-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, LsBoCFFpMo4YG+352ivZQgCAkQ715gJBeLLez6nT3tLsDvqjZYVrE7Y8ncNrjrk3 iApO6V4qnT+EzNKTObJ2Cg== 0000070538-94-000031.txt : 19941122 0000070538-94-000031.hdr.sgml : 19941122 ACCESSION NUMBER: 0000070538-94-000031 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19940831 FILED AS OF DATE: 19941121 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL SERVICE INDUSTRIES INC CENTRAL INDEX KEY: 0000070538 STANDARD INDUSTRIAL CLASSIFICATION: 3640 IRS NUMBER: 580364900 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03208 FILM NUMBER: 94561311 BUSINESS ADDRESS: STREET 1: 1420 PEACHTREE ST NE CITY: ATLANTA STATE: GA ZIP: 30309 BUSINESS PHONE: 4048531000 MAIL ADDRESS: STREET 1: 1420 PEACHTREE ST NE CITY: ATLANTA STATE: GA ZIP: 30309 10-K 1 NATIONAL SERVICE INDUSTRIES, INC. 10-K 1 Page 1 of 95 Exhibit Index on Page 19 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the fiscal year ended August 31, 1994 Commission file number 1- 3208 NATIONAL SERVICE INDUSTRIES, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 58-0364900 (State or Other Jurisdiction of (I.R.S. Employer Identification Number) Incorporation or Organization) 1420 Peachtree Street, N. E., Atlanta, Georgia 30309-3002 (Address of Principal Executive Offices) (Zip Code) (404) 853-1000 (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered Common Stock ($1.00 Par Value) New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Based upon the closing price as quoted on the New York Stock Exchange October 31, 1994 the aggregate market value of the voting stock held by nonaffiliates of the registrant was $1,317,369,635.25. The number of shares outstanding of the registrant's common stock, $1.00 par value, was 49,247,463 shares as of October 31, 1994. DOCUMENTS INCORPORATED BY REFERENCE Location in Form 10-K Incorporated Document Part I, Item 1 1994 Annual Report Part II, Items 5, 6, 7, and 8 1994 Annual Report Part III, Items 10, 11, 12, and 13 1994 Proxy Statement Part IV, Item 14 1994 Annual Report PART I Page 2 ITEM 1. BUSINESS The registrant, incorporated in Delaware in 1928, provides a wide variety of products and services through its operating divisions, as follows:
Divisions Principal Products or Services Marketing Area Products and services for industrial, commercial, institutional, and healthcare customers TEXTILE RENTAL National Linen Service Rented napkins and table Principally the southern, National Uniform Service linens, bed linens, towels, southwestern, central, National Healthcare Linen Service uniforms, specialized and northeastern National Dust Control Service garments, sterilized United States National Direct Source products, restroom products, mats and mops, and complimentary direct sale products. CHEMICAL Zep Manufacturing Company Chemical products, Throughout the United Zep Manufacturing Company of Canada primarily for maintenance, States, Canada, Zep Alcare sanitation, and water Puerto Rico, and Zep Europe treatment, including soaps, western Europe. Selig Chemical Industries detergents, waxes, and National Chemical disinfectants. ENVELOPE Atlantic Envelope Company Business and specialty South and Southwest. ATENCO Filing Systems envelopes and records R. P. Gillotte Co. storage and filing systems. Lyon Folder Company Techno-Aide/Stumb Metal Products Company Products for the construction industry LIGHTING EQUIPMENT Lithonia Lighting Fluorescent fixtures for Throughout the United Lithonia Fluorescent commercial, industrial, States, Canada and Lithonia Hi-Tek Lighting and institutional overseas. Lithonia Downlighting applications; high-intensity Major Reflector Products discharge fixtures for RELOC Wiring Systems industrial and commercial Lithonia Controls Systems use; outdoor lighting; Lithonia Emergency Lighting downlighting; track lighting; Lithonia Lighting Canada vandal-resistant fixtures; emergency lighting; lighting and dimming controls; and manufactured wiring systems. INSULATION SERVICE North Bros. Co. Commercial, industrial, and Principally in the South Insulation Company institutional insulation southeastern United Western State Insulation Company products, accessories, and States. Merit Insulation Company contracting services. Precision Foam Fabricators Mid-State Insulation Co.
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Divisions Principal Products or Services Marketing Area Products and services for the consumer LIGHTING EQUIPMENT Home-Vue Lighting Fluorescent work lamps, recessed Throughout the United Light Concepts and track lighting, and other States. decorative fluorescent fixtures.
Competition While each of the registrant's businesses is highly competitive, the competitive conditions and the registrant's relative position and market share vary widely from business to business. A limited number of the competitors of each division are large diversified companies, but most of the competitors of the principal divisions are smaller companies than the registrant. Such smaller companies frequently specialize in one industry or one geographic area, which in many instances increases the intensity of competition. Management believes that its lighting equipment division is the largest manufacturer of lighting fixtures in the world and its textile rental division is one of the largest such companies in the United States. Raw Materials There were no significant shortages of materials or components during the years ended August 31, 1994, 1993, and 1992. No one commodity or supplier provided a significant portion of the company's material requirements. Total Employment The registrant employs approximately 22,000 people. Financial Information about Industry Segments The financial information required by this item is included on page 32 of the company's annual report for the year ended August 31, 1994, under the caption "Business Segment Information" and is incorporated herein by reference. Page 4 ITEM 2. PROPERTIES The general offices of the company are located in Atlanta, Georgia. Because of the diverse nature of the operations and the large number of individual locations, it is neither practical nor significant to describe all of the operating facilities owned or leased by the company. The following listing summarizes the significant facility categories by division:
Number of Facilities Division Owned Leased Nature of Facilities Lighting Equipment 9 3 Manufacturing plants 1 2 Distribution centers - 30 Field warehouses Textile Rental 71 19 Linen plants 17 42 Linen service centers - 1 Distribution centers Chemical 9 4 Manufacturing plants 22 48 Distribution centers - 3 Sales offices Insulation Service 2 - Fabrication plants 26 13 Warehouses Envelope 6 4 Manufacturing plants - 3 Warehouses - 1 Sales office Corporate Office 1 - Corporate headquarters
Page 5 ITEM 3. LEGAL PROCEEDINGS The Registrant is neither a party to nor is its property subject to any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this item is included on the inside back cover of the company's annual report for the year ended August 31, 1994, under the caption "Common Share Prices and Dividends per Share" and is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information required by this item is included on pages 36 and 37 of the company's annual report for the year ended August 31, 1994, under the caption "Ten-Year Financial Summary" and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is included on pages 34 and 35 of the company's annual report for the year ended August 31, 1994, under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is included on pages 25 through 33 of the company's annual report for the year ended August 31, 1994, under the captions "Consolidated Balance Sheets," "Consolidated Statements of Income," Consolidated Statements of Stockholders' Equity," "Consolidated Statements of Cash Flows," "Notes to Consolidated Financial Statements," and "Report of Independent Public Accountants" and is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. Page 6 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item, with respect to directors, is included on pages 2 through 4 under the caption "Information Concerning Nominees" of the company's proxy statement for the annual meeting of stockholders to be held January 4, 1995, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference. EXECUTIVE OFFICERS OF THE REGISTRANT Executive officers of the company are elected at the organizational meeting of the Board of Directors in January.
Name and age of each executive officer Business experience of executive officers during the five and positions held with the company years ended August 31, 1994 and term in office D. Raymond Riddle, age 61 Mr. Riddle served as President and Chief Executive Chairman and Chief Executive Officer, Officer from January, 1993 to September, 1994 when he Director, and member of the Executive was elected Chairman and Chief Executive Office. He Committee of the Board served from 1985 until 1993 as an Executive Vice President of Wachovia Corporation and from 1987 until 1993 as President and Chief Executive Officer and as a director of Wachovia Corporation of Georgia and its lead bank, Wachovia Bank of Georgia, N.A. Don W. Hubble, age 55 Mr. Hubble was elected President effective September, President and Chief Operating Officer 1994 and was designated Chief Operating Officer in and Director September, 1993. He served as a Group Vice President from 1980 until 1988, when he was elected Executive Vice President. David Levy, age 57 Mr. Levy was elected Executive Vice President, Executive Vice President, Administration Administration in October, 1992. He served as Vice and Counsel and Director President, Secretary and Counsel from 1975 until he was elected Senior Vice President in 1982. J. Robert Hipps, age 54 Mr. Hipps was elected Senior Vice President, Finance in Senior Vice President, Finance March, 1990 and also served as Treasurer until June, 1992. Previously, he served General Signal Corporation as Vice President and Treasurer and, from 1987, as Vice President and Controller.
ITEM 11. EXECUTIVE COMPENSATION The information required by this item is included on pages 6 through 13 under the captions "Compensation of Directors," "Other Information Concerning the Board and its Committees," "Compensation Committee Interlocks and Insider Participation," "Summary Compensation Table," "Option Grants in Last Fiscal Year," "Aggregated Option Exercises and Fiscal Year-End Option Values," "Other Agreements," and "Pension and Supplemental Retirement Benefits" of the company's proxy statement for the annual meeting of stockholders to be held January 4, 1995, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is included on page 5 under the caption "Beneficial Ownership of the Corporation's Securities" of the company's proxy statement for the annual meeting of stockholders to be held January 4, 1995, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference. Page 7 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is included on page 5 under the caption "Certain Transactions" of the company's proxy statement for the annual meeting of stockholders to be held January 4, 1995, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report: Financial Statements The company's 1994 Annual Report contains the consolidated balance sheets as of August 31, 1994 and 1993, the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended August 31, 1994, and the related report of Arthur Andersen LLP. The financial statements, incorporated herein by reference, include the following: Consolidated Balance Sheets - August 31, 1994 and 1993 Consolidated Statements of Income for the years ended August 31, 1994, 1993, and 1992 Consolidated Statements of Stockholders' Equity for the years ended August 31, 1994, 1993, and 1992 Consolidated Statements of Cash Flows for the years ended August 31, 1994, 1993, and 1992 Notes to Consolidated Financial Statements Financial Statement Schedules: Report of Independent Public Accountants on Schedules
Schedule Number II Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other than Related Parties V Property, Plant, and Equipment VI Accumulated Depreciation and Amortization of Property, Plant, and Equipment VIII Valuation and Qualifying Accounts IX Short-Term Borrowings X Supplementary Income Statement Information
Any of schedules I through XIV not listed above have been omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto. Page 8 ITEM 14. (Continued) 3. Exhibits filed with this report
Reference No. from Reg. 229.601 Item 601 Description of Exhibit 3 Restated Certificate of Incorporation and By-Laws 4 Shareholder Rights Plan Adopted May 9, 1988 10(i) Section 168 Agreement and Election dated as of April 9, 1982, between National Service Industries, Inc. and Oglethorpe Power Corporation 10(iii)A Management Contracts and Compensatory Arrangements: (a) Directors' Deferred Compensation Plan (b) Executives' Deferred Compensation Plan and Amendment (c) Restated and Amended Supplemental Retirement Plan for Executives of National Service Industries, Inc. and Amendment (d) The National Service Industries, Inc. Senior Management Benefit Plan and Amendments (e) Severance Protection Agreement between National Service Industries, Inc. and David Levy (f) Severance Protection Agreements between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii) J. Robert Hipps (g) Bonus Letter Agreements between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii) David Levy (iv) J. Robert Hipps (h) Long-Term Incentive Program and Amendment (i) Incentive Stock Option Agreements between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii) David Levy (iv) J. Robert Hipps (j) Nonqualified Stock Option Agreement for Corporate Officers between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii) David Levy (iv) J. Robert Hipps
Page 9 ITEM 14. (Continued)
3. Exhibits filed with this report (Continued) Reference No. from Reg. 229.601 Item 601 Description of Exhibit (k) Nonqualified Stock Option Agreement for Corporate Officers Effective Beginning September 21, 1994 between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii) David Levy (l) Benefits Protection Trust Agreement and Amendment (m) Executive Benefits Trust Agreement (n) Consulting Agreement between National Service Industries, Inc. and Erwin Zaban (o) Consulting Agreement between National Service Industries, Inc. and Sidney Kirschner (p) 1992 Nonemployee Directors' Stock Option Plan Effective September 16, 1992 (q) Nonemployee Directors' Stock Option Agreement between National Service Industries, Inc. and (i) John L. Clendenin (ii) Jesse Hill, Jr. (iii) Robert M. Holder, Jr. (iv) F. Ross Johnson (v) James C. Kennedy (vi) Donald R. Keough (vii) Bryan D. Langton (viii)Bernard Marcus (ix) John G. Medlin, Jr. (x) Dr. Betty L. Siegel (xi) Erwin Zaban (r) Summary of Incentive Bonus Program for Executive Officers of National Service Industries, Inc. ("NSI") for the Fiscal Year Ending August 31, 1994 (s) National Service Industries, Inc. Executive Savings Plan Effective September 1, 1994 (t) National Service Industries, Inc. Management Compensation and Incentive Plan Effective September 1, 1994, Subject to Approval by Shareholders at Annual Meeting to be Held January 4, 1995 11 Computations of Net Income per Share of Common Stock 13 Information Incorporated by Reference from Annual Report for the Year Ended August 31, 1994 21 List of Subsidiaries 23 Consent of Independent Public Accountants 24 Powers of Attorney 27 Financial Data Schedules
Page 10 ITEM 14. (Continued) (b) No reports on Form 8-K were filed for the three months ended August 31, 1994. (c) Exhibits 2, 9, 12, 18, 22, and 28 have been omitted because they are not applicable. (d) Not applicable. Page 11 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NATIONAL SERVICE INDUSTRIES, INC. Date: November 18, 1994 By: /s/ Kenyon W. Murphy Kenyon W. Murphy Secretary and Assistant Counsel Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title D. Raymond Riddle* Chairman and Chief Executive Officer J. Robert Hipps* Senior Vice President, Finance (Principal Financial Officer) John A. Bostater* Vice President and Controller John L. Clendenin* Director Jesse Hill, Jr.* Director Robert M. Holder, Jr.* Director Don W. Hubble* Director F. Ross Johnson* Director - November 18, 1994 James C. Kennedy* Director Donald R. Keough* Director Bryan D. Langton* Director David Levy* Director Bernard Marcus* Director John G. Medlin, Jr.* Director Betty L. Siegel* Director Erwin Zaban* Director
*By /s/ David Levy Attorney-in-Fact David Levy Page 12 Arthur Andersen LLP Atlanta, Georgia REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES To National Service Industries, Inc.: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in NATIONAL SERVICE INDUSTRIES, INC. and subsidiaries' annual report to stockholders incorporated by reference in this Form 10-K and have issued our report thereon dated October 20, 1994. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in Item 14 in this Form 10-K are the responsibility of the Company's management and are presented for the purpose of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP October 20, 1994 Page 13 SCHEDULE II NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTORS, AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEARS ENDED AUGUST 31, 1994, 1993, AND 1992 (In thousands)
Balance at Beginning Amounts Balance at End of Period Description of Period Additions Collected Current Noncurrent YEAR ENDED AUGUST 31, 1994: Division Officers $ 119 $ - $ 26 $ 93 $ - YEAR ENDED AUGUST 31, 1993: Division Officers $ 109 $ 18 $ 8 $ 119 $ - YEAR ENDED AUGUST 31, 1992: Division Officers $ 250 (1),(2) $ - $ 141 $ 109 $ - (1) $150,000 promissory note receivable from Mr. Peele, secured by real property, originally due November 15, 1991, with interest at prime rate announced by FNB-Atlanta adjusted at first of month. (2) $100,000 promissory note receivable from Mr. Gurbacki, secured by real property, originally due December 31, 1991, with interest at prime rate announced by FNB-Atlanta adjusted on first of month.
