Page 23
Exhibit 10(iii)A(c)
SEVERANCE PROTECTION AGREEMENT
THIS AGREEMENT made as of the 1st day of February, 1996, by and between
National Service Industries, Inc. (the "Company") and James S. Balloun (the
"Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat of or the occurrence of a Change in Control can result in
significant distractions of its key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure his continued dedication and efforts in such event without undue concern
for his personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits in the event his employment is
terminated as a result of, or in connection with, a Change in Control and to
provide the Executive with the Gross-Up Payment (as hereinafter defined) and
certain other benefits whether or not the Executive's employment is terminated.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Term of Agreement.
(a) This Agreement shall commence as of February 1, 1996, and shall
continue in effect until the earlier of the Executive's sixty-fifth (65th)
birthday or the Executive's termination of employment prior to a Change in
Control, as provided in Section 1(b) below.
(b) Prior to a Change in Control and other than during a Threatened
Change in Control Period, the term of this Agreement shall expire on the date
the Executive ceases to serve as Chairman of the Board and Chief Executive
Officer, or in another capacity as an executive officer (as defined in Rule 3b-7
under the Securities Exchange Act of 1934, as amended (the "1934 Act") as in
effect on the date hereof) of the Company, unless such cessation was at the
request of a Third Party or otherwise occurred in connection with, or in
anticipation of, a Change in Control.
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Exhibit 10(iii)A(c)
2. Definitions.
2.1 Cause. For purposes of this Agreement, a termination for "Cause"
is a termination evidenced by a resolution adopted in good faith by two-thirds
of the Board that the Executive (a) intentionally and continually failed to
substantially perform his duties with the Company (other than a failure
resulting from the Executive's incapacity due to physical or mental illness)
which failure continued for a period of at least thirty (30) days after a
written notice of demand for substantial performance has been delivered to the
Executive specifying the manner in which the Executive has failed to
substantially perform, or (b) intentionally engaged in conduct which is
demonstrably and materially injurious to the Company, monetarily or otherwise;
provided, however, that no termination of the Executive's employment shall be
for Cause as set forth in clause (b) above until (x) there shall have been
delivered to the Executive a copy of a written notice setting forth that the
Executive was guilty of the conduct set forth in clause (b) and specifying the
particulars thereof in detail, and (y) the Executive shall have been provided an
opportunity to be heard by the Board (with the assistance of the Executive's
counsel if the Executive so desires). No act, nor failure to act, on the
Executive's part, shall be considered "intentional" unless he has acted, or
failed to act, with an absence of good faith and without a reasonable belief
that his action or failure to act was in the best interest of the Company.
Notwithstanding anything contained in this Agreement to the contrary, no failure
to perform by the Executive after a Notice of Termination is given by the
Executive shall constitute Cause for purposes of this Agreement.
2.2 Change in Control. For purposes of this Agreement, a "Change in
Control" shall mean any of the following events:
(a) The acquisition (other than from the Company) by any "Person"
(as the term person is used for purposes of Sections 13(d) or 14(d) of the 1934
Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of twenty percent (20%) or more of the combined voting power of
the Company's then outstanding voting securities; or
(b) The individuals who, as of February 1, 1996, are members of
the Board (the "Incumbent Board") cease for any reason to constitute at least
two-thirds of the Board; provided, however, that if the election, or nomination
for election by the Company's stockholders, of any new director was approved by
a vote of at least two-thirds of the Incumbent Board, such new director shall,
for purposes of this Agreement, be considered as a member of the Incumbent
Board; or
(c) Approval by stockholders of the Company of (1) a merger or
consolidation involving the Company if the stockholders of the Company,
Page 25
Exhibit 10(iii)A(c)
immediately before such merger or consolidation do not, as a result of such
merger or consolidation, own, directly or indirectly, more than seventy percent
(70%) of the combined voting power of the then outstanding voting securities of
the corporation resulting from such merger or consolidation in substantially the
same proportion as their ownership of the combined voting power of the voting
securities of the Company outstanding immediately before such merger or
consolidation, or (2) a complete liquidation or dissolution of the Company or an
agreement for the sale or other disposition of all or substantially all of the
assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur pursuant to Section 2.2(a), solely because twenty percent (20%)
or more of the combined voting power of the Company's then outstanding
securities is acquired by (i) a trustee or other fiduciary holding securities
under one or more employee benefit plans maintained by the Company or any of its
subsidiaries, or (ii) any corporation which, immediately prior to such
acquisition, is owned directly or indirectly by the stockholders of the Company
in the same proportion as their ownership of stock in the Company immediately
prior to such acquisition (hereinafter referred to as "Related Persons").
