-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MtF6PGpJoZIUsb+tVt03pW7FAUwqd1FZ+TGvwx9HGi5ctmlaL3/yFme1P0TqLTYg rbHfvUdFty0LU60lew0B6g== 0000950144-01-510027.txt : 20020413 0000950144-01-510027.hdr.sgml : 20020413 ACCESSION NUMBER: 0000950144-01-510027 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 26 CONFORMED PERIOD OF REPORT: 20011130 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20011214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL SERVICE INDUSTRIES INC CENTRAL INDEX KEY: 0000070538 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 580364900 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03208 FILM NUMBER: 1814136 BUSINESS ADDRESS: STREET 1: 1420 PEACHTREE ST NE CITY: ATLANTA STATE: GA ZIP: 30309-3002 BUSINESS PHONE: 4048531000 MAIL ADDRESS: STREET 1: 1420 PEACHTREE ST NE CITY: ATLANTA STATE: GA ZIP: 30309 8-K 1 g73258e8-k.txt NATIONAL SERVICE INDUSTRIES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): November 30, 2001 ----------------- National Service Industries, Inc. --------------------------------- (Exact name of registrant as specified in its charter) Delaware -------- (State or other jurisdiction of incorporation) 001-03208 --------- (Commission File Number) 58-03649 -------- (IRS Employer Identification Number) 1420 Peachtree Street, N. E., Atlanta, Georgia 30309-3002 --------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (404) 853-1000 ------------- Not applicable -------------- (Former Name or Former Address, if Changed Since Last Report) Item 2. Acquisition or Disposition of Assets. On November 30, 2001, National Service Industries, Inc. ("NSI" or the "Registrant") completed the distribution of the common stock of its lighting equipment and chemicals subsidiary, Acuity Brands, Inc. (formerly L&C Spinco, Inc.) ("Acuity"), to its stockholders in a tax-free distribution, effective 11:59 p.m. The spin-off of Acuity was effected by way of a pro rata dividend (the "Distribution") of the common stock of Acuity to NSI's stockholders of record as of November 16, 2001 (the "Record Date"). In the Distribution, the Company's stockholders received one share of Acuity common stock for each share of NSI common stock owned as of the Record Date. Following the Distribution, NSI will concentrate its operations on its textile rental and envelopes businesses. Acuity is now an independent public company trading under the symbol "AYI" on the New York Stock Exchange. NSI continues to trade on the New York Stock Exchange under the symbol "NSI." Further information concerning the Distribution and related matters is contained in Acuity's Registration Statement on Form 10, dated July 3, 2001, as amended, filed by Acuity with the Securities and Exchange Commission A copy of each of the definitive material agreements executed by NSI in connection with the Distribution is filed as an exhibit hereto and each is incorporated herein by reference. Item 7. Financial Statements and Exhibits. (a) Financial Statements of Businesses Acquired None. (b) Pro Forma Financial Information In its Annual Report on Form 10-K for its fiscal year ended August 31, 2001, the Registrant presented the net assets of Acuity as "Net Assets of Discontinued Operations" in its balance sheet as of August 31, 2001. (c) Exhibits. The following exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION ----------- ----------- 10.1 Tax Disaffiliation Agreement, dated as of November 30, 2001, by and between National Service Industries, Inc. and Acuity Brands, Inc. 10.2 Transition Services Agreement, dated as of November 30, 2001, by and between National Service Industries, Inc. and Acuity Brands, Inc. 10.3 Agreement and Plan of Distribution by and between National Service Industries, Inc. and Acuity Brands, Inc., dated as of November 30, 2001. 10.4 Employee Benefits Agreement, by and between National Service Industries, Inc. and Acuity Brands, Inc., dated as of November 30, 2001. 10.5 Lease Agreement, dated as of November 30, 2001, by and between National Service Industries, Inc. and Acuity Brands, Inc.
10.6 Put Option Agreement, dated as of November 30, 2001, by and between National Service Industries, Inc. and Acuity Brands, Inc. 10.7 First Supplemental Indenture, dated as of October 23, 2001, to Indenture dated January 26, 1999, between National Service Industries, Inc., L&C Spinco, Inc., L&C Lighting Group, Inc., The Zep Group, Inc. and SunTrust Bank. 10.8 Amendment No. 2 to National Service Industries, Inc. Supplemental Deferred Savings Plan. 10.9(a) Amendment No. 4 to the National Service Industries, Inc. Senior Management Benefit Plan. 10.9(b) Amendment No. 5 to the National Service Industries, Inc. Senior Management Benefit Plan. 10.10(a) Amendment No. 5 to the Supplemental Retirement Plan For Executives Of National Service Industries, Inc. 10.10(b) Amendment No. 6 to Supplemental Retirement Plan For Executives Of National Service Industries, Inc. 10.11(a) Amendment No. 2 to the National Service Industries, Inc. Executives' Deferred Compensation Plan. 10.11(b) Amendment No. 3 to the National Service Industries, Inc. Executives' Deferred Compensation Plan. 10.12 Amendment No. 3 to National Service Industries, Inc. Nonemployee Director Deferred Stock Unit Plan 10.13 Amendment No. 4 to the National Service Industries, Inc. Benefits Protection Trust 10.14(a) Supplemental Retirement Plan for Eligible Employees of AECO Products Division of National Service Industries, Inc. 10.14(b) Amendment No. 1 to the Supplemental Retirement Plan for Eligible Employees of AECO Products Division of NSI. 10.14(c) Amendment No. 2 to the Supplemental Retirement Plan for Eligible Employees of AECO Products Division of NSI. 10.14(d) Amendment No. 3 to the Supplemental Retirement Plan for Eligible Employees of AECO Products Division of NSI. 10.15 Form of Amendment No. 2 to Severance Protection Agreement (for Executives). 10.16(a) Form of Severance Protection Agreement for Key Management 10.16(b) Form of Amendment No. 1 to Severance Protection Agreement for Key Management 10.17 Amendment No. 2 to National Service Industries, Inc. Executive Savings Plan. 99.1 Press release, issued by the Registrant on December 3, 2001.
