapore
to Houston in 1999.
(7) Mr. Fitzgerald joined the company in March 2001.
(8) 15,947 shares of restricted stock valued at $36.98, the closing price of
Veritas DGC common stock on the New York Stock Exchange on March 9, 2001,
the date of grant. On July 31, 2002, the 15,947 restricted shares had a
value $196,467 based on the July 31, 2002, closing price of Veritas DGC
common stock of $12.32 per share on the New York Stock Exchange. Of the
restricted shares granted, 5,316 shares vested on March 9, 2002, and
assuming that Mr. Fitzgerald is still then employed by Veritas DGC, 5,315
will vest on March 9, 2003, and the remaining 5,316 will vest on March 9,
2004.
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OPTION GRANTS IN FISCAL YEAR ENDED JULY 31, 2002
No options were granted to Messrs. Robson, Ludlow, Wells, Tripodo or
Fitzgerald during the fiscal year ended July 31, 2002. On August 6, 2002, they
were, however, granted options to purchase the following number of shares for
$10.96 per share: Mr. Robson -- 94,662; Mr. Ludlow -- 36,268; Mr. Wells --
35,584; Mr. Tripodo -- 32,847; and Mr. Fitzgerald -- 30,794. Each option granted
expires five years from the date of grant. Each grant is exercisable as follows:
25% of the options were immediately exercisable on August 6, 2002 and an
additional 25% become exercisable on August 6 of each succeeding year until all
are exercisable on August 6, 2005.
The following table sets forth information with respect to Messrs.
Robson's, Ludlow's, Wells', Tripodo's and Fitzgerald's options to purchase
Veritas DGC shares that were exercised during the fiscal year ended July 31,
2002 or unexercised at fiscal year end.
AGGREGATED OPTION EXERCISES DURING FISCAL YEAR ENDED JULY 31, 2002
AND OPTION VALUES AS OF JULY 31, 2002
Value of In-the-Money
Options Exercised During Number of Unexercised Options Unexercised Options Held at
Fiscal Year Held at Fiscal Year End Fiscal Year End(1)
------------------------- -------------------------------- -----------------------------
Shares
Acquired on Value
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------ ---------- --------------- --------------- ------------ ---------------
David B. Robson ......... -- -- 165,964 24,314 $425,063 --
Stephen J. Ludlow ....... -- -- 56,549 9,573 19,919 --
Timothy L. Wells ........ -- -- 21,114 9,106 8,269 --
Anthony Tripodo ......... -- -- 40,200 8,384 12,461 --
Matthew D. Fitzgerald -- -- 4,561 15,192 -- --
(1) Value of in-the-money unexercised options calculated based on the July 31,
2002, closing price of Veritas DGC common stock of $12.32 per share on the
New York Stock Exchange.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the three voting members of the compensation committee --
Messrs. Gibbs, Gilbert, and MacNeill -- is or has been at any time an executive
officer or employee of Veritas DGC or any of its subsidiaries nor has any of
them had any relationship with Veritas DGC that would otherwise require
disclosure.
Mr. Robson, chairman and chief executive officer of Veritas DGC, was an
ex officio non-voting member of the compensation committee until he resigned
from the committee on September 25, 2002. Prior to his resignation, he was
invited to and attended meetings of the compensation committee from time to
time. At no time was he allowed to vote on any item that came before the
committee, nor was he allowed to be present during the committee's discussions
of his compensation.
COMPENSATION COMMITTEE REPORT
The compensation committee of the board of directors has furnished the
following report on executive compensation for fiscal year 2002:
We seek to relate a significant portion of potential total executive
compensation to Veritas DGC's financial performance. Our executive compensation
consists of three elements: base compensation, bonus and stock-based benefits.
-16-
We intend the base compensation for executive officers to afford a
reasonable degree of financial security and flexibility to those individuals
whom we regard as acceptably discharging the levels and types of responsibility
implicit in the various executive positions. In setting base compensation we
initially consider the compensation plans of executives in other companies,
including companies in the oil services industry. We target base compensation at
levels consistent with median levels for public companies of our relative size.
We generally do not consider the compensation plans of executives in other
seismic companies, because some of our principal competitors are subsidiaries of
larger, more diversified oilfield service concerns, and compensation data was
not publicly available for the comparable executive positions in those
subsidiaries. Moreover, the few publicly held seismic operators have such
disparate operating and financial characteristics and were of such dissimilar
sizes, that the compensation committee has found little basis for reliable
comparison. In setting the salaries of the executive officers, we also consider
the executive's salary history, level of responsibility, breadth of knowledge,
past performance, credentials and experience with Veritas DGC, as well as his
perceived future utility to Veritas DGC.
We last increased the base pay for certain executive officers,
including Messrs Robson, Wells and Tripodo, effective in March 2001. At that
time, the compensation committee set the base salary for Mr. David B. Robson,
Chairman and Chief Executive Officer, at $415,000 per year. This salary was
established by comparing the compensation of chief executive officers in a group
of comparative companies. Mr. Robson's base salary remained at $415,000 for the
fiscal year ended July 31, 2002.
We require a minimum level of company financial performance before the
executive officers earn any annual bonuses, and we award bonuses for achieving
higher levels of performance directly tied to the level achieved. In fiscal
1998, we recommended and the board of directors adopted an incentive
compensation program pursuant to which some 300 managerial personnel (including
the named executive officers) became eligible to earn bonuses based upon two
criteria: (1) Veritas DGC's actual results of operations as a percentage of
those results anticipated in the annual budget approved by the board of
directors at the beginning of the fiscal year; and (2) the attainment of
individual performance goals assigned at the beginning of the year. Based on
their achievement of performance objectives in fiscal year 2002, we awarded the
following bonuses to the named executive officers (these bonuses were paid in
September 2002): Mr. Robson -- $298,369; Mr. Ludlow -- $90,100; Mr. Wells --
$88,400; Mr. Tripodo -- $95,040; and Mr. Fitzgerald -- $76,500.
We believe periodic grants of stock options to executive officers helps
to align the executive's economic interests with those of stockholders and to
provide a direct and continuing focus on the goal of increasing stockholder
value. We will consider such grants every year. The options that would normally
have been granted in March 2002 to key employees, including the executive
officers, were not granted until August 2002. On August 6, 2002, options were
granted to the following executive officers to purchase the specified number of
shares for $10.96 per share, the fair market value at the time of the grant: Mr.
Robson -- 94,662; Mr. Ludlow -- 36,268; Mr. Wells -- 35,584; Mr. Tripodo --
32,847; and Mr. Fitzgerald -- 30,794. Each option granted expires five years
from the date of grant. Each grant is exercisable as follows: 25% of the options
were immediately exercisable on August 6, 2002 and an additional 25% become
exercisable on August 6 of each succeeding year until all are exercisable on
August 6, 2005.
Section 162(m) of the Internal Revenue Code of 1986, as amended,
currently imposes a $1 million limitation on the deductibility of certain
compensation paid to the chief executive officer and four highest paid
executives. Certain performance-based compensation and certain other
compensation that has been approved by stockholders are not subject to the
deduction limit. The deductibility of compensation paid to Veritas DGC's
officers has not, to date, been limited by the application of Section 162(m).
The compensation committee has and will continue to take into account the
potential application of Section 162(m) on incentive compensation awards and
other compensation decisions.
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The compensation committee believes that the compensation program for
the executives of the company is comparable with the compensation programs
provided by comparable companies and serves the best interests of stockholders
of Veritas DGC. The committee also believes that annual performance pay is
appropriately linked to individual performance, annual financial performance of
Veritas DGC and stockholder value.
Brian F. MacNeill (Chairman)
James R. Gibbs
Steven J. Gilbert
CERTAIN STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of shares at September 30, 2002, by (i) each person we know
to own beneficially more than 5% of the outstanding shares, (ii) all directors
and director nominees, (iii) each executive officer named in the Summary
Compensation Table, and (iv) all directors, director nominees and executive
officers as a group.
Amount and Nature of
Beneficial Percentage of
Name and Address(1) Ownership(2), (3) Class(4)
------------------------------------------- -------------------------- ----------------
Beneficial Owners of 5% or more of Shares:
PIMCO Equity Advisors LLC 3,060,000 9.23
800 Newport Center Drive
Newport Beach, CA 92660
Mellon Bank NA 2,570,000 7.75
One Mellon Bank Center, Room 0980
Pittsburgh, PA 15258
Deutsche Bank Aktiengesellschaft 1,860,000 5.61
Taunusanlage 12
60325 Frankfurt am Main, Germany
Executive Officers, directors and director nominees:
David B. Robson....................... 1,401,442(5) 4.23
Stephen J. Ludlow..................... 76,272 *
Timothy L. Wells...................... 30,010 *
Matthew D. Fitzgerald................. 35,069 *
Anthony Tripodo....................... 54,088 *
Clayton P. Cormier.................... 20,804 *
James R. Gibbs........................ 19,750 *
Brian F. MacNeill..................... 35,167 *
Jan Rask.............................. 13,625 *
---------------------------------------------------------------------------------------------
All directors, director nominees and
executive officers as a group........... 1,686,227 5.09
* Does not exceed one percent.
(1) The address of each person shown is c/o Veritas DGC Inc., 10300 Town Park
Drive, Houston, Texas 77072, unless an address is listed.
(2) Each person has sole voting and investment power with respect to the
shares listed unless otherwise specified.
(3) Includes the following shares subject to options granted pursuant to a
Veritas DGC option plan and exercisable within 60 days: Mr. Robson --
189,629 shares; Mr. Ludlow -- 65,616 shares; Mr. Wells -- 30,010 shares;
Mr. Fitzgerald -- 12,259; Mr. Tripodo -- 48,411 shares; Mr. Cormier --
18,800 shares; Mr. Gibbs -- 18,750 shares; Mr. MacNeill -- 31,167 shares;
and Mr. Rask -- 13,625 shares.
