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Exhibit 10(iii)A(9)
ASPIRATION ACHIEVEMENT INCENTIVE AWARD AGREEMENT
FOR EXECUTIVE OFFICERS
THIS AGREEMENT, made as of the 23rd day of September, 1997 (the "Grant
Date"), between National Service Industries, Inc., a Delaware corporation
("NSI") and NSI SERVICES, L.P. (GA), a Subsidiary of NSI (together, the
"Company"), and Grantee (the "Grantee").
WHEREAS, NSI has adopted the National Service Industries, Inc. Long-Term
Achievement Incentive Plan (the "Plan") in order to provide additional
incentives to certain officers and key employees of NSI and its Subsidiaries;
and
WHEREAS, the Committee responsible for administration of the Plan has
determined to grant to the Grantee an Aspiration Achievement Incentive Award as
provided herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Aspiration Award.
1.1 The Company hereby grants to the Grantee an Aspiration Achievement
Incentive Award (the "Award"), which has a value determined as provided in
Section 2 below based upon the performance of the Operations during the
Performance Cycle from September 1, 1997 to August 31, 2000. As provided in
the Plan, Grantee's right to payment of this Award is dependent upon
Grantee's continued employment in Grantee's current position with the
Company, or in a position with responsibilities of substantially similar
value to the Company during the Performance Cycle. Under certain
circumstances as described below, Grantee may be entitled to receive
payment for some portion of the Award if Grantee's employment terminates
prior to the end of the Performance Cycle.
1.2 The Grantee hereby acknowledges receipt of a copy of the Plan and
agrees to be bound by all the terms and provisions thereof. This Agreement
shall be construed in accordance with, and subject to, the provisions of
the Plan (the provisions of which are hereby incorporated by reference)
and, except as otherwise expressly set forth herein, the capitalized terms
used in this Agreement shall have the same definitions as set forth in the
Plan.
2. Performance Measure and Performance Levels.
The Committee has established the performance measure (the "Performance
Measure"), and award and performance levels set forth in Appendix A attached
hereto. The chart in Appendix A specifies a Commitment performance level, at
which the Commitment Level
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Exhibit 10(iii)A(9)
Award will be paid, an Aspiration performance level, at or above which an
Aspiration Level Award will be paid, and a threshold performance level, at which
a minimum incentive award will be paid and below which no award will be paid.
For each level of performance at or above the threshold performance level
through the Aspiration performance level, Grantee will receive an award
determined in accordance with the chart and formulae set forth in Appendix A.
The terms used in determining the Performance Measure are defined in Appendix B.
3. Determination of Aspiration Award.
3.1 Determination Notice. Subject to Section 3.2, as soon as practical
following the last day of the Performance Cycle, the Committee will
determine, in accordance with Section 7(c) of the Plan, the performance
level of NSI with respect to the Performance Measure for the Performance
Cycle. The Committee may in determining the performance level with respect
to the Performance Measure adjust NSI's financial results for the
Performance Cycle to exclude the effect of unusual charges or income items
which are distortive of financial results for the Performance Cycle;
provided, that, in determining financial results, items whose exclusion
from consideration will increase the performance level of NSI shall only
have their effects excluded if they constitute "extraordinary items" under
generally accepted accounting principles and all such items shall be
excluded. The Committee shall also adjust the performance calculations to
exclude the unanticipated effect on financial results of changes in the
Code, or other tax laws, and the regulations thereunder. The Committee
shall also exclude from consideration the effect on financial performance
of each of the following events or items where the result of excluding the
particular event or item is to increase the performance level of NSI: (i)
an acquisition or a divestiture involving more than $10 million in net
worth or $25 million in business revenues; (ii) an equity restructuring
involving more than $1 million; (iii) asset impairment charges involving
more than $1 million and restructuring costs involving more than $1 million
associated with facility closings or reduction in employment levels; (iv)
changes in accounting treatment or rules involving more than $1 million.
The Committee may decrease the amount of the Award otherwise payable to
Grantee if, in the Committee's view, such adjustment is necessary or
desirable, regardless of the extent to which the Performance Measure has
been achieved. The Committee may establish such guidelines and procedures
for reducing the amount of an Award as it deems appropriate.