- --------------- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: December 14, 2001 NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Carol E. Morgan ------------------------------------------ Carol E. Morgan Senior Vice President, General Counsel and Secretary EX-10.1 3 g73258ex10-1.txt TAX DISAFFILIATION AGREEMENT EXHIBIT 10.1 TAX DISAFFILIATION AGREEMENT dated as of November 30, 2001, by and between NATIONAL SERVICE INDUSTRIES, INC. ("NSI-Del"), a Delaware corporation, NATIONAL SERVICE INDUSTRIES, INC. ("NSI Enterprises"), a California corporation, and ACUITY BRANDS, INC. ("Spinco"), a Delaware corporation. RECITALS A. NSI Enterprises and National Services Industries, Inc. ("NSI-GA"), a Georgia corporation, are first tier subsidiaries of NSI-Del. B. NSI-Del is the common parent of an affiliated group of corporations within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"), which currently files consolidated Federal income tax returns. C. As reflected in the Agreement and Plan of Distribution (the "Distribution Agreement") dated November 30, 2001 by and between NSI-Del and Spinco, NSI Enterprises has formed Spinco as a first tier subsidiary. D. In addition, NSI-GA has merged into NSI Enterprises. Immediately after such merger, NSI Enterprises contributed its lighting equipment and chemical businesses to Spinco along with certain intercompany debt. E. As reflected in the Distribution Agreement, NSI Enterprises then distributed all of the outstanding shares of stock of Spinco to NSI-Del (the "First Distribution"). F. After the First Distribution, NSI-Del contributed to Spinco the stock of certain foreign subsidiaries and certain intercompany debt owed by Spinco to NSI-Del. Further contributions were then made by Spinco to subsidiaries of Spinco. G. After these contributions and pursuant to the Distribution Agreement, NSI-Del shall distribute to its stockholders all of the outstanding shares of stock of Spinco, together with associated preferred stock purchase rights, on a pro rata basis (the "Second Distribution," together with the First Distribution, the "Distributions"). H. NSI-Del, NSI Enterprises and Spinco intend that the Distributions will qualify as distributions described in Section 355 of the Code and will not result in the recognition of any taxable gain or income to NSI-Del, NSI Enterprises, Spinco or any of their respective stockholders. I. From the day after the Date of the Second Distribution forward, Spinco and its subsidiaries shall cease to be a member of the NSI-Del affiliated group for all applicable tax purposes. J. NSI-Del, NSI Enterprises and Spinco desire on behalf of themselves, their subsidiaries and their successors to set forth their rights and obligations with respect to taxes due for periods before and after the Second Distribution. NOW, THEREFORE, in consideration of the transactions recited above and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I Definitions For the purposes of this Agreement: 1.01 "40 Percent Interest" shall have the meaning ascribed to the term "50-percent or greater interest" in Section 355(e)(4) of the Code, substituting therein "40" each place "50" appears. 1.02 "40 Percent Threshold" shall have the meaning set forth in Section 2.04(d)(v). 1.03 "Ancillary Agreements" shall have the meaning specified in the Distribution Agreement. 1.04 "Affiliate" shall mean, when used with respect to any specified Person, a Person that directly or indirectly controls, is controlled by, or is under common control with such specified Person; provided, however, that for purposes of this Agreement, any Person who was a member of both Groups prior to the Second Distribution shall be deemed to be an Affiliate only of the Group of which such Person is a member following the Second Distribution. As used herein, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract or otherwise. Any contrary provision of this Agreement notwithstanding, neither NSI-Del nor any NSI-Del Subsidiaries shall be deemed to be an Affiliate of SpinCo, and neither SpinCo nor any SpinCo Subsidiaries shall be deemed to be an Affiliate of NSI-Del. 1.05 "After Tax Basis" shall mean, with respect to any payment to be received, that the amount of such payment is increased to the extent necessary so that, after deduction of all taxes (assuming for this purpose that the recipient of such payment is subject to taxation at the highest federal and applicable state and local marginal rates applicable to widely held corporations for the year in which such income is taxable) required to be paid by the recipient (less any tax savings to be realized, utilizing the same tax rate assumptions as set forth in the immediately preceding parenthetical phrase, by the recipient as a result of the payment of such amounts) with respect to the receipt of such amounts, such increased payment (as so reduced) is equal to the payment otherwise required to be made. 1.06 "Agreement" shall mean this Tax Disaffiliation Agreement dated November 30, 2001, between NSI-Del, NSI Enterprises, and Spinco, as the same may be amended from time to time. 2 1.07 "Applicable Federal Rate" shall have the meaning set forth in Section 1274(d) of the Code for a short term rate, compounded quarterly. 1.08 "Assets" shall mean the assets of NSI-Del, NSI Enterprises, Spinco, their respective Affiliates, or a "predecessor or successor" (within the meaning Section 355(e)(4)(D) of the Code) of such corporations or their Affiliates; it being understood that any transfer, sale or assignment of the assets of NSI-Del, NSI Enterprises, Spinco, their Affiliates, or a predecessor or a successor in the ordinary course of business shall not be taken into account for purposes of Section 2.04(d) of this Agreement, unless in conjunction with a transaction described in Section 355(e)(3)(B) of the Code or Final or Temporary regulations promulgated thereunder. 1.09 "Claim" shall have the meaning set forth in Section 5.03(a). 1.10 "Closing Price" of Spinco Common Stock or NSI-Del Common Stock on any day shall mean the last reported sales price for such stock, on such day, or in the case no sale takes place on such day, the average of the reported closing bid and asked prices for the stock in either case as reported on the New York Stock Exchange. 1.11 "Code" shall have the meaning set forth in paragraph B of the recitals. 1.12 "Controlling Party" shall have the meaning set forth in Section 5.01. 1.13 "Corporate Transactions" shall have the meaning set forth in the Distribution Agreement. 1.14 "Date of the First Distribution" shall mean August 31, 2001. 1.15 "Date of the Second Distribution" shall mean the Distribution Date specified in the Distribution Agreement. 1.16 "Distribution Agreement" shall have the meaning set forth in paragraph C of the recitals. 1.17 "Distribution Related Gain" shall mean any gain recognized by NSI Enterprises or NSI-Del, respectively, or NSI-Del's or Spinco's stockholders, by virtue of (i) either Distribution failing to qualify as a distribution described in Section 355 of the Code, (ii) any stock or securities of Spinco failing to qualify as "qualified property" within the meaning of Section 355(c)(2)(B) and 361(c)(2)(B) of the Code, (iii) the application of Section 355(f) of the Code to the First Distribution, or (iv) the application of Section 355(e) of the Code to the Second Distribution. 