(4) Percentages are calculated based on total of all outstanding shares as of
September 30, 2002.
(5) Includes 1,083,826 shares owned by Rexam Investments Ltd., an Alberta
corporation owned and controlled by Mr. Robson, 117,925 shares owned by
Vada Industries, Ltd., an Alberta corporation owned and controlled by Mr.
Robson, 8,862 shares owned by Mr. Robson, and 1,200 shares owned by Mr.
Robson's wife.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
executive officers and directors and persons who own more than 10% of a
registered class of our equity securities to file reports of ownership and
changes of ownership with the Securities and Exchange Commission. We believe
that our officers, directors and greater than 10% stockholders met all
applicable filing requirements for fiscal year ended July 31, 2002.
COMMON STOCK PERFORMANCE GRAPH
The following graph illustrates the performance of our shares compared
with the cumulative total return on (i) Standard & Poor's 500 Stock Index and
(ii) an index of peer companies we selected for the period beginning July 31,
1997 and ending July 31, 2002. The graph assumes that the value of the
investment in our shares and each index was $100 at July 31, 1997. In all cases
the cumulative total return assumes, as contemplated by the Securities and
Exchange Commission rules, that any cash dividends on the common stock of each
entity included in the data presented below were reinvested in that security.
[PERFORMANCE GRAPH]
-------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ANALYSIS
7/31/1997 7/31/1998 7/31/1999 7/31/2000 7/31/2001 7/31/2002
-------------------------------------------------------------------------------------------------------------------
VERITAS DGC $100.00 $132.34 $71.16 $85.59 $91.16 $49.04
PEER GROUP $100.00 $83.81 $74.65 $95.73 $78.63 $63.18
S&P 500 $100.00 $119.28 $143.39 $156.25 $133.47 $101.56
-------------------------------------------------------------------------------------------------------------------
Source: CTA Public Relations www.ctapr.com (303) 665-4200. Data from BRIDGE
Information Systems, Inc.
The index of peer companies for fiscal year 2002 consists of Dawson
Geophysical Company, Petroleum Geo-Services, Inc., Schlumberger Limited, and
Seitel, Inc. Until 1999, Western Atlas was
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included in the index of peer companies. Once Western Atlas became a wholly
owned subsidiary of Baker Hughes Incorporated, the index included Baker Hughes
for years 1999 and 2000. After fiscal year 2001, Baker Hughes has been removed
from the index of peer companies since its seismic operations were merged with
Schlumberger Limited's seismic operations to form WesternGeco, which is already
included in the peer group as a part of Schlumberger.
The graph above depicts the past performance of our shares and should
not be used to predict future performance. We do not make or endorse any
predictions as to future share performance. These price performance comparisons
shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933 or under the Exchange Act except to the extent that we
specifically incorporate this graph by reference, and shall not otherwise be
deemed filed under such acts.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, independent accountants, have served as the
independent accountants of Veritas DGC since November 1996. No action will be
taken at the meeting with respect to the continued employment of
PricewaterhouseCoopers. PricewaterhouseCoopers continues to provide audit
services to us, and representatives of the firm plan to attend the annual
meeting and will be available to answer questions. Its representatives will also
have an opportunity to make a statement at the meeting if they so desire.
AUDIT FEES
The aggregate fees billed for professional services rendered for the
audit of our audited financial statements for the fiscal year ended July 31,
2002 and the reviews of financial statements included in the company's Forms
10-Q for the fiscal year ended July 31, 2002 was $240,000.
FEES FOR FINANCIAL INFORMATION SYSTEM DESIGN AND IMPLEMENTATION
PricewaterhouseCoopers LLP performed no services related to financial
information system design and implementation during the fiscal year ended July
31, 2002 and billed no fees for such services.
ALL OTHER FEES
The aggregate fees billed by PricewaterhouseCoopers LLP during the
fiscal year ended July 31, 2002 for other services totaled $1,393,000. Of that
amount, $240,000 was billed for audit related services (issuance of consents,
statutory audits in foreign jurisdictions, audits of our employee benefit plan
and internal audit services); $145,000 related to income tax and related tax
services, and $1,008,000 related to due diligence, tax planning, and other
services performed in connection with our proposed business combination with
Petroleum Geo-Services ASA prior to termination of the merger agreement.
Our audit committee has reviewed the services provided by
PricewaterhouseCoopers LLP and has determined that the services provided are
compatible with the maintenance of PricewaterhouseCoopers LLP's independence.
AVAILABILITY OF ANNUAL REPORT AND FORM 10-K
We have mailed our annual report to stockholders covering the fiscal
year ended July 31, 2002 to each stockholder entitled to vote at the annual
meeting.
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We will provide a copy of our annual report on Form 10-K for the fiscal
year ended July 31, 2002 without charge to any stockholder making written
request to Larry L. Worden, Vice President, General Counsel and Secretary, 10300
Town Park Drive, Houston, Texas 77072.
ADVANCE NOTICE DEADLINE
If you wish to submit a proposal for action to be included in the proxy
statement and form of proxy relating to our 2003 annual meeting of stockholders
you must submit your proposal to us before July 1, 2003 and otherwise comply
with Rule 14a-8 under the Securities Exchange Act of 1934.
By Order of the Board of Directors,
Larry L. Worden
Secretary
October 23, 2002
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VERITAS DGC INC. SHARE INCENTIVE PLAN
ANNEX A
TABLE OF CONTENTS
SECTION
ARTICLE I PURPOSE AND TERM
Purpose.............................................................1.1
Term of Plan........................................................1.2
ARTICLE II DEFINITIONS
Affiliate ..........................................................2.1
Award ...........................................................2.2
Award Agreement.....................................................2.3
Board ...........................................................2.4
Change in Control...................................................2.5
Code ...........................................................2.6
Committee...........................................................2.7
Company ............................................................2.8
Deferred Share Unit.................................................2.9
Deferred Share Unit Agreement......................................2.10
Deferred Share Unit Award..........................................2.11
Disability.........................................................2.12
Effective Time.....................................................2.13
Employee ..........................................................2.14
Exchange Act.......................................................2.15
Existing Restricted Stock Plans....................................2.16
Existing Stock Option Plans........................................2.17
Fair Market Value..................................................2.18
Holder ..........................................................2.19
Incentive Stock Option.............................................2.20
Mature Shares......................................................2.21
Non-Employee Director..............................................2.22
Nonqualified Stock Option..........................................2.23
Option ............................................................2.24
Option Agreement...................................................2.25
Performance Goal...................................................2.26
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TABLE OF CONTENTS
(continued)
SECTION
Performance Shares.................................................2.27
Performance Share Agreement........................................2.28
Performance Share Award............................................2.29
Plan ..........................................................2.30
Restricted Shares..................................................2.31
Restricted Share Agreement.........................................2.32
Restricted Share Award.............................................2.33
Retirement.........................................................2.34
Shares ..........................................................2.35
Share Appreciation Right................... .......................2.36
Share Appreciation Right Agreement ................................2.37
ARTICLE III ELIGIBILITY
ARTICLE IV GENERAL PROVISIONS RELATING TO AWARDS
Authority to Grant Awards...........................................4.1
Dedicated Shares; Maximum Awards....................................4.2
Non-Transferability.................................................4.3
Requirements of Law.................................................4.4
Changes in the Company's Capital Structure..........................4.5
ARTICLE V OPTIONS AND SHARE APPRECIATION RIGHTS
Type of Option......................................................5.1
Exercise Price......................................................5.2
Duration of Options.................................................5.3
Amount Exercisable..................................................5.4
Exercise of Options.................................................5.5
Substitution Options................................................5.6
Limitations on Grants and Terms of Incentive Stock Options..........5.7
Share Appreciation Rights...........................................5.8
No Rights as Shareholder ...........................................5.9
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TABLE OF CONTENTS
(continued)
SECTION
ARTICLE VI RESTRICTED SHARE AWARDS
Restricted Share Awards.............................................6.1
Holder's Rights as Shareholder......................................6.2
ARTICLE VII PERFORMANCE SHARE AWARDS
Performance Share Awards............................................7.1
Holder's Rights as Shareholder......................................7.2
Increases Prohibited................................................7.3
ARTICLE VIII DEFERRED SHARE UNITS AWARDS
Deferred Share Unit Awards..........................................8.1
Payments Under Deferred Share Unit Awards...........................8.2
Holder's Rights as Shareholder......................................8.3
ARTICLE IX SUBSTITUTION AWARDS
ARTICLE X ADMINISTRATION
ARTICLE XI AMENDMENT OR TERMINATION PLAN
ARTICLE XII MISCELLANEOUS
No Establishment of a Trust Fund...................................12.1
No Employment or Affiliation Obligation............................12.2
Forfeiture.........................................................12.3
Tax Withholding....................................................12.4
Written Agreement..................................................12.5
Indemnification of the Committee...................................12.6
Gender.............................................................12.7
Headings ..........................................................12.8
Other Compensation Plans...........................................12.9
Other Awards......................................................12.10
Persons Residing Outside of the United States.....................12.11
Governing Law.....................................................12.12
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ARTICLE I
PURPOSE AND TERM
1.1 PURPOSE. The Plan is intended to advance the best interests of the
Company and its shareholders by providing those persons who have substantial
responsibility for the management and growth of the Company and its Affiliates
with additional incentives and an opportunity to obtain or increase their
proprietary interest in the Company, thereby encouraging them to continue in
their employment or affiliation with the Company or any of its Affiliates.