SCHEDULE V NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES PROPERTY, PLANT, AND EQUIPMENT FOR THE YEARS ENDED AUGUST 31, 1994, 1993, AND 1992 (In thousands)
Balance at Other Balance at Beginning Additions (1) Sales or Changes (2) End Classification of Period at Cost Retirements Add (Deduct) of Period YEAR ENDED AUGUST 31, 1994: Land $ 33,304 $ 295 $ 1,371 $ 9 $ 32,237 Buildings 173,288 3,715 7,495 296 169,804 Machinery and equipment 371,354 23,082 18,225 (479) 375,732 Delivery equipment 65,203 8,751 5,386 4 68,572 Furniture and fixtures 55,207 6,307 1,863 496 60,147 Service equipment 8,648 - 5,553 (138) 2,957 Leasehold improvements 17,034 368 255 (22) 17,125 $ 724,038 $ 42,518 $ 40,148 $ 166 $ 726,574 YEAR ENDED AUGUST 31, 1993: Land $ 29,534 $ 4,392 $ 590 $ (32) $ 33,304 Buildings 154,606 21,809 2,685 (442) 173,288 Machinery and equipment 350,057 36,169 13,990 (882) 371,354 Delivery equipment 56,372 12,392 3,505 (56) 65,203 Furniture and fixtures 58,545 6,972 10,520 210 55,207 Service equipment 12,642 - 3,994 - 8,648 Leasehold improvements 17,781 437 1,126 (58) 17,034 $ 679,537 $ 82,171 $ 36,410 $ (1,260) $ 724,038 YEAR ENDED AUGUST 31, 1992: Land $ 28,462 $ 1,492 $ 411 $ (9) $ 29,534 Buildings 148,066 11,690 4,274 (876) 154,606 Machinery and equipment 332,306 26,007 7,881 (375) 350,057 Delivery equipment 55,749 4,438 3,822 7 56,372 Furniture and fixtures 53,929 5,505 1,717 828 58,545 Service equipment 12,274 515 147 - 12,642 Leasehold improvements 18,520 142 856 (25) 17,781 $ 649,306 $ 49,789 $ 19,108 $ (450) $ 679,537 (1) Additions during the year included property, plant, and equipment recorded in acquisitions and normal replacements and purchases of property, plant, and equipment for divisions to meet operational requirements. (2) Transfers and foreign currency conversion. Page 14
Page 15 SCHEDULE VI NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT, AND EQUIPMENT FOR THE YEARS ENDED AUGUST 31, 1994, 1993, AND 1992 (In thousands)
Balance at Other Balance at Beginning Charged to Sales or Changes (1) End Classification of Period Expense Retirements Add (Deduct) of Period YEAR ENDED AUGUST 31, 1994: Buildings $ 48,342 $ 5,880 $ 2,138 $ 191 $ 52,275 Machinery and equipment 213,945 25,351 13,705 (30) 225,561 Delivery equipment 38,740 7,374 4,974 5 41,145 Furniture and fixtures 38,014 7,035 1,488 159 43,720 Service equipment 7,624 482 5,540 (113) 2,453 Leasehold improvements 12,188 1,131 198 (13) 13,108 $358,853 $ 47,253 $ 28,043 $ 199 $378,262 YEAR ENDED AUGUST 31, 1993: Buildings $ 42,260 $ 5,981 $ 1,600 $1,701 $ 48,342 Machinery and equipment 199,802 25,929 12,348 562 213,945 Delivery equipment 35,252 6,576 3,123 35 38,740 Furniture and fixtures 38,958 7,008 10,448 2,496 38,014 Service equipment 10,943 663 3,983 1 7,624 Leasehold improvements 11,972 1,282 1,058 (8) 12,188 $339,187 $ 47,439 $ 32,560 $4,787 $358,853 YEAR ENDED AUGUST 31, 1992: Buildings $ 38,958 $ 5,150 $ 1,734 $ (114) $ 42,260 Machinery and equipment 181,135 23,734 4,884 (183) 199,802 Delivery equipment 32,821 5,625 3,185 (9) 35,252 Furniture and fixtures 32,489 8,005 1,572 36 38,958 Service equipment 10,229 803 89 0 10,943 Leasehold improvements 11,330 1,373 721 (10) 11,972 $306,962 $ 44,690 $ 12,185 $ (280) $339,187 (1) Transfers, foreign currency conversion, and accumulated depreciation recorded in acquisitions.
SCHEDULE VIII NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED AUGUST 31, 1994, 1993, AND 1992 (In thousands)
Balance at Additions Charged to Balance at Beginning Costs and Other End Description of Period Expenses Accounts (1) Deductions (2) of Period YEAR ENDED AUGUST 31, 1994: Deducted in the balance sheet from the asset to which it applies- Reserve for doubtful accounts $7,170 $2,804 $ 923 $3,512 $7,385 YEAR ENDED AUGUST 31, 1993: Deducted in the balance sheet from the asset to which it applies- Reserve for doubtful accounts $3,696 $3,300 $3,462 $3,288 $7,170 YEAR ENDED AUGUST 31, 1992: Deducted in the balance sheet from the asset to which it applies- Reserve for doubtful accounts $3,443 $3,398 $ 49 $3,194 $3,696 (1) Recoveries credited to reserve and reserves recorded in acquisitions. (2) Uncollectible accounts written off.
Page 16 Page 17 SCHEDULE IX NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES SHORT-TERM BORROWINGS FOR THE YEARS ENDED AUGUST 31, 1994, 1993, AND 1992 (In thousands) Maximum Amount Average Weighted Weighted Outstanding Amount Average Balance at Average at Month End Outstanding Interest Rate Category of Aggregate End Interest during during during Short-Term Borrowings of Period Rate the Period the Period the Period YEAR ENDED AUGUST 31, 1994: Banks (1) $5,098 5.90% $ 5,098 $ 4,481 7.41% YEAR ENDED AUGUST 31, 1993: Banks (1) $4,404 11.50% $42,732 $22,916 9.75% YEAR ENDED AUGUST 31, 1992: Banks (2) $ - - $ 1,372 $ 1,000 7.93% (1) Short-term borrowings under multi-currency lines of credit from a European bank. (2) Short-term revolving credit assumed in connection with Canadian acquisition in January, 1991.
Page 18 SCHEDULE X NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED AUGUST 31, 1994, 1993, AND 1992 (In thousands)
Charged to Costs and Item Expenses YEAR ENDED AUGUST 31, 1994: Maintenance and Repairs $26,581 YEAR ENDED AUGUST 31, 1993: Maintenance and Repairs $26,414 YEAR ENDED AUGUST 31, 1992: Maintenance and Repairs $26,074
Page 19 INDEX TO EXHIBITS
Page No. EXHIBIT 3 - Restated Certificate of Incorporation Reference is made to Exhibit 3 of registrant's Form 10-Q for the quarter ended May 31, 1992, which is incorporated herein by reference. - By-Laws as Amended and Restated June 21, Reference is made to Exhibit 3 of registrant's 1989 Form 10-K for the fiscal year ended August 31, 1989, which is incorporated herein by reference. EXHIBIT 4 - Shareholder Rights Plan Adopted May 9, 1988 Reference is made to Exhibit 1 of registrant's Form 8-A as filed with the Commission on May 11, 1988, which is incorporated herein by reference. EXHIBIT 10(i) - Section 168 Agreement and Election Dated Reference is made to Exhibit 10(i) of April 9, 1982 between National Service registrant's Form 10-K for the fiscal year Industries, Inc. and Oglethorpe Power ended August 31, 1982, which is incorporated Corporation herein by reference. EXHIBIT 10(iii)A Management Contracts and Compensatory Arrangements: (a)-Director's Deferred Compensation Plan Reference is made to Exhibit 10(iii)A (b) of registrant's Form 10-K for the fiscal year ended August 31, 1982, which is incorporated herein by reference. (b)-(i) Executives' Deferred Compensation Plan Reference is made to Exhibit 19 of registrant's Form 10-K for the fiscal year ended August 31, 1982, which incorporated herein by reference. (ii) First Amendment To Executives' Reference is made to Exhibit 10(iii)A (b)-(ii) Deferred Compensation Plan, Dated of registrant's Form 10-K for the fiscal year September 21, 1989 ended August 31, 1989, which is incorporated herein by reference. (c)-(i)Restated and Amended Supplemental Reference is made to Exhibit 10(iii)A (c)-(i) Retirement Plan for Executives of National of registrant's Form 10-K for the fiscal year Service Industries, Inc. (Supplemental ended August 31, 1993, which is incorporated Pension Plan) herein by reference. (ii) Amendment to Restated and Amended Reference is made to Exhibit 10(iii)A (a) of Supplemental Retirement Plan for Executives registrant's Form 10-Q for the quarter ended of National Service Industries, Inc. February 28, 1994, which is incorporated (Supplemental Pension Plan) herein by reference. (d)-(i) The National Service Industries, Inc. Reference is made to Exhibit 10(iii)A (f) of Senior Management Benefit Plan, Dated registrant's Form 10-K for the fiscal year August 15, 1985 ended August 31, 1985, which is incorporated herein by reference. (ii) First Amendment to National Service Reference is made to Exhibit 10(iii)A (e)-(ii) Industries, Inc. Senior Management Benefit of registrant's Form 10-K for the fiscal year Plan, Dated September 21, 1989 ended August 31, 1989, which is incorporated herein by reference.
Page 20 INDEX TO EXHIBITS
Page No. (d) (iii) Second Amendment to National Service 23 Industries, Inc. Senior Management Benefit Plan, Dated September 16, 1994 (e)-Severance Protection Agreement between Reference is made to Exhibit 10(iii)A (h) of National Service Industries, Inc. and David registrant's Form 10-K for the fiscal year Levy ended August 31, 1989, which is incorporated herein by reference. (f)-Severance Protection Agreements between Reference is made to Exhibit 10(iii)A (i) of National Service Indus tries, Inc. and registrant's Form 10-K for the fiscal year (i) D. Raymond Riddle ended August 31, 1989, which is incorporated (ii) Don W. Hubble herein by reference. (iii)J. Robert Hipps (g)-Bonus Letter Agreements between Reference is made to Exhibit 10(iii)A (j) of National Service Industries, Inc. and registrant's Form 10-K for the fiscal year (i) D. Raymond Riddle ended August 31, 1989, which is incorporated (ii) Don W. Hubble herein by reference. (iii)David Levy (iv) J. Robert Hipps (h)-(i)Long-Term Incentive Program, Dated Reference is made to Exhibit 10(iii)A (k) of September 20, 1989 registrant's Form 10-K for the fiscal year ended August 31, 1989, which is incorporated herein by reference. -(ii)First Amendment to Long-Term 28 Incentive Program, Dated September 20, 1989 (i)-Incentive Stock Option Agreements between Reference is made to Exhibit 10(iii)A (l) of National Service Industries, Inc., and registrant's Form 10-K for the fiscal year (i) D. Raymond Riddle ended August 31, 1989, which is incorporated (ii) Don W. Hubble herein by reference. (iii)David Levy (iv) J. Robert Hipps (j)-Nonqualified Stock Option Agreement for Reference is made to Exhibit 10(iii)A (j) of Corporate Officers between National Service registrant's Form 10-K for the fiscal year Industries, Inc. and ended August 31, 1992, which is incorporated (i) D. Raymond Riddle herein by reference. (ii) Don W. Hubble (iii)David Levy (iv) J. Robert Hipps (k)-Nonqualified Stock Option Agreement for 29 Corporate Officers Effective Beginning September 21, 1994 between National Service Industries, Inc. and (i) D. Raymond Riddle (ii) Don W. Hubble (iii)David Levy (l)-(i)Benefits Protection Trust Agreement Dated Reference is made to Exhibit 10(iii)A (n) of July 5, 1990, between National Service Indus- registrant's Form 10-K for the fiscal year tries, Inc. and Wachovia Bank and Trust ended August 31, 1990, which is incorporated Company herein by reference.
Page 21 INDEX TO EXHIBITS
Page No. (l)-(ii)Amended Schedule 1 of Benefits Reference is made to Exhibit 10(iii)A (k)-(ii) Protection Trust Agreement between of registrant's Form 10-K for the fiscal year National Service Industries, Inc. and ended August 31, 1993, which is incorporated Wachovia Bank and Trust Company herein by reference. Dated September 15, 1993 (m)-Executive Benefits Trust Agreement Dated Reference is made to Exhibit 10(iii)A (o) of July 5, 1990, between National Service Indus- registrant's Form 10-K for the fiscal year tries, Inc. and Wachovia Bank and Trust ended August 31, 1990, which is incorporated Company herein by reference. (n)-Consulting Agreement between National Reference is made to Exhibit 10(iii)A of Service Industries, Inc. and Erwin Zaban, registrant's Form 10-Q for the quarter ended Dated December 30, 1991 November 30, 1991, which is incorporated herein by reference. (o)-Consulting Agreement between National Reference is made to Exhibit 10(iii)A (n) of Service Industries, Inc. and Sidney Kirschner, registrant's Form 10-K for the fiscal year Effective November 1, 1992 ended August 31, 1992, which is incorporated herein by reference. (p)-1992 Nonemployee Directors' Stock Option Reference is made to Exhibit 10(iii)A (o) of Plan Effective September 16, 1992 registrant's Form 10-K for the fiscal year ended August 31, 1992, which is incorporated herein by reference. (q)-Nonemployee Directors' Stock Option 35 Agreement between National Service Industries, Inc. and (i) John L. Clendenin (ii) Jesse Hill, Jr. (iii)Robert M. Holder, Jr. (iv) F. Ross Johnson (v) James C. Kennedy (vi) Donald R. Keough (vii)Bryan D. Langton (vii)Bernard Marcus (ix) John G. Medlin, Jr. (x) Dr. Betty L. Siegel (xi) Erwin Zaban (r)-Summary of Incentive Bonus Program for Reference is made to Exhibit 10(iii)A (p) of Executive Officers of National Service registrant's Form 10-K for the fiscal year Industries, Inc. ("NSI") for the Fiscal Year ended August 31, 1993, which is incorporated Ending August 31, 1994 herein by reference. (s)-National Service Industries, Inc. Executive 40 Savings Plan Effective September 1, 1994 (t)-National Service Industries, Inc. Management 61 Compensation and Incentive Plan Effective September 1, 1994, Subject to Approval by Shareholders at the Annual Meeting to be Held January 4, 1995 EXHIBIT 11 - Computations of Net Income per Share of 65 Common Stock EXHIBIT 13 - Information Incorporated by Reference from 66 Annual Report for the Year Ended August 31, 1994
INDEX TO EXHIBITS Page 22
Page No. EXHIBIT 21 - List of Subsidiaries 81 EXHIBIT 23 - Consent of Independent Public Accountants 82 EXHIBIT 24 - Powers of Attorney 83 EXHIBIT 27 - Financial Data Schedules 95
EX-10 2 SENIOR MANAGEMENT BENEFIT PLAN AMENDMENT 2 1 Page 23 Exhibit 10(iii)A(d)-(iii) AMENDMENT NO. 2 TO NATIONAL SERVICE INDUSTRIES, INC. SENIOR MANAGEMENT BENEFIT PLAN THE AMENDMENT made as of the 16th day of September, 1994, by NATIONAL SERVICE INDUSTRIES, INC., a Delaware Corporation (the "Employer"); WITNESSETH: WHEREAS, the Employer previously adopted the National Service Industries, Inc. Senior Management Benefit Plan ("Plan") for the benefit of certain management and highly compensated employees of the Employer; and WHEREAS, the Employer now desires to amend the Plan, as set forth below: 1. Paragraph 5.5 of the Plan is hereby amended by deleting the first paragraph of the present provision and substituting the following in lieu thereof: "5.5 Payment of Retirement Benefits. Benefits payable to a Participant upon such Participant's retirement from full- time employment with the Employer, pursuant to the provisions of Paragraphs 5.1, 5.2 or 5.3, hereof, shall be payable on the Retirement Benefit Commencement Date specified by Participant in such Participant's Benefit Payment Election. A Participant may, however, no later than twenty-four (24) months prior to such 2 Page 24 Exhibit 10(iii)A(d)-(iii) Participant's retirement, and with the approval of the Plan Committee, change the date on which payment of such Participant's Retirement Benefits shall commence and the method of payment of such Retirement Benefits, by executing a new Benefit Payment Election, Schedule A, provided, that (i) if a Participant satisfies the requirements of Paragraph 5.2 for Early Retirement but incurs an interest earnings rate reduction under Paragraph 5.4(b), he may make an election change up to six (6) months prior to retirement, so long as such election is made in the tax year prior to retirement, (ii) the 24-month election period shall not apply to election changes relating to death benefits, and (iii) the Plan Committee may, in its sole discretion, permit a shorter election period to allow a Participant to accelerate the time and/or manner of payment in the event of a Participant's unforseen and severe financial hardship (as described in Paragrah 7.6 and as determined by the Plan Committee). In the event a Participant fails to execute a Benefit Payment Election, such Participant's Retirement Benefits shall by payable pursuant to the method determined by the Plan Committee, in its sole discretion, commencing on the first day of the second calendar month following the date of such Participant's retirement. Such Participant's Retirement Benefit shall be payable pursuant to one of the 3 Page 25 Exhibit 10(iii)A(d)-(iii) following methods, as requested by such Participant, in such Participant's Benefit Payment Election:" 2. Paragraph 6.1(a) is hereby amended by deleting the second and third sentences of the current section and substituting the following in lieu thereof: "The amount payable for the first year hereunder shall be an amount that will fully amortize the balance in the Participant's Deferred Benefit Account, as of the Participant's Benefit Determination Date, over the fifteen (15) year period, based on assumed interest earnings using an interest rate equal to the Moody's Seasoned Corporate Bond Yield Index, as published monthly by Moody's Investor's Service, Inc., or successor thereto, or if such monthly index is no longer published, a substantially similar average as established by the Plan Committee (such interest rate being hereinafter referred to as the "Moody's Interest Rate"), as of such Benefit Determination Date. Thereafter, annually, on the Anniversary Date, the amount payable for the following year shall be adjusted to an amount that will fully amortize the remaining balance in the Participant's Deferred Benefit Account, on said date, over the remaining years in the aforesaid fifteen (15) year installment period, based on the Moody's Interest Rate as of said Anniversary Date." 4 Page 26 Exhibit 10(iii)A(d)-(iii) 3. Paragraph 6.2(a) is hereby amended by adding the following at the end of the present provision: "(with interest determined in accordance with Section 5.5(a))". 4. Paragraph 7.4 is hereby amended by deleting the reference to "Paragraph 6.2" in the last line of the present provision and substituting "Paragraph 7.3" in lieu thereof. 5. Article VII is hereby amended by adding the following new Paragraph 7.6 at the end of the present provision: "7.6 Hardship. A Participant (whether or not actively employed) who is suffering an unforeseen and severe financial hardship as a result of (i) an illness or accident of the Participant or his immediate family, (ii) loss of Participant's property due to casualty, or (iii) for such other reasons as the Plan Committee may establish, may file a written request with the Plan Committee for distribution of all or a portion of the amount credited to his Deferred Benefit Account. The Plan Committee shall have the sole discretion to determine whether to grant a Participant's hardship request and the amount to distribute to the Participant. The Plan Committee shall 5 Page 27 Exhibit 10(iii)A(d)-(iii) have authority in connection with such hardship request to accelerate the date and method of payment of the Participant's Deferred Benefit Account." 6. Paragraph 9.1 of the Plan is hereby amended by deleting the second and third sentences of the present provision and substituting the following in lieu thereof: "The Plan Committee shall have the exclusive discretionary authority to construe and to interpret the Plan, to decide all questions of eligibility for benefits and to determine the amount of such benefits, and its decisions on such matters shall be final and conclusive on all parties." 