1.18 "Distributions" shall have the meaning set forth in paragraph G of the recitals. 1.19 "Final Determination" shall mean with respect to any issue (a) a decision, 3 judgment, decree or other order by any court of competent jurisdiction, which decision, judgment, decree or other order has become final and not subject to further appeal, (b) a binding closing agreement whether or not entered into under Section 7121 of the Code or any other binding settlement agreement (whether or not with the Internal Revenue Service), or (c) the completion of the highest level of administrative proceedings if a judicial contest is not or is no longer available. 1.20 "First Distribution" shall have the meaning set forth in paragraph E of the recitals. 1.21 "First Spinco Notification Letter" shall have the meaning set forth in Section 2.03(c)(ii). 1.22 "Indemnitor" shall have the meaning set forth in Section 5.02. 1.23 "IRS" shall have the meaning set forth in Section 2.04(d)(vi). 1.24 "Market Cap" shall mean, with respect to NSI-Del or Spinco, the total of (a) the average Closing Price of NSI-Del Common Stock or Spinco Common Stock, respectively, over the 10 business days following the Date of the Second Distribution, multiplied by (b) the number of outstanding shares of such common stock on the Date of the Second Distribution. 1.25 "NSI-Del" shall have the meaning set forth in the preamble to this Agreement. 1.26 "NSI-Del Common Stock" shall mean the common stock of NSI-Del, par value $1.00 per share. 1.27 "NSI-Del Group" shall mean, for any period, NSI-Del and its then Subsidiaries. Under no circumstances shall the NSI-Del Group include any member of the Spinco Group. 1.28 "NSI-Del Notification Letter" shall have the meaning set forth in Section 2.03(c)(ii). 1.29 "NSI-Del Subsidiary" or "Subsidiary of NSI-Del" shall include all of the Subsidiaries listed on EXHIBIT A attached hereto. None of Spinco or the Spinco Subsidiaries shall be considered a Subsidiary of NSI-Del. 1.30 "NSI-Del Tainting Act" means (a) any breach of any written representation given by Brock A. Hattox on behalf of NSI-Del in the letter to King & Spalding and Ernst & Young dated November 29, 2001 (notwithstanding such representation was also given by James S. Balloun on behalf of Spinco and NSI-Del in a separate letter to King & Spalding and Ernst & Young dated November 29, 2001), or (b) any act or acts first occurring after the Date of the Second Distribution of or involving any Person (other than Spinco or any Person that is an Affiliate of Spinco immediately before or immediately after such action or actions), or any omission or omissions of any Person (other than Spinco or any Person that is an Affiliate of Spinco immediately before or immediately after such omission or omissions), of an act or acts first available to it after the Date of the Second Distribution, if such breach, action or omission 4 described in (a) or (b) contributes to a Final Determination that the First or Second Distribution results in any Distribution Related Gain. Notwithstanding any provision of this Agreement to the contrary, a breach of any written representation given by Brock A. Hattox on behalf of NSI-Del in the letter to King & Spalding and Ernst & Young dated November 29, 2001 shall not be considered an NSI-Del Tainting Act under clause (a) of the first sentence of this Section 1.30, if such breach is the result of a Spinco Tainting Act. 1.31 "NSI Enterprises" shall have the meaning set forth in the preamble to this Agreement. 1.32 "NSI-GA" shall have the meaning set forth in paragraph A of the recitals. 1.33 "Period After the Second Distribution" shall mean (i) any taxable year or other taxable period beginning after the Date of the Second Distribution and, (ii) in the case of any Stub Period, that part of the Stub Period that begins on the day immediately after the Date of the Second Distribution. 1.34 "Period Before the Second Distribution" shall mean (i) any taxable year or other taxable period that ends on, at the close of, or before the Date of the Second Distribution and, (ii) in the case of any Stub Period, that part of the Stub Period through and including the Date of the Second Distribution. 1.35 "Person" shall mean any individual, partnership, joint venture, corporation, limited liability company, trust, unincorporated organization, government or department or agency of a government. 1.36 "Restructuring Taxes" means any taxes resulting from the Corporate Transactions or either Distribution, including, but not limited to, any taxes imposed pursuant to or as a result of Sections 311 or 1001 of the Code or the Treasury Regulations under Section 1502 of the Code (and any applicable similar federal, state, local or foreign taxes, together with related interest, penalties and additions to tax), but excluding (i) any taxes imposed as a result of a Final Determination that the First or Second Distribution results in any Distribution Related Gain, and (ii) any transfer taxes imposed on the transfer of real or personal property in the Corporate Transactions. 1.37 "Second Distribution" shall have the meaning set forth in paragraph G of the recitals. 1.38 "Second Spinco Notification Letter" shall have the meaning set forth in Section 2.03(c)(ii). 1.39 "Spinco" shall have the meaning set forth in the preamble to this Agreement. 1.40 "Spinco Common Stock" shall mean the common stock of Spinco, par value $.01 per share. 5 1.41 "Spinco Group" shall mean, for any period, Spinco and its then Subsidiaries. Under no circumstances shall the Spinco Group include any member of the NSI-Del Group. 1.42 "Spinco Subsidiary" or "Subsidiary of Spinco" shall include all of the Subsidiaries listed on EXHIBIT B attached hereto. None of the NSI-Del Subsidiaries shall be considered a Subsidiary of Spinco. 1.43 "Spinco Tainting Act" means (a) any breach of any written representation given by James S. Balloun on behalf of Spinco and NSI-Del in the letter to King & Spalding and Ernst & Young dated November 29, 2001 (notwithstanding such representation was also given by Brock A. Hattox on behalf of NSI-Del in a separate letter to King & Spalding and Ernst & Young dated November 29, 2001), or (b) any act or acts first occurring after the Date of the Second Distribution of or involving any Person (other than NSI-Del or any Person that is an Affiliate of NSI-Del immediately before or immediately after such action or actions), or any omission or omissions of any Person (other than NSI-Del or any Person that is an Affiliate of NSI-Del immediately before or immediately after such omission or omissions) of an act or acts first available to it after the Date of the Second Distribution, if such breach, act or omission described in (a) or (b) contributes to a Final Determination that First or Second Distribution results in any Distribution Related Gain. Notwithstanding any provision of this Agreement to the contrary, a breach of any written representation given by James S. Balloun on behalf of Spinco and NSI-Del in the letter to King & Spalding and Ernst & Young dated November 29, 2001 shall not be considered a Spinco Tainting Act under clause (a) of the first sentence of this Section 1.43, if such breach is the result of an NSI-Del Tainting Act. 1.44 "Spinco Tax Adjustment Amount" shall have the meaning set forth in Section 2.03(c)(ii). 