(d) Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior to a Change in
Control and the Executive reasonably demonstrates that such termination (1) was
at the request of a Third Party (as hereinafter defined), or (2) otherwise
occurred in connection with, or in anticipation of, a Change in Control
(including, without limitation, during a Threatened Change in Control Period),
then for all purposes of this Agreement, the date of a Change in Control shall
mean the date immediately prior to the date of such termination of the
Executive's employment.
2.3 Disability. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Executive's ability to
substantially perform his duties under this Agreement for a period of one
hundred eighty (180) consecutive days.
2.4 (a) Good Reason. For purposes of this Agreement, "Good Reason"
shall mean the occurrence after a Change in Control of any of the events or
conditions described in Subsections (1) through (9) hereof:
(1) a change in the Executive's status, title, position, or
responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment, represents an adverse change from his status,
title, position, or responsibilities as in effect immediately prior thereto; the
assignment to the Executive of any duties or responsibilities which, in the
Executive's reasonable judgment, are inconsistent with his status, title,
position, or responsibilities; or any removal of the Executive from or failure
Page 26
Exhibit 10(iii)A(c)
to reappoint or reelect him to any of such offices or positions, except in
connection with the termination of his employment for Disability, Cause, as a
result of his death, or by the Executive other than for Good Reason;
(2) a reduction in the Executive's base salary or any failure to
pay the Executive any compensation or benefits to which he is entitled within
five (5) days of the date due;
(3) a failure to increase the Executive's base salary at least
annually at a percentage of base salary no less than the average percentage
increases (other than increases resulting from the Executive's promotion)
granted to the Executive during the three (3) full years ended prior to a Change
in Control (or such lesser number of full years during which the Executive was
employed);
(4) the Company1s requiring the Executive to be based at any
place outside a thirty (30) mile radius from Atlanta, Georgia, except for
reasonably required travel on the Company's business which is not greater than
such travel requirements prior to the Change in Control;
(5) the failure by the Company to (A) continue in effect (without
reduction in benefit level, and/or reward opportunities) any compensation or
employee benefit plan in which the Executive was participating immediately prior
to the Change in Control, including, but not limited to, the plans listed on the
Appendix, unless a substitute or replacement plan has been implemented which
provides substantially identical compensation or benefits to the Executive, or
(B) provide the Executive with compensation and benefits, in the aggregate, at
least equal (in terms of benefit levels and/or reward opportunities) to those
provided for under each other compensation or employee benefit plan, program,
and practice as in effect immediately prior to the Change in Control (or as in
effect following the Change in Control, if greater);
(6) the insolvency or the filing (by any party, including the
Company) of a petition for bankruptcy of the Company;
(7) any material breach by the Company of any provision of this
Agreement;
(8) any purported termination of the Executive's employment for
Cause by the Company which does not comply with the terms of Section 2.1; or
(9) the failure of the Company to obtain an agreement,
satisfactory to the Executive, from any successor or assign of the Company to
assume and agree to perform this Agreement, as contemplated in Section 9 hereof.
Page 27
Exhibit 10(iii)A(c)
(b) Any event or condition described in this Section 2.4(a)(1)
through (9) which occurs prior to a Change in Control but which the Executive
reasonably demonstrates (1) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated to effect a Change
in Control (a "Third Party"), or (2) otherwise arose in connection with or in
anticipation of a Change in Control, shall constitute Good Reason for purposes
of this Agreement notwithstanding that it occurred prior to the Change in
Control.