1.2 TERM OF PLAN. Subject to earlier termination by the Committee
pursuant to Article XI, no Award will be granted under this Plan after July 31,
2012 (the "termination date"). Unless otherwise expressly provided in the Plan
or in an applicable Award Agreement, any Award granted prior to the termination
date may extend beyond such date, and all authority of the Committee with
respect to Awards hereunder, including the authority to amend an Award, shall
continue during any suspension of this Plan and in respect of Awards outstanding
on the termination date.
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ARTICLE II
DEFINITIONS
The words and phrases defined in this Article shall have the meaning
set out in these definitions throughout the Plan, unless the context in which
any such word or phrase appears reasonably requires a broader, narrower or
different meaning.
2.1 "AFFILIATE" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at the
time of the action or transaction, each of the corporations other than the
Company owns shares possessing 50 percent or more of the total combined voting
power of all classes of shares in one of the other corporations in the chain.
The term "subsidiary corporation" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company if, at the time
of the action or transaction, each of the corporations other than the last
corporation in the unbroken chain owns shares possessing 50 percent or more of
the total combined voting power of all classes of shares in one of the other
corporations in the chain.
2.2 "AWARD" means any Option, Share Appreciation Right, Deferred Share
Unit Award, Restricted Share Award or Performance Share Award granted under the
Plan.
2.3 "AWARD AGREEMENT" means a written agreement evidencing an Award
granted under the Plan.
2.4 "BOARD" means the board of directors of the Company.
2.5 "CHANGE IN CONTROL" means the occurrence of any of the following
events:
(a) The acquisition by an individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of fifty percent (50%) or more of
the total voting power of all of the Company's then outstanding
securities entitled to vote generally in the election of directors to
the Board; provided, however, that for purposes of this subsection (a),
the following acquisitions shall not constitute a Change in Control:
(i) any acquisition by the Company or its Affiliates, (ii) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or its Affiliates, or (iii) any acquisition
consummated with the prior approval of the Board; or
(b) During the period of two consecutive calendar years,
individuals who at the beginning of such period constitute the Board,
and any new directors whose election by the Board or nomination for
election by the Company's shareholders was approved by a vote of at
least two-thirds of the directors then still in office, who either were
directors at the beginning of the two-year period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; or
II-1
(c) The Company becomes a party to a consummated merger, plan
of reorganization, consolidation or share exchange in which either (i)
the Company is not the surviving corporation or (ii) the Company is the
surviving corporation and any outstanding Shares are converted into
shares of any other company (other than a re-incorporation or the
establishment of a holding company involving no change of ownership of
the Company) or other securities, cash or other property (excluding
payments made solely for fractional shares); or
(d) The consummation of a merger, plan of reorganization,
consolidation or share exchange with any other corporation, and
immediately following such merger, plan of reorganization,
consolidation or share exchange the holders of the voting securities of
the Company outstanding immediately prior thereto hold securities
representing fifty percent (50%) or less of the combined voting power
of the voting securities of the Company or such surviving entity
outstanding immediately after such merger, plan of reorganization,
consolidation or share exchange; provided, however, that
notwithstanding the foregoing, no Change in Control shall be deemed to
have occurred if one-half (1/2) or more of the members of the Board or
the board of directors of such surviving entity immediately after such
merger, plan of reorganization, consolidation or share exchange is
comprised of persons who served as directors of the Company immediately
prior to such merger, plan of reorganization, consolidation or share
exchange or who are otherwise designees of the Company; or
(e) Upon approval by the Company's shareholders of a complete
liquidation and dissolution of the Company or the sale or other
disposition of all or substantially all of the assets of the Company
other than to an Affiliate; or
(f) Any other event that a majority of the Board, in its sole
discretion, shall determine constitutes a Change in Control.
Notwithstanding the occurrence of any of the foregoing events of this
Section 2.5 which would otherwise result in a Change in Control, the Board may
determine in its complete discretion, if it deems to be in the best interest of
the Company, that an event or events otherwise constituting a Change in Control
shall not be considered a Change in Control. Such determination shall be
effective only if it is made by the Board prior to the occurrence of an event
that otherwise would be a Change in Control, or after such event if made by the
board of directors, a majority of which is composed of directors who were
members of the Board immediately prior to the event that otherwise would be a
Change in Control.
2.6 "CODE" means the United States Internal Revenue Code of 1986, as
amended.
2.7 "COMMITTEE" means a committee of at least two persons, who are
members of the Compensation Committee of the Board and are appointed by the
Compensation Committee of the Board, or, to the extent it chooses to operate as
the Committee, the Compensation Committee of the Board. Each member of the
Committee in respect of his or her participation in any decision with respect to
an Award intended to satisfy the requirements of Section 162(m) of the Code must
satisfy the requirements of "outside director" status within the meaning of
Section
II-2
162(m) of the Code; provided, however, that the failure to satisfy such
requirement shall not affect the validity of the action of any committee
otherwise duly authorized and acting in the matter. As to Awards, grants or
other transactions that are authorized by the Committee and that are intended to
be exempt under Rule 16b-3, the requirements of Rule 16b-3(d)(1) with respect to
committee action must also be satisfied.
2.8 "COMPANY" means Veritas DGC Inc., a Delaware corporation, or any
successor (by reincorporation, merger or otherwise).
2.9 "DEFERRED SHARE UNIT" means a unit credited to a Holder's ledger
account maintained by the Company pursuant to Article VIII.
2.10 "DEFERRED SHARE UNIT AGREEMENT" means a written agreement entered
into between the Company and the Holder setting forth the terms and conditions
pursuant to which a Deferred Share Unit Award is granted.
2.11 "DEFERRED SHARE UNIT AWARD" means an Award granted pursuant to
Article VIII.
2.12 "DISABILITY" means as determined by the Committee in its
discretion exercised in good faith, a physical or mental condition of the Holder
that would entitle him to disability income payments under the Company's
long-term disability insurance policy or plan for employees as then in effect;
or in the event that the Holder is not covered, for whatever reason (including,
without limitation, because the Holder is a Non-Employee Director), under the
Company's long-term disability insurance policy or plan for employees or in the
event the Company does not maintain such a long-term disability insurance
policy, and with respect to Incentive Stock Options, "Disability" means a
permanent and total disability as defined in section 22(e)(3) of the Code. A
determination of Disability may be made by a physician selected or approved by
the Committee and, in this respect, the Holder shall submit to an examination by
such physician upon request by the Committee.
2.13 "EFFECTIVE TIME" means the time the shareholders of the Company
approve of the adoption of the Plan.
2.14 "EMPLOYEE" means a person employed by the Company or any Affiliate
as a common law employee (including an officer, as such term is defined in Rule
16a-1 under the Exchange Act).
2.15 "EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended.
2.16 "EXISTING RESTRICTED STOCK PLANS" means (i) the Veritas DGC Inc.
Restricted Stock Agreements (as filed with the Securities and Exchange
Commission on a Form S-8 dated March 31, 1998); (ii) the Veritas DGC Inc.
Restricted Stock Plan; and (iii) the Veritas DGC Inc. 2001 Key Employee
Restricted Stock Plan.
2.17 "EXISTING STOCK OPTION PLANS" means (i) the Veritas DGC Inc. 1992
Employee Nonqualified Stock Option Plan; (ii) the Veritas DGC Inc. 1992
Non-Employee Director Stock
II-3
Option Plan; and (iii) the Veritas DGC Inc. 2001 Key Employee Nonqualified Stock
Option Plan.
2.18 "FAIR MARKET VALUE" of one Share means the last reported sale
price for the Share on the principal exchange on which the Share is traded on
the business day immediately preceding the date for which the Fair Market Value
is being determined (or, if the Share was not traded on such immediately
preceding date, on the immediately preceding date on which the Share was so
traded).
2.19 "HOLDER" means a person who has been granted an Award or any
person who is entitled to receive Shares (and/or cash in the case of a Share
Appreciation Right) under an Award.
2.20 "INCENTIVE STOCK OPTION" means an Option which is designated as an
incentive stock option and satisfies the requirements of Section 422 of the
Code.
2.21 "MATURE SHARES" means Shares that the Holder has held for at least
six months.
2.22 "NON-EMPLOYEE DIRECTOR" means an individual, who is not an
employee of the Company, who is elected by the shareholders of the Company, or
in the case of a vacancy or newly created position, by the other directors, to
serve on the Board who performs the functions of a director set forth in the
Company's charter documents and bylaws.
2.23 "NONQUALIFIED STOCK OPTION" means an Option that is designated as
a Nonqualified Stock Option and shall include any Option intended as an
Incentive Stock Option that fails to meet the applicable legal requirements
thereof. Any Option granted hereunder that is not designated as an incentive
stock option shall be deemed to be designated a nonqualified stock option under
the Plan and not an incentive stock option under the Code.
2.24 "OPTION" means an option to purchase Shares granted under the
Plan. The Committee shall designate any Option granted under the Plan as a
Nonqualified Stock Option or an Incentive Stock Option..
2.25 "OPTION AGREEMENT" means a written contract setting forth the
terms and conditions of an Option.
2.26 "PERFORMANCE GOAL" means a standard established by the Committee
to determine in whole or in part whether a Performance Share Award shall be
earned.
2.27 "PERFORMANCE SHARES" means Shares issued or granted under the Plan
pursuant to a Performance Share Agreement.
2.28 "PERFORMANCE SHARE AGREEMENT" means the written agreement entered
into between the Company and the Holder setting forth the terms and conditions
pursuant to which a Performance Share Award is granted.
II-4
2.29 "PERFORMANCE SHARE AWARD" means an authorization by the Committee
to issue or transfer Performance Shares to a Holder.
