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Exhibit 10(iii)A(31)
NATIONAL SERVICE INDUSTRIES, INC.
MANAGEMENT COMPENSATION AND INCENTIVE PLAN
As Amended and Restated, Effective As Of September 1, 1998
1. ESTABLISHMENT AND EFFECTIVE DATE OF PLAN
National Service Industries, Inc. (the "Corporation") hereby
amends and restates the National Service Industries, Inc. Management
Compensation and Incentive Plan (the "Plan") for its executive officers
and certain other executives of the Corporation, its Operating Units
and affiliates who are in management positions designated as eligible
for participation by the Executive Resource and Compensation Committee
(the "Committee") of the Board of Directors of the Corporation or its
designee. The amended and restated Plan shall be effective on September
1, 1998 and shall remain in effect, subject to the rights of amendment
and termination in Section 13, until the Incentive Awards are paid for
the Corporation's fiscal year ending in 2004. Payments under the Plan
shall only be made to Named Executive Officers after the Plan is
approved by the stockholders of the Corporation.
2. PURPOSE OF THE PLAN
The purpose of the Plan is to further the growth and financial
success of the Corporation by offering performance incentives to
designated executives who have significant responsibility for such
success.
3. DEFINITIONS
() "Base Annual Salary" means the actual salary paid to a
Participant during the applicable Plan Year, increased by the
amount of any pre-tax deferrals or other pre-tax payments made
by the Participant to the Corporation's deferred compensation
or welfare plans (whether qualified or non-qualified).
() "Board of Directors" means the Board of Directors of the
Corporation.
() "Change in Control" means any of the following events:
(i) The acquisition (other than from the Corporation)
by any "Person" [as the term person is used for purposes of
Sections 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (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 Corporation's then outstanding voting securities;
or
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Exhibit 10(iii)A(31)
(ii) The individuals who, as of September 22, 1998,
are members of the Board of Directors (the "Incumbent Board"),
cease for any reason to constitute at least two-thirds of the
Board of Directors; provided, however, that if the election,
or nomination for election by the Corporation'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 Plan, be considered as a member of the
Incumbent Board; or
(iii) Approval by stockholders of the Corporation of
(1) a merger or consolidation involving the Corporation if the
stockholders of the Corporation, 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 Corporation outstanding
immediately before such merger or consolidation or (2) a
complete liquidation or dissolution of the Corporation or an
agreement for the sale or other disposition of all or
substantially all of the assets of the Corporation.
Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur pursuant to subsection (i) above,
solely because twenty percent (20%) or more of the combined
voting power of the Corporation'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 Corporation 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
Corporation in the same proportion as their ownership of stock
in the Corporation immediately prior to such acquisition.
() "Chief Executive Officer" means the chief executive officer
of the Corporation, unless otherwise specified.
() "Code" means the Internal Revenue Code of 1986, as amended.
() "Committee" means the Executive Resource and Compensation
Committee of the Board of Directors or any other committee
designated by the Board of Directors which is responsible for
administering the Plan.
() "Corporation" means National Service Industries, Inc., a
Delaware corporation, and its successors.
() "Incentive Award" or "Award" means the bonus awarded to a
Participant under the terms of the Plan.
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Exhibit 10(iii)A(31)
() "Maximum Award" means the maximum percentage of Base Annual
Salary which may be paid based upon the Relative Performance
during the Plan Year.
() "Named Executive Officer" means a Participant who as of
the date of payment of an Incentive Award is one of the
group of "covered employees" under Code Section 162(m) and
the regulations thereunder.
() "Operating Unit" means a separate business operating unit
of the Corporation with respect to which separate
performance goals may be established hereunder.
() "Participant" means an employee of the Corporation, an
Operating Unit or an affiliate who is designated by the
Committee to participate in the Plan.
() "Personal Performance Goals" means the goals that may be
established for a Participant each year to improve the
effectiveness of the Participant's area of responsibility
as well as the Corporation as a whole.
() "Plan Rules" means the guidelines established annually
by the Committee pursuant to Section 4, subject, where
applicable, to ratification by the Board of Directors.
() "Plan Year" means the twelve month period which is the same as
the Corporation's fiscal year. The initial Plan Year for the
amended and restated Plan shall be September 1, 1998 through
August 31, 1999.
() "Relative Performance" means the extent to which the
Corporation, and/or designated Operating Unit, as applicable,
achieves the performance measurement criteria set forth in the
Plan Rules.
() "Target Award" means the percentage (which may vary among
Participants and from Plan Year to Plan Year) of Base Annual
Salary which will be paid to a Participant as an Incentive
Award if the performance measurement criteria applicable to
the Participant for the Plan Year is achieved, as reflected in
the Plan Rules for such Plan Year.
() "Threshold Award" means the percentage of Base Annual Salary
which may be paid based on the minimum acceptable Relative
Performance during the Plan Year.