(c) The Executive's right to terminate his employment pursuant to
this Section 2.4 shall not be affected by his incapacity due to physical or
mental illness.
2.5 Threatened Change in Control. For purposes of this Agreement, a
"Threatened Change in Control" shall mean the occurrence of any of the following
events:
(a) when the Company is aware of, or is contemplating, a proposal
(a "Proposal") for any Person other than a Related Person (1) to acquire five
percent (5%) or more of the voting power of the Company's outstanding
securities, or (2) to merge or consolidate with another entity, transfer or sell
assets of the Company, or liquidate or dissolve the Company, in each case
described in this clause (2), in a transaction that would constitute a Change in
Control; or
(b) any Person other than a Related Person,
(1) acquires five percent (5%) or more of the voting power
of the Company's outstanding securities, other than as a holder whose investment
in the Company is eligible to be reported on Schedule 13G pursuant to Rule
13d-l(b)(1) promulgated under the Exchange Act, or
(2) initiates a tender or exchange offer to acquire such
number of securities as would result in such Person holding twenty percent (20%)
or more of the voting power of the Company's outstanding securities, or
(3) solicits proxies for votes to elect members of the Board
at a shareholders meeting of the Company.
2.6 Threatened Change in Control Period. For purposes of this
Agreement, a "Threatened Change in Control Period" shall mean the period
commencing on the date that a Threatened Change in Control has occurred and
ending upon:
(a) the date the Proposal referred to in Section 2.5(a) is
abandoned;
Page 28
Exhibit 10(iii)A(c)
(b) the acquisition of five percent (5%) of the voting power of
the Company's outstanding securities by the Person referred to in Section
2.5(a)(1) if such acquisition does not constitute a Threatened Change in Control
under Section 2.5(b)(1);
(c) the date when any Person described in Section 2.5(b), (1)
shall own less than five percent (5%) of the voting power of the Company's
outstanding securities, (2) shall have abandoned the tender or exchange offer,
or (3) shall not have elected a member of the Board as the case may be; or
(d) the date a Change in Control occurs.
3. Termination of Employment.
3.1 If, during the term of this Agreement, the Executive's employment
with the Company shall be terminated within twenty-four (24) months following a
Change in Control, the Executive shall be entitled to the following compensation
and benefits (in addition to any compensation and benefits provided for under
any of the Company's employee benefit plans, policies, and practices):
(a) If the Executive's employment with the Company shall be
terminated (1) by the Company for Cause or Disability, (2) by reason of the
Executive's death, or (3) by the Executive other than for Good Reason or during
the Window Period (as each term is defined herein), the Company shall pay the
Executive all amounts earned or accrued through the Termination Date but not
paid as of the Termination Date, including (i) base salary, (ii) reimbursement
for reasonable and necessary expenses incurred by the Executive on behalf of the
Company during the period ending on the Termination Date, (iii) vacation pay,
and (iv) sick leave (collectively, "Accrued Compensation"). In addition to the
foregoing, if the Executive's employment is terminated by the Company for
Disability or by reason of the Executive's death, the Company shall pay to the
Executive or his beneficiaries an amount equal to the "Pro Rata Bonus" (as
hereinafter defined). The "Pro Rata Bonus" is an amount equal to the Bonus
Amount (as hereinafter defined) multiplied by a fraction, the numerator of which
is the number of days in such fiscal year through the Termination Date and the
denominator of which is three hundred sixty-five (365). The term "Bonus Amount"
shall mean the greater of the (x) most recent annual bonus paid or payable to
the Executive, or, if greater, the annual bonus paid or payable for the full
fiscal year ended prior to the fiscal year during which a Change in Control
occurred, or (y) average of the annual bonuses paid or payable during the three
(3) full fiscal years ended prior to the Termination Date or, if greater, the
three (3) full fiscal years ended prior to the Change in Control (or, in each
case, such lesser period for which annual bonuses were paid or payable to the
Executive). Executive's entitlement to any other compensation or benefits shall
be determined in accordance with the Company's employee benefit plans and other
Page 29
Exhibit 10(iii)A(c)
applicable programs and practices then in effect.