7. This Amendment No. 2 shall be effective as of the date hereof; provided that any Participant who is age 55 or older on the date hereof who makes an election change by August 31, 1994, shall have such election change recognized if it is made at least six (6) months prior to his retirement. Except as hereby modified, the Plan shall remain in full force and effect. IN WITNESS THEREOF, the Employer has caused this Amendment No. 2 to be executed as of the date first above written. NATIONAL SERVICE INDUSTRIES, INC. BY:_____________________________ EX-10 3 LONG TERM INCENTIVE PROGRAM AMENDMENT 1 1 Page 28 Exhibit 10(iii)A(h)-(ii) AMENDMENT NO. 1 TO THE NATIONAL SERVICE INDUSTRIES, INC. LONG-TERM INCENTIVE PROGRAM WHEREAS, The National Service Industries, Inc. Long- Term Incentive Program (the "Long-Term Plan") was adopted by the Board of Directors (the "Board") of National Service Industries, Inc. ("NSI") and became effective on September 20, 1989, and was approved by stockholders on January 3, 1990; and WHEREAS, paragraph 14(a) of the Plan permits the Board to amend the Plan, subject to certain restrictions set forth therein; and WHEREAS, the Board desires to amend the Long-Term Plan as set forth herein to enable the Corporation to grant options transferable under certain circumstances; NOW, THEREFORE, the Long-Term Plan is amended, effective September 21, 1994, by deleting paragraph 6(c) thereof in its entirety and substituting in lieu thereof the following: (c) Non-transferability. No Option granted hereunder shall be transferable by the Optionee to whom granted otherwise than (i) by will or the laws of descent and distribution and (ii) if permitted by the Committee, and upon such terms and conditions as the Committee may establish, to immediate family members of the Optionee or to a trust, partnership or similar vehicle for the benefit of such immediate family members (collectively, the "Permitted Transferees"). An Option may be exercised during the lifetime of such Optionee only by the Optionee or his guardian or legal representative or, if applicable, by Permitted Transferees. The terms of such Option shall be final, binding and conclusive upon the beneficiaries, executors, administrators, heirs, successors, and Permitted Transferees of the Optionee. IN WITNESS WHEREOF, this AMENDMENT NO. 1 has been executed on behalf of the Corporation, and the Corporation's seal has been affixed hereto, pursuant to action taken by the Board of Directors on September 21, 1994. Attest: NATIONAL SERVICE INDUSTRIES, INC. /s/ Kenyon W. Murphy By: /s/ D. Raymond Riddle Kenyon W. Murphy, Secretary D. Raymond Riddle Chairman of the Board and Chief Executive Officer (CORPORATE SEAL) EX-10 4 NONQUALIFIED STOCK OPTION AGREEMENT FOR CORPORATE OFFICERS 1 Page 29 Exhibit 10(iii)A(k) NONQUALIFIED STOCK OPTION AGREEMENT FOR CORPORATE OFFICERS THIS AGREEMENT, made as of the _____ day of _____________, 199___ (the "Grant Date"), between National Service Industries, Inc., a Delaware corporation (the "Company"), and ______________________ (the "Optionee"). WHEREAS, the Company has adopted the National Service Industries, Inc. Long-Term Incentive Program (the "Program") in order to provide additional incentive to certain officers and employees of the Company and its Subsidiaries; and WHEREAS, the Committee responsible for administration of the Program for corporate officers has determined to grant an option to the Optionee as provided herein. NOW, THEREFORE, the parties hereto agree as follows: 1. Grant of Option. 1.1 The Company hereby grants to the Optionee the right and option (the "Option") to purchase all or any part of an aggregate of _____________ whole Shares subject to, and in accordance with, the terms and conditions set forth in this Agreement. 1.2 The Option is not intended to qualify as an Incentive Stock Option within the meaning of Section 422 of the Code. 1.3 This Agreement shall be construed in accordance and consistent with, and subject to, the provisions of the Program (the provisions of which are incorporated herein 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 Program. 2. Purchase Price. The price at which the Optionee shall be entitled to purchase Shares upon the exercise of the Option shall be $_________ per Share. 3. Duration of Option. The Option shall be exercisable to the extent and in the manner provided herein for a period of ten (10) years from the Grant Date (the "Exercise Term"); provided, however, that the Option may be earlier terminated as provided in Section 6 hereof. 2 Page 30 Exhibit 10(iii)A(k) 4. Exercisability of Option. Unless otherwise provided in this Agreement or the Program, the Option shall entitle the Optionee to purchase, in whole at any time or in part from time to time, _________________________________, and each such right of purchase shall be cumulative and shall continue, unless sooner exercised or terminated as herein provided during the remaining period of the Exercise Term. 5. Manner of Exercise and Payment. 5.1 Subject to the terms and conditions of this Agreement and the Program, the Option may be exercised by delivery of written notice to the Company at its principal executive office. Such notice shall state that the Optionee is electing to exercise the Option and the number of Shares in respect of which the Option is being exercised and shall be signed by the person or persons exercising the Option. If requested by the Committee, such person or persons shall (i) deliver this Agreement to the Secretary of the Company who shall endorse thereon a notation of such exercise and (ii) provide satisfactory proof as to the right of such person or persons to exercise the Option. 5.2 The notice of exercise described in Section 5.1 shall be accompanied by the full purchase price for the Shares in respect of which the Option is being exercised, in cash, by check, or by transferring Shares to the Company having a Fair market value on the day preceding the date of exercise equal to the cash amount for which such Shares are substituted. 5.3 Upon receipt of notice of exercise and full payment for the Shares in respect of which the Option is being exercised, the Company shall, subject to Section 17 of the Program, take such action as may be necessary to effect the transfer to the Optionee of the number of Shares as to which such exercise was effective. 5.4 The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to any Shares subject to the Option until (i) the Option shall have been exercised pursuant to the terms of this Agreement and the Optionee shall have paid the full purchase price for the number of Shares in respect of which the Option was exercised, (ii) the Company shall have issued and delivered the Shares to the Optionee, and (iii) the Optionee's name shall have been entered as a stockholder of record on the books of the Company, whereupon the Optionee shall have full voting and other ownership rights with respect to such Shares. 6. Termination of Employment. 6.1 Death, Disability, Retirement, or Change in Control. If the employment of the Optionee is terminated as a result of his death, Disability, Retirement, 3 Page 31 Exhibit 10(iii)A(k) or within two (2) years following a Change in Control, the Option shall continue to be exercisable in whole or in part (to the extent exercisable on the date of the Optionee's termination of employment) at any time within three (3) years after the date of such termination of employment, but in no event after the expiration of the Exercise Term. In the event of the Optionee's death, the Option shall be exercisable, to the extent provided in the Program and this Agreement, by the legatee or legatees under his will, or by his personal representatives or distributees and such person or persons shall be substituted for the Optionee each time the Optionee is referred to herein. 6.2 Other Termination of Employment. If the employment of the Optionee is terminated for any reason other than the reasons set forth in Section 6.1 (including the Optionee's ceasing to be employed by a Subsidiary or Division as a result of the sale of such Subsidiary or Division or an interest in such Subsidiary or Division), the Option shall terminate on the date of the Optionee's termination of employment, whether or not exercisable. 7. Effect of Change in Control. Notwithstanding anything contained in this Agreement to the contrary, in the event of a Change in Control, (i) the Option shall become immediately and fully exercisable, and (ii) the Optionee will be permitted to surrender for cancellation, within sixty (60) days after such Change in Control, the Option or any portion of the Option to the extent not yet exercised and the Optionee shall be entitled to receive immediately a cash payment in an amount equal to the excess, if any, of (A) the greater of (x) the Fair market value, on the date preceding the date of the surrender, of the Shares subject to the Option or portion of the Option surrendered or (y) the Adjusted Fair Market value of the Shares subject to the Option or the portion of the Option surrendered, over (B) the aggregate purchase price for such Shares under the Option; provided, however, that if the Option was granted within six (6) months prior to the Change in Control and the Optionee may be subject to liability under Section 16(b) of the Exchange Act, the Optionee shall be entitled to surrender for cancellation the Option or any portion of the Option during the sixty (60) day period following the expiration of six (6) months from the Grant Date and to receive the amount described above with respect to such surrender for cancellation. 8. Nontransferability. The Option shall not be transferable other than-by will or by the laws of descent and distribution. Notwithstanding the foregoing, the Option may be transferred, in whole or in part, without consideration, by written instrument signed by the Optionee, to any members of the immediate family of Optionee (i.e., spouse, children and grandchildren), any trusts for the benefit of such family members or any partnerships whose only partners are such family members (the "Permitted Transferees"). Appropriate 4 Page 32 Exhibit 10(iii)A(k) evidence of any such transfer to the Permitted Transferees shall be delivered to the Company at its principal executive office. During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee, or, if applicable, by the Permitted Transferees. 9. No Right to Continued Employment. Nothing in this Agreement or the Program shall be interpreted or construed to confer upon the Optionee any right with respect to continuance of employment by the Company, nor shall this Agreement or the Program interfere in any way with the right of the Company to terminate the Optionee's employment at any time. 10. Adjustments. In the event of a Change in Capitalization, the Committee may make appropriate adjustments to the number and class of Shares or other stock or securities subject to the Option and the purchase price for such Shares or other stock or securities. The Committee's adjustment shall be made in accordance with the provisions of Section 11 of the Program and shall be effective and final, binding, and conclusive for all purposes of the Program and this Agreement. 11. Terminating Events. Subject to Section 7 hereof, upon the effective date of (i) the liquidation or dissolution of the Company or (ii) a merger or consolidation of the Company (a "Transaction"), the Option shall continue in effect in accordance with its terms and the Optionee shall be entitled to receive in respect of all Shares subject to the Option, upon exercise of the Option, the same number and kind of stock, securities, cash, property, or other consideration that each holder of Shares was entitled to receive in the Transaction. 12. Withholding of Taxes. 12.1 The Company shall have the right to deduct from any distribution of cash to the Optionee 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 the Option. If the Optionee is entitled to receive Shares upon exercise of the Option, the Optionee shall pay the Withholding Taxes to the Company in cash prior to the issuance of such Shares. In satisfaction of the Withholding Taxes, the Optionee may make a written election (the "Tax Election"), which may be accepted or rejected in the discretion of the Committee, to have withheld a portion of the Shares issuable to him or her upon exercise of the Option, having an aggregate Fair Market value on the date preceding the Tax Date (as defined below) equal to the Withholding Taxes, provided that (i) if the Optionee may be subject to liability under Section 16(b) of the Exchange Act 5 Page 33 Exhibit 10(iii)A(k) (unless his or her employment was terminated due to Disability or death), (A) the Optionee makes the Tax Election at least six (6) months after the Grant Date and (B) the Tax Election is made either at least six (6) months prior to the date that the amount of the Withholding Taxes are determined (the "Tax Date") or during the ten (10) day period beginning on the third business day and ending on the twelfth business day following the release for publication of the Company's quarterly or annual statements of earnings, (ii) the Tax Election is made prior to the Tax Date, and (iii) the Tax Election is irrevocable; provided, however, in the event that the Tax Date occurs subsequent to the exercise of the Option, the Optionee shall tender back to the Company on the Tax Date that number of Shares having a Fair Market Value on the date preceding the Tax Date equal to the Withholding Taxes. 13. Employee Bound by the Program. The Optionee hereby acknowledges receipt of a copy of the Program and agrees to be bound by all the terms and provisions thereof. 14. 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. 15. Severability. 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 it full force in accordance with their terms. 16. Governing Law. 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. 17. Successors in Interest. This Agreement shall inure to the benefit of and be binding upon each successor to the Company. This Agreement shall inure to the benefit of the Optionee's legal representatives and Permitted Transferees. All obligations imposed upon the Optionee and all rights granted to the Company under this Agreement shall be final, binding, and conclusive upon the Optionee's heirs, executors, administrators, successors, and Permitted Transferees. 6 Page 34 Exhibit 10(iii)A(k) 18. 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 Optionee and the Company for all purposes. ATTEST: NATIONAL SERVICE INDUSTRIES, INC. /s/ Kenyon W. Murphy By: /s/ D. Raymond Riddle Secretary D. Raymond Riddle Chairman of the Board and Chief Executive Officer Name of Optionee: EX-10 5 NONEMPLOYEE DIRECTOR'S STOCK OPTION AGREEMENT 1 Page 35 Exhibit 10(iii)A(q) STOCK OPTION AGREEMENT FOR NONEMPLOYEE DIRECTORS THIS AGREEMENT, made as of the ____ day of ___________, 199__ (the "Grant Date"), between National Service Industries, Inc., a Delaware corporation (the "Company"), and _________________ (the "Optionee"). WHEREAS, the Company has adopted the National Service Industries, Inc. 1992 Nonemployee Directors' Stock Option Plan (the "Plan") in order to provide additional incentive to nonemployee directors to exert maximum efforts for the success of the Company; and WHEREAS, pursuant to the terms of the Plan, the Optionee is entitled to the option grant provided herein. NOW, THEREFORE, the parties hereto agree as follows: 1. Grant of Option. 1.1 The Company hereby grants to the Optionee the right and option (the "Option") to purchase all or any part of an aggregate of ___________ whole Shares subject to, and in accordance with, the terms and conditions set forth in this Agreement. 1.2 The Option is not intended to qualify as an Incentive Stock Option within the meaning of Section 422A of the Code. 1.3 This Agreement shall be construed in accordance and consistent with, and subject to, the provisions of the Plan (the provisions of which are incorporated herein 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. Purchase Price. The price at which the Optionee shall be entitled to purchase Shares upon the exercise of the Option shall be $_________ per Share. 3. Duration of Option. The Option shall be exercisable to the extent and in the manner provided herein for a period of ten (10) years from the Grant Date (the "Exercise Term"); provided, however, that the Option may be earlier terminated as provided in Section 6 hereof. 2 Page 36 Exhibit 10(iii)A(q) 4. Exercisability of Option. Unless otherwise provided in this Agreement or the Plan, the Option shall entitle the Optionee to purchase, in whole at any time or in part from time to time, the shares covered by the option after the expiration of one (1) year from the Grant Date. 5. Manner of Exercise and Payment. 5.1 Subject to the terms and conditions of this Agreement and the Plan, the Option may be exercised by delivery of written notice to the Company, at its principal executive office. Such notice shall state that the Optionee is electing to exercise the Option and the number of Shares in respect of which the Option is being exercised and shall be signed by the person or persons exercising the Option. If requested, such person or persons shall (i) deliver this Agreement to the Secretary of the Company who shall endorse thereon a notation of such exercise and (ii) provide satisfactory proof as to the right of such person or persons to exercise the Option. 5.2 The notice of exercise described in Section 5.1 shall be accompanied by the full purchase price for the Shares in respect of which the Option is being exercised, in cash, by check or by transferring Shares to the Company having a Fair Market value on the day preceding the date of exercise equal to the cash amount for which such Shares are substituted. 5.3 Upon receipt of notice of exercise and full payment for the Shares in respect of which the Option is being exercised, the Company shall, subject to Section 12 of the Plan, take such action as may be necessary to effect the transfer to the Optionee of the number of Shares as to which such exercise was effective. 5.4 The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Shares subject to the Option until (i) the Option shall have been exercised pursuant to the terms of this Agreement and the Optionee shall have paid the full purchase price for the number of Shares in respect of which the Option was exercised, (ii) the Company shall have issued and delivered the Shares to the Optionee, and (iii) the Optionee's name shall have been entered as a stockholder of record on the books of the Company, whereupon the Optionee shall have full voting and other ownership rights with respect to such Shares. 6. Termination of Service. 6.1 Termination for Cause. If the Optionee's service as a Director terminates for Cause, the Option shall immediately terminate in full and no rights hereunder may be exercised. 6.2 Other Termination of Service. If the Optionee's service as a Director is terminated for any reason other than for Cause, the Option shall continue to be exercisable in whole or in part (to the extent exercisable on the date of such termination) at any time within 3 Page 37 Exhibit 10(iii)A(q) three (3) years after the date of such termination, but in no event after the expiration of the Exercise Term. In the event of the Optionee's death, the Option shall be exercisable, to the extent provided in the Plan and this Agreement, by the legatee or legatees under his will, or by his personal representatives or distributees and such person or persons shall be substituted for the Optionee each time the Optionee is referred to herein. 