4. ADMINISTRATION OF THE PLAN
The Plan will be administered by the Committee, subject to its
right to delegate responsibility for administration of the Plan as it
applies to Participants other than Named Executive Officers pursuant to
Section 7. The Committee will have authority to establish Plan Rules
with respect to the following matters for the Plan Year, subject to the
right of the Board of Directors to ratify such Plan Rules as provided
in this Section 4:
(a) the employees who are Participants in the Plan;
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Exhibit 10(iii)A(31)
(b) the Target Award, Maximum Award and Threshold Award that can
be granted to each Participant and the method for determining
such award, which the Committee may amend from time to time;
(c) the performance targets and the measurement criteria to be
used in determining the Corporation's or an Operating Unit's
Relative Performance, which will include one or more of the
following, as determined by the Committee each year: sales,
net income, earnings per share, return on equity, return on
assets (or net assets), after-tax or pre-tax profit, market
value of the Corporation's stock, total shareholder return,
return on investment, economic profit, capitalized economic
profit, cash flow and cash flow return; and
(d) the time or times and the conditions subject to which any
Incentive Award may become payable.
The Plan Rules will be adopted by the Committee prior to, or
as soon as practical after, the commencement of each Plan Year. Subject
to the provisions of the Plan and the Committee's right to delegate its
responsibilities, the Committee will also have the discretionary
authority to interpret the Plan, to prescribe, amend and rescind rules
and regulations relating to it, and to make all other determinations
deemed necessary or advisable in administering the Plan. The
determinations of the Committee on the matters referred to in
paragraphs (a) through (d) of this Section 4 with respect to Named
Executive Officers (and such other Participants as the Committee may
determine) shall be submitted at least annually to the Board of
Directors for its consideration and ratification. For Participants who
are not Named Executive Officers, the Committee may in its discretion
establish performance measures not listed in this Section 4 without
obtaining shareholder approval.
5. PARTICIPATION
Eligibility for participation in the Plan is limited to
executive officers of the Corporation and certain other executives of
the Corporation and its Operating Units or affiliates who hold key
management and staff positions. From among those eligible and based
upon the recommendations of the Chief Executive Officer and other
designees, the Committee will designate by name or position the
Participants each Plan Year. Any employee who is a Participant in one
Plan Year may be excluded from participation in any other Plan Year.
If, during the Plan Year, a Participant other than a Named Executive
Officer changes employment positions to a new position which
corresponds to a different award level, the Committee may, in its
discretion, adjust the Participant's award level for such Plan Year.
The Committee may, in its discretion, designate employees who are hired
after the beginning of the Plan Year as Participants for such Plan Year
and as eligible to receive full or partial Incentive Awards for such
year.
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Exhibit 10(iii)A(31)
6. INCENTIVE AWARDS
6.1 Determination of the Amount of Incentive Awards
At the end of each Plan Year, the Committee shall certify the
extent to which the performance targets and measurement criteria
established pursuant to Section 4 have been achieved for such Plan Year
based upon financial information provided by the Corporation. Subject
to the right to decrease an award as described in the next paragraph,
the Participant's Incentive Award shall be computed by the Committee
based upon the achievement of the established performance targets,
measurement criteria and the requirements of the Plan. The Committee
may in determining whether performance targets have been met adjust the
Corporation's financial results to exclude the effect of unusual
charges or income items or other events, including acquisitions or
dispositions of businesses or assets, recapitalizations,
reorganizations, restructurings, reductions in force, currency
fluctuations or changes in accounting, which are distortive of results
for the year (either on a segment or consolidated basis); provided,
that for purposes of determining the Incentive Awards of Named
Executive Officers, the Committee shall exclude unusual items whose
exclusion has the effect of increasing Relative Performance if such
items constitute "extraordinary items" under generally accepted
accounting principles or are significant unusual items. In addition,
the Committee will adjust its calculations to exclude the unanticipated
effect on financial results of changes in the Code or other tax laws,
or the regulations relating thereto.
The Committee may, in its discretion, decrease the amount of a
Participant's Incentive Award for a Plan Year based upon such factors
as it may determine, including the failure of the Corporation or an
Operating Unit to meet certain performance goals or of a Participant to
meet his Personal Performance Goals. The factors to be used in reducing
an Incentive Award may be established at the beginning of a Plan Year
and may vary among Participants.
In the event that the Corporation's or an Operating Unit's
performance is below the anticipated performance thresholds for the
Plan Year and the Incentive Awards are below expectations or not earned
at all, the Committee may in its discretion grant Incentive Awards (or
increase the otherwise earned Incentive Awards) to deserving
Participants, except for Participants who are Named Executive Officers.
The Plan Rules and Incentive Awards under the Plan shall be
administered in a manner to qualify payments under the Plan to the
Named Executive Officers for the performance-based exception under Code
Section 162(m) and the regulations thereunder, except where the Board
of Directors determines such compliance is not necessary. The maximum
Incentive Award that may be paid to an individual Participant for a
Plan Year shall be the amount which when added to the Participant's
Base Annual Salary for such Plan Year totals an aggregate of $2.5
million.