(b) If the Executive's employment with the Company shall be
terminated (other than by reason of death), (1) by the Company other than for
Cause or Disability, (2) by the Executive for Good Reason, or (3) by the
Executive for any reason within the sixty (60) day period commencing on the
first anniversary of the date of the occurrence of a Change in Control (the
"Window Period"), the Executive shall be entitled to the following:
(i) the Company shall pay the Executive all Accrued
Compensation and a Pro-Rata Bonus;
(ii) the Company shall pay the Executive as severance pay
and in lieu of any further compensation for periods subsequent to the
Termination Date, in a single payment an amount (the Severance Amount") in cash
equal to two (2) times the sum of (A) the greater of the Executive's base salary
in effect on the Termination Date or at any time during the ninety (90) day
period prior to the Change in Control ("Base Salary"), and (B) the Bonus Amount.
Notwithstanding the foregoing, if the Executive has attained at least age
sixty-three (63) on the Termination Date, the Severance Amount to be paid under
this Subsection (ii) shall be the amount described in the preceding sentence
multiplied by a fraction (which in no event shall be less than one-half (1/2)),
the numerator of which shall be the number of months (for this purpose any
partial month shall be considered as a whole month) remaining until the
Executive's sixty-fifth (65th) birthday (but in no event shall be less than
twelve (12)) and the denominator of which shall be twenty-four (24);
(iii) for a number of months equal to the lesser of (A)
twenty-four (24), or (B) the number of months remaining until the Executive's
sixty-fifth (65th) birthday (the "Continuation Period"), the Company shall at
its expense continue on behalf of the Executive and his dependents and
beneficiaries, the life insurance, disability, medical, dental, and
hospitalization benefits provided (x) to the Executive at the time Notice of
Termination is given, at any time during the ninety (90) day period prior to the
Change in Control, or at any time thereafter, or (y) to other similarly situated
executives who continue in the employ of the Company during the Continuation
Period. The coverage and benefits (including deductibles and costs) provided in
this Section 3.1(b)(iii) during the Continuation Period shall be no less
favorable to the Executive and his dependents and beneficiaries than the most
favorable of such coverages and benefits during any of the periods referred to
in clauses (x) and (y) above. The Company's obligation hereunder with respect to
the foregoing benefits shall be limited to the extent that the Executive obtains
any such benefits pursuant to a subsequent employer's benefit plans, in which
case, the Company may reduce the coverage of any benefits it is required to
provide the Executive hereunder as long as the aggregate coverages and benefits
of the combined benefit plans is no less favorable to the Executive than the
Page 30
Exhibit 10(iii)A(c)
coverages and benefits required to be provided hereunder. This Subsection (iii)
shall not be interpreted so as to limit any benefits to which the Executive or
his dependents may be entitled under any of the Company's employee benefit
plans, programs, or practices following the Executive's termination of
employment, including, without limitation, retiree medical and life insurance
benefits;
(iv) the Company shall pay in a single payment an amount in
cash equal to the excess of (A) the Supplemental Retirement Benefit (as defined
below) had (w) the Executive remained employed by the Company for an additional
two (2) complete years of credited service (or until his sixty-fifth (65th)
birthday, if earlier), (x) his annual compensation during such period been equal
to his Base Salary and the Bonus Amount, (y) the Company made employer
contributions to each defined contribution plan in which the Executive was a
participant at the Termination Date (in an amount equal to the amount of such
contribution for the plan year immediately preceding the Termination Date), and
(z) he been fully (100%) vested in his benefit under each retirement plan in
which the Executive was a participant, over (B) the lump sum actuarial
equivalent of the aggregate retirement benefit the Executive is actually
entitled to receive under such retirement plans. For purposes of this Subsection
(iv), the "Supplemental Retirement Benefit" shall mean the lump sum actuarial
equivalent of the aggregate retirement benefit the Executive would have been
entitled to receive under the Company's supplemental and other retirement plans,
including, but not limited to, Pension Plan C (the "NSI Pension Plan");
provided, however, if the Executive has attained at least age fifty (50) and has
been employed by the Company for at least fifteen (15) years as of the
Termination Date, the calculation of the Supplemental Retirement Benefit shall
be made pursuant to the Early Retirement Accrued Pension formula under the
Supplemental Retirement Plan for Executives of the Company without regard to the
Executive's attained age or year of credited service (as defined therein). For
purposes of this Subsection (iv), the "actuarial equivalent" shall be determined
in accordance with the actuarial assumptions used for the calculation of