7. Effect of Change in Control. Notwithstanding anything contained in this Agreement to the contrary, in the event of a Change in Control, (i) theOption shall become immediately and fully exercisable, and (ii) the Optionee will be permitted to surrender for cancellation within sixty (60) days after such Change in Control, the Option or any portion of the Option to the extent not yet exercised and the Optionee shall be entitled to receive immediately a cash payment in an amount equal to the excess, if any, of (A) the greater of (x) the Fair Market value, on the date preceding the date of the surrender, of the Shares subject to the Option or portion of the Option surrendered or (y) the Adjusted Fair Market Value of the Shares subject to the Option or the portion of the Option surrendered, over (B) the aggregate purchase price for such Shares under the Option; provided, however, that if the Option was granted within six (6) months prior to the Change in Control, the Optionee shall be entitled to surrender for cancellation the Option or any portion of the Option during the sixty (60) day period following the expiration of six (6) months from the Grant Date and to receive the amount described above with respect to such surrender for cancellation. 8. Nontransferability. The Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee. 9. No Right to Continuing Service. Nothing in this Agreement or the Plan shall be interpreted or construed to confer upon the Optionee any right with respect to continuance of service as a director of the Company, nor shall this Agreement or the Plan interfere in any way with the right of the Company to terminate the Optionee's service as a director at any time. 10. Adjustments. In the event of a Change in Capitalization, the Board shall make appropriate adjustments to the number and class of Shares or other stock or securities subject to the Option and the purchase price for such Shares or other stock or securities. The Board's adjustment shall be made in accordance with the provisions of Section 7 of the Plan and shall be effective and final, binding, and conclusive for all purposes of the Plan and this Agreement. 4 Page 38 Exhibit 10(iii)A(q) 11. Terminating Events. Subject to Section 7 hereof, upon the effective date of (i) the liquidation or dissolution of the Company or (ii) a merger or consolidation of the Company (a "Transaction"), the Option shall continue in effect in accordance with its terms and the Optionee shall be entitled to receive in respect of all Shares subject to the Option, upon exercise of the Option, the same number and kind of stock, securities, cash, property, or other consideration that each holder of Shares was entitled to receive in the Transaction. 12. Optionee Bound by the Plan. The Optionee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof. 13. 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. 14. Severability. 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. 15. Governing Law. 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. 16. Successors in Interest. This Agreement shall inure to the benefit of and be binding upon each successor to the Company. This Agreement shall inure to the benefit of the Optionee's legal representatives. All obligations imposed upon the Optionee and all rights granted to the Company under this Agreement shall be final, binding and conclusive upon the Optionee's heirs, executors, administrators and successors. 5 Page 39 Exhibit 10(iii)A(q) 17. 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 Board. Any determination made hereunder shall be final, binding, and conclusive on the Optionee and the Company for all purposes. ATTEST: NATIONAL SERVICE INDUSTRIES, INC. /s/ Kenyon W. Murphy By: /s/ D. Raymond Riddle Secretary D. Raymond Riddle, Chairman of the Board and Chief Executive Officer Name of Optionee: EX-10 6 EXECUTIVE SAVINGS PLAN 1 Page 40 Exhibit 10(iii)A(s) NATIONAL SERVICE INDUSTRIES, INC. EXECUTIVE SAVINGS PLAN (Effective As of September 1, 1994) 2 Page 41 Exhibit 10(iii)A(s) NATIONAL SERVICE INDUSTRIES, INC. EXECUTIVE SAVINGS PLAN TABLE OF CONTENTS ARTICLE I INTRODUCTION AND ESTABLISHMENT. . . . . . . . . 1 ARTICLE II DEFINITIONS . . . . . . . . . . . . . . . . . . 1 2.1 Account. . . . . . . . . . . . . . . . . . . . . . . 1 2.2 Beneficiary. . . . . . . . . . . . . . . . . . . . . 1 2.3 Bonus. . . . . . . . . . . . . . . . . . . . . . . . 1 2.4 Change in Control. . . . . . . . . . . . . . . . . . 1 2.5 Class Year . . . . . . . . . . . . . . . . . . . . . 2 2.6 Class Year Account . . . . . . . . . . . . . . . . . 2 2.7 Code . . . . . . . . . . . . . . . . . . . . . . . . 2 2.8 Company. . . . . . . . . . . . . . . . . . . . . . . 3 2.9 Election Form. . . . . . . . . . . . . . . . . . . . 3 2.10 Employer . . . . . . . . . . . . . . . . . . . . . . 3 2.11 ERISA. . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 Executive. . . . . . . . . . . . . . . . . . . . . . 3 2.13 Fiscal Year. . . . . . . . . . . . . . . . . . . . . 3 2.14 Interest Earnings Rate . . . . . . . . . . . . . . . 3 2.15 Participant. . . . . . . . . . . . . . . . . . . . . 3 2.16 Plan . . . . . . . . . . . . . . . . . . . . . . . . 3 2.17 Plan Administrator . . . . . . . . . . . . . . . . . 3 2.18 Plan Year. . . . . . . . . . . . . . . . . . . . . . 4 2.19 Prime Rate . . . . . . . . . . . . . . . . . . . . . 4 2.20 Termination for Cause. . . . . . . . . . . . . . . . 4 2.21 Termination of Service . . . . . . . . . . . . . . . 4 2.22 Total and Permanent Disability . . . . . . . . . . . 4 2.23 Valuation Dates. . . . . . . . . . . . . . . . . . . 4 ARTICLE III PARTICIPATION . . . . . . . . . . . . . . . . . 1 3.1 Eligibility to Participate . . . . . . . . . . . . . 1 3.2 Deferral Election. . . . . . . . . . . . . . . . . . 1 ARTICLE IV INTEREST OF PARTICIPANTS. . . . . . . . . . . . 1 4.1 Accounting for Participants' Interests . . . . . . . 1 4.2 Vesting of a Participant's Account . . . . . . . . . 1 4.3 Distribution of a Participant's Account. . . . . . . 1 4.4 Hardship . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE V PLAN ADMINISTRATOR. . . . . . . . . . . . . . . 1 5.1 Committee. . . . . . . . . . . . . . . . . . . . . . 1 5.2 Action . . . . . . . . . . . . . . . . . . . . . . . 1 5.3 Right and Duties . . . . . . . . . . . . . . . . . . 1 3 Page 42 Exhibit 10(iii)A(s) 5.4 Compensation, Indemnity and Liability. . . . . . . . 2 5.5 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE VI CLAIMS PROCEDURE. . . . . . . . . . . . . . . . 1 6.1 Claims for Benefits. . . . . . . . . . . . . . . . . 1 6.2 Appeals. . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE VII AMENDMENT AND TERMINATION; CHANGE IN CONTROL. . 1 7.1 Amendments . . . . . . . . . . . . . . . . . . . . . 1 7.2 Termination of Plan. . . . . . . . . . . . . . . . . 1 7.3 Change In Control Provisions . . . . . . . . . . . . 1 ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . 1 8.1 Limitation on Participant's Rights . . . . . . . . . 1 8.2 Benefits Unfunded. . . . . . . . . . . . . . . . . . 1 8.3 Other Plans. . . . . . . . . . . . . . . . . . . . . 1 8.4 Receipt or Release . . . . . . . . . . . . . . . . . 1 8.5 Governing Law. . . . . . . . . . . . . . . . . . . . 2 8.6 Gender, Tense, and Headings. . . . . . . . . . . . . 2 8.7 Successors and Assigns; Nonalienation of Benefits. . 2 APPENDIX A Election To Participate And Beneficiary Designation . . . . . . . . . . . . . . . . . .A-1 APPENDIX B Election To Defer Distribution. . . . . . . . .B-1 4 Page 43 Exhibit 10(iii)A(s) ARTICLE I INTRODUCTION AND ESTABLISHMENT National Service Industries, Inc. ("Company") hereby establishes the National Service Industries, Inc. Executive Savings Plan ("Plan") for the benefit of eligible management and highly compensated employees of the Company and its affiliated or related employers. The Plan is designed to assist eligible employees in accumulating capital and supplementing their retirement income. The terms of this Plan are applicable only to eligible employees who are actively employed on or after September 1, 1994. Any employee who terminates his employment relationship prior to that date shall not be covered by this Plan. 5 Page 44 Exhibit 10(iii)A(s) ARTICLE II DEFINITIONS When used in this Plan, the following terms shall have the meanings set forth below unless a different meaning is plainly required by the context: 2.1 "Account" means the records maintained by the Plan Administrator to determine each Participant's interest under this Plan. Such Account may be reflected as an entry in the Company's records, or as a separate account under a trust, or as a combination of both. Each Participant's Account shall consist of subaccounts for each Class Year to reflect his deferral of Bonus (if any) for such Class Year and earnings thereon. The Plan Administrator may establish such additional subaccounts as it deems necessary for the proper administration of the Plan. 2.2 "Beneficiary" means the person or persons last designated in writing by the Participant to receive the amount in his Account in the event of such Participant's death; or if no designation shall be in effect at the time of a Participant's death or if all designated Beneficiaries shall have predeceased the Participant, then the Beneficiary shall be the Participant's estate. 2.3 "Bonus" means any performance or discretionary bonus awarded by the Company to a Participant for a Fiscal Year. 2.4 "Change in Control" means any of the following events: (i) 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 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 Company's then outstanding voting securities; or (ii) The individuals who, as of September 1, 1994, 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 6 Page 45 Exhibit 10(iii)A(s) 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 Company of (1) a merger or consolidation involving the Company if the stockholders of the Company, 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 subsection (i) above, 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. 2.5 "Class Year" means the Fiscal Year for which a deferral of Bonus is elected. 2.6 "Class Year Account" means the subaccount set up to reflect the Participant's deferral of Bonus for each Class Year and any earnings thereon. 2.7 "Code" means the Internal Revenue Code of 1986, as amended. 7 Page 46 Exhibit 10(iii)A(s) 2.8 "Company" means National Service Industries, Inc., a Delaware Corporation, or its successor or successors. 2.9 "Election Form" means the form prescribed by the Plan Administrator on which a Participant may specify the amount of his Bonus that is to be deferred pursuant to the provisions of Article III. 2.10 "Employer" means the Company and any affiliated or related employer designated by the Company to participate in the Plan. 2.11 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 2.12 "Executive" means an officer of the Company or one of the Company's Operating Divisions, and other designated employees. Any dispute regarding any individual's classification shall be determined by the Plan Administrator in its sole discretion. 2.13 "Fiscal Year" means the year commencing on September 1 and ending on August 31 of the following calendar year. 2.14 "Interest Earnings Rate" means an interest rate (i) for the period October 1 to March 31 equal to one percent (1%) above the average of the Prime Rates on October 1 and on January 1, and (ii) for the period April 1 to September 30 equal to one percent (1%) above the average of the Prime Rates on April 1 and July 1, provided that for a Participant who on a valuation date is an executive officer of the Company for whom disclosure of compensation information is required by the Proxy Rules adopted by the Securities and Exchange Commission, the Interest Earnings Rate credited on such Valuation Date shall not exceed 120% of the Federal mid-term rate (as determined under Section 1274(d) of the Code). 2.15 "Participant" means an Eligible Executive as defined in Section 3.1 (or an individual who was an Eligible Executive), a portion of whose Bonus for any Fiscal Year has been deferred pursuant to the Plan and whose interest in the Plan has not been wholly distributed. 2.16 "Plan" means the National Service Industries, Inc. Executive Savings Plan as set forth herein and as it may be amended from time to time. 2.17 "Plan Administrator" means the Committee appointed pursuant to Article V to administer the Plan. In the absence of such appointment, the Company shall be the Plan Administrator. 8 Page 47 Exhibit 10(iii)A(s) 2.18 "Plan Year" means the Fiscal Year. 2.19 "Prime Rate" means the prime rate of interest on a particular date, as established by the Wachovia Bank of Georgia, N.A. (or its successor). 2.20 "Termination for Cause" means the Executive has terminated employment and has been found by the Committee to be guilty of theft, embezzlement, fraud or misappropriation of the Company's property or of any action which, if the individual were an officer of the Company, would constitute a breach of fiduciary duty. 2.21 "Termination of Service" or similar expression means the termination of the Participant's employment as an Executive. A Participant who is granted a temporary leave of absence, whether with or without pay, shall not be deemed to have terminated his service. In the event of a transfer of an Executive to a position in which he would no longer be eligible to continue in this Plan, or in the event of the disability of a Participant, the Plan Administrator in its sole discretion, shall determine whether a Termination of Service has occurred. 2.22 "Total and Permanent Disability" means the permanent and lasting inability of a Participant due to illness, accident, or other physical or mental incapacity, to perform his usual duties and services for the Employer. The determination as to whether Total and Permanent Disability exists shall be made by the Plan Administrator based upon the information provided to it. 2.23 "Valuation Dates" mean March 31 and September 30 of each year. 9 Page 48 Exhibit 10(iii)A(s) ARTICLE III PARTICIPATION 3.1 Eligibility to Participate. Prior to the commencement of each Fiscal Year, the Company (or its designee) shall specify the Executives who are eligible to make deferral elections under the Plan for the following Fiscal Year (an "Eligible Executive"). Such eligibility designation may be made by establishing a minimum compensation level for participation or by the use of such other criteria as the Company (or its designee) deems appropriate from time to time. An Eligible Executive shall become a Participant upon making the deferral election described in Section 3.2 below. 3.2 Deferral Election. Each Eligible Executive may elect on an Election Form to have a portion of the Bonus, if any, to be received by him for the Fiscal Year commencing September 1, 1994, and for any Fiscal Year thereafter in which he is eligible to participate, irrevocably deferred in accordance with the terms and conditions of the Plan. The amount that may be deferred for any Fiscal Year shall not be less than $1,000, nor more than 100% of the Bonus for such Fiscal Year. An Executive desiring to exercise such election shall, prior to the beginning of each such Fiscal Year (or prior to or coincident with the beginning of the Eligible Executive's initial employment if such employment is to commence other than at the beginning of a Fiscal Year), complete an Election Form indicating the percentage or dollar amount of his Bonus for such Fiscal Year that he elects to have deferred. If the Eligible Executive's election would result in a deferral greater than the maximum provided herein, any deferred amount shall be reduced to the maximum limit provided herein. An election to defer Compensation must be filed with the Plan Administrator within the time period prescribed by the Plan Administrator. If a Participant fails to file a properly completed and duly executed Election Form with the Plan Administrator by the prescribed time, he will be deemed to have elected not to defer any Bonus under this Plan for the Fiscal Year, except to the extent the Plan Administrator in its sole discretion permits an extension of the election period. An Eligible Executive may not, after the applicable election date discontinue his election to participate or change the percentage of Bonus he has elected to defer for a Fiscal Year. The Eligible Executive shall designate on the Election Form (or on a separate form provided by the Plan Administrator) a Beneficiary to receive payment of amounts in his Account in the event of his death. 10 Page 49 Exhibit 10(iii)A(s) ARTICLE IV INTEREST OF PARTICIPANTS 4.1 Accounting for Participants' Interests. (a) Class Year Accounts. A Participant's Class Year Account shall be credited as of the October 1 next following the end of the Class Year for which the deferral election was made with the dollar amount of Bonus deferred by the Participant for such Class Year pursuant to Section 3.2. (b) Account Earnings. Each Class Year Account of the Participant shall be credited with earnings for the period from the prior Valuation Date to the current Valuation Date (or the payment date, where applicable) at the Interest Earnings Rate. The Interest Earnings Rate on the current Valuation Date shall be applied to the balance in each Class Year Account of the Participant as of such Valuation Date. 4.2 Vesting of a Participant's Account. (a) In General. Except as provided in (b) below, a Participant's interest in the amount credited to each Class Year Account shall at all times be 100% vested and nonforfeitable. (b) Termination For Cause. Notwithstanding subsection (a), if a Participant incurs a Termination for Cause, he shall forfeit all earnings credited on all amounts deferred to Class Year Accounts that have not yet been fully distributed to him under Section 4.3. The final determination of whether a Participant has incurred a Termination for Cause, as defined herein, shall be made by the Plan Administrator. 