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Exhibit 10(iii)A(31)
6.2 Eligibility for Payment of Incentive Award
No Participant will have any vested right to receive any
Incentive Award until such date as the Board of Directors has ratified
the Committee's determination with respect to the payment of individual
Incentive Awards, except where the Committee determines such
ratification is not necessary. No Incentive Award will be paid to any
Participant who is not an active employee of the Corporation, an
Operating Unit or an affiliate at the end of the Plan Year to which the
Incentive Award relates; provided, however, at the discretion of the
Committee or its designee (subject to ratification by the Board of
Directors, where required, and the limitations of Code Section 162(m)),
partial Incentive Awards may be paid to Participants (or their
beneficiaries) who are terminated without cause (as determined by the
Committee or its designee) or who retire, die or become permanently and
totally disabled during the Plan Year. No Participant entitled to
receive an Incentive Award shall have any interest in any specific
asset of the Corporation, and such Participant's rights shall be
equivalent to that of a general unsecured creditor of the Corporation.
6.3 Payment of Awards
Payment of the Incentive Awards will be made as soon as
practicable after their determination pursuant to Sections 6.1 and 6.2,
subject to a Participant's right to defer payment pursuant to any
applicable deferred compensation plans of the Corporation. Payment will
generally be made in a lump sum in cash, unless the Committee otherwise
determines at the beginning of the Plan Year.
7. DELEGATION OF AUTHORITY BY THE COMMITTEE
Notwithstanding the responsibilities of the Committee set
forth herein, the Committee may delegate to the Chief Executive Officer
or others all or any portion of its responsibility for administration
of the Plan as it relates to Participants other than Named Executive
Officers. Such delegation may include, without limitation, the
authority to designate employees who can participate in the Plan, to
establish Plan Rules, to interpret the Plan, to determine the extent to
which performance criteria have been achieved, and to adjust any
Incentive Awards that are payable. In the case of each such delegation,
the administrative actions of the delegate shall be subject to the
approval of the person within the Corporation to whom the delegate
reports (or, in the case of a delegation to the Chief Executive
Officer, to the approval of the Committee).
8. CHANGE IN CONTROL
Upon the occurrence of a Change in Control, unless the
Participant otherwise elects in writing, the Participant's Incentive
Award for the Plan Year, determined at the Target Award level (without
any reductions under Section 6.1) shall be deemed to have been fully
earned for the Plan Year, provided that` the Participant shall only be
entitled to a pro rata portion of the Incentive Award based upon the
number of days within the Plan Year that had elapsed as of the
effective date of the Change in Control. The Incentive Award amount
shall be paid in cash within thirty (30) days of the effective date of
the Change in Control. The Incentive Award payable upon a Change in
Control to a Participant for the Plan Year during which a Change in
Control occurs shall be the greater of the amount provided for under
this Section 8 or the amount of the Incentive Award payable to such
Participant for the Plan Year under the terms of any employment
agreement or severance agreement with the Corporation, its Operating
Units or affiliates.
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Exhibit 10(iii)A(31)
9. BENEFICIARY
To the extent provided by the Committee or its designee each
Participant will designate a person or persons to receive, in the event
of death, any Incentive Award to which the Participant would then be
entitled under Section 6.2. Such designation will be made in the manner
determined by the Committee and may be revoked by the Participant in
writing. If the Committee does not provide for a designation of
beneficiary or if a Participant fails effectively to designate a
beneficiary, then the estate of the Participant will be deemed to be
the beneficiary.
10. WITHHOLDING OF TAXES
The Corporation shall deduct from each Incentive Award the
amount of any taxes required to be withheld by any governmental
authority.
11. EMPLOYMENT
Nothing in the Plan or in any Incentive Award shall confer (or
be deemed to confer) upon any Participant the right to continue in the
employ of the Corporation, a Division or an affiliate, or interfere
with or restrict in any way the rights of the Corporation, a Division
or an affiliate to discharge any Participant at any time for any reason
whatsoever, with or without cause.
12. SUCCESSORS
All obligations of the Corporation under the Plan with respect
to Incentive Awards granted hereunder shall be binding upon any
successor to the Corporation, whether such successor is the result of
an acquisition of stock or assets of the Corporation, a merger, a
consolidation or otherwise.
13. TERMINATION AND AMENDMENT OF THE PLAN; GOVERNING LAW
The Committee, subject to the ratification rights of the Board
of Directors, has the right to suspend or terminate the Plan at any
time, or to amend the Plan in any respect, provided that no such action
will, without the consent of a Participant, adversely affect the
Participant's rights under an Incentive Award approved under Section
6.2. The Plan shall be interpreted and construed under the laws of the
State of Georgia.
AS APPROVED BY THE BOARD OF DIRECTORS OF THE CORPORATION ON
THE 22nd DAY OF SEPTEMBER, 1998.