benefits under the NSI Pension Plan as applied prior to the Termination Date in
accordance with such plan's past practices; and
(v) (A) the restrictions on any outstanding incentive awards
(including restricted stock and granted Performance Shares) granted to the
Executive under the Long-Term Incentive Program (the "Program") or under any
other incentive plan or arrangement shall lapse and such incentive award shall
become one hundred percent (100%) vested, all stock options and stock
appreciation rights granted to the Executive shall become immediately
exercisable and shall become hundred percent (100%) vested, and all Performance
Units granted to the Executive shall become hundred percent (100%) vested, and
(B) the Executive shall have the right to require the Company to purchase, for
cash, any shares of unrestricted stock or shares purchased upon exercise of any
options, at a price equal to the fair market value of such shares on the date of
Page 31
Exhibit 10(iii)A(c)
purchase by the Company.
(c) The amounts provided for in Sections 3.1(a) and
3.1(b)(i), (ii), (iv), and (v) shall be paid within five (5) days after the
Executive's Termination Date.
(d) The Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Executive in any subsequent employment
except as provided in Section 3.1(b)(iii).
3.3 The severance pay and benefits provided for in Sections 3.1(a) and
3.1(b)(i) and (ii) shall be in lieu of any other severance pay to which the
Executive may be entitled under any Company severance plan, program, or
arrangement.
4. Notice of Termination. During a Threatened Change in Control Period and
following a Change in Control, any purported termination by the Company or by
the Executive shall be communicated by written Notice of Termination to the
other. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which indicates the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. For purposes of this Agreement, no such purported
termination shall be effective without such Notice of Termination.
5. Termination Date. "Termination Date" shall mean in the case of the
Executive's death, his date of death, and in all other cases, the date specified
in the Notice of Termination subject to the following:
(a) If the Executive's employment is terminated by the Company for
Cause or due to Disability, the date specified in the Notice of Termination
shall be at least thirty (30) days from the date the Notice of Termination is
given to the Executive, provided that in the case of Disability, the Executive
shall not have returned to the full-time performance of his duties during such
period of at least thirty (30) days; and
(b) If the Executive's employment is terminated for Good Reason, the
date specified in the Notice of Termination shall not be more than sixty (60)
days from the date the Notice of Termination is given to the Company.
6. Excise Tax Payments.
(a) Notwithstanding anything contained in this Agreement to the
contrary and without regard to whether the Executive's employment with the
Company has terminated, in the event that any payment or benefit (within the
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Exhibit 10(iii)A(c)
meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
[the "Code"]) to the Executive or for his benefit, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise in connection with, or arising out of, his employment with the Company
or a change in ownership or effective control of the Company or of a substantial
portion of its assets (a "Payment" or "Payments"), would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes and the Excise Tax), including any Excise
Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) An initial determination as to whether a Gross-Up Payment is
required pursuant to this Section 6 and the amount of such Gross-Up Payment
shall be made by an accounting firm selected by the Company and reasonably
acceptable to the Executive which is designated one of the five (5) largest
accounting firms in the United States (the "Accounting Firm"). The Accounting
Firm shall provide its determination (the "Determination"), together with
detailed supporting calculations and documentation, to the Company and the
Executive within five (5) days of the Termination Date, if applicable, or such
other time as requested by the Company or by the Executive (provided the
Executive reasonably believes that any of the Payments may be subject to the
Excise Tax) and if the Accounting Firm determines that no Excise Tax is payable
by the Executive with respect to a Payment or Payments, it shall furnish the
Executive with an opinion reasonably acceptable to the Executive that no Excise
Tax will be imposed with respect to any such Payment or Payments. Within five
(5) days of the delivery of the Determination to the Executive, the Executive
shall have the right to dispute the Determination (the "Dispute"). The Gross-Up
Payment, if any, as determined pursuant to this Section 6(b) shall be paid by
the Company to the Executive within five (5) days of the receipt of the
Accounting Firm's determination. The existence of the Dispute shall not in any
way affect the right of the Executive to receive the Gross-Up Payment in
accordance with the Determination. If there is no Dispute, the Determination
shall be binding, final, and conclusive upon the Company and the Executive
subject to the application of Section 6(c).