4.3 Distribution of a Participant's Account. Subject to Article VII, a Participant's Account shall be distributed as follows: (a) Class Year Accounts. Except as provided in (b) and (c) below, distribution of each Class Year Account of a Participant shall be made in a single lump sum payment on the October 1 next following five (5) full Fiscal Years after the Class Year. For example, the distribution of the 1995 Class Year Account (the Participant's deferral of Bonus credited to him on October 1, 1995) shall be made on October 1, 2000 and for the 1996 Class Year Account on October 1, 2001, and so on. (b) Election to Defer Distribution. A Participant who will become eligible to receive distribution of a Class Year Account under (a) above may elect to defer to the October 1 of a later year (subject to the limitations provided below) the distribution of such Class Year Account. The election to defer distribution of a Class Year Account must be filed prior to the end of the Fourth Fiscal Year immediately following the Class Year for such Class Year Account. For example, for the 1995 11 Page 50 Exhibit 10(iii)A(s) Class Year Account, the election must be filed prior to September 1, 1999. The Participant's deferral election for a Class Year Account must indicate (i) the October 1 when he desires his benefit to be paid or to commence, which date must be at least two (2) years after the date he could initially have received a distribution, and (ii) whether the distribution should be made in a lump sum or in annual installments over a period of up to ten (10) years; provided that the lump sum or the last installment payment shall be due not later than 10 years after the Participant's retirement. A Participant's Class Year Account for which a deferral election is made under this subsection (b) shall continue to be credited with earnings under Section 4.1(b) until the amount is fully distributed. (c) Death, Disability, Termination of Service. (i) Notwithstanding the existence of a deferral election under Section 4.3(b), in the event prior to age 55 a Participant dies, becomes Totally and Permanently Disabled, or has a Termination of Service for any other reason, distribution of the balance credited to a Participant's Account shall be made to the Participant (or his Beneficiary in the event of death) as soon as practical. In the event of Termination of Service or death, payment of the Participant's Account shall be made in a lump sum; in the event a Participant becomes Totally and Permanently Disabled, he shall receive a lump sum payment, except for any Class Year Accounts he has previously elected to receive in installments which shall be paid in installments commencing upon his termination. In the event payments are made pursuant to this subsection (c)(i), earnings shall be credited under Section 4.1(b) to the day prior to the date of payment (except as limited in the case of Termination for Cause). (ii) In the event of a Participant's Termination of Service on or after 55 (except for death or Total and Permanent Disability), the balance credited to a Participant's Account shall be distributed to him in a lump sum as soon as practical; provided, that any Class Year Accounts as to which he has properly elected under subsection (b) above a delayed distribution and/or payment in annual installments, shall be distributed in accordance with such elections. A Participant retiring on or after age 55 may elect at least one (1) year prior to the date of his retirement to make the deferral election in Section 4.3(b) with respect to all Class Year Accounts which have not yet become distributable. (iii) In the event of death or Total and Permanent Disability on or after age 55 (whether or not the Participant is then employed by an Employer), all amounts credited to a Participant's Account, whether such amounts are currently being paid in installments or are subject to a deferral election under Section 4.3(b), shall be paid in a lump sum to the Participant (or his Beneficiary in the event of death); provided, that a participant who becomes Totally and Permanently Disabled shall receive (or continue to receive), any amount he elected to receive in installments in accordance with such installment 12 Page 51 Exhibit 10(iii)A(s) election commencing on the later of his termination date or the date he became Totally and Permanently Disabled. 4.4 Hardship. A Participant who is suffering an unforeseen and severe financial hardship as a result of (i) an illness or accident of the Participant or his immediately family, (ii) loss of Participant's property due to casualty, or (iii) for such other reasons as the Plan Administrator may establish, may file a written request with the Plan Administrator for distribution of all or a portion of the amount credited to his Account. The Plan Administrator shall have the sole discretion to determine whether to grant a Participant's hardship request and the amount to distribute to the Participant. The Plan Administrator shall have authority in connection with such hardship request to accelerate the payment of any Class Year Accounts which have been deferred pursuant to Section 4.3(b). 13 Page 52 Exhibit 10(iii)A(s) ARTICLE V PLAN ADMINISTRATOR 5.1 Committee. The Plan Administrator shall be the Executive Resource and Nominating Committee of the Board of Directors of the Company or such other committee as may be designated by the Company to administer and manage the Plan, provided that, if no committee is designated, the Company shall be the Plan Administrator and shall have the duties of the Plan Administrator provided for herein. Members of the committee shall not be required to be employees of the Company or Participants. 5.2 Action. Action of the Plan Administrator may be taken with or without a meeting of committee members. If a member of the committee is a Participant in the Plan, he shall not participate in any decision which solely affects his own Account. 5.3 Right and Duties. The Plan Administrator shall administer and manage the Plan and shall have all powers necessary to accomplish that purpose, including (but not limited to) the following: (a) To construe, interpret, and administer this Plan; (b) To make allocations and determinations required by this Plan, and to maintain records regarding Participants' Accounts; (c) To compute and certify to the Company the amount and kinds of benefits payable to Participants or their beneficiaries, and to determine the time and manner in which such benefits are to be paid; (d) To authorize all disbursements by the Company pursuant to this Plan; (e) To maintain (or cause to be maintained) all the necessary records of the administration of this Plan; (f) To make and publish such rules for the regulation of this Plan as are not inconsistent with the terms hereof; (g) To delegate to other individuals or entities from time to time the performance of any of its duties or responsibilities hereunder; and (h) To hire agents, accountants, actuaries, consultants and legal counsel to assist in operating and administering the Plan. The Plan Administrator shall have the exclusive discretionary authority to construe and to interpret the Plan, to 14 Page 53 Exhibit 10(iii)A(s) decide all questions of eligibility for benefits and to determine the amount and manner of payment of such benefits, and its decisions on such matters shall be final and conclusive on all parties. 5.4 Compensation, Indemnity and Liability. The Plan Administrator shall serve as such without bond and without compensation for services hereunder. All expenses of the Plan and the Plan Administrator shall be paid by the Company. If the Plan Administrator is a committee, no member of the committee shall be liable for any act or omission of any other member of the committee, nor for any act or omission on his own part, excepting his own willful misconduct. The Company shall indemnify and hold harmless the Plan Administrator and each member of the committee against any and all expenses and liabilities, including reasonable legal fees and expenses, arising out of his membership on the committee, excepting only expenses and liabilities arising out of his own willful misconduct. 5.5 Taxes. If the whole or any part of any Participant's Account shall become liable for the payment of any estate, inheritance, income, or other tax which the Company shall be required to pay or withhold, the Company shall have the full power and authority to withhold and pay such tax out of any monies or other property in its hand for the account of the Participant whose interests hereunder are so liable. The Company shall provide notice of any such withholding. Prior to making any payment, the Company may require such releases or other documents from any lawful taxing authority as it shall deem necessary. 15 Page 54 Exhibit 10(iii)A(s) ARTICLE VI CLAIMS PROCEDURE 6.1 Claims for Benefits. If a Participant or beneficiary (hereafter, "Claimant") does not receive timely payment of any benefits which he believes are due and payable under the Plan, he may make a claim for benefits to the Plan Administrator. The claim for benefits must be in writing and addressed to the Plan Administrator or to the Company. If the claim for benefits is denied, the Plan Administrator shall notify the Claimant in writing within 90 days after the Plan Administrator initially received the benefit claim. However, if special circumstances require an extension of time for processing the claim, the Plan Administrator shall furnish notice of the extension to the Claimant prior to the termination of the initial 90-day period and such extension shall not exceed one additional, consecutive 90-day period. Any notice of a denial of benefits shall advise the Claimant of the basis for the denial, any additional material or information necessary for the Claimant to perfect his claim, and the steps which the Claimant must take to have his claim for benefits reviewed. 6.2 Appeals. Each Claimant whose claim for benefits has been denied may file a written request for a review of his claim by the Plan Administrator. The request for review must be filed by the Claimant within 60 days after he received the written notice denying his claim. The decision of the Plan Administrator will be made within 60 days after receipt of a request for review and shall be communicated in writing to the Claimant. Such written notice shall set forth the basis for the Plan Administrator's decision. If there are special circumstances which require an extension of time for completing the review, the Plan Administrator's decision shall be rendered not later than 120 days after receipt of a request for review. 16 Page 55 Exhibit 10(iii)A(s) ARTICLE VII AMENDMENT AND TERMINATION; CHANGE IN CONTROL 7.1 Amendments. Subject to Section 7.3, the Company (or its designee) shall have the right in its sole discretion to amend this Plan in any manner at any time; provided, however, that no such amendment shall reduce the Participant's vested interest in his Account under Section 4.2 at that time. Any amendment shall be in writing and executed by a duly authorized officer of the Company. All Participants shall be bound by such amendment. 7.2 Termination of Plan. The Company expects to continue this Plan, but does not obligate itself to do so. Subject to Section 7.3, the Company reserves the right to discontinue and terminate the Plan at any time, in whole or in part, for any reason (including a change, or an impending change, in the tax laws of the United States or any State). If the Plan is terminated, the Plan Administrator shall be notified of such action in a writing executed by a duly authorized officer of the Company, and the Plan shall be terminated at the time therein set forth. Termination of the Plan shall be binding on all Participants, but in no event may such termination reduce the amounts credited at that time to any Participant's Account. If this Plan is terminated, amounts theretofore credited to Participants' Accounts, including interest from the last Valuation Date to the termination date, shall either be paid in a lump sum immediately, or distributed in some other manner consistent with this Plan, as determined by the Plan Administrator in its sole discretion. 7.3 Change In Control Provisions. (a) Amendment or Termination. Notwithstanding anything contained in this Plan to the contrary, for a period of two (2) years following a Change in Control this Plan shall not be terminated or amended to reduce, suspend or eliminate any Eligible Executive's or Participant's benefits or participation (or right to participate) provided under this Plan, including, without limitation, the benefits provided in Articles III and IV. Any amendment or termination of this Plan which a Participant reasonably demonstrates (i) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with or in anticipation of a Change in Control, and which was not consented to in writing by the Participant shall be null and void, and shall have no effect whatsoever with respect to the Participant. (b) Termination of Employment. Notwithstanding anything contained in this Plan to the contrary, if a Participant's employment is terminated by the Company (other than for "Cause" as defined in (c) below) or by the Participant for any reason within two (2) years following a Change in Control, 17 Page 56 Exhibit 10(iii)A(s) the Company shall, within five (5) days, pay to the Participant a lump sum cash payment of the amount credited to his Account (including any Class Year Accounts subject to a deferral election under Section 4.3(b)) with earnings determined under Section 4.1(b) credited thereto to the date of payment. If a Participant's employment is terminated (i) for Cause (as defined in (c) below) within two (2) years following a Change in Control or (ii) for any reason more than two (2) years after a Change in Control, the provisions of Article IV shall apply to the distribution of the Participant's Account. (c) Cause. For purposes of Section 7.3(b), a termination for "Cause" is a termination of the Executive evidenced by a resolution adopted in good faith by two-thirds of the Board of Directors of the Company that the Participant (i) intentionally and continually failed to substantially perform his duties with the Company (other than a failure resulting from the Participant'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 Participant specifying the manner in which the Participant has failed to substantially perform, or (ii) intentionally engaged in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; provided, however, that no termination of the Participant's employment shall be for Cause as set forth in clause (ii) above until (x) there shall have been delivered to the Participant a copy of a written notice setting forth that the Participant was guilty of the conduct set forth in clause (ii) and specifying the particulars thereof in detail, and (y) the Participant shall have been provided an opportunity to be heard by the Board (with the assistance of the Participant's counsel if the Participant so desires). No act, nor failure to act, on the Participant'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, in the case of any Participant who is a party to a Severance Protection Agreement, no failure to perform by the Participant after a Notice of Termination (as defined in the Participant's Severance Protection Agreement) is given by the Participant shall constitute Cause for purposes of this Plan. 18 Page 57 Exhibit 10(iii)A(s) ARTICLE VIII MISCELLANEOUS 8.1 Limitation on Participant's Rights. Participation in this Plan shall not give any Participant the right to be retained in the Company's employ or the employ of any Employer, or any right or interest in this Plan or any assets of the Company other than as herein provided. The Company reserves the right to terminate the employment of any Participant without any liability for any claim against the Company under this Plan, except to the extent provided herein. 8.2 Benefits Unfunded. The benefits provided by this Plan shall be unfunded. All amounts payable under this Plan to Participants shall be paid from the general assets of the Company, and nothing contained in this Plan shall require the Company to set aside or hold in trust any amounts or assets for the purpose of paying benefits to Participants. This Plan shall create only a contractual obligation on the part of the Company, and Participants shall have the status of general unsecured creditors of the Company under the Plan with respect to amounts of Compensation they defer hereunder or any other obligation of the Company to pay benefits pursuant hereto. Any funds of the Company available to pay benefits pursuant to the Plan shall be subject to the claims of general creditors of the Company, and may be used for any purpose by the Company. Notwithstanding the preceding paragraph, the Company may at any time transfer assets to a trust for purposes of paying all or any part of its obligations under this Plan. However, to the extent provided in the trust only, such transferred amounts shall remain subject to the claims of general creditors of the Company. To the extent that assets are held in a trust when a Participant's benefits under the Plan become payable, the Plan Administrator shall direct the trustee to pay such benefits to the Participant from the assets of the trust. 8.3 Other Plans. This Plan shall not affect the right of any Executive or Participant to participate in and receive benefits under and in accordance with the provisions of any other employee benefit plans which are now or hereafter maintained by the Company, unless the terms of such other employee benefit plan or plans specifically provide otherwise. 8.4 Receipt or Release. Any payment to a Participant in accordance with the provisions of this Plan shall, to the extent thereof, be in full satisfaction of all claims against the Plan Administrator, the Company and any Employer, and the Plan Administrator may require such Participant, as a condition precedent to such payment, to execute a receipt and release to such effect. 19 Page 58 Exhibit 10(iii)A(s) 8.5 Governing Law. This Plan shall be construed, administered, and governed in all respects in accordance with applicable federal law and, to the extent not preempted by federal law, in accordance with the laws of the State of Georgia. If any provisions of this instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. 8.6 Gender, Tense, and Headings. In this Plan, whenever the context so indicates, the singular or plural number and the masculine, feminine, or neuter gender shall be deemed to include the other. Headings and subheadings in this Plan are inserted for convenience of reference only and are not considered in the construction of the provisions hereof. 8.7 Successors and Assigns; Nonalienation of Benefits. This Plan shall inure to the benefit of and be binding upon the parties hereto and their successors and assigns; provided, however, that the amounts credited to the Account of a Participant shall not (except as provided in Section 5.5) be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to any benefits payable hereunder, including, without limitation, any assignment or alienation in connection with a separation, divorce, child support or similar arrangement, shall be null and void and not binding on the Plan or the Company. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to substantially all of the business or assets of the Company to expressly agree to assume and perform this Agreement in the same manner that the Company would be required to perform it. IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized officers to be effective September 1, 1994. NATIONAL SERVICE INDUSTRIES, INC. By: \s\ D. Raymond Riddle 20 Page 59 Exhibit 10(iii)A(s) APPENDIX A NATIONAL SERVICE INDUSTRIES, INC. EXECUTIVE SAVINGS PLAN ELECTION TO PARTICIPATE AND DESIGNATION OF BENEFICIARY To the Plan Administrator: I hereby elect to participate in the NATIONAL SERVICE INDUSTRIES, INC. EXECUTIVE SAVINGS PLAN (the "Plan") pursuant to the terms and conditions of such Plan contained in the Plan document adopted by NATIONAL SERVICE INDUSTRIES, INC. ("Company"), all of which terms and conditions are incorporated herein by reference. I. BONUS DEFERRAL ELECTION a. Bonus Deferral: I hereby elect to defer the amount of my Bonus indicated below for the Company's Fiscal Year commencing September 1, ____: (indicate Fiscal Year for which this election is effective). _____% of my Bonus $_____ of my Bonus (if my Bonus is less than this amount, 100% of my Bonus will be deferred). _____% of my Bonus in excess of $ Other b. Deferral Limitation: Notwithstanding my election in this Section I, I understand that my annual deferral cannot be less than $1,000 nor exceed 100% of my Bonus for the Fiscal Year and, that in the event my election does not satisfy these limitations, the Plan Administrator will adjust my election in an appropriate manner. II. Election Not To Participate I hereby elect not to defer any portion of my Bonus for the Company's Fiscal Year commencing September 1, ____: (indicate Fiscal Year). 