2.30 "PLAN" means the Veritas DGC Inc. Share Incentive Plan, as set
forth in this document and as it may be amended from time to time.
2.31 "RESTRICTED SHARES" means Shares issued or granted under the Plan
pursuant to a Restricted Share Agreement.
2.32 "RESTRICTED SHARE AGREEMENT" means the written agreement entered
into between the Company and the Holder setting forth the terms and conditions
pursuant to which a Restricted Share Award is granted.
2.33 "RESTRICTED SHARE AWARD" means an authorization by the Committee
to issue or transfer Restricted Shares to a Holder.
2.34 "RETIREMENT" means in the case of an Employee, the occurrence of
the Employee's voluntary termination of employment with the Company and all
Affiliates after (1) he has attained the age of 62 and completed ten years of
employment with the Company and/or any Affiliate, including any predecessor
thereto, or (2) he has attained such other retirement age as may be specified in
the Employee's Award Agreement.
2.35 "SHARES" means the common stock of the Company, $.01 par value per
share, or, in the event that the outstanding ordinary shares are later changed
into or exchanged for a different class of shares or securities of the Company
or another corporation, that other share or security. Shares, when issued, may
be represented by a certificate or by book or electronic entry.
2.36 "SHARE APPRECIATION RIGHT" means any right granted under Section
5.8 of the Plan.
2.37 "SHARE APPRECIATION RIGHT AGREEMENT" means a written agreement
entered into between the Company and the Holder setting forth the terms and
conditions pursuant to which a Share Appreciation Right is granted.
II-5
ARTICLE III
ELIGIBILITY
The individuals who shall be eligible to receive Awards shall be those
persons, including Employees, consultants, advisors and Non-Employee Directors,
who have substantial responsibility for the management and growth of the Company
or any of its Affiliates as the Committee shall determine from time to time. A
consultant or advisor may be selected only if such person's participation in the
Plan would not adversely affect (i) the Company's eligibility to use Form S-8 to
register under the Securities Act of 1933, as amended, the offering of shares
issuable under the Plan by the Company; or (ii) the Company's compliance with
any other applicable laws.
III-1
ARTICLE IV
GENERAL PROVISIONS RELATING TO AWARDS
4.1 AUTHORITY TO GRANT AWARDS. The Committee may grant Awards to those
Employees of the Company or any of its Affiliates and other eligible persons as
it shall from time to time determine, under the terms and conditions of the
Plan. Subject only to any applicable limitations set out in the Plan, the number
of Shares to be covered by any Award to be granted to any person shall be as
determined by the Committee.
4.2 DEDICATED SHARES; MAXIMUM AWARDS. The aggregate number of Shares
with respect to which Awards may be granted under the Plan is the sum of the
following: (i) 1,200,000, not more than 300,000 of which may be granted in a
form other than Stock Options; (ii) that number equal to the number of Shares
available for issuance under the Existing Stock Option Plans and Existing
Restricted Stock Plans, which Shares are not the subject of an option or
restricted stock award granted under such plans as of the Effective Time; and
(iii) that number equal to the number of Shares subject to unexercised options
or unvested restricted stock awards granted prior to the Effective Time under
the Existing Stock Option Plans and Existing Restricted Stock Plans that expire
or are cancelled, terminated or forfeited after the Effective Time but prior to
exercise or vesting. The maximum number of Shares with respect to which
Incentive Stock Options may be granted under the Plan is 2,000,000 Shares. The
maximum number of Shares with respect to which Options and Share Appreciation
Rights may be granted to any person under the Plan during any three consecutive
calendar years is 500,000, and the number of Performance Shares that may be
issued to an individual during any three consecutive calendar years cannot
exceed 250,000. Each of the foregoing numerical limits stated in this Section
4.2 shall be subject to adjustment in accordance with the provisions of Section
4.5. The number of Shares stated in this Section 4.2 shall also be increased by
such number of Shares as become subject to substitute Awards granted pursuant to
Article IX; provided, however, that such increase shall be conditioned upon the
approval of the shareholders of the Company. If any outstanding Award expires or
terminates for any reason, is settled in cash in lieu of Shares or any Award is
surrendered, the Shares allocable to the unexercised portion of that Award may
again be subject to an Award granted under the Plan. If the exercise price of an
Option is paid in Shares or Shares are withheld from payment of an Award to
satisfy tax obligations with respect to the Award, such Shares will not count
against the aggregate number of Shares with respect to which Awards may be
granted under the Plan. If a Share Appreciation Right is exercised, only the
number of Shares actually issued shall be charged against the maximum number of
Shares that may be delivered pursuant to Awards under this Plan.
4.3 NON-TRANSFERABILITY. Except as specified in the applicable Award
Agreements or in domestic relations court orders, Awards shall not be
transferable by the Holder other than by will or under the laws of descent and
distribution, and shall be exercisable, during the Holder's lifetime, only by
him or her. In the discretion of the Committee, any attempt to transfer an Award
other than under the terms of the Plan and the applicable Award Agreement may
terminate the Award.
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4.4 REQUIREMENTS OF LAW. The Company shall not be required to sell or
issue any Shares under any Award if issuing those Shares would constitute or
result in a violation by the Holder or the Company of any provision of any law,
statute or regulation of any governmental authority. Specifically, in connection
with any applicable statute or regulation relating to the registration of
securities, upon exercise of any Option or pursuant to any other Award, the
Company shall not be required to issue any Shares unless the Committee has
received evidence satisfactory to it to the effect that the Holder of that Award
will not transfer the Shares except in accordance with applicable law, including
receipt of an opinion of counsel satisfactory to the Company to the effect that
any proposed transfer complies with applicable law. The determination by the
Committee on this matter shall be final, binding and conclusive. The Company
may, but shall in no event be obligated to, register any Shares covered by the
Plan pursuant to applicable securities laws of any country or any political
subdivision. In the event the Shares issuable on exercise of an Option or
pursuant to any other Award are not registered, the Company may imprint on the
certificate evidencing the Shares any legend that counsel for the Company
considers necessary or advisable to comply with applicable law or, should the
Shares be represented by book or electronic entry rather than a certificate, the
Company may take such steps to restrict transfer of the Shares as counsel for
the Company considers necessary or advisable to comply with applicable law. The
Company shall not be obligated to take any other affirmative action in order to
cause the exercise of an Option or Share Appreciation Right or vesting under an
Award, or the issuance of Shares pursuant thereto, to comply with any law or
regulation of any governmental authority.
4.5 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.
(a) The existence of outstanding Awards shall not affect in
any way the right or power of the Company or its shareholders to make
or authorize any or all adjustments, recapitalizations, reorganizations
or other changes in the Company's capital structure or its business,
any merger or consolidation of the Company, any issue of bonds,
debentures, preferred or prior preference shares ahead of or affecting
the Shares or Share rights, the dissolution or liquidation of the
Company, any sale or transfer of all or any part of its assets or
business or any other corporate act or proceeding, whether of a similar
character or otherwise.
(b) If the Company shall effect a subdivision or consolidation
of Shares or other capital readjustment, the payment of a Share
dividend, or other increase or reduction of the number of Shares
outstanding, without receiving compensation for money, services or
property, then (i) the number, class or series and per Share price of
Shares subject to outstanding Options or Share Appreciation Rights
under the Plan shall be appropriately adjusted in such a manner as to
entitle a Holder to receive upon exercise of an Option or Share
Appreciation Right, for the same aggregate cash consideration, the
equivalent total number and class or series of Shares the Holder would
have received had the Holder exercised his or her Option or Share
Appreciation Right in full immediately prior to the event requiring the
adjustment, and (ii) the number and class or series of Shares then
reserved to be issued under the Plan shall be adjusted by substituting
for the total number and class or series of Shares then reserved, that
number and class or series
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of Shares that would have been received by the owner of an equal number
of outstanding Shares of each class or series of Shares as the result
of the event requiring the adjustment.