(c) As a result of the uncertainty in the application of Sections 4999
and 280G of the Code, it is possible that a Gross-Up Payment (or a portion
thereof) will be paid which should not have been paid (an "Excess Payment"), or
a Gross-Up Payment (or a portion thereof) which should have been paid will not
have been paid (an "Underpayment"). An Underpayment shall be deemed to have
occurred (1) upon notice (formal or informal) to the Executive from any
governmental taxing authority that the tax liability of the Executive (whether
Page 33
Exhibit 10(iii)A(c)
in respect of the then current taxable year of the Executive or in respect of
any prior taxable year of the Executive) may be increased by reason of the
imposition of the Excise Tax on a Payment or Payments with respect to which the
Company has failed to make a sufficient Gross-Up Payment, (2) upon a
determination by a court, (3) by reason of determination by the Company (which
shall include the position taken by the Company, or together with its
consolidated group, on its federal income tax return), or (4) upon the
resolution to the satisfaction of the Executive of the Dispute. If an
Underpayment occurs, the Executive shall promptly notify the Company and the
Company shall pay to the Executive at least five (5) days prior to the date on
which the applicable government taxing authority has requested payment, an
additional Gross-Up Payment equal to the amount of the Underpayment plus any
interest and penalties (other than interest and penalties imposed by reason of a
failure to file timely a tax return or pay taxes shown due on a return) imposed
on the Underpayment. An Excess Payment shall be deemed to have occurred upon a
"Final Determination" (as hereinafter defined) that the Excise Tax shall not be
imposed upon a Payment or Payments with respect to which the Executive had
previously received a Gross-Up Payment. A Final Determination shall be deemed to
have occurred when the Executive has received from the applicable government
taxing authority a refund of taxes or other reduction in his tax liability by
reason of the Excess Payment and upon either (i) the date a determination is
made by, or an agreement is entered into with, the applicable governmental
taxable authority which finally and conclusively binds the Executive and such
taxing authority, or in the event that a claim is brought before a court of
competent jurisdiction, the date upon which a final determination has been made
by such court and either all appeals have been taken and finally resolved or the
time for all appeals has expired, or (ii) the statute of limitations with
respect to the Executive's applicable tax return has expired. If an Excess
Payment is determined to have been made, the amount of the Excess Payment shall
be treated as a loan by the Company to the Executive and the Executive shall pay
to the Company on demand (but not less than ten (10) days after the
determination of such Excess Payment) the amount of the Excess Payment plus
interest at an annual rate equal to the rate provided for in Section
1274(b)(2)(B) of the Code from the date the Gross-Up Payment (to which the
Excess Payment relates) was paid to the Executive until the date of repayment to
the Company.
(d) Notwithstanding anything contained in this Agreement to the
contrary, in the event that, according to the Determination, an Excise Tax will
be imposed on any Payment or Payments, the Company shall pay to the applicable
government taxing authorities as Excise Tax withholding, the amount of the
Excise Tax that the Company has actually withheld from the Payment or Payments.