21 Page 60 Exhibit 10(iii)A(s) III. BENEFICIARY DESIGNATION I designate the following person(s) as Primary and Contingent Beneficiaries under the Plan: Primary Beneficiary: ______________________ __________________ __________________ Name % Benefit Relationship ______________________ __________________ __________________ Name % Benefit Relationship ______________________ __________________ __________________ Name % Benefit Relationship Contingent Beneficiary(s): (will only receive benefits if none of the Primary Beneficiary(ies) survives the Participant) ______________________ __________________ __________________ Name % Benefit Relationship ______________________ __________________ __________________ Name % Benefit Relationship ______________________ __________________ __________________ Name % Benefit Relationship III. SIGNATURE I retain the right, at any time, to change the Beneficiary designation in Section III above by giving written notice of such change to the Plan Administrator and to make such other changes to this Election Form as may be permitted by the Plan. I hereby agree to be bound by all of the terms and conditions of the Plan, as it may be amended from time to time. Dated: ____________________ ___________________________ S.S.N. __________________ Received By Company: _______________________ __________________ Signature Date EX-10 7 MANAGEMENT COMPENSATION AND INCENTIVE PLAN 1 Page 61 Exhibit 10(iii)A(t) NATIONAL SERVICE INDUSTRIES, INC. MANAGEMENT COMPENSATION AND INCENTIVE PLAN Effective as of September 1, 1994 1. ESTABLISHMENT AND EFFECTIVE DATE OF PLAN National Service Industries, Inc. (the "Corporation") hereby adopts the National Service Industries, Inc. Management Compensation and Incentive Plan (the "Plan") for its executive officers and certain other executives of the Corporation, its Divisions and affiliates who are in management positions designated as eligible for participation by the Executive Resource and Nominating Committee (the "Committee") of the Board of Directors of the Corporation or its designee. The Plan shall be effective on September 1, 1994 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 1999. 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 (a) "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). (b) "Board of Directors" means the Board of Directors of the Corporation. (c) "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 (ii) The individuals who, as of September 1, 1994, are members of the Board of Directors (the "Incumbent Board"), cease for any reason to constitute at least twothirds 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 twothirds 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. (d) "Chief Executive Officer" means the chief executive officer of the Corporation, unless otherwise specified. 2 Page 62 Exhibit 10(iii)A(t) (e) "Code" means the Internal Revenue Code of 1986, as amended. (f) "Committee" means the Executive Resource and Nominating Committee of the Board of Directors or any other committee designated by the Board of Directors which is responsible for administering the Plan. (g) "Corporation" means National Service Industries, Inc. and its successors. (h) "Division" means a separate business operating unit of the Corporation with respect to which separate performance goals are established hereunder. (i) "Incentive Award" or "Award" means the bonus awarded to a Participant under the terms of the Plan. (j) "Maximum Award" means the maximum percentage of Base Annual Salary which may be paid based upon the Relative Performance during the Plan Year. (k) "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. (l) "Participant" means an employee of the Corporation, a Division or an affiliate who is designated by the Committee to participate in the Plan. (m) "Personal Performance Goals" means the goals established for each Participant each year to improve the effectiveness of the Participant's area of responsibility as well as the Corporation as a whole. (n) "Plan Rules" means the guidelines established annually by the Committee pursuant to Section 4, subject to ratification by the Board of Directors. (o) "Plan Year" means the twelve month period which is the same as the Corporation's fiscal year. The initial Plan Year shall be September 1, 1994 through August 31, 1995. (p) "Relative Performance" means the extent to which the Corporation, or designated Division, as applicable, achieves the performance measurement criteria set forth in the Plan Rules. (q) "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. (r) "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 8. The Committee will have authority to establish Plan Rules with respect to the following matters, subject to the right of the Board of Directors to ratify such Plan Rules: (a) the employees who are to become Participants in the Plan; (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) performance targets and the measurement criteria to be used in determining the Corporation's or a Division's Relative Performance, which will include one or more of the following, as determined by the Committee each year: net income, earnings per share, return on equity, return on assets (or net assets), profit before taxes, market value of the Corporation's stock, and total shareholder 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 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. 3 Page 63 Exhibit 10(iii)A(t) 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 Divisions 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. 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 information prepared by the Corporation's finance department. 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, including gains and losses resulting from divestitures, currency fluctuations or changes in accounting, which are distortive of results year over 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. 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 a Division 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 a Division's performance is below the performance thresholds for the Plan Year and the Incentive Awards are reduced or cancelled, the Committee may in its discretion grant 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 $1.5 million. 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, a division 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), partial Incentive Awards may be authorized by the Committee to be paid to Participants (or their beneficiaries) who are terminated without cause 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. 4 Page 64 Exhibit 10(iii)A(t) 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 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 Incentive Awards 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. 9. BENEFICIARY 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 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. EX-11 8 COMPUTATION OF NET INCOME PER SHARE 1 Page 65 Exhibit 11 NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES COMPUTATIONS OF NET INCOME PER SHARE OF COMMON STOCK (In thousands, except per-share data)
Years Ended August 31 1994 1993 Primary: Weighted Average Number of Shares (determined on a monthly basis) 49,547 49,556 Net Income $ 82,698 $ 75,116 Primary Earnings per Share $1.67 $1.52 Fully Diluted: Weighted Average Number of Shares Outstanding 49,547 49,556 Additional Shares Assuming Exercise of Options: Options exercised 707 545 Treasury stock purchased with proceeds (619) (478) Average Common Shares Outstanding (as adjusted) 49,635 49,623 Net Income $ 82,698 $ 75,116 Fully Diluted Earnings per Share $1.67 $1.51
EX-13 9 1994 ANNUAL REPORT INCORPORATED BY REFERENCE 1 Page 66 Exhibit 13 Consolidated Balance Sheets August 31 (In thousands, except share data) 1994 1993 Assets Current Assets: Cash and cash equivalents $ 58,619 $ 15,853 Short-term investments 2,579 4,776 Receivables, less reserves for doubtful accounts of $7,385,000 in 1994 and $7,170,000 in 1993 256,051 249,958 Inventories, at the lower of cost (on a first-in, first-out basis) or market 178,590 171,545 Linens in service, net of amortization 90,037 77,931 Prepaid income taxes 13,473 25,340 Prepayments 8,933 11,513 Total Current Assets 608,282 556,916 Property, Plant, and Equipment, at cost: Land 32,237 33,303 Buildings and leasehold improvements 186,929 190,276 Machinery and equipment 507,408 500,459 Total Property, Plant, and Equipment 726,574 724,038 Less-Accumulated depreciation and amortization 378,262 358,853 Property, Plant, and Equipment-net 348,312 365,185 Other Assets: Goodwill and other intangibles 112,286 127,387 Other 37,876 38,025 Total Other Assets 150,162 165,412 Total Assets $1,106,756 $1,087,513 Liabilities and Stockholders' Equity Current Liabilities: Current maturities of long-term debt $ 667 $ 1,792 Notes payable 5,098 4,404 Accounts payable 81,969 85,505 Accrued salaries, commissions, and bonuses 42,624 37,103 Self insurance reserves 77,680 71,888 Other accrued liabilities 42,716 42,981 Total Current Liabilities 250,754 243,673 Long-Term Debt, less current maturities 26,863 28,418 Deferred Income Taxes 78,814 84,289 Other Long-Term Liabilities 22,940 27,110 Stockholders' Equity: Series A participating preferred stock, $.05 stated value, 500,000 shares authorized, none issued Preferred stock, no par value, 500,000 shares authorized, none issued Common stock, $1 par value, 80,000,000 shares authorized, 57,918,978 shares issued in 1994 and 1993 57,919 57,919 Paid-in capital 7,684 7,299 Retained earnings 705,504 673,399 771,107 738,617 Less- Treasury stock, at cost (8,678,666 shares in 1994 and 8,357,539 shares in 1993) 43,722 34,594 Total Stockholders' Equity 727,385 704,023 Total Liabilities and Stockholders' Equity $1,106,756 $1,087,513 The accompanying notes to consolidated financial statements are an integral part of these balance sheets. Page 67 Exhibit 13 Consolidated Statements of Income Years Ended August 31 (In thousands) 1994 1993 1992 Sales and Service Revenues: Net sales of products $1,337,410 $1,257,906 $1,189,684 Service revenues 544,454 546,916 444,127 Total Revenues 1,881,864 1,804,822 1,633,811 Costs and Expenses: Cost of products sold 875,055 832,264 810,552 Cost of services 286,519 281,551 236,474 Selling and administrative expenses 577,291 557,011 462,653 Interest expense 3,668 4,961 2,690 Other expense, net 7,133 9,519 4,534 Total Costs and Expenses 1,749,666 1,685,306 1,516,903 Income before Provision for Income Taxes 132,198 119,516 116,908 Provision for Income Taxes 49,500 44,400 42,800 Net Income $ 82,698 $ 75,116 $ 74,108 Earnings per Share (in dollars) $ 1.67 $ 1.52 $ 1.50 Weighted Average Number of Shares Outstanding 49,547 49,556 49,539 Consolidated Statements of Stockholders' Equity Common Paid-in Retained Treasury Performance Stock Capital Earnings Stock Shares Total (In thousands, except per-share data) Balance August 31, 1991 $57,919 $ 7,631 $630,309 $(33,734) $(1,558) $660,567 Return of stock issued under long-term incentive program(1) - (1,300) - (258) 1,558 - Adjustment of treasury stock issued in connection with acquisition(2) - (18) - (3) - (21) Net income - - 74,108 - - 74,108 Cash dividends of $.99 per share paid on common stock - - (49,105) - - (49,105) Adjustment to recognize net increase in pension liability - - (1,721) - - (1,721) Foreign currency translation adjustment - - (874) - - (874) Balance August 31, 1992 57,919 6,313 652,717 (33,995) - 682,954 Treasury stock purchased(3) - - - (837) - (837) Stock options exercised(4) - 1,003 - 241 - 1,244 Adjustment of treasury stock issued in connection with acquisition(5) - (17) - (3) - (20) Net income - - 75,116 - - 75,116 Cash dividends of $1.03 per share paid on common stock - - (51,041) - - (51,041) Adjustment to recognize net increase in pension liability - - (411) - - (411) Foreign currency translation adjustment - - (2,982) - - (2,982) Balance August 31, 1993 57,919 7,299 673,399 (34,594) - 704,023 Treasury stock purchased(6) - - - (27) - (27) Stock options exercised(7) - 385 - 90 - 475 Treasury stock acquired in connection with divestiture(8) - - - (9,191) - (9,191) Net income - - 82,698 - - 82,698 Cash dividends of $1.07 per share paid on common stock - - 53,042) - - (53,042) Adjustment to recognize net decrease in pension liability - - 2,203 - - 2,203 Foreign currency translation adjustment - - 246 - - 246 Balance August 31, 1994 $57,919 $ 7,684 $705,504 $(43,722) $ - $727,385 (1)63,612 shares. (2)748 shares. (3)34,100 shares. (4)58,359 shares. (5)723 shares. (6)992 shares. (7)21,705 shares. (8)341,840 shares. The accompanying notes to consolidated financial statements are an integral part of these statements. Page 68 Exhibit 13 Consolidated Statements of Cash Flows Years Ended August 31 (In thousands) 1994 1993 1992 Cash Provided by (Used for) Operating Activities Net income $ 82,698 $ 75,116 $ 74,108 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 60,548 62,097 53,816 Provision for losses on accounts receivable 2,804 3,300 3,398 Gain on the sale of property, plant, and equipment (76) (1,153) (143) Gain on the sale of business (2,249) (1,379) - Provision for deferred income taxes (1,600) (4,363) (4,506) Change in assets and liabilities net of effect of acquisitions and sale of business- Receivables (8,425) (17,544) (7,934) Inventories and linens in service, net (23,095) (22,722) 17,761 Prepaid income taxes 11,867 9,698 (6,923) Prepayments and other 4,667 (4,037) (459) Accounts payable and accrued liabilities 10,542 3,923 (31) Net Cash Provided by Operating Activities 137,681 102,936 129,087 Cash Provided by (Used for) Investing Activities Change in short-term investments 2,197 3,736 5,551 Purchases of property, plant, and equipment (42,517) (35,513) (43,456) Sale of property, plant, and equipment 4,552 4,399 7,067 Sale of business 2,395 2,558 - Acquisitions (569) (97,267) (9,242) Change in other assets 20 (7,179) (12,904) Net Cash Used for Investing Activities (33,922) (129,266) (52,984) Cash Provided by (Used for) Financing Activities Repayment of long-term debt (2,680) (2,521) (3,949) Recovery of investment in tax benefits 2,080 1,820 2,043 Deferred income taxes from investment in tax benefits (3,875) (3,070) (3,148) Issuance of treasury stock, net 448 407 - Change in other long-term liabilities (4,170) (1,567) 6,547 Cash dividends paid (53,042) (51,041) (49,105) Net Cash Used for Financing Activities (61,239) (55,972) (47,612) Effect of Exchange Rate Changes on Cash 246 (2,982) (874) Net Change in Cash and Cash Equivalents 42,766 (85,284) 27,617 Cash and Cash Equivalents at Beginning of Year 15,853 101,137 73,520 Cash and Cash Equivalents at End of Year $ 58,619 $ 15,853 $101,137 Supplemental Cash Flow Information Income taxes paid during the year $ 41,584 $ 35,620 $ 51,142 Interest paid during the year 4,030 5,925 4,971 Noncash Investing and Financing Activities Treasury stock returned for contingent performance share grants under long-term incentive program $ - $ - $ (258) Noncash aspects of divestitures- Liabilities removed $ (2,442) $ - $ - Treasury stock acquired (9,191) - - Noncash aspects of acquisitions- Liabilities assumed or incurred $ - $ 31,594 $ 12,997 Treasury stock returned - (20) (21) The accompanying notes to consolidated financial statements are an integral part of these statements. Page 69 Exhibit 13 Notes to Consolidated Financial Statements NOTE 1: Summary of Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the company and all subsidiaries after elimination of significant intercompany transactions and accounts. Cash, Cash Equivalents, and Short-Term Investments Cash in excess of daily requirements is invested in time deposits and marketable securities, consisting primarily of tax exempt variable rate demand notes, included in the balance sheet at the lower of cost or market value. For financial statement purposes, the company considers time deposits and marketable securities purchased with an original maturity of three months or less to be cash equivalents. Investments purchased with a maturity of more than three months are considered short-term investments. At August 31, 1994 and 1993, the carrying amounts of short-term investments equal fair value. Inventories and Linens in Service Inventories are valued at the lower of cost (on a first-in, first-out basis) or market and consisted of the following at August 31, 1994 and 1993: (In thousands) 1994 1993 Raw materials and supplies $ 72,677 $ 77,911 Work in progress 9,918 11,269 Finished goods 95,995 82,365 $178,590 $171,545 Linens in service are recorded at cost and are amortized over their estimated useful lives. Goodwill and Other Intangibles Goodwill of $3,460,000 was recognized in connection with a 1969 acquisition and is not being amortized. Remaining amounts of goodwill ($47,102,000 in 1994 and $48,284,000 in 1993) and other intangible assets are being amortized on a straight-line basis over various periods up to 40 years. The company recorded $54,235,000 of intangibles related to acquisitions in 1993 (Note 7). Depreciation For financial reporting purposes, depreciation is determined principally on a straight-line basis using estimated useful lives of plant and equipment (20 to 45 years for buildings and 3 to 16 years for machinery and equipment) while accelerated depreciation methods are used for income tax purposes. Leasehold improvements are amortized over the life of the lease. Foreign Currency Translation The functional currency for the company's foreign operations is the local currency. The translation of foreign currencies into U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. The gains or losses resulting from the translation are included in retained earnings and are excluded from net income. Gains or losses resulting from foreign currency transactions are included in "Other expense, net" in the consolidated statements of income and amounted to losses of $379,000 in 1994, $863,000 in 1993, and $430,000 in 1992. Postretirement Healthcare and Life Insurance Benefits The company's retiree medical plans are financed entirely by retiree contributions; therefore, the company has no liability in connection with them. Several programs provide limited retiree life insurance benefits. The liability for these plans is not significant. Pension and Profit Sharing Plans The company has several pension plans covering hourly and salaried employees. Benefits paid under these plans are based generally on employees' years of service and/or compensation during the final years of employment. The company makes annual contributions to the plans to the extent indicated by actuarial valuations. Plan assets are invested primarily in equity and fixed income securities. Net pension (income) cost for 1994, 1993, and 1992 included the following components: (In thousands) 1994 1993 1992 Service cost of benefits earned during the period $ 2,466 $ 2,652 $ 1,393 Interest cost on projected benefit obligation 7,262 7,165 6,780 Return on plan assets (1,929) (8,198) (7,648) Net amortization of transition amounts (8,215) (1,217) (897) Net pension (income) cost $ (416) $ 402 $ (372) Page 70 Exhibit 13 Notes to Consolidated Financial Statements The following schedule reconciles the funded status of the plans as of June 1, 1994, with amounts reported in the company's balance sheet at August 31, 1994: Plan Accumulated Assets Benefit Exceed Obligation Accumulated Exceeds Benefit Plan (In thousands) Obligation