The Company will notify the Grantee (or the executors or
administrators of the Grantee's estate, if applicable) of the Committee's
determination (the "Determination Notice"). The Determination Notice shall
specify the performance level of the Operations with respect to the
Performance Measure for the Performance Cycle and the amount of Award (if
any) Grantee will be entitled to receive. Unless the Committee determines
otherwise at the time the Award is paid and except as otherwise provided in
the event of a Change in Control, the amount Grantee is entitled to receive
will be paid one-half in cash and one-half in Shares. The Shares will be
valued at their Fair Market Value as of the last day of the Performance
Cycle. Except in the case of a Change in Control, the Committee may, in its
discretion, attach restrictions, terms and conditions to the Shares issued
as part of the Award.
3.2 Significant Corporate Events. If, during a Performance Cycle, NSI
consummates an acquisition or disposition that (i) involves assets whose
value equals or exceeds 20% of the total value of NSI's assets, (ii)
represents a part of the business whose revenues equal or exceed 20% of the
total of NSI's revenues, or (iii) causes a material restructuring of NSI,
the following rules shall apply:
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Exhibit 10(iii)A(9)
(a) If the transaction is consummated during the first year of the
Performance Cycle, the Performance Cycle and the Grantee's outstanding
Award will be terminated with no payout and a new Performance Cycle
containing a new Award will be started.
(b) If the transaction is consummated after the first year of the
Performance Cycle, the Performance Cycle will end and the outstanding Award
will be determined and paid at NSI's actual performance level to such date,
taking into account the adjustments provided for in Section 3.1 above and
using prorated performance levels of the Performance Measure to reflect the
portion of the Performance Cycle that had elapsed as of the date of
consummation of the acquisition or disposition. Payment of the Award will
be made as soon as practical after it is determined. A new Performance
Cycle will be started to cover the period remaining in the initial
Performance Cycle or, if that result is not practical, the Committee will
make an appropriate adjustment to reflect the premature termination of the
initial Performance Cycle.
If, during a Performance Cycle, NSI consummates an acquisition or
disposition that is not covered by the special provisions of this Section
3.2, the financial effects of such acquisition or disposition shall be
handled as provided in Section 3.1.
Any actions under this Section 3.2 shall be taken in accordance with
the requirements of Code Section 162(m) and the regulations thereunder.
4. Termination of Employment.
4.1 In General. Except as provided in Sections 4.2, 4.3 and 4.4 below,
in the event that a Grantee's employment terminates during a Performance
Cycle, all unearned Aspiration Awards shall be immediately forfeited by the
Grantee.
4.2 Termination of Employment Due to Death, Disability, or Retirement.
In the event the employment of a Grantee is terminated by reason of death
or Disability during a Performance Cycle, the Grantee shall be entitled to
a prorated payout with respect to the unearned Award. The prorated payout
shall be determined by the Committee based upon the length of time that the
Grantee was actively employed during the Performance Cycle relative to the
full length of the Performance Cycle; provided, that payment shall only be
made to the extent at the end of the Performance Cycle the Award would have
been earned based upon the performance level achieved for the Performance
Cycle (taking into account the adjustment provisions and other rules in
Section 3 above); and provided, further, that the performance level used to
determine the prorated award cannot exceed 200% of the Commitment
performance level.
In the event of Grantee's Retirement (on or after age 65), the full
Award shall continue to be eligible for payout at the end of the
Performance Cycle, just as if Grantee had remained employed for the
remainder of the Performance Cycle (including if the Grantee dies after
Retirement but before the end of the Performance Cycle). At the end of the
Performance Cycle, the Committee shall make its determination in the same
manner as provided in Section 3.
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Exhibit 10(iii)A(9)
Payment of earned Awards to Grantee in the event of termination due to
death, Disability, or Retirement shall be made at the same time payments
would be made to Grantee if Grantee did not terminate employment during the
Performance Cycle.
4.3 Change In Control. Notwithstanding anything in this Agreement to
the contrary, if a Change in Control occurs during the Performance Cycle,
then the Grantee's Award shall be determined for the Performance Cycle then
in progress as though the Performance Cycle had ended as of the date of the
Change in Control and the outstanding Award will be paid at the Commitment
Level Award or the actual performance level to such date (using, for such
purpose, prorated performance levels of the Performance Measure to reflect
the portion of the Performance Cycle that has elapsed as of the date of the
Change in Control), whichever provides the greater payment. The Award
determined in accordance with the preceding sentence shall be fully vested
and payable immediately to the Grantee. The Committee shall determine the
amount of the Award under this Section 4.3, subject to the terms of this
section, and no downward adjustment of the Award which would result in
reduction of the Award by more than 50% shall be permitted. The Award will
be paid in full in cash, unless the Grantee elects to receive one-half of
the Award in Shares. For purposes of determining the number of Shares to be
paid to a Grantee under this Section 4.3, the Fair Market Value of a Share
shall be determined by taking the average closing price per share for the
last twenty (20) trading days prior to the commencement of the offer,
transaction or other event which resulted in a Change in Control.