1.45 "Spinco Tax Position" shall have the meaning set forth in Section 2.03(c)(i). 1.46 "Stock" shall mean common or preferred stock or any instrument that might reasonably be treated as common or preferred stock for federal income tax purposes; provided, however, for purposes of Section 2.04(d) only, the term Stock shall not include stock in NSI-Del, NSI Enterprises or Spinco acquired by an employee or director of such corporation (or a Person related to such corporation under Section 355(d)(7)(A) of the Code) in connection with the performance of services as an employee or director for the corporation or a Person related to it under Section 355(d)(7)(A) of the Code (and that is not excessive by reference to the services performed) in a transaction in which Section 83 of the Code applies. 1.47 "Stock Options" shall mean call options, warrants, convertible obligations, the conversion feature of convertible stock, put options, redemption agreements (including rights to cause the redemption of stock), any other instruments that provide for the right or possibility to issue, redeem, or transfer stock (including an option on an option), or any other similar interest treated as an option; provided, however, for purposes of Section 2.04(d) only the term Stock Options only includes instruments that provide for the right or possibility to issue, redeem or transfer stock and does not include: (i) an option that is part of a security arrangement in a typical lending transaction (including a purchase money loan), if the arrangement is subject to 6 customary commercial conditions; (ii) an option to acquire stock in NSI-Del, NSI Enterprises or Spinco with customary terms and conditions provided to an employee or director of such corporation, or a person related to NSI-Del, NSI Enterprises, or Spinco under Section 355(d)(7)(A) of the Code in connection with the performance of services for the corporation or a person related to it under Section 355(d)(7)(A) of the Code (and is not excessive by reference to the services performed) and that immediately after the Second Distribution and 6 months thereafter (a) is nontransferable within the meaning of Treasury Regulation Section 1.83-3(d) and (b) does not have a readily ascertainable fair market value as defined in Treasury Regulation Section 1.83-7(b); and (iii) an option entered into between shareholders of a corporation (or a shareholder and the corporation) that is exercisable only upon death, disability or mental incompetency of the shareholder, or, in the case of stock acquired in connection with the performance of services for a corporation, or a person related to the corporation under Section 355(d)(7)(A) (and that is not excessive by reference to the services performed), the shareholder's separation from service. 1.48 "Stub Period" shall mean any taxable year or other taxable period that begins on or before and ends after the Date of the Second Distribution. 1.49 "Subsidiary" shall mean a corporation, limited liability company, partnership, joint venture or other business entity if 50% or more of the outstanding equity or voting power of such entity is owned directly or indirectly by the corporation with respect to which such term is used. Each of the Subsidiaries listed on Exhibit A, attached hereto, shall be considered a Subsidiary of NSI-Del. Each of the Subsidiaries listed on Exhibit B, attached hereto, shall be considered a Subsidiary of Spinco. Notwithstanding any provision of this agreement to the contrary, Spinco shall not be considered a Subsidiary of NSI-Del. 1.50 "tax" or "taxes" whether used in the form of a noun or adjective, shall mean all forms of taxation, whenever created or imposed, including, but not limited to, taxes on or measured by income, franchise, gross receipts, sales, use, excise, payroll, personal property (tangible or intangible), real property, ad-valorem, value-added, leasing, leasing use or other taxes, levies, imposts, duties, charges or withholdings of any nature whether imposed by a nation, locality, municipality, government, state, federation, or other governmental body (a "Taxing Authority"). Whenever the term "tax" or "taxes" is used (including, without limitation, in the context of any duty to pay, or to reimburse another party or indemnify for taxes or refunds or credits of taxes) it shall include penalties, fines, additions to tax and interest thereon. The term "tax" or "taxes" does not include any unclaimed or abandoned property remitted or required to be remitted to any Taxing Authority under applicable law. 1.51 "Taxing Authority" shall have the meaning set forth in Section 1.50. 1.52 "Tax Returns" shall mean all reports, returns, information statements, questionnaires, evidence of tax payments, invoices or other documents received from, or required to be filed or that may be filed for any period with, any Taxing Authority (whether domestic or foreign) in connection with any tax or taxes (whether domestic or foreign). 7 All capitalized terms used but not defined herein shall have the meaning given to such terms in the Distribution Agreement. ARTICLE II Tax Returns, Tax Payments and Tax Sharing Obligations 2.01 Obligations to File Tax Returns. (a) Spinco shall prepare, at its own expense, and shall timely file or cause to be filed (i) all Tax Returns with respect to the Spinco Group and the NSI-Del Group that are due (including extensions) after the Date of the Second Distribution but are for a taxable year or period ending on or before the Date of the Second Distribution, (ii) all Tax Returns with respect to the Spinco Group for any taxable year or other taxable period beginning after the Date of the Second Distribution, (iii) all Tax Returns filed on a separate company basis for any member of the Spinco Group for any Stub Period, and (iv) all Tax Returns filed on a consolidated, combined or unitary basis for the Stub Period other than those described in clause (iii) of Section 2.01(b). Spinco shall make full and timely payment of all taxes shown due on all Tax Returns