Assets Actuarial present value of benefit obligations as of June 1, 1994: Vested $ (76,845) $(3,861) Nonvested (6,036) (77) Accumulated benefit obligation (82,881) (3,938) Effect of projected salary increases (5,787) (1,523) Total projected benefit obligation (88,668) (5,461) Fair value of plan assets 106,031 - Plan assets greater (less) than projected benefit obligation 17,363 (5,461) Unrecognized transition (asset) liability (12,087) 98 Unrecognized prior service cost obligation 3,058 2,514 Unrecognized net loss (gain) 16,814 (744) Adjustment required to recognize minimum liability - (515) Prepaid (accrued) pension expense at August 31, 1994 $ 25,148 $ (4,108) The discount rate used to determine the projected benefit obligation is 8 percent. The assumed growth rate of compensation is 5.5 percent. The expected long-term rate of return on plan assets is 9.5 percent. The company also has profit sharing and 401(k) plans to which both employees and the company contribute. At August 31, 1994, assets of the 401(k) plans included shares of the company's common stock with a market value of approximately $4,703,000. The company's cost of these plans was $3,133,000 in 1994, $3,031,000 in 1993, and $3,193,000 in 1992. Self Insurance It is the policy of the company to self insure for certain insurable risks consisting primarily of physical loss to property; business interruptions resulting from such loss; and workers' compensation, comprehensive general, and auto liability. Insurance coverage is obtained for catastrophic property and casualty exposures as well as those risks required to be insured by law or contract. Provision for claims under the self-insured program is recorded based on the company's estimate of the aggregate liability for claims incurred. NOTE 2: Long-Term Debt and Lines of Credit Long-term debt at August 31, 1994 and 1993, consisted of the following: (In thousands) 1994 1993 70% to 13.0% mortgage notes, payable in installments through 2011 (secured in part by property, plant, and equipment having a net book value of $2,800,000 at August 31, 1994) $ 671 $ 1,930 2.55% to 6.625% other notes, payable in installments through 2021 26,859 28,280 27,530 30,210 Less-Amounts payable within one year included in current liabilities 667 1,792 $26,863 $28,418 The annual maturities of long-term debt are as follows: (In thousands) Amount Year Ending August 31 1995 $ 667 1996 88 1997 52 1998 5,497 1999 23 Later years 21,203 $27,530 The company has complimentary lines of credit totaling $124,000,000 of which $82,000,000 has been provided domestically and $42,000,000 is available on a multi-currency basis primarily from a European bank. At August 31, 1994 the company had foreign currency short-term bank borrowings equivalent to $5,098,000 at an average foreign currency interest rate of 5.9%. Long-term debt recorded in the accompanying balance sheets approximates fair value based on the borrowing rates currently available to the company for bank loans with similar terms and average maturities. Page 71 Exhibit 13 Notes to Consolidated Financial Statements NOTE 3: Common Stock and Related Matters In 1988, the company adopted a shareholder rights plan under which one preferred stock purchase right is presently attached to and trades with each outstanding share of the company's common stock. The rights become exercisable and transferable apart from the common stock ten days after a person or group, without the company's consent, acquires beneficial ownership of, or the right to obtain beneficial ownership of, 20 percent or more of the company's common stock or announces or commences a tender offer or exchange offer that could result in 20 percent ownership (unless such date is extended by the Board of Directors). Once exercisable, each right entitles the holder to purchase one one-hundredth share of Series A Participating Preferred Stock at an exercise price of $80, subject to adjustment to prevent dilution. The rights have no voting power and, until exercised, no dilutive effect on net income per common share. The rights expire on May 19, 1998, and are redeemable under certain circumstances. If a person acquires 20 percent ownership, except in an offer approved by the company under the plan, each right not owned by the acquirer or related parties will entitle its holder to purchase, at the right's exercise price, common stock or common stock equivalents having a market value immediately prior to the triggering of the right of twice that exercise price. In addition, after an acquirer obtains 20 percent ownership, if the company is involved in certain mergers, business combinations, or asset sales, each right not owned by the acquirer or related persons will entitle its holder to purchase, at the right's exercise price, shares of common stock of the other party to the transaction having a market value immediately prior to the triggering of the right of twice that exercise price. The company has 1,000,000 shares of preferred stock authorized, 500,000 of which have been reserved for issuance under the shareholder rights plan. No shares of preferred stock had been issued at August 31, 1994. In 1990, the stockholders approved the National Service Industries, Inc. Long-Term Incentive Program for the benefit of officers and other key employees. There were 1,750,000 treasury shares reserved for issuance under the program. The employee stock options granted under the program become exercisable in four equal annual installments beginning one year from the date of the grant and expire at the end of ten years. In 1993, the stockholders approved the National Service Industries, Inc. 1992 Nonemployee Directors' Stock Option Plan under which a maximum of 100,000 shares were reserved for issuance. The shares become exercisable one year from the date of the grant. Stock option transactions for the stock option plans and stock option agreements during the years ended August 31, 1994, 1993, and 1992 were as follows: (In thousands) 1994 1993 1992 Options outstanding at September 1 680,139 473,415 339,831 Granted 214,700 365,900 164,744 Exercised 21,705 58,359 - Canceled 52,382 100,817 31,160 Options outstanding at August 31 820,752 680,139 473,415 Option price range at $19.75- $19.75- $19.75- August 31 $29.00 $29.00 $29.00 Options exercisable at August 31 316,024 176,625 111,943 Options available for grant at August 31 949,184 1,111,502 1,276,585 Potential dilution of earnings per share applicable to these stock options is not significant. NOTE 4: Leases The company leases certain of its buildings and equipment under noncancelable lease agreements. Minimum lease payments under noncancelable leases for years subsequent to August 31, 1994, are as follows: (In thousands) Amount Year Ending August 31 1995 $ 9,354 1996 7,666 1997 5,613 1998 3,856 1999 2,510 Later years 5,390 $34,389 Total rent expense was $10,585,000 in 1994, $11,230,000 in 1993, and $8,953,000 in 1992. Page 72 Exhibit 13 NOTE 5: Quarterly Financial Data (Unaudited) (In thousands, except earnings per share) Sales and Income Service Gross before Net Earnings Revenues Profit Taxes Income per Share 1994 1st Quarter $459,900 $175,584 $30,803 $19,172 $.39 2nd Quarter 439,337 166,082 26,149 16,273 .33 3rd Quarter 481,001 187,031 36,849 22,928 .46 4th Quarter 501,626 191,593 38,397 24,325 .49 1993 1st Quarter $434,341 $168,946 $29,358 $18,586 $.38 2nd Quarter 426,993 161,897 23,181 14,634 .30 3rd Quarter 459,964 177,949 32,702 20,511 .41 4th Quarter 483,524 182,215 34,275 21,385 .43 NOTE 6: Income Taxes Income taxes are reconciled with the Federal statutory rate as follows: (In thousands) 1994 1993 1992 Federal income tax computed at statutory rate $46,269 $41,433 $39,748 Increase (decrease) in taxes: State income tax, net of Federal income tax benefit 4,693 4,230 3,358 Tax exempt interest (330) (495) (1,184) Other, net (1,132) (768) 878 $49,500 $44,400 $42,800 Provisions for income taxes include state income and franchise taxes of $7,220,000 in 1994, $6,478,000 in 1993, and $5,088,000 in 1992. In 1994, 1993, and 1992 income before taxes included $952,000, $5,149,000, and $413,000, respectively, of losses generated by the company's foreign operations. The following summarizes the components of income tax expense: (In thousands) 1994 1993 1992 Provision for current taxes $47,473 $41,710 $44,763 Provision (credit) for deferred taxes: Current: Tax effect of linen book amortization less than tax amortization 3,339 9,877 3,700 Restructuring costs 365 3,025 4,028 Insurance costs (1,745) (3,452) (4,182) Other timing differences 1,668 (2,397) (1,003) Noncurrent- Other (primarily tax effect of differences between book depreciation and tax depreciation on fixed assets) (1,600) (4,363) (4,506) $49,500 $44,400 $42,800 Components of net deferred income tax liability at August 31, 1994 and 1993 include: (In thousands) 1994 1993 Deferred income taxes: Safe harbor lease $ 47,203 $ 51,078 Depreciation 43,443 42,511 Self insurance (17,309) (16,108) Other 5,477 6,808 78,814 84,289 Prepaid income taxes: Self insurance (11,539) (9,400) Deferred compensation, bonuses, etc. (3,700) (5,484) Other 1,766 (10,456) (13,473) (25,340) Net deferred tax liability $ 65,341 $ 58,949 Page 73 Exhibit 13 Notes to Consolidated Financial Statements NOTE 7: Divestitures and Acquisitions Effective August 31, 1994, the company sold its Marketing Services Division. A small gain resulted from the transaction as the company received approximately 342,000 of its common shares in return for those assets transferred to the purchasers. The Division had sales of approximately $32,000,000 in 1994 and an immaterial operating loss. Effective September 1, 1992, the company acquired Initial Services Investments, Inc., an industrial uniform and dust control business known as Initial USA. Initial was included in the results of operations of the Textile Rental Division for the entire 1993 fiscal year. Effective September 30, 1992, the company acquired Graham International, a privately held, European specialty chemical business. Graham manufactures in the Netherlands for industrial and institutional specialty chemical markets in France, Italy, Belgium, the Netherlands, and Switzerland. Graham became a part of Zep Manufacturing Company and the Chemical segment. Also in September, 1992, the Chemical Division acquired Kleen Canada, Inc., a Canadian manufacturer of specialty chemicals. The operating results of Graham and Kleen were included in the Chemical segment beginning in October, 1992. These and several small acquisitions, all of which were accounted for by the purchase method, brought total 1993 acquisition spending to $97 million. 1993 results included revenues of approximately $162.5 million and pretax earnings of approximately $5.2 million attributable to the 1993 acquisitions and to Associated Textile Rental Services acquired at fiscal 1992 year end. NOTE 8: Business Segment Information Depreci- Capital ation Expendi- and tures Sales and Identi- Amorti- Including Service Operating fiable zation Acquisi- (In thousands) Revenues Profit(Loss) Assets Expense tions 1994 Lighting Equipment $ 763,592 $ 50,092 $ 323,335 $15,460 $13,183 Textile Rental 544,454 48,840 432,994 31,656 20,986 Chemical 332,298 35,368 168,956 6,392 5,315 Other 241,520 8,822 75,580 5,792 2,695 1,881,864 143,122 1,000,865 59,300 42,179 Corporate(1) (7,256) 105,891 1,248 339 Interest Expense (3,668) Total $1,881,864 $132,198 $1,106,756 $60,548 $42,518 1993 Lighting Equipment $ 691,946 $ 38,623 $ 298,575 $16,823 $10,193 Textile Rental 546,916 49,096 433,408 31,134 55,015 Chemical 318,098 33,280 173,175 6,499 12,743 Other 247,862 10,275 104,892 6,357 4,048 1,804,822 131,274 1,010,050 60,813 81,999 Corporate(1) (6,797) 77,463 1,284 172 Interest Expense (4,961) Total $1,804,822 $119,516 $1,087,513 $62,097 $82,171 1992 Lighting Equipment $ 683,546 $ 35,355 $ 280,205 $18,275 $ 9,959 Textile Rental 444,127 42,781 343,332 24,140 28,156 Chemical 253,947 33,556 112,719 4,260 4,607 Other 252,191 13,581 101,564 6,238 5,085 1,633,811 125,273 837,820 52,913 47,807 Corporate(1) (5,675) 204,592 903 1,982 Interest Expense (2,690) Total $1,633,811 $116,908 $1,042,412 $53,816 $49,789 (1)Operating profit (loss) includes income on short-term investments. Page 74 Exhibit 13 Report of Management The management of National Service Industries, Inc. is responsible for the integrity and objectivity of the financial information in this annual report. These financial statements are prepared in conformity with generally accepted accounting principles, using informed judgments and estimates where appropriate. The information in other sections of this report is consistent with the financial statements. The company maintains a system of internal controls and accounting policies and procedures designed to provide reasonable assurance that assets are safeguarded and transactions are executed and recorded in accordance with management's authorization. The audit committee of the Board of Directors, composed entirely of outside directors, is responsible for monitoring the company's accounting and reporting practices. The audit committee meets regularly with management, the internal auditors, and the independent accountants to review the work of each and to assure that each performs its responsibilities. Both the internal auditors and Arthur Andersen LLP have unrestricted access to the audit committee allowing open discussion, without management's presence, on the quality of financial reporting and the adequacy of internal accounting controls. D. Raymond Riddle J. Robert Hipps John A. Bostater Chairman and Senior Vice President, Vice President and Chief Executive Officer Finance Controller Report of Independent Public Accountants To the Stockholders of National Service Industries, Inc.: We have audited the accompanying consolidated balance sheets of National Service Industries, Inc. (a Delaware corporation) and subsidiaries as of August 31, 1994 and 1993 and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended August 31, 1994. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of National Service Industries, Inc. and subsidiaries as of August 31, 1994 and 1993 and the results of their operations and their cash flows for each of the three years in the period ended August 31, 1994 in conformity with generally accepted accounting principles. Arthur Andersen LLP Atlanta, Georgia October 20, 1994 Page 75 Exhibit 13 Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition National Service Industries maintained a strong financial position as it completed fiscal 1994. Net working capital increased to $357.5 million from $313.2 million at August 31, 1993, and the current ratio was 2.4, compared with 2.3 at last year end. Cash and short-term investments were $61.2 million, up from $20.6 million at the prior year end. During 1994, the company invested $43.1 million in capital expenditures and acquisitions. Long-term liabilities were 6.4 percent of total capitalization, down from 7.3 percent at August 31, 1993. Cash provided by operations rose to $137.7 million from $102.9 million in 1993 and $129.1 million in 1992. The improvement in 1994 was largely due to a reduced rate of investment in accounts receivable, the reduction of prepayments, and lower charges against insurance reserves due to improved claims experience. The decrease in 1993 resulted primarily from higher investment in accounts receivable and inventories. Capital expenditures, exclusive of acquisition spending, were $42.5 million in 1994, $35.5 million in 1993, and $43.5 million in 1992. Current-year spending was primarily the result of facilities and manufacturing process improvements in the Lighting Equipment Division, facilities additions and information systems enhancements in the Chemical Division, and wastewater compliance projects and fleet upgrades in the Textile Rental Division. Prior-year expenditures were attributable to cost reduction spending in many divisions, information systems enhancements in the Lighting Equipment Division, capacity expansion in the Chemical Division, and fleet expansion in the Textile Rental Division. Cash payments in connection with acquisitions totaled $.6 million in 1994, $97.3 million in 1993, and $9.2 million in 1992. Effective September 1, 1992, the company acquired Initial Services Investments, Inc., an industrial uniform and dust control business known as Initial USA. Initial was included in the results of operations of National Uniform Service, a business unit of the Textile Rental Division, for the entire 1993 fiscal year. Effective September 30, 1992, the company acquired Graham International, a privately held, European specialty chemical business. Graham manufactures in the Netherlands for industrial and institutional specialty chemical markets in France, Italy, Belgium, the Netherlands, and Switzerland. Graham became part of Zep Manufacturing Company and the Chemical segment. Also in September, 1992, the Chemical Division acquired Kleen Canada, Inc., a Canadian manufacturer of specialty chemicals. The operating results of Graham and Kleen were included in the Chemical segment beginning in October, 1992. In June, 1993, the Textile Rental Division acquired the linen supply business of Heritage Linen Service, Inc. in Hickory, North Carolina. The effect of the 1993 acquisitions on the consolidated income statements is further discussed under "Results of Operations." Dividend payments totaled $53.0 million, or $1.07 per share, in 1994, compared with $51.0 million, or $1.03 per share, in 1993, and $49.1 million, or 99 cents per share, in 1992. The fiscal 1994 dividend of $1.07 per share was a 3.9 percent increase. For the periods presented, capital expenditures, working capital needs, dividends, and acquisitions were financed primarily with internally generated funds, supplemented by short-term borrowings in the European market. The Initial acquisition was a cash transaction. The Graham acquisition in Europe was funded primarily through short-term debt financing, which was repaid during the remainder of the 1993 fiscal year. Contractual commitments for capital and acquisition spending for fiscal 1995 total $12.1 million. The company expects actual capital expenditures to be somewhat higher than levels of recent years. Current liquid assets and internally generated funds are expected to be more than adequate to meet anticipated cash requirements for the next twelve months, although some interim borrowings might be incurred to meet short-term needs. The company has complimentary lines of credit totaling $124 million, of which $82 million has been provided domestically and $42 million is available on a multi- currency basis primarily from a European bank. Results of Operations For the fiscal year ended August 31, 1994, revenues moved ahead 4.3 percent to $1.88 billion from $1.80 billion in 1993. The revenue increase was largely the result of volume gains in the Lighting Equipment and Chemical segments. Fiscal 1993 revenues rose 10.5 percent from 1992's $1.63 billion due Page 76 Exhibit 13 primarily to volume gains in the Lighting Equipment, Textile Rental, and Chemical segments. Net income for fiscal 1994 advanced 10.1 percent to $82.7 million, or $1.67 per share. For fiscal 1993, net income reached $75.1 million, or $1.52 per share, a 1.4 percent increase over the $74.1 million posted in 1992. Lighting Equipment Division revenues for 1994 grew 10.4 percent to $764 million from $692 million in 1993. 