4.4 Termination Without Cause. In the event Grantee's employment is
terminated by the Company without Cause more than one (1) year after the
commencement of the Performance Cycle and prior to the end of the
Performance Cycle, the Grantee shall be entitled to a prorated payout of
the Award based upon the length of time that the Grantee was actively
employed during the Performance Cycle relative to the full length of the
Performance Cycle; provided, that payment shall be made only to the extent
at the end of the Performance Cycle the Award would have been earned based
upon the performance level achieved during the Performance Cycle (taking
into account the adjustment provisions and other rules in Section 3 above);
and provided, further, that the performance level used to determine the
prorated award cannot exceed 200% of the Commitment performance level.
Payment shall be made to Grantee at the same time as if Grantee had not
terminated employment during the Performance Cycle
5. No Right to Continued Employment.
Nothing in this Agreement or the Plan shall be interpreted to confer upon
the Grantee any rights with respect to continuance of employment by the Company,
nor shall this Agreement or the Plan interfere in any way with the right of the
Company to terminate the Grantee's employment at any time.
6. Nonassignment.
The Grantee shall not have the right to assign, alienate, pledge, transfer
or encumber any amounts due Grantee hereunder, and any attempt to assign,
alienate, pledge, transfer, or encumber Grantee's rights or benefits shall be
null and void and not recognized by the Plan or the Company.
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Exhibit 10(iii)A(9)
7. Modification of Agreement.
This Agreement may be modified, amended, suspended or terminated, and any
terms or conditions may be waived, but only by a written instrument executed by
the parties hereto.
8. Severability; Governing Law
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware without giving
effect to the conflicts of laws principles thereof.
9. Successors in Interest.
This Agreement shall inure to the benefit of and be binding upon any
successor to the Company. All obligations imposed upon the Grantee and all
rights granted to the Company under this Agreement shall be binding upon the
Grantee's heirs, executors, and administrators.
10. Resolution of Disputes.
Any dispute or disagreement which may arise under, or as a result of, or in
any way relate to, the interpretation, construction or application of this
Agreement shall be determined by the Committee. Any determination made hereunder
shall be final, binding and conclusive on the Grantee and the Company for all
purposes.
11. Withholding of Taxes.
The Company shall have the right to deduct from any amount payable under
this Agreement, an amount equal to the federal, state and local income taxes and
other amounts as may be required by law to be withheld (the "Withholding Taxes")
with respect to any such amount. In satisfaction of all or part of the
Withholding Taxes, the Grantee may make a written election (the "Tax Election"),
which may be accepted or rejected in the discretion of the Company, to have
withheld a portion of the Shares issuable to him or her pursuant to an Award,
having an aggregate Fair Market Value equal to the Withholding Taxes.
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Exhibit 10(iii)A(9)
12. Shareholder Approval.
The effectiveness of this Agreement and of the grant of the Award pursuant
hereto is subject to the approval of the Plan by the stockholders of NSI in
accordance with the terms of the Plan.
NATIONAL SERVICE INDUSTRIES, INC.
By: /s/ James S. Balloun
JAMES S. BALLOUN
Chairman, President and Chief Executive Officer
NSI SERVICES, L.P. (GA), Subsidiary
By: /s/ James S. Balloun
JAMES S. BALLOUN
Chairman, President and Chief Executive Officer
Name of Grantee:
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Exhibit 10(iii)A(9)
Appendix A(1)
NSI Aspiration Award Program Illustration - FY 1998-2000
Name: James S. Balloun Division: NSI Total
Position: Chairman & Chief Executive Officer
Salary: $750,000
Total LTI Multiple: 160%
AAI % of LTI: 30%
Achievement Level
Threshold Commitment Aspiration
FY98-00 Economic Profit ($000,000) ** ** **
Individual AAI Opportunity $90,000 $360,000 $1,800,000
Aspiration Award Program Opportunity
The following graph depicts the potential incentive award that would be paid out
at different levels of NSI cumulative economic profit, including: a Threshold
performance level; a Commitment performance level; and an Aspiration performance
level.