described in this Section 2.01(a). (b) NSI-Del shall prepare, at its own expense, and shall timely file or cause to be filed (i) all Tax Returns with respect to the NSI-Del Group for any taxable year or other taxable period beginning after the Date of the Second Distribution, (ii) all Tax Returns filed on a separate company basis, for any member of the NSI-Del Group for any Stub Period, and (iii) all Tax Returns filed on a consolidated, combined or unitary basis for the Stub Period that include one or more members of the NSI-Del Group (whether or not they include one or more members of the Spinco Group). Subject to Section 2.03(c) hereof, NSI-Del shall make full and timely payment of all taxes shown due on all Tax Returns described in this Section 2.01(b). (c) To the extent required or permitted by law or administrative practice, in the case of any Tax Return prepared by NSI-Del pursuant to clause (iii) of Section 2.01(b) that includes one or more members of the Spinco Group, the taxable year of the Spinco Group shall be treated as closing at the close of the Date of the Second Distribution. 2.02 Obligation to Remit Taxes. Spinco and NSI-Del shall each timely remit or cause to be remitted any taxes due in respect of any tax for which it is required to file a Tax Return hereunder and shall be entitled to reimbursement for such payments only to the extent provided in Section 2.03. 2.03 Tax Sharing Obligations and Prior Agreements. (a) Spinco's obligations. Other than liabilities dealt with elsewhere in this Agreement and except as provided in Section 3.01(d), Spinco shall be liable for and shall indemnify and hold the NSI-Del Group harmless on an After Tax Basis against (i) any tax liability of any member of the Spinco Group or any member of the NSI-Del Group for any Period Before the Second Distribution, except for $5,258,977 of which NSI-Del is liable 8 pursuant to Section 2.03(b), (ii) any tax liability for any member of the Spinco Group for any Period After the Second Distribution, and (iii) any amount determined to be Spinco's liability under Section 2.04 hereof. Except as provided in Section 3.01 for refunds attributable to carry backs, Spinco shall be entitled to any refund of or credit for taxes for which Spinco is responsible under this Section 2.03(a) or with respect to which Spinco is required to file a Tax Return under Section 2.01 hereof. (b) NSI-Del's Obligations. Other than liabilities dealt with elsewhere in this Agreement, NSI-Del shall be liable for, and shall hold the Spinco Group harmless on an After Tax Basis against (i) any tax liability of any member of the NSI-Del Group for any Period After the Second Distribution, and (ii) any amount determined to be NSI-Del's liability under Section 2.04 hereof. In addition, NSI-Del shall be liable for, and shall hold the Spinco Group harmless on an After Tax Basis against, $5,258,977 of tax liability of any member of the Spinco Group or any member of the NSI-Del Group for any Period Before the Second Distribution. Except as provided in Section 3.01 for refunds attributable to carry backs, NSI-Del shall be entitled to any refund of or credit for taxes for any periods for which NSI-Del is responsible under this Section 2.03(b) or with respect to which NSI-Del is required to file a Tax Return under Section 2.01 hereof. (c) Spinco's Stub Period Liability. (i) Subject to clause (ii) of this Section 2.03(c), with respect to any Tax Return that is described in clause (ii) or (iii) of Section 2.01(b), or with respect to any estimated tax payment relating to any such Tax Return, NSI-Del shall, in good faith, calculate Spinco's tax liability under clause (i) of the first sentence of Section 2.03(a) with respect to such Tax Return or estimated tax payment (taking into account one-fourth of NSI-Del's $5,258,977 obligation under Section 2.03(b) when calculating Spinco's obligation for each of the four estimated tax payments for fiscal year 2002 (i.e. the estimated tax payments due on December 15, 2001, February 15, 2002, May 15, 2002 and August 15, 2002 )) and notify Spinco of such amount. Such notification shall constitute a request for payment, and, subject to the following sentence, Spinco shall pay such amount, in immediately available funds, to NSI-Del within five (5) days after receipt of such notice from NSI-Del, provided that Spinco shall not be obligated to make such payment to NSI-Del (A) earlier than ten (10) days prior to the due date for the filing or making of the relevant Tax Return or estimated tax payment or (B) unless NSI-Del has offset Spinco's tax liability for the each of the prior estimated tax payments for fiscal year 2002 by one-fourth of $5,258,977 in satisfaction of NSI-Del's obligation under Section 2.03(b) and (c). If Spinco determines, in good faith, that its tax liability under clause (i) of the first sentence of Section 2.03(a) with respect to such Tax Return or estimated payment should be greater than the amount determined by NSI-Del for such return or payment, Spinco can elect to pay a greater amount to NSI-Del and provide NSI-Del with a statement describing the tax position taken by Spinco implicit in the determination of such larger amount (the "Spinco Tax Position"). If pursuant to the proceeding sentence Spinco pays a greater amount, NSI-Del covenants, to the extent permitted by law, to take the Spinco Tax Position on the Tax Return or payment in question and will remit the larger amount received from Spinco to the appropriate Taxing Authority when filing such return or payment. After the filing or making of any Tax Return or estimated tax payment mentioned in this clause (i) of Section 2.03(c), NSI-Del shall supply Spinco with a copy of each tax return (or evidence of each estimated tax payment) with respect to which Spinco shall have made payment. 