1993 revenues were a 1.2 percent increase over 1992. Unit sales increases that began late in fiscal 1993 continued through 1994 and accounted for the improvement in both years. Operating profit grew 29.7 percent to 6.6 percent of revenues, compared with 5.6 percent in 1993, and 5.2 percent in 1992. For 1994, profit improvements were largely the result of higher unit volumes and cost savings. In 1993, previously implemented manufacturing efficiencies were augmented by the closing of the division's 130,000 square foot facility in Rancho Cucamonga, California. This action took advantage of excess capacity by shifting production to plants in Crawfordsville, Indiana and Louisville, Kentucky and further reduced manufacturing costs. Revenues of the Textile Rental Division were $544 million in 1994, compared with $547 million in 1993 and $444 million in 1992. Pricing gains in 1994 were offset by declining volumes, particularly in the fine dining and hospital markets. 1993 revenues improved on the strength of the acquisitions of Initial USA early in 1993 and Associated Textile Rental Services, Inc. at fiscal 1992 year end. The acquisitions provided revenues of $109 million in 1993. Operating income was 9.0 percent of revenues in 1994 and 1993, compared with 9.6 percent in 1992. Merchandise costs as a percentage of revenues grew slightly in 1994, while administrative expenses declined. For both 1994 and 1993 costs related to acquisitions continued to take a higher percentage of revenues. Operating margins in 1993 for the two acquired companies were 6.3 percent of related revenues. Chemical Division revenues rose 4.5 percent to $332 million from $318 million in 1993, which was a 25.3 percent gain from 1992. Volume gains in domestic operations contributed to the improvement in both years. In 1993, the European and Canadian acquisitions accounted for $53.2 million of the gain. Operating profit was 10.6 percent of revenues in 1994 and 10.5 percent in 1993, down from 13.2 percent in 1992. European and Canadian operating margins, although improved in 1994, fell short of those achieved in the U.S. The European units' loss of $1.8 million for 1993 was significantly reduced in 1994. NSI's other businesses produced revenues of $242 million, down 2.6 percent from $248 million in 1993, which was a 1.7 percent decline from 1992. Operating profit declined to $8.8 million from $10.3 million in 1993 and $13.6 million in 1992. In both years, reduced volumes and pricing pressures experienced by the Insulation and Marketing Services divisions more than offset improvements in the Envelope Division. Effective August 31, 1994, NSI sold its Marketing Services Division. A small gain resulted from the transaction as the company received approximately 342,000 of its common shares in return for those assets transferred to the purchasers. The Division had sales of $32 million in 1994 and an immaterial operating loss. Corporate income was lower in both 1994 and 1993 due primarily to the effect of lower short-term investments levels and lower interest rates. Foreign currency exchange rate fluctuations in 1994 and 1993 were progressively less unfavorable than in 1992. 1994 interest expense was less than in 1993 due to reductions in acquisition-related debt. The increase in interest expense for 1993 resulted from the European acquisition. Consolidated income before taxes improved 10.6 percent in 1994 and 2.2 percent in 1993. The corresponding improvement in net income was reduced to 10.1 percent and 1.4 percent, respectively, due to the higher Federal tax rate. The provision for income taxes was 37.4 percent of pretax income in 1994, compared with 37.1 percent in 1993 and 36.6 percent in 1992. The 1994 and 1993 rates were increased as a result of the Omnibus Budget Act of 1993. Changes in the year-to-year effective rates also result from variation in the relative amount of tax exempt income. Outlook The current-year earnings increase of 10.1 percent is indicative of the commitment of each of NSI's operating divisions to the more aggressive plans formulated for fiscal 1994. The momentum established in 1994 should propel earnings forward at double-digit growth rates and produce gains for NSI's stockholders in fiscal 1995 and beyond. Page 77 Exhibit 13 Ten-Year Financial Summary (Dollar amounts in thousands, except per-share data) 1994 1993 1992 Operating Results Net sales of products $1,337,410 $1,257,906 $1,189,684 Service revenues 544,454 546,916 444,127 Total revenues 1,881,864 1,804,822 1,633,811 Cost of products sold 875,055 832,264 810,552 Cost of services 286,519 281,551 236,474 Selling and administrative expenses 577,291 557,011 462,653 Interest expense 3,668 4,961 2,690 Restructuring expense - - - Other income, net 7,133 9,519 4,534 Income before taxes 132,198 119,516 116,908 Income taxes 49,500 44,400 42,800 Net income 82,698 75,116 74,108 Per-Share Data(1) Net income $ 1.67 $ 1.52 $ 1.50 Cash dividends 1.07 1.03 .99 Stockholders' equity 14.77 14.21 13.79 Financial Ratios Current ratio 2.4 2.3 2.7 Net income as a percent of sales 4.4% 4.2% 4.5% Return on average stockholders' equity 11.6% 10.8% 11.0% Dividends as a percent of current year earnings 64.1% 67.9% 66.3% Long-term debt and other long-term liabilities as a percent of total capitalization 6.4% 7.3% 7.7% Other Data Net working capital $ 357,528 $ 313,243 $ 357,759 Increase (decrease) in: Cash and cash equivalents 42,766 (85,284) 27,617 Short-term investments (2,197) (3,736) (5,551 Capital expenditures (including acquisitions) 42,518 82,171 49,789 Depreciation and amortization 60,548 62,097 53,816 Total assets 1,106,756 1,087,513 1,042,412 Long-term debt 26,863 28,418 28,359 Deferred income taxes 78,814 84,289 92,654 Other long-term liabilities 22,940 27,110 28,677 Stockholders' equity 727,385 704,023 682,954 Weighted average number of shares outstanding (in thousands )(1) 49,547 49,556 49,539 Shareholders 7,034 7,262 7,554 Associates 22,000 22,200 20,100 Use of Total Revenues Salaries and wages $ 565,859 $ 572,163 $ 502,709 Materials and supplies 783,610 760,551 700,338 Other operating expenses 347,600 299,977 273,330 Restructuring expnse - - - Taxes and licenses 102,097 97,015 83,326 Dividends paid 53,042 51,041 49,105 Retained earnings 29,656 24,075 25,003 $1,881,864 $1,804,822 $1,633,811 (1) Restated to reflect stock splits of 3 for 2 effective January 13, 1987, and 4 for 3 effective January 13, 1986. Page 78 Exhibit 13 1991 1990 1989 1988 1987 1986 1985 $1,164,181 $1,250,833 $1,183,666 $1,093,163 $1,032,145 $ 968,308 $ 887,340 437,534 396,981 355,845 321,025 294,713 314,614 303,865 1,601,715 1,647,814 1,539,511 1,414,188 1,326,858 1,282,922 1,191,205 791,355 832,867 800,385 741,383 690,689 643,936 599,687 240,376 219,673 198,262 179,793 159,019 170,571 167,381 456,903 439,076 397,283 361,970 350,641 340,582 312,665 3,834 3,864 4,963 4,234 4,149 3,999 3,376 63,467 - - - - - - (2,856 (3,381) (9,400) (6,414) (10,030) (3,507) (3,565) 48,636 155,715 148,018 133,222 132,390 127,341 111,661 16,400 56,000 53,300 47,100 56,700 56,000 44,000 32,236 99,715 94,718 86,122 75,690 71,341 67,661 $ .65 $ 2.02 $ 1.92 $ 1.75 $ 1.54 $ 1.45 $ 1.37 .95 .90 .82 .73 .62 .54 .49 13.33 13.68 12.44 11.33 10.31 9.39 8.48 2.8 4.0 4.3 4.4 4.5 4.0 3.9 2.0% 6.1% 6.2% 6.1% 5.7% 5.6% 5.7% 4.8% 15.5% 16.2% 16.2% 15.6% 16.2% 17.1% 146.2% 44.6% 42.6% 41.8% 40.2% 37.0% 35.3% 7.5% 6.1% 5.9% 6.2% 6.2% 6.4% 3.9% $ 351,559 $ 434,092 $ 436,450 $ 426,413 $ 404,886 $ 355,175 $ 301,163 (50,437) 23,433 14,612 (24,786) 16,318 63,315 20,267 12,813 (27,247) (19,633) 35,971 5,160 - - 90,229 82,932 66,491 55,394 45,258 53,968 47,679 50,249 42,821 36,260 31,037 27,333 26,707 22,939 1,012,000 962,136 887,836 825,345 760,318 710,376 617,726 31,373 27,465 20,765 21,391 21,466 21,857 8,577 100,308 100,791 102,798 104,460 104,033 97,783 79,673 22,015 16,067 17,964 15,330 12,042 9,794 8,218 660,567 675,444 612,668 558,160 508,219 462,907 417,958 49,540 49,389 49,255 49,258 49,278 49,280 49,277 7,996 8,248 8,459 8,851 9,164 9,326 8,406 20,900 21,800 20,800 20,400 19,400 19,300 18,700 $ 501,502 $ 491,334 $ 465,522 $ 428,325 $ 399,968 $ 378,993 $ 340,026 683,871 713,310 668,655 616,223 574,179 551,550 536,027 258,919 246,288 219,270 201,478 188,414 194,215 174,538 63,467 - - - - - - 59,889 97,167 91,346 82,040 88,607 86,823 72,953 47,124 44,506 40,389 35,960 30,428 26,410 23,899 (13,057) 55,209 54,329 50,162 45,262 44,931 43,762 $1,601,715 $1,647,814 $1,539,511 $1,414,188 $1,326,858 $1,282,922 $1,191,205 Page 79 Exhibit 13 Directors, Officers, and Division Executives Directors D. Raymond Riddle Chairman of the Board and Chief Executive Officer John L. Clendenin Chairman of the Strategic Planning and Finance Committee; Chairman of Board, President and Chief Executive Officer, BellSouth Corporation Jesse Hill, Jr. Chairman and Chief Executive Officer Atlanta Life Insurance Company Robert M. Holder, Jr. Chairman of the Audit Committee; Chairman of the Board, Holder Corporation Don W. Hubble President and Chief Operating Officer F. Ross Johnson Chairman and Chief Executive Officer, RJM Group, Inc. James C. Kennedy Chairman and Chief Executive Officer, Cox Enterprises, Inc. Donald R. Keough Chairman of the Board, Allen & Company Incorporated Bryan D. Langton Chairman, Chief Executive Officer, and President, Holiday Inns, Inc. David Levy Executive Vice President, Administration and Counsel Bernard Marcus Chairman of the Board and Chief Executive Officer, The Home Depot, Inc. John G. Medlin, Jr. Chairman of the Executive Resource and Nominating Committee; Chairman, Wachovia Corporation Dr. Betty L. Siegel President, Kennesaw State College Chairman Emeritus Erwin Zaban Retired Chairman of the Board Associate Directors Gerald V. Gurbacki President, National Linen Service Harry Maziar President, Zep Manufacturing Company Jim H. McClung President, Lithonia Lighting Company Officers D. Raymond Riddle Chairman of the Board and Chief Executive Officer Don W. Hubble President and Chief Operating Officer David Levy Executive Vice President, Administration and Counsel J. Robert Hipps Senior Vice President, Finance John A. Bostater Vice President and Controller Howard S. Kaplan Vice President, Corporate Development Melissa K. Meder Vice President, Taxes Kenyon W. Murphy Secretary and Assistant Counsel Walter H. Buce Staff Vice President-Risk Management F. Andrew Logue Staff Vice President-Human Resources Robert J. Mello Staff Vice President-Auditing Bruce E. Dunkley, Jr. Assistant Vice President and Assistant Controller-Financial Analysis Helen D. Haines Assistant Vice President and Assistant Controller-Financial Reporting Carol Ellis Morgan Assistant Vice President-Legal and Assistant Secretary Donald A. Hundeby Assistant Vice President-Employee Benefits Margaret Shelfer Assistant Vice President-Taxes William E. Statton Assistant Vice President-Claims Administration W. Russell Watson Assistant Treasurer Division Executives Gerald V. Gurbacki President, National Linen Service Dennis Harris President, North Bros. Co. Lyons B. Joel, Jr. President, Selig Chemical Industries Harry Maziar President, Zep Manufacturing Company Jim H. McClung President, Lithonia Lighting Company J. Randolph Zook President, Atlantic Envelope Company Page 80 Exhibit 13 Executive Offices NSI Center 1420 Peachtree Street, N.E. Atlanta, Georgia 30309 (404) 853-1000 Transfer Agent and Registrar Wachovia Bank and Trust Company, N.A. Corporate Trust Department P.O. Box 3001 Winston-Salem, North Carolina 27102 (800) 633-4236 Listing New York Stock Exchange Independent Public Accountants Arthur Andersen LLP 133 Peachtree Street, N.E. Atlanta, Georgia 30303 (404) 658-1776 Annual Meeting 10:00 a.m., Wednesday, January 4, 1995 High Museum of Art 1280 Peachtree Street, N.E. Atlanta, Georgia Common Share Prices and Dividends per Share Dividends Price per Share Paid High Low per Share 1994 First Quarter $26-1/8 $23-1/8 $.26 Second Quarter 28-3/8 23-1/8 .27 Third Quarter 28-1/4 24-3/4 .27 Fourth Quarter 27-1/2 25-3/8 .27 1993 First Quarter $26-3/8 $23-5/8 $.25 Second Quarter 27-7/8 24-7/8 .26 Third Quarter 27 23-1/2 .26 Fourth Quarter 27 24-1/2 .26 The above common share prices are as quoted on the New York Stock Exchange. Ticker Symbol: NSI The number of shareholders of record of the company's common stock as of September 29, 1994, was 7,034. EX-21 10 LIST OF SUBSIDIARIES 1 Page 81 Exhibit 21 LIST OF SUBSIDIARIES Registrant - National Service Industries, Inc. Registrant owns all of the common stock of the following subsidiaries: State or Other Jurisdiction of Incorporation Subsidiary Principal Location or Organization Corisma Group, Inc. Atlanta, Georgia Georgia Lithonia Lighting Mexico, S.A. de C.V. Monterrey, Nuevo Leon Mexico Lithonia Lighting Products Co. of Arizona Conyers, Georgia Arizona Lithonia Lighting Products Co. of Georgia Conyers, Georgia Georgia Lithonia Lighting Products Co. of Nevada Conyers, Georgia Nevada National St. Louis Redevelopment Corporation Atlanta, Georgia Missouri NSI Holdings, Inc. Montreal, Quebec, Canada Canada NSI Insurance (Bermuda) Ltd. Hamilton, Bermuda Bermuda NSI Inversiones de Mexico, S.A. de C.V. Monterrey, Nuevo Leon Mexico NSI Leasing, Inc. Atlanta, Georgia Delaware Productos Lithonia Lighting de Mexico, S.A. de C.V. Monterrey, Nuevo Leon Mexico Selig Company of Puerto Rico, Inc. Atlanta, Georgia Puerto Rico South Insulation Co., Inc. Atlanta, Georgia Texas I.A. Enterprises, Inc. which owns the Santa Clara, California California stock of- Keplime B.V. Bergen op Zoom, Holland Netherlands Keplime Ltd. London, England United Kingdom ZEP Europe B.V. which owns the Bergen op Zoom, Holland Netherlands stock of- ZEP FRANCE Paris, France France Zep Industries S.A. Paris, France France Resolve S.A. Paris, France France Research Development Industries S.A. Paris, France France Chemical Continental Industries S.A.R.L. Paris, France France Zep Kem Italia S.r.l. Rome, Italy Italy Zep Cerfact S.r.l. Rome, Italy Italy Nobel Spain Madrid, Spain Spain ZEP Belgium S.A. Brussels, Belgium Belgium Research Development Industries S.A. Bern, Switzerland Switzerland Graham International B.V. Bergen op Zoom, Holland Netherlands Kem Europa B.V. Bergen op Zoom, Holland Netherlands Cerfact Europa B.V. Bergen op Zoom, Holland Netherlands Chemical Specialties B.V. Bergen op Zoom, Holland Netherlands NUS, Inc. which owns the stock of- Atlanta, Georgia Delaware NUS Florida, Inc. Atlanta, Georgia Florida Monroe Appearance Corp. Atlanta, Georgia North Carolina The consolidated financial statements include the accounts of all subsidiaries. EX-23 11 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 Page 82 Exhibit 23 Arthur Andersen LLP Atlanta, Georgia CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports dated October 20, 1994, included or incorporated by reference in National Service Industries, Inc. Form 10-K for the year ended August 31, 1994, into the Company's previously filed Registration Statement File Nos. 33-36980, 33-51339, 33-51341, 33-51343, 33-51345, 33-51347, 33-51349, 33-51351, 33-51355 and 33-51357. ARTHUR ANDERSEN LLP November 18, 1994 EX-24 12 POWER OF ATTORNEY 1 Page 83 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1994, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. \s\ D. Raymond Riddle D. Raymond Riddle, Chairman of the Board and Chief Executive Officer, and Director \s\ Don W. Hubble Don W. Hubble, President and Chief Operating Officer, and Director \s\ J. Robert Hipps J. Robert Hipps, Senior Vice President, Finance (Principal Financial and Accounting Officer) \s\ John A. Bostater John A. Bostater, Vice President and Controller \s\ David Levy David Levy, Executive Vice President, Administration and Counsel, and Director Dated: November 8, 1994 Page 84 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1994, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in- fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ John L. Clendenin John L. Clendinen Dated: November 8, 1994 Page 85 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1994, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in- fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Jesse Hill, Jr. Jesse Hill, Jr. Dated: November 8, 1994 Page 86 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1994, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in- fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Robert M. Holder, Jr. Robert M. Holder, Jr. Dated: November 8, 1994 Page 87 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1994, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in- fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ F. Ross Johnson F. Ross Johnson Dated: November 8, 1994 Page 88 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1994, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in- fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ James C. Kennedy James C. Kennedy Dated: November 8, 1994 Page 89 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1994, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in- fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Donald R. Keough Donald R. Keough Dated: November 8, 1994 Page 90 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1994, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in- fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Bryan D. Langton Bryan D. Langton Dated: November 8, 1994 Page 91 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1994, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in- fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Bernard Marcus Bernard Marcus Dated: November 8, 1994 Page 92 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1994, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in- fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ John G. Medlin, Jr. John G. Medlin, Jr. Dated: November 8, 1994 Page 93 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, her true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for her in her name, place, and stead in her capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1994, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in- fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. \s\ Betty L. Siegel Betty L. Siegel Dated: November 8, 1994 Page 94 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints David Levy and J. Robert Hipps, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of National Service Industries, Inc., to file a registrant's annual report on Form 10-K for the fiscal year ended August 31, 1994, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in- fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. /s/ Erwin Zaban Erwin Zaban Dated: November 8, 1994 EX-27 13 ART. 5 FDS FOR FISCAL YEAR 1994
5 Page 95 Exhibit 27 Financial Data Schedules Year Ended August 31, 1994 Persuant to Section 601(c) of Regulation S-K This schedule contains summary financial information extracted from National Service Industries, Inc. consolidated balance sheet as of August 31, 1994 and the consolidated statement of income for the year ended August 31, 1994, and is qualified in its entirety by reference to such financial statements. 12-MOS AUG-31-1994 AUG-31-1994 58,619 2,579 263,436 7,385 178,590 608,282 726,574 378,262 1,106,746 250,754 0 57,919 0 0 713,188 727,385 1,337,410 1,881,864 875,055 1,161,574 584,424 0 3,668 132,198 49,500 82,692 0 0 0 82,698 1.67 1.67
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