Individual
Aspiration
Economic Profit (000,000) Award
Threshold** $ 90,000
Commitment** $ 360,000
Aspiration** $1,800,000
**Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
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Exhibit 10(iii)A(9)
Appendix A(2)
NSI Aspiration Award Program Illustration - FY 1998-2000
Name: Brock A. Hattox Division: NSI Total
Position: EVP, Chief Financial Officer
Salary: $360,000
Total LTI Multiple: 160%
AAI % of LTI: 30%
Achievement Level
Threshold Commitment Aspiration
FY98-00 Economic Profit ($000,000) ** ** **
Individual AAI Opportunity $43,200 $172,800 $864,000
Aspiration Award Program Opportunity
The following graph depicts the potential incentive award that would be paid out
at different levels of NSI cumulative economic profit, including: a Threshold
performance level; a Commitment performance level; and an Aspiration performance
level.
Individual
Aspiration
Economic Profit (000,000) Award
Threshold** $ 43,200
Commitment** $172,800
Aspiration** $864,000
**Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
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Exhibit 10(iii)A(9)
Appendix A(3)
NSI Aspiration Award Program Illustration - FY 1998-2000
Name: David Levy Division: NSI Total
Position: EVP, Administration & Counsel
Salary: $350,000
Total LTI Multiple: 160%
AAI % of LTI: 30%
Achievement Level
Threshold Commitment Aspiration
FY98-00 Economic Profit ($000,000) ** ** **
Individual AAI Opportunity $42,000 $168,000 $840,000
Aspiration Award Program Opportunity
The following graph depicts the potential incentive award that would be paid out
at different levels of NSI cumulative economic profit, including: a Threshold
performance level; a Commitment performance level; and an Aspiration performance
level.
Individual
Aspiration
Economic Profit (000,000) Award
Threshold** $ 42,000
Commitment** $168,000
Aspiration** $840,000
**Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
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Exhibit 10(iii)A(9)
Appendix A(4)
NSI Aspiration Award Program Illustration - FY 1998-2000
Name: Stewart A. Searle Division: NSI Total
Position: SVP, Corporate Development
Salary: $225,000
Total LTI Multiple: 160%
AAI % of LTI: 30%
Achievement Level
Threshold Commitment Aspiration
FY98-00 Economic Profit ($000,000) ** ** **
Individual AAI Opportunity $27,000 $108,000 $540,000
Aspiration Award Program Opportunity
The following graph depicts the potential incentive award that would be paid out
at different levels of NSI cumulative economic profit, including: a Threshold
performance level; a Commitment performance level; and an Aspiration performance
level.
Individual
Aspiration
Economic Profit (000,000) Award
Threshold** $ 27,000
Commitment** $108,000
Aspiration** $540,000
**Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
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Exhibit 10(iii)A(9)
APPENDIX B
ASPIRATION ACHIEVEMENT
INCENTIVE AWARD
PERFORMANCE MEASURE
PERFORMANCE MEASURE DEFINITION
Economic Profit Sum of the annual economic profits for
the performance cycle. Annual
economic profit shall be determined
as follows: Adjusted After-Tax
Profits (AATP) minus [Average Invested
Capital times the Weighted Average Cost
of Capital (WACC)]
RELATED TERMS DEFINITION
Average Invested Capital Average of the average
beginning and ending Invested Capital
balances each month.
Adjusted After-Tax Profit (AATP) Adjusted Pre-Tax Profit minus Book
Income Taxes.
Adjusted Pre-Tax Profit (APTP) Income before
provision for income taxes plus interest
expense plus implied interest on
capitalized operating leases.
Book Income Taxes Reported tax rate (determined by
dividing the provision for income taxes
by the income before the provision for
income taxes, as reported in NSI's
annual financial statements) applied to
APTP.
Invested Capital [Total assets plus capitalized operating
leases, less short and long-term
investment in tax benefits] less [non-
interest bearing liabilities except for
self insurance reserves and deferred tax
credits relating to the safe harbor
lease].
Weighted Average Cost of Capital (WACC) Ten
percent (10%) will be the WACC for the
Performance Cycle ending August 31.