9 (ii) Spinco shall make an initial determination, in good faith, of the amount (the "Spinco Tax Adjustment Amount") of its tax liability under clause (i) of the first sentence of Section 2.03(a) with respect to all Tax Returns that are described in clause (ii) and (iii) of Section 2.01(b), such tax liability to be determined without regard to payments, if any, that Spinco shall have made to NSI-Del pursuant to clause (i) of this Section 2.03(c) (such determination, with calculations in reasonable detail, being referred to as the "First Spinco Notification Letter"). If NSI-Del determines in good faith that Spinco's determination of the Spinco Tax Adjustment Amount is incorrect, NSI-Del shall notify Spinco of such determination (including in such notification its determination of the correct amount of the Spinco Tax Adjustment Amount) (the "NSI-Del Notification Letter") within thirty (30) days of receipt of the First Spinco Notification Letter. If Spinco objects to NSI-Del's determination of the Spinco Tax Adjustment Amount in the NSI-Del Notification Letter, it must notify NSI-Del within twenty (20) days of receipt of the NSI-Del Notification Letter (the "Second Spinco Notification Letter"). If the dispute is not resolved by mutual accord within thirty (30) days of NSI-Del's receipt of the Second Spinco Notification Letter, the dispute shall be resolved under the provisions of Article VIII. Until NSI-Del and Spinco reach agreement, or any dispute between them is resolved pursuant to Article VIII, as to the Spinco Tax Adjustment Amount, the provisions of clause (i) of this Section 2.03(c) shall continue to apply. Clause (i) of this Section 2.03(c) will not apply once NSI-Del and Spinco reach agreement or any dispute between them as to the Spinco Tax Adjustment is resolved pursuant to Article VIII. Within ten (10) days of such agreement or resolution, Spinco shall pay to NSI-Del an amount equal to the excess of (x) the Spinco Tax Adjustment Amount, as so agreed or resolved, over (y) the payments, if any, that Spinco shall have theretofore made to NSI-Del pursuant to clause (i) of this Section 2.03(c). In the event that the payments that Spinco shall have theretofore made to NSI-Del pursuant to clause (i) of this Section 2.03(c) shall exceed the Spinco Tax Adjustment Amount, NSI-Del shall, within ten (10) days of such agreement or resolution, pay the amount of such excess to Spinco. (d) Except as set forth in this Agreement and in consideration of the mutual indemnities and other obligations of this Agreement, any and all prior tax sharing agreements or practices between any member of the NSI-Del Group and any member of the Spinco Group shall be terminated as of the Date of the Second Distribution. 2.04 Restructuring Taxes; Other Taxes Relating to the Distribution. (a) Generally. Notwithstanding any other provision of this Agreement to the contrary, Spinco shall bear any Restructuring Taxes (together with any reasonable expenses, including, but not limited to, attorney's fees, incurred in defending any audit or examination with respect to Restructuring Taxes). In the event of a Final Determination that the First or Second Distribution results in any Distribution Related Gain (other than a Final Determination that the First or Second Distribution results in any Distribution Related Gain which determination would not have been made but for a NSI-Del Tainting Act or a Spinco Tainting Act), the liability of NSI-Del and Spinco for any taxes arising from such Final Determination, including any liability to stockholders arising from such Final Determination (together with any reasonable expenses, including, but not limited to, attorney's fees incurred in defending against any liability) shall be borne by NSI-Del and Spinco pro rata based on their relative Market Caps. Also, in the event of 10 a Final Determination that the First or Second Distribution results in any Distribution Related Gain which determination would not have been made but for the occurrence of both a NSI-Del Tainting Act and a Spinco Tainting Act, any taxes or liability resulting from such Final Determination (together with any reasonable expenses, including, but not limited to, attorney's fees incurred in defending against any liability) shall be borne by NSI-Del and Spinco pro rata based on their relative Market Caps. (b) Covenant and Indemnification for Spinco Tainting Acts. Spinco covenants that neither Spinco nor any member of the Spinco Group shall commit or be party to or the subject of any Spinco Tainting Act. In the event of a Final Determination that the First or Second Distribution results in any Distribution Related Gain which Final Determination would not have been made but for a Spinco Tainting Act, Spinco shall pay, and shall indemnify and hold harmless NSI-Del and NSI Enterprises and their Affiliates on an After Tax Basis, from and against, any liability of NSI-Del or NSI Enterprises or their Affiliates to any Taxing Authority, NSI-Del stockholders or Spinco stockholders (together with any reasonable expenses, including, but not limited to, attorney's fees incurred in defending against any such liability) resulting from a Final Determination that the First or Second Distribution results in any Distribution Related Gain. (c) Covenant and Indemnification for NSI-Del Tainting Acts. NSI-Del covenants that neither NSI-Del nor any member of the NSI-Del Group shall commit or be party to or the subject of any NSI-Del Tainting Act. In the event of a Final Determination that the First or Second Distribution results in any Distribution Related Gain which Final Determination would not have been made but for a NSI-Del Tainting Act, NSI-Del shall pay, and shall indemnify and hold harmless Spinco and its Affiliates on an After Tax Basis, from and against, any liability of Spinco, NSI-Del, NSI Enterprises or their Affiliates to any Taxing Authority, NSI-Del stockholders or Spinco stockholders (together with any reasonable expenses, including, but not limited to, attorney's fees incurred in defending against any such liability) resulting from a Final Determination that the First or Second Distribution results in any Distribution Related Gain. (d) Reporting and Restrictions. (i) At quarterly intervals beginning on February 30, 2001 and at any other time reasonably requested by the party to receive such report, during the period commencing immediately after the Date of the Second Distribution and ending two years after such date, NSI-Del will provide to Spinco, NSI Enterprises will provide to Spinco and Spinco will provide to NSI-Del and NSI Enterprises a report ("Report") listing for the period commencing immediately after the Date of the Second Distribution and ending on the date of the Report any issuance, sale, transfer, assignment or redemption (or any agreement, understanding, arrangement, or substantial negotiations concerning the issuance, sale, transfer, assignment or redemption) of the reporting corporation's: (x) Stock (excluding any sale, transfer, or assignment of Stock between two shareholders neither of whom own, either directly or indirectly, five-percent or more of the Stock of the corporation whose Stock is transferred (treating all options as exercised), provided that the reporting corporation has not authorized such sale, transfer, or assignment and that such sale, transfer, or assignment meets the requirements of the safe harbor in Temporary regulations Section 1.355-7(f)(5)); (y) Stock Options; and (z) Assets (excluding: (A) any sale, transfer, or assignment of Assets that is fully taxable to the 11 transferor; and (B) any other sale, transfer, or assignment of Assets that in