(c) If while unexercised Options or Share Appreciation Rights
remain outstanding under the Plan (i) the Company shall not be the
surviving entity in any merger, consolidation or other reorganization
(or survives only as a subsidiary of an entity other than an entity
that was wholly-owned by the Company immediately prior to such merger,
consolidation or other reorganization), (ii) the Company sells, leases
or exchanges or agrees to sell, lease or exchange all or substantially
all of its assets to any other person or entity (other than an entity
wholly-owned by the Company), (iii) the Company is to be dissolved or
(iv) the Company is a party to any other corporate transaction (as
defined under section 424(a) of the Code and applicable Department of
Treasury Regulations) that is not described in clauses (i), (ii) or
(iii) of this sentence (each such event is referred to herein as a
"Corporate Change"), then, except as otherwise provided in an Option
Agreement or Share Appreciation Right Agreement (provided that such
exceptions shall not apply in the case of a reincorporation merger), or
in Section 4.5(d), or as a result of the Committee's effectuation of
one or more of the alternatives described below, there shall be no
acceleration of the time at which any Option or Share Appreciation
Right then outstanding may be exercised, and no later than ten days
after the approval by the shareholders of the Company of such Corporate
Change, the Committee, acting in its sole and absolute discretion
without the consent or approval of any Holder, shall act to effect one
or more of the following alternatives, which may vary among individual
Holders and which may vary among Options or Share Appreciation Rights
held by any individual Holder (provided that, with respect to a
reincorporation merger in which holders of the Company's ordinary
shares will receive one ordinary share of the successor corporation for
each ordinary share of the Company, none of such alternatives shall
apply and, without Committee action, each Option, Share Appreciation
Right and Restricted Share shall automatically convert into an Option,
Share Appreciation Right or Restricted Share of the successor
corporation exercisable, in the case of an Option or Share Appreciation
Right, for the same number of ordinary shares of the successor as the
Option or Share Appreciation Right was exercisable for ordinary shares
of the Company):
(1) accelerate the time at which some or all of the
Options or Share Appreciation Rights then outstanding may be
exercised so that such Options or Share Appreciation Rights
may be exercised in full for a limited period of time on or
before a specified date (before or after such Corporate
Change) fixed by the Committee, after which specified date all
such Options or Share Appreciation Rights that remain
unexercised and all rights of Holders thereunder shall
terminate;
(2) require the mandatory surrender to the Company by
all or selected Holders of some or all of the then outstanding
Options or Share Appreciation Rights held by such Holders
(irrespective of whether such Options or Share Appreciation
Rights are then exercisable under the provisions of the Plan
or the Option Agreements or Share Appreciation
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Right Agreements evidencing such Options or Share Appreciation
Rights) as of a date, before or after such Corporate Change,
specified by the Committee, in which event the Committee shall
thereupon cancel such Options and Share Appreciation Rights
and the Company shall pay to each such Holder an amount of
cash per share equal to the excess, if any, of the per share
price offered to shareholders of the Company in connection
with such Corporate Change over the exercise prices under such
Options or Share Appreciation Rights for such shares;
(3) with respect to all or selected Holders, have
some or all of their then outstanding Options or Share
Appreciation Rights (whether vested or unvested) assumed or
have a new Option or Share Appreciation Right substituted for
some or all of their then outstanding Options or Share
Appreciation Rights (whether vested or unvested) by an entity
which is a party to the transaction resulting in such
Corporate Change and which is then employing such Holder or
which is affiliated or associated with such Holder in the same
or a substantially similar manner as the Company prior to the
Corporate Change, or a parent or subsidiary of such entity,
provided that (A) such assumption or substitution is on a
basis where the excess of the aggregate fair market value of
the Shares subject to the Option or Share Appreciation Right
immediately after the assumption or substitution over the
aggregate exercise price of such Shares is equal to the excess
of the aggregate fair market value of all Shares subject to
the Option or Share Appreciation Right immediately before such
assumption or substitution over the aggregate exercise price
of such Shares, and (B) the assumed rights under such existing
Option or Share Appreciation Right or the substituted rights
under such new Option or Share Appreciation Right as the case
may be will have the same terms and conditions as the rights
under the existing Option or Share Appreciation Right assumed
or substituted for, as the case may be;
(4) provide that the number and class or series of
Shares covered by an Option or Share Appreciation Right
(whether vested or unvested) theretofore granted shall be
adjusted so that such Option or Share Appreciation Right when
exercised shall thereafter cover the number and class or
series of Shares or other securities or property (including,
without limitation, cash) to which the Holder would have been
entitled pursuant to the terms of the agreement or plan
relating to such Corporate Change if, immediately prior to
such Corporate Change, the Holder had been the holder of
record of the number of Shares then covered by such Option or
Share Appreciation Right; or
(5) make such adjustments to Options and Share
Appreciation Rights then outstanding as the Committee deems
appropriate to reflect such Corporate Change (provided,
however, that the Committee may
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determine in its sole and absolute discretion that no such
adjustment is necessary).
In effecting one or more of alternatives (3), (4) or (5)
above, and except as otherwise may be provided in an Option Agreement
or Share Appreciation Right Agreement, the Committee, in its sole and
absolute discretion and without the consent or approval of any Holder,
may accelerate the time at which some or all Options or Share
Appreciation Rights then outstanding may be exercised.
(d) In the event of the occurrence of a Change in Control, an
outstanding Option or Share Appreciation Right shall be fully
exercisable immediately upon the occurrence of the Change in Control
unless otherwise expressly provided in the Holder's Option Agreement or
Share Appreciation Right Agreement; provided, however, that nothing in
this paragraph (d) of Section 4.5 shall preclude the Committee from
effecting any of alternatives (2), (3), (4) or (4) of paragraph (c) of
Section 4.5. The provisions of this paragraph (d) of Section 4.5 may
not be deleted or amended to adversely affect an Option or Share
Appreciation Right granted under the Plan without the prior written
consent of the Holder of the Option or Share Appreciation Right, unless
the Holder's Option Agreement or Share Appreciation Right Agreement
expressly provides otherwise.
(e) In the event of the occurrence of a Change in Control, a
Holder of an outstanding Restricted Share Award, Deferred Share Unit
Award or Performance Share Award shall have a fully nonforfeitable and
transferable interest in his Restricted Share Award, Deferred Share
Unit Award, or Performance Share Award immediately upon the occurrence
of the Change in Control unless otherwise expressly provided in the
Holder's Restricted Share Award, Deferred Share Unit Award or
Performance Share Award. The provisions of this paragraph (e) of
Section 4.5 may not be deleted or amended to adversely affect a
Restricted Share Award, Deferred Share Unit Award or Performance Share
Award granted under the Plan without the prior written consent of the
Holder of the Award, unless the Holder's Restricted Share Award
Agreement, Deferred Share Unit Award Agreement or Performance Share
Agreement expressly provides otherwise.
(f) In the event of changes in the outstanding Shares by
reason of recapitalizations, reorganizations, mergers, consolidations,
combinations, exchanges or other relevant changes in capitalization
occurring after the date of the grant of any Option or Share
Appreciation Right and not otherwise provided for by this Section 4.5,
any outstanding Options and Share Appreciation Rights and any
agreements evidencing such Options and Share Appreciation Rights shall
be subject to adjustment by the Committee in its sole and absolute
discretion as to the number and price of Shares or other consideration
subject to such Options and Share Appreciation Rights. In the event of
any such change in the outstanding Shares, the aggregate number of
Shares available under the Plan may be appropriately adjusted by the
Committee, whose determination shall be conclusive.
(g) After a merger of one or more corporations into the
Company or after a consolidation of the Company and one or more
corporations in which the Company shall
IV-5
be the surviving corporation, each Holder shall be entitled to have his
Restricted Shares appropriately adjusted based on the manner in which
the Shares were adjusted under the terms of the agreement of merger or
consolidation.
(h) The issuance by the Company of Shares of any class or
series, or securities convertible into, or exchangeable for, Shares of
any class or series, for cash or property, or for labor or services
either upon direct sale or upon the exercise of rights or warrants to
subscribe for them, or upon conversion or exchange of Shares or
obligations of the Company convertible into, or exchangeable for,
Shares or other securities, shall not affect, and no adjustment by
reason of such issuance shall be made with respect to, the number,
class or series, or price of Shares then subject to outstanding
Options, Share Appreciation Rights, Deferred Share Unit Awards,
Restricted Share Awards, or Performance Share Awards.
(i) The portion of any Incentive Stock Option accelerated in
connection with a Change in Control or any other action permitted
hereunder shall remain exercisable as an Incentive Stock Option only to
the extent the applicable $100,000 limitation is not exceeded. To the
extent exceeded, the accelerated portion of the Option shall be
exercisable as a Nonqualified Stock Option under the Code.
IV-6
ARTICLE V
OPTIONS AND SHARE APPRECIATION RIGHTS
5.1 TYPE OF OPTION. The Committee will designate each Option granted
under the Plan as either an Incentive Stock Option or a Nonqualified Stock
Option and such designation shall be set forth in the applicable Option
Agreement. Any Option granted hereunder that is not designated as an Incentive
Stock Option will be deemed to be designated a Nonqualified Stock Option under
the Plan and not an incentive stock option under the Code. Incentive Stock
Options shall be subject to the provisions of Section 5.7 in addition to the
provisions hereof applicable to Options generally.
5.2 EXERCISE PRICE. The price at which Shares may be purchased under an
Option shall not be less than 100 percent (110 percent in the case of a Holder
described in Section 5.7(d) purchasing Shares under an Incentive Stock Option)
of the Fair Market Value of the Shares on the date the Option is granted.
5.3 DURATION OF OPTIONS. An Option shall not be exercisable after the
earlier of (i) the general term of the Option specified in Section 5.3(a), or
(ii) the period of time specified herein that follows the Holder's Retirement,
Disability, death or other severance of the employment or affiliation
relationship between the Holder and the Company and all Affiliates. Unless the
Holder's Option Agreement specifies otherwise, an Option shall not continue to
vest after the severance of the employment or affiliation relationship between
the Company and all Affiliates for any reason other than the death or Disability
of the Holder.
(a) General Term of Option. Unless the Option Agreement
specifies a shorter general term, an Option shall expire on the tenth
anniversary of the date the Option is granted (the fifth anniversary of
the date the Option is granted in the case of an Incentive Stock Option
granted to a Holder described in Section 5.7(d)).
Early Termination of Option Due to Severance of Employment or
Affiliation Relationship (Other Than for Death, Disability or
Retirement). Except as may be otherwise expressly provided in an Option
Agreement, and subject to Section 12.3, an Option that has been granted
to a person other than a Non-Employee Director shall terminate on the
earlier of (1) the date of the expiration of the general term of the
Option or (2) one day less than three months after the date of the
termination of employment or affiliation relationship between the
Holder and the Company and all Affiliates for any reason other than the
death, Disability or Retirement of the Holder, during which period the
Holder shall be entitled to exercise the Option in respect of the
number of Shares that the Holder would have been entitled to purchase
had the Holder exercised the Option on the date of such termination of
employment or affiliation. Unless Company policy or the Committee
otherwise provides, the employment or affiliation relationship shall
not be considered terminated in the case of (i) sick leave, (ii)
military leave, or (iii) any other leave of absence authorized by the
Company or the Committee; provided that unless reemployment upon the
expiration of such leave is guaranteed by contract or law, such leave
is for a period of not more than 90 days. In the case of any Holder on
an approved
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leave of absence, continued vesting of the Award while on leave from
the employ of the Company and all Affiliates may be suspended until the
employee returns to service, unless the Committee otherwise provides or
applicable law otherwise requires
(b) Early Termination of Option Due to Death. In the case of
an Option granted to a person other than a Non-Employee Director,
unless the Option Agreement specifies otherwise, and subject to Section
12.3, in the event of the severance of the employment or Affiliation
relationship between the Holder and the Company and all Affiliates due
to death before the date of expiration of the general term of the
Option, the Holder's Option shall terminate on the earlier of the date
of expiration of the general term of the Option or the first
anniversary of the date of the Holder's death.