7. Unauthorized Disclosure. During the period that the Executive is
actively employed by the Company, the Executive shall not make any Unauthorized
Disclosure. For purposes of this Agreement, "Unauthorized Disclosure" shall mean
Page 34
Exhibit 10(iii)A(c)
disclosure by the Executive without the consent of the Board (other than
pursuant to a court order) to any person, other than an employee or director of
the Company or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties as
an executive of the Company, or as may be legally required, of any material
confidential information obtained by the Executive while in the employ of the
Company (including any material confidential information with respect to any of
the Company's customers or methods of distribution), the disclosure of which is
demonstrably and materially injurious to the Company; provided; however, that
such term shall not include the use or disclosure by the Executive, without
consent, of any information known generally to the public (other than as a
result of disclosure by him in violation of this Section 7) or any information
not otherwise considered confidential and material by a reasonable person
engaged in the same business as that conducted by the Company; provided further,
however, that any breach of this Section 7 shall in no event subject the
Executive to damages (including costs, fees, and expenses incurred by the
Company) in excess of Ten Thousand Dollars ($10,000) in the aggregate.
8. Non-Compete. During the period that the Executive is actively employed
by the Company, the Executive shall not, directly or indirectly, own, manage,
operate, control, consult with, or be connected as an officer, employee, agent,
partner, director, or consultant with, or have any financial interest in, or
assist anyone in the conduct of, any business which directly competes with the
businesses of the Company in the State of Georgia. Notwithstanding the
foregoing, the Executive shall not be in violation of the preceding sentence due
to ownership (directly or indirectly) by the Executive of not more than five
percent (5%) of the issued and outstanding class of securities of a corporation
whose securities are publicly traded.
9. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its successors and assigns and the Company shall require
any successor or assign to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. The term "the
Company" as used herein shall include such successors and assigns. The term
"successors and assigns" as used herein shall mean a corporation or other entity
acquiring all or substantially all the assets and business of the Company
(including this Agreement) whether by operation of law or otherwise.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive, his beneficiaries, or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal personal representative.
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Exhibit 10(iii)A(c)
10. Fees and Expenses. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence, and counsel) incurred by the
Executive as they become due as a result of (a) the Executive's termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment), (b) the Executive seeking to
obtain or enforce any right or benefit provided by this Agreement or by any
other plan or arrangement maintained by the Company under which the Executive is
or may be entitled to receive benefits, or (c) the Executive's hearing before
the Board as contemplated in Section 2.1 of this Agreement; provided, however,
that the circumstances set forth in clauses (a) and (b) (other than as a result
of the Executive's termination of employment under circumstances described in
Section 2.2(d)) occurred on or after a Change in Control.
11. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All notices
and communications shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.
12. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive, or other plan or program provided by the Company or any of its
subsidiaries and for which the Executive may qualify, nor shall anything herein
limit or reduce such rights as the Executive may have under any other agreements
with the Company or any of its subsidiaries. Amounts which are vested benefits
or which the Executive is otherwise entitled to receive under any plan or
program of the Company or any of its subsidiaries shall be payable in accordance
with such plan or program, except as explicitly modified by this Agreement.
13. Settlement of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense, or other right which
the Company may have against the Executive or others.
14. Miscellaneous. No provision of this Agreement may be modified, waived,
or discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
Page 36
Exhibit 10(iii)A(c)
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
15. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in Fulton County in the State of Georgia.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
17. Entire Agreement - Letter Agreement of February 1, 1996. This Agreement
constitutes the entire agreement between the parties hereto and, except as
provided hereinbelow in this Paragraph 17, supersedes all prior agreements, if
any, understandings, and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof. The Executive and the Company
have entered into a letter agreement dated February 1, 1996, which, in Paragraph
7 thereof, provides severance payments in certain circumstances. In the event of
the Executive's termination in connection with a Change in Control that entitles
the Executive to benefits under this Agreement, the Executive will receive the
greater of the payments and benefits provided under this Agreement (after
consideration of any tax penalties) or the severance payments described in
Paragraph 7 of said letter agreement.
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Exhibit 10(iii)A(c)
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Executive has executed this Agreement as of
the day and year first above written.
ATTEST: NATIONAL SERVICE INDUSTRIES, INC.
/s/ Carol Ellis Morgan By: /s/ John G. Medlin, Jr.
Assistant Secretary John G. Medlin, Jr.
Chairman, Executive Resource,
Compensation and Nominating
Committee of The Board of Directors
/s/ James S. Balloun
James S. Balloun