the aggregate does not exceed 5 percent of the gross assets of the selling, transferring, or assigning corporation as reflected on such corporation's balance sheet during any 90 day period). (ii) In addition within two months following the Date of the Second Distribution, Spinco shall provide to NSI-Del a Report listing any issuance, sale, transfer, assignment or redemption (or any agreement, understanding, arrangement, or substantial negotiations, whether or not consummated, concerning the issuance, sale, arrangement, assignment or redemption) of NSI-Del's, NSI Enterprises' and Spinco's Stock, Stock Options, or Assets in each instance for the period commencing two years before the Date of the First Distribution and ending on the Date of the Second Distribution. For purposes of this clause (ii) of Section 2.04(d) the exclusions from NSI-Del's, NSI Enterprises' and Spinco's Stock and Asset reporting obligations contained in clause (i) of Section 2.04(d) shall apply. (iii) At any time that the issuance, sale, transfer, assignment or redemption (or any agreement, understanding, arrangement, or substantial negotiations concerning the issuance, sale, arrangement, assignment or redemption) of the reporting corporation's Stock or Stock Options would exceed ten (10) percent by vote or value of the reporting corporation's outstanding Stock (treating Stock Options as exercised) or the issuance, sale, transfer, or assignment (or any agreement, understanding, arrangement, or substantial negotiations concerning the issuance, sale, transfer, or assignment) of the reporting corporation's Assets would exceed 10 percent of the gross assets of the selling, transferring, or assigning corporation as reflected on such corporation's balance sheet, a notice ("Notice") of such transaction must be given to the other party 30 days prior to such issuance, transfer, assignment or redemption (or the entering into of any agreement, understanding, arrangement, or substantial negotiations concerning the issuance, sale, arrangement, assignment or redemption). For purposes of this clause (iii) of Section 2.04(d), the exclusions from NSI-Del's, NSI Enterprises' and Spinco's Stock and Asset reporting obligations contained in clause (i) of Section 2.04(d) shall apply. (iv) NSI-Del's, NSI Enterprises' and Spinco's obligations to issue Reports and Notices will be extended beyond the 2 year reporting period (not to exceed 5 years after the Date of the Second Distribution) until the consummation of any agreement, understanding, arrangement or substantial negotiations for the issuance, sale, transfer or assignment of the reporting corporations' Stock, Stock Options or Assets that is reported or required to be reported during the 2 year period after the Date of the Second Distribution. (v) If, before the expiration of the reporting period (i.e. the two year anniversary of the Date of the Second Distribution or later if the period is extended under clause (iv) of this Section 2.04(d)), the issuances, sales, transfers, assignments, or redemptions (or agreement, understanding, arrangement or substantial negotiations concerning the issuance, sale, transfer, assignment or redemption) of the reporting corporation's Stock, Stock Options or Assets that have been reported pursuant to clauses (i) and (ii) of this Section 2.04(d) or would be required to be reported pursuant to clauses (i) and (ii) of this Section 2.04(d) if such reports were due, in the aggregate, would equal or exceed (as calculated using a method provided by a nationally recognized tax advisor acceptable to both NSI-Del and Spinco) a 40 Percent Interest in such reporting company (the "40 Percent Threshold"), such company (or companies, if both have 12 reached the 40 Percent Threshold) shall not take any action or fail to take any action that would cause the 40 Percent Threshold to be exceeded without obtaining an opinion from a nationally recognized tax advisor (acceptable to both NSI-Del and Spinco) that such issuance, sale, transfer, assignment, or redemption (or agreement, understanding, arrangement or substantial negotiations concerning the issuance, sale, transfer, assignment or redemption) will not cause Section 355(e) of the Code to apply to the Second Distribution or Section 355(f) of the Code to apply to the First Distribution. The expense of obtaining any opinion under this clause (v) of Section 2.04(d) will be borne by the party whose issuance, sale, transfer, assignment, redemption is the subject of such opinion. (vi) For purposes of this Section 2.04(d), NSI-Del, NSI Enterprises and Spinco will not be required to report any issuance, sale, transfer, assignment, or redemption of Stock, Stock Options or Assets with respect to which (y) the Internal Revenue Service ("IRS") has issued a private letter ruling to NSI-Del, NSI Enterprises or Spinco, or (z) a nationally recognized tax advisor acceptable to both NSI-Del and Spinco has issued an opinion, that such issuance, sale, transfer, assignment, or redemption is not required to be taken into account in applying Sections 355(e) or 355(f) of the Code by reason of any statutory provision that may hereafter be enacted, any applicable final or temporary regulations that may be issued, or any applicable guidance that may be published by the IRS upon which taxpayers are authorized to rely. The expense of obtaining any opinion under this Section 2.04(d)(vi) from a nationally recognized tax advisor or an IRS private letter ruling will be borne by the party whose issuance, sale, transfer, assignment or redemption is the subject of such opinion or private letter ruling. (f) Transfer Taxes. Notwithstanding clause (i) of Section 2.03(a), liability for any transfer taxes imposed on any transfer in the Corporate Transactions of real or personal property will be allocated between Spinco and NSI-Del according to Section 7.5 of the Distribution Agreement. ARTICLE III Carrybacks, Distributions and Elections 3.01 Carrybacks. (a) To the extent permitted by law, any member of the Spinco Group shall be entitled to carry back any net operating loss or other item from a taxable period ending after the Date of the Second Distribution to a taxable period ending on or before the Date of the Second Distribution. At the direction of Spinco, NSI-Del shall file any claim for refund relating to such carry back. Any refund of taxes resulting from any such carryback by a member of the Spinco Group shall be payable to Spinco as provided in Section 4.01. Spinco shall indemnify and hold NSI-Del harmless for any tax liability that results from any refund claim relating to a carryback under this Section 3.01(a). Notwithstanding any other provision of this Agreement to the contrary, Spinco shall be considered the Controlling Party for purposes of Article V for any tax audit or proceeding involving any period ending on or before the Date of the Second Distribution to which the net operating loss or other item is carried back and Spinco shall have sole right to contest such audit or proceeding and to employ advisors of its choice under Section 5.01. 