(c) Early Termination of Option Due to Disability. In the case
of an Option granted to a person other than a Non-Employee Director,
unless the Option Agreement specifies otherwise, and subject to Section
12.3, in the event of the severance of the employment relationship
between the Holder and the Company and all Affiliates due to Disability
before the date of the expiration of the general term of the Option,
the Holder's Option shall terminate on the earlier of the expiration of
the general term of the Option or the day before the first anniversary
of the date of the termination of the employment or Affiliation
relationship between the Holder and the Company and all Affiliates due
to Disability.
(d) Early Termination of Option Due to Retirement. Unless the
Option Agreement specifies otherwise, and subject to Section 12.3, in
the event of the severance of the employment relationship between the
Holder and the Company and all Affiliates by reason of Retirement
before the expiration of the general term of the Option, the Holder's
Option shall terminate on the earlier of the expiration of the general
term of the Option or three years (one day less than three months in
the case of an Incentive Stock Option) after the date of the
termination of the employment relationship between the Holder and the
Company and all Affiliates due to Retirement.
(e) Early Termination of Option Granted to Non-Employee
Director. Except as may be otherwise expressly provided in an Option
Agreement, and subject to Section 12.3, an Option that has been granted
to a Non-Employee Director shall terminate on the earlier of (1) the
date of the expiration of the general term of the Option or (2) the
date that is three years after the Non-Employee Director is no longer a
director of the Company for any reason.
After the death of the Holder, the Holder's executors, administrators
or any person or persons to whom the Holder's Option may be transferred by will
or by the laws of descent and distribution, shall have the right, at any time
prior to the termination of the Option to exercise the Option, in respect to the
number of all of the remaining unexercised and unexpired Shares subject to the
Option.
5.4 AMOUNT EXERCISABLE. Each Option may be exercised at the time, in
the manner and subject to the conditions the Committee specifies in the Option
Agreement in its sole discretion. If a Holder incurs a severance of the
employment or affiliation relationship with the
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Company and all Affiliates due to death or Disability, the Holder's Option will
be immediately exercisable in full on the date of the severance of the
employment or affiliation relationship.
5.5 EXERCISE OF OPTIONS. Subject to the provisions contained in the
Plan and in a Holder's Option Agreement, Options may be exercised in whole or in
part from time to time by request to the Company. Except in the case of exercise
by a third party broker as provided below, payment of the exercise price and any
applicable tax withholding amounts must be made at the time of exercise by any
combination of the following: (a) cash, certified check, bank draft or postal or
express money order for an amount equal to the exercise price under the Option,
(b) Mature Shares with a Fair Market Value on the date of exercise equal to the
exercise price under the Option, (c) an election to make a cashless exercise
through a registered broker-dealer (if approved in advance by the Committee or
an executive officer of the Company) or (d) except as specified below, any other
form of payment which is acceptable to the Committee. If Mature Shares are used
for payment by the Holder, the aggregate Fair Market Value of the Shares
tendered must be equal to or less than the aggregate exercise price of the
Shares being purchased upon exercise of the Option, and any difference must be
paid by cash, certified check, bank draft or postal or express money order
payable to the order of the Company.
The Committee may permit a Holder to elect to pay the exercise price by
authorizing a third-party broker to sell all or a portion of the Shares acquired
upon exercise of the Option and remit to the Company a sufficient portion of the
sale proceeds to pay the exercise price and any applicable tax withholding
resulting from such exercise.
The Committee shall not permit a Holder to pay such Holder's exercise
price upon the exercise of an Option by having the Company reduce the number of
Shares that will be delivered pursuant to the exercise of the Option. In
addition, the Committee shall not permit a Holder to pay such Holder's exercise
price upon the exercise of an Option by using Shares other than Mature Shares.
An Option may not be exercised for a fraction of a Share.
5.6 SUBSTITUTION OPTIONS. Options may be granted under the Plan from
time to time in substitution for options held by employees of other corporations
who are about to become employees of or affiliated with the Company or any
Affiliate as the result of a merger or consolidation of the employing
corporation with the Company or any Affiliate, or the acquisition by the Company
or any Affiliate of the assets of the employing corporation, or the acquisition
by the Company or any Affiliate of shares of the employing corporation as the
result of which it becomes an Affiliate of the Company. The terms and conditions
of the substitute Options granted may vary from the terms and conditions set out
in the Plan to the extent the Committee, at the time of grant, may deem
appropriate to conform, in whole or in part, to the provisions of the options in
substitution for which they are granted.
5.7 LIMITATIONS ON GRANT AND TERMS OF INCENTIVE STOCK OPTIONS.
(a) $100,000 Limit. To the extent that the aggregate "Fair
Market Value" of stock with respect to which incentive stock options
first become exercisable by a Holder
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in any calendar year exceeds $100,000, taking into account both Shares
subject to Incentive Stock Options under the Plan and stock subject to
incentive stock options under all other plans of the Company or any
Affiliate, such options shall be treated as Nonqualified Stock Options.
For this purpose, the "Fair Market Value" of the stock subject to
options shall be determined as of the date the options were awarded. In
reducing the number of options treated as incentive stock options to
meet the $100,000 limit, the most recently granted options shall be
reduced first. To the extent a reduction of simultaneously granted
options is necessary to meet the $100,000 limit, the Committee may, in
the manner and to the extent permitted by law, designate which Shares
are to be treated as shares acquired pursuant to the exercise of an
Incentive Stock Option.
(b) Option Period. Each Option and all rights thereunder shall
expire no later than 10 years after the Option is granted.
(c) Other Code Limits. Incentive Stock Options may only be
granted to key Employees of the Company or its Affiliates. There shall
be imposed in any Option Agreement relating to Incentive Stock Options
such other terms and conditions as from time to time are required in
order that the Option be an "incentive stock option" as that term is
defined in Section 422 of the Code.
(d) Limits on 10% Holders. No Incentive Stock Option may be
granted to any person who, at the time the Option is granted, owns (or
is deemed to own under Section 424(d) of the Code) shares of
outstanding Shares possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of any
Affiliate, unless the exercise price of such Option is at least 110% of
the Fair Market Value of the stock subject to the Option and such
Option by its terms is not exercisable after the expiration of five
years from the date such Option is granted.
5.8 SHARE APPRECIATION RIGHTS. The Committee may grant Share
Appreciation Rights under the Plan. Each Share Appreciation Right shall be
evidenced by a Share Appreciation Right Agreement which shall specify the term
of the Share Appreciation Right as well as vesting and termination provisions.
Subject to the terms of the Plan, a Share Appreciation Right granted under the
Plan shall confer on the Holder a right to receive, upon exercise thereof,
payment of an amount equal to the excess of (a) the Fair Market Value of one
Share on the date of exercise over the (b) the grant price of the right, which
shall not be less than the Fair Market Value of one Share on the date of grant
of the Share Appreciation Right and in no event less than par value of one
Share. The Committee may impose such conditions or restrictions on the exercise
of any Share Appreciation Right as it may deem appropriate.
The Committee, in its sole discretion, shall determine the form in
which payment shall be made of the amount determined under preceding paragraph,
either solely in cash, solely in Shares (valued at Fair Market Value on the date
of exercise of the Share Appreciation Right), or partly in Shares and partly in
cash, provided that the Committee shall have determined that such exercise and
payment are consistent with applicable law. To the extent that a Share
Appreciation Right is exercised, only the actual number of delivered Shares
shall be charged against the maximum amount of Shares that may be delivered
pursuant to Awards under this Plan. The
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number of shares subject to the Share Appreciation Right shall, however, be
reduced by the number of underlying shares as to which the exercise related,
unless the Share Appreciation Right Agreement otherwise provides.
5.9 NO RIGHTS AS SHAREHOLDER. A Holder of an Option or Share
Appreciation Right, as such, shall have no rights as a shareholder.
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ARTICLE VI
RESTRICTED SHARE AWARDS
6.1 RESTRICTED SHARE AWARDS. The Committee may make Awards of
Restricted Shares to eligible persons selected by it. The amount of, the vesting
and the transferability restrictions applicable to any Restricted Share Award
shall be determined by the Committee in its sole discretion. If the Committee
imposes vesting or transferability restrictions on a Holder's rights with
respect to Restricted Shares, the Committee may issue such instructions to the
Company's share transfer agent in connection therewith as it deems appropriate.
The Committee may also cause the certificate for Shares issued pursuant to a
Restricted Share Award to be imprinted with any legend which counsel for the
Company considers advisable with respect to the restrictions or, should the
Shares be represented by book or electronic entry rather than a certificate, the
Company may take such steps to restrict transfer of the Shares as counsel for
the Company considers necessary or advisable to comply with applicable law.
Each Restricted Share Award shall be evidenced by a Restricted Share
Award Agreement that contains any vesting, transferability restrictions and
other provisions not inconsistent with the Plan as the Committee may specify.
6.2 HOLDER'S RIGHTS AS SHAREHOLDER. Subject to the terms and conditions
of the Plan, each Holder of Restricted Shares shall have all the rights of a
shareholder with respect to the Shares included in the Award during any period
in which such Shares are subject to forfeiture and restrictions on transfer,
including without limitation, the right to vote such Shares, if unrestricted
Shares of the same class have the right to vote. Dividends paid with respect to
Restricted Shares in cash or property other than Shares or rights to acquire
Shares shall be paid to the Holder currently. Dividends paid in Shares or rights
to acquire Shares shall be added to and become a part of the Restricted Shares.
VI-1
ARTICLE VII
PERFORMANCE SHARE AWARDS
7.1 PERFORMANCE SHARE AWARDS. The Committee may make Awards of
Performance Shares to eligible persons selected by it. The amount of, the
vesting and the transferability restrictions applicable to any Performance Share
Award shall be based upon the attainment of such Performance Goals as the
Committee may determine. A Performance Goal for a particular Performance Share
Award must be established by the Committee prior to the earlier to occur of (x)
90 days after the commencement of the period of service to which the Performance
Goal relates or (y) the lapse of 25 percent of the period of service, and in any
event while the outcome is substantially uncertain. A Performance Goal must be
objective such that a third party having knowledge of the relevant facts could
determine whether the goal is met. Such a Performance Goal may be based on one
or more business criteria that apply to the Holder, one or more business units
of the Company, or the Company as a whole, with reference to one or more of the
following: earnings per share, earnings per share growth, total shareholder
return, economic value added, cash return on capitalization, increased revenue,
revenue ratios (per employee or per customer), net income, stock price, market
share, return on equity, return on assets, return on capital, return on capital
compared to cost of capital, return on capital employed, return on invested
capital, shareholder value, net cash flow, operating income, earnings before
interest and taxes, cash flow, cash flow from operations, cost reductions, cost
ratios (per employee or per customer), proceeds from dispositions, project
completion time and budget goals, net cash flow before financing activities,
customer growth and total market value. Goals may also be based on performance
relative to a peer group of companies. Unless otherwise stated, such a
Performance Goal need not be based upon an increase or positive result under a
particular business criterion and could include, for example, maintaining the
status quo or limiting economic losses (measured, in each case, by reference to
specific business criteria). In interpreting Plan provisions applicable to
Performance Goals and Performance Share Awards, it is intended that the Plan
will conform with the standards of Section 162(m) of the Code and Treasury
Regulations Section 1.162-27(e)(2)(i), and the Committee in establishing such
goals and interpreting the Plan shall be guided by such provisions. Prior to the
payment of any compensation based on the achievement of Performance Goals, the
Committee must certify in writing that applicable Performance Goals and any of
the material terms thereof were, in fact, satisfied. Subject to the foregoing
provisions, the terms, conditions and limitations applicable to any Performance
Share Awards made pursuant to the Plan shall be determined by the Committee. If
the Committee imposes vesting or transferability restrictions on a Holder's
rights with respect to Performance Shares, the Committee may issue such
instructions to the Company's share transfer agent in connection therewith as it
deems appropriate. The Committee may also cause the certificate for Shares
issued pursuant to a Performance Share Award to be imprinted with any legend
which counsel for the Company considers advisable with respect to the
restrictions or, should the Shares be represented by book or electronic entry
rather than a certificate, the Company may take such steps to restrict transfer
of the Shares as counsel for the Company considers necessary or advisable to
comply with applicable law.
VII-1
Each Performance Share Award shall be evidenced by a Performance Share
Award Agreement that contains any vesting, transferability restrictions and
other provisions not inconsistent with the Plan as the Committee may specify.
7.2 HOLDER'S RIGHTS AS SHAREHOLDER. Subject to the terms and conditions
of the Plan, each Holder of Performance Shares shall have all the rights of a
shareholder with respect to the Shares included in the Award during any period
in which such Shares are subject to forfeiture and restrictions on transfer,
including without limitation, the right to vote such Shares, if unrestricted
Shares of the same class have the right to vote. Dividends paid with respect to
Performance Shares in cash or property other than Shares or rights to acquire
Shares shall be paid to the Holder currently. Dividends paid in Shares or rights
to acquire Shares shall be added to and become a part of the Performance Shares.
7.3 INCREASES PROHIBITED. None of the Committee nor, the Board of the
Company may increase the amount of compensation payable under a Performance
Share Award. If the time at which a Performance Share Award will vest is
accelerated for any reason, the number of Shares subject to the Performance
Share Award shall be reduced pursuant to Department of Treasury Regulation
section 1.162-27(e)(2)(iii) to reasonably reflect the time value of money.
VII-2
ARTICLE VIII
DEFERRED SHARE UNIT AWARDS
8.1 DEFERRED SHARE UNIT AWARDS. The Committee may make Awards of
Deferred Share Units to eligible persons selected by it. The amount of, the
vesting and the transferability restrictions applicable to any Deferred Share
Unit Award shall be determined by the Committee in its sole discretion. The
Committee shall maintain a bookkeeping ledger account which reflects the number
of Deferred Share Units credited under the Plan for the benefit of a Holder.
Each Deferred Share Unit Award shall be evidenced by a Deferred Share
Unit Award Agreement that contains any vesting, transferability restrictions and
other provisions not inconsistent with the Plan as the Committee may specify.
Deferred Share Unit Awards shall be similar to Restricted Shares except that no
Shares are actually transferred to the Holder until a later date specified in
the Holder's Deferred Share Unit Award Agreement. Each Deferred Share Unit shall
have a value equal to the Fair Market Value of a Share.
8.2 PAYMENTS UNDER DEFERRED SHARE UNIT AWARDS. Payments pursuant to a
Deferred Share Unit Awards shall be made at such time as the Committee specifies
in the Holder's Award Agreement. Payment under a Deferred Share Unit Award shall
be made in Shares that have an aggregate Fair Market Value equal to the value of
the Deferred Share Units.
At the discretion of the Committee, Holders of Deferred Share Unit
Awards may be entitled to be credited with dividend units with respect to
dividends declared with respect to Shares. Any such dividends may be subject to
the same vesting and payout restrictions as apply to the Holder's original
Deferred Share Unit Awards.
8.3 HOLDER'S RIGHTS AS SHAREHOLDER. Subject to the terms and conditions
of the Plan, each Holder of Deferred Share Units shall have no rights of a
shareholder with respect to the Holder's Deferred Share Units.
VIII-1
ARTICLE IX
SUBSTITUTION AWARDS
Awards may be granted under the Plan from time to time in substitution
for options and stock awards held by employees of other corporations who are
about to become employees of or affiliated with the Company or any Affiliate as
the result of a merger or consolidation of the employing corporation with the
Company or any Affiliate, or the acquisition by the Company or any Affiliate of
the assets of the employing corporation, or the acquisition by the Company or
any Affiliate of shares of the employing corporation as the result of which it
becomes an Affiliate of the Company. The terms and conditions of the substitute
Awards granted may vary from the terms and conditions set out in the Plan to the
extent the Committee, at the time of grant, may deem appropriate to conform, in
whole or in part, to the provisions of the options and stock awards in
substitution for which they are granted.
IX-1
ARTICLE X
ADMINISTRATION
The Plan shall be administered by the Committee. All questions of
interpretation and application of the Plan and Awards shall be subject to the
determination of the Committee. A majority of the members of the Committee shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Any decision or determination reduced to writing and
signed by a majority of the members shall be as effective as if it had been made
by a majority vote at a meeting properly called and held. The Plan shall be
administered in such a manner as to permit the Options which are designated as
Incentive Stock Options to qualify as Incentive Stock Options. In carrying out
its authority under the Plan, the Committee shall have full and final authority
and discretion, including but not limited to the following rights, powers and
authorities, to:
(a) determine the persons to whom and the time or times at
which Awards will be made;
(b) determine the number and exercise price of Shares covered
in each Award, subject to the terms of the Plan;
(c) determine the terms, provisions and conditions of each
Award, which need not be identical and need not match the default terms
set forth in the Plan;
(d) accelerate the time at which any outstanding Option or
Share Appreciation Right may be exercised or Restricted Share Award or
Deferred Share Unit Award will vest;
(e) subject to Section 7.3, accelerate the time at which any
Performance Share Award will vest;
(f) prescribe, amend and rescind rules and regulations
relating to administration of the Plan; and
(g) make all other determinations and take all other actions
deemed necessary, appropriate or advisable for the proper
administration of the Plan.
The actions of the Committee in exercising all of the rights, powers,
and authorities set out in this Article and all other Articles of the Plan, when
performed in good faith and in its sole judgment, shall be final, conclusive and
binding on all parties.
Notwithstanding any provision of the Plan to the contrary, neither the
Committee nor the Board shall have the power to cancel an Option with an
exercise price that exceeds the Fair Market Value of the Shares that may be
purchased under such Option on the date of cancellation without the approval of
the Company's shareholders.
X-1
ARTICLE XI
AMENDMENT OR TERMINATION OF PLAN
The Committee may amend, terminate or suspend the Plan at any time, in
its sole and absolute discretion. However, to the extent required under Section
162, 422 or 424 of the Code or any other applicable law, or deemed necessary or
advisable by the Board, any amendment to the Plan shall be subject to
shareholder approval.
XI-1
ARTICLE XII
MISCELLANEOUS
12.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall be set aside
nor shall a trust fund of any kind be established to secure the rights of any
Holder under the Plan. All Holders shall at all times rely solely upon the
general credit of the Company for the payment of any benefit which becomes
payable under the Plan.
12.2 NO EMPLOYMENT OR AFFILIATION OBLIGATION. The granting of any Award
shall not constitute an employment contract, express or implied, nor impose upon
the Company or any Affiliate any obligation to employ or continue to employ, or
utilize the services of, any Holder. The right of the Company or any Affiliate
to terminate the employment or affiliation of any person shall not be diminished
or affected by reason of the fact that an Award has been granted to him.
12.3 FORFEITURE. Notwithstanding any other provisions of the Plan, an
Option Agreement, Share Appreciation Right Agreement, Restricted Share
Agreement, Deferred Share Unit Agreement or Performance Share Agreement if the
Committee finds by a majority vote after full consideration of the facts that
the Holder, before or after termination of such Holder's employment or
affiliation relationship with the Company or an Affiliate for any reason
committed or engaged in willful misconduct, gross negligence, a breach of
fiduciary duty, fraud, embezzlement, theft, a felony, a crime involving moral
turpitude or proven dishonesty in the course of such Holder's employment by or
affiliation with the Company or an Affiliate, the Holder shall forfeit all
outstanding Awards. The decision of the Committee shall be final. No decision of
the Committee, however, shall affect the finality of the discharge of the Holder
by the Company or an Affiliate in any manner.
12.4 TAX WITHHOLDING. Except with respect to each Holder who is a
Non-Employee Director, the Company or any Affiliate shall be entitled to deduct
from other compensation payable to each Holder any sums required by federal,
state or local tax law to be withheld with respect to the vesting or exercise of
an Option or Share Appreciation Right, or lapse of restrictions on Restricted
Shares or Performance Shares. In the alternative, the Company may require the
Holder of an Award to pay such sums for taxes directly to the Company or any
Affiliate in cash or by check within ten days after the date of vesting,
exercise or lapse of restrictions. In the discretion of the Committee, and with
the consent of the Holder, the Company may reduce the number of Shares issued to
the Holder upon such Holder's exercise of an Option to satisfy the tax
withholding obligations of the Company or an Affiliate; provided that the Fair
Market Value of the Shares held back shall not exceed the Company's or the
Affiliate's minimum statutory withholding tax obligations. The Committee may, in
its discretion, permit a Holder to satisfy any minimum tax withholding
obligations arising upon the vesting of Restricted Shares or Performance Shares
by delivering to the Holder of the Restricted Share Award or Performance Share
Award a reduced number of Shares in the manner specified herein. If permitted by
the Committee and acceptable to the Holder, at the time of vesting of Restricted
Shares or Performance Shares, the Company shall (i) calculate the amount of the
Company's or an Affiliate's minimum statutory tax withholding obligation on the
assumption
XII-1
that all such vested Restricted Shares are made available for delivery, (ii)
reduce the number of such Shares made available for delivery so that the Fair
Market Value of the Shares withheld on the vesting date approximates the minimum
amount of tax the Company or an Affiliate is obliged to withhold and (iii) in
lieu of the withheld Shares, remit cash to the United States Treasury and other
applicable governmental authorities, on behalf of the Holder, in the amount of
the minimum withholding tax due. The Company shall withhold only whole Shares to
satisfy its minimum withholding obligation. Where the Fair Market Value of the
withheld Shares does not equal the Company's minimum withholding tax obligation,
the Company shall withhold Shares with a Fair Market Value slightly less than
the amount of its minimum withholding obligation and the Holder of the
Restricted Share Award, Deferred Share Unit Award or Performance Share Award
must satisfy the remaining minimum withholding obligation in some other manner
permitted under this Section 12.4. The withheld Shares not made available for
delivery by the Company shall be retained as treasury shares or will be
cancelled and, in either case, the Holder's right, title and interest in such
Shares shall terminate. The Company shall have no obligation upon vesting or
exercise of any Option, Share Appreciation Right or Deferred Share Unit or lapse
of restrictions on Restricted Shares or Performance Shares until the Company or
an Affiliate has received payment sufficient to cover all minimum tax
withholding amounts due with respect to that vesting, exercise or lapse of
restrictions. Neither the Company nor any Affiliate shall be obligated to advise
a Holder of the existence of the tax or the amount which it will be required to
withhold.
12.5 WRITTEN AGREEMENT. Each Award shall be embodied in a written
agreement which shall be subject to the terms and conditions of the Plan and
shall be signed by the Holder and by a member of the Committee on behalf of the
Committee and the Company or an executive officer of the Company, other than the
Holder, on behalf of the Company. The agreement may contain any other provisions
that the Committee in its discretion shall deem advisable which are not
inconsistent with the terms of the Plan.
12.6 INDEMNIFICATION OF THE COMMITTEE. The Company shall indemnify each
present and future member of the Committee against, and each member of the
Committee shall be entitled without further action on his or her part to
indemnity from the Company for, all expenses (including attorney's fees, the
amount of judgments and the amount of approved settlements made with a view to
the curtailment of costs of litigation, other than amounts paid to the Company
itself) reasonably incurred by such member in connection with or arising out of
any action, suit or proceeding in which such member may be involved by reason of
such member being or having been a member of the Committee, whether or not he or
she continues to be a member of the Committee at the time of incurring the
expenses, including, without limitation, matters as to which such member shall
be finally adjudged in any action, suit or proceeding to have been negligent in
the performance of such member's duty as a member of the Committee. However,
this indemnity shall not include any expenses incurred by any member of the
Committee in respect of matters as to which such member shall be finally
adjudged in any action, suit or proceeding to have been guilty of gross
negligence or willful misconduct in the performance of his duty as a member of
the Committee. In addition, no right of indemnification under the Plan shall be
available to or enforceable by any member of the Committee unless, within 60
days after institution of any action, suit or proceeding, such member shall have
offered the Company, in writing, the opportunity to handle and defend same at
its own expense. This
XII-2
right of indemnification shall inure to the benefit of the heirs, executors or
administrators of each member of the Committee and shall be in addition to all
other rights to which a member of the Committee may be entitled as a matter of
law, contract or otherwise.
12.7 GENDER. If the context requires, words of one gender when used in
the Plan shall include the other and words used in the singular or plural shall
include the other.
12.8 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of the Plan and shall
not be used in construing the terms of the Plan.
12.9 OTHER COMPENSATION PLANS. The adoption of the Plan shall not
affect any other option, incentive or other compensation or benefit plans in
effect for the Company or any Affiliate, nor shall the Plan preclude the Company
from establishing any other forms of incentive compensation arrangements for
Employees.
12.10 OTHER AWARDS. The grant of an Award shall not confer upon the
Holder the right to receive any future or other Awards under the Plan, whether
or not Awards may be granted to similarly situated Holders, or the right to
receive future Awards upon the same terms or conditions as previously granted.
12.11 PERSONS RESIDING OUTSIDE OF THE UNITED STATES. Notwithstanding
any provision of the Plan to the contrary, in order to comply with the laws in
other countries in which the Company and its Affiliates operate or have
Employees, the Committee, in its sole discretion, shall have the power and
authority to:
(a) determine which Affiliates shall be covered by the Plan;
(b) determine which persons employed outside the United States
are eligible to participate in the Plan;
(c) amend or vary the terms of the Plan and the terms and
conditions of any Award granted to persons who reside outside the
United States;
(d) establish subplans and modify exercise procedures and
other terms and procedures to the extent such actions may be necessary
or advisable. Any subplans and modifications to Plan terms and
procedures established under this Section 12.11 by the Committee shall
be attached to the Plan document as Appendices; and
(e) take any action, before or after an Award is made, that it
deems advisable to obtain or comply with any necessary local government
regulatory exemptions or approvals.
Notwithstanding the above, the Committee may not take any actions
hereunder, and no Awards shall be granted, that would violate the Exchange Act,
the Code, any securities law or governing statute or any other applicable law.
XII-3
12.12 GOVERNING LAW. The provisions of the Plan shall be construed,
administered and governed under the laws of the State of Texas.
XII-4
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS DECEMBER 3, 2002
VERITAS DGC INC.
PROXY SOLICITATION BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON DECEMBER 3, 2002
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints David B. Robson, Stephen J. Ludlow,
Timothy L. Wells, Matthew D. Fitzgerald, Rene M.J. VandenBrand and Larry L.
Worden, or any of them, attorneys and proxies, with power of substitution and
revocation, to vote, as designated on the reverse side, all shares of stock
which the undersigned is entitled to vote, with all powers which the
undersigned would possess if personally present, at the Annual Meeting
(including all adjournments thereof) of Stockholders of Veritas DGC Inc. to be
held on Tuesday, December 3, 2002 at 10:00 a.m., Houston time, at the offices
of the Company, 10300 Town Park Drive, Houston, Texas 77072.
1. [ ] FOR all nominees (except as specified hereon): Clayton P. Cormier,
James R. Gibbs, Stephen J. Ludlow, Brian F. MacNeill, Jan Rask and
David B. Robson.
[ ] WITHHOLD authority to vote for all nominees listed above.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
______________________________________________________________________
(THIS PROXY CONTINUES AND MUST BE SIGNED ON THE REVERSE SIDE)
2. Adoption of the Company's Share Incentive Plan.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
3. [ ] As such proxies may determine in their discretion upon such other
business (including procedural and other matters relating to the conduct
of the meeting) that may properly come before the meeting and any
adjournment thereof.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned. In the absence of such instructions this proxy will be
voted FOR the nominees listed in Item 1 and the adoption of the Company's Share
Incentive Plan listed in Item 2.
The undersigned hereby acknowledges
receipt of the Notice of Annual Meeting
of Stockholders and the Proxy Statement
furnished therewith.
Dated this _____ day of __________, 2002
________________________________________
________________________________________
Signature(s) of Stockholder
(Sign exactly as name(s) appear on your
stock certificate. If shares are held
jointly each holder should sign. If
signing for estate, trust or
corporation, title or capacity should be
stated.)
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED BUSINESS ENVELOPE.