13 (b) To the extent permitted by law, any member of the NSI-Del Group shall be entitled, upon consent from Spinco (which consent shall not be unreasonably delayed or withheld), to carry back any net operating loss or other item from a taxable period ending after the Date of the Second Distribution to a taxable period ending on or before the Date of the Second Distribution. NSI-Del shall be responsible for filing any claim for refund relating to such carry back, except that NSI-Del shall not file any claim without prior written approval of such claim by Spinco (which approval shall not be unreasonably delayed or withheld). Any refund of taxes resulting from any such carryback by a member of the NSI-Del Group shall be payable to NSI-Del as provided in Section 4.01. NSI-Del shall indemnify and hold Spinco harmless for any tax liability that results from any refund claim relating to a carryback under this Section 3.01(b). Notwithstanding any other provision of this Agreement to the contrary, Spinco shall be considered the Controlling Party for purposes of Article V for any tax audit or proceeding involving any period ending on or before the Date of the Second Distribution to which the net operating loss or other item is carried back and Spinco shall have sole right to contest such audit or proceeding and to employ advisors of its choice under Section 5.01 provided, however, that Spinco shall (i) permit NSI-Del to participate at its own expense in any proceedings relating to any claim for refund pursuant to this Section 3.01(b); (ii) shall, at NSI's request, contest any denial (in whole or in part) of any such claim for refund, provided that NSI-Del shall agree to pay to Spinco on demand all out-of-pocket costs, losses and expenses (including, but not limited to, legal and accounting fees) paid or incurred by Spinco in connection with contesting such claim; (iii) not settle any such claim for refund without NSI-Del's consent (which consent shall not be unreasonably delayed or withheld); provided that if Spinco wishes to settle such claim and NSI-Del does not consent, NSI-Del will pay to Spinco on demand all out-of-pocket costs, losses and expenses (including, but not limited to, legal and accounting fees) paid or incurred by Spinco in connection with contesting such claim, regardless of whether NSI-Del requested such claim to be contested; and (iv) to the extent NSI-Del is not participating, shall keep NSI-Del informed as to all significant developments relating to any such claim for refund or the contest of any denial thereof. (c) To the extent NSI-Del elects to carry back any net operating loss or other item from a taxable period beginning after the Date of the Second Distribution to a Stub Period (any refund resulting from which carry back to be payable to NSI-Del as provided in Section 4.01), Spinco shall not be liable (notwithstanding clause (i) of Section 2.03(a) to the contrary) for any tax liability resulting from a claim of refund for such carry back. 3.02 Distributions and Elections. (a) No member of the Spinco Group shall make any tax election, pay or cause to be paid any distribution from an Affiliate or take any other action that would cause an actual increase in the taxes for which the NSI-Del Group is responsible or would cause an actual reduction in the amount of any refund of taxes payable to the NSI-Del Group. (b) No member of the NSI-Del Group shall make any tax election, pay or cause to be paid any distribution from an Affiliate or take any other action that would cause an actual increase in the taxes for which the Spinco Group is responsible or would cause an actual reduction in the amount of any refund of taxes payable to the Spinco Group. 14 (c) Neither Spinco nor NSI-Del shall be liable to the other under Section 3.02(a) or Section 3.02(b) for any tax position on a Tax Return that independent tax counsel selected by Spinco (in the case of a Tax Return position desired to be taken by any member of the Spinco Group) or NSI-Del (in the case of a Tax Return position desired to be taken by any member of the NSI-Del Group), the identity of which is reasonably acceptable to the other party, opines that such position is necessary and required to comply with the Code, the regulations or other applicable law. (d) To the extent permitted by law, Spinco and NSI-Del will file any Tax Return which such party is responsible to file for the Stub Period or for any Period Before the Second Distribution consistent with the tax principles and methods reflected in the NSI-Del fiscal year ending August 31, 2000 federal income tax return as filed. ARTICLE IV Payments 4.01 Payments. Subject to the provisions of Section 2.03 and Section 5.03, and except as otherwise explicitly provided herein, all payments due hereunder to a party shall be paid not later than twenty (20) days after the receipt or crediting of a refund or the receipt of notice of a Final Determination by reason of which a party is liable for an indemnified cost pursuant to this Agreement, together with interest at a rate equal to the Applicable Federal Rate from the date on which the indemnifying party receives such receipt, credit or notice. 4.02 Notice. Spinco and NSI-Del shall give each other prompt written notice of any payment that may be due under this Agreement. 4.03 Reimbursement. Any party hereto that is entitled to indemnification, payment or reimbursement pursuant to the terms of this agreement shall be reimbursed on an After Tax Basis for all reasonable expenses (including, but not limited to, attorney's fees) incurred in connection with the enforcement of its rights hereunder. The preceding sentence shall not be construed to limit a party's entitlement to reimbursements or payments to which it otherwise is entitled pursuant to the terms of this agreement. ARTICLE V Tax Audits 5.01 General. Except as provided in Sections 3.01, 5.02 and 6.02 hereof, each of Spinco and NSI-Del shall have sole responsibility for all audits or other proceedings with respect to Tax Returns that it is required to file under Section 2.01 (the "Controlling Party"). Except as provided in Section 5.03 hereof, the Controlling Party shall have the sole right to contest the 15 audit or proceeding and to employ advisors of its choice. In addition, Spinco shall be considered the Controlling Party of any audit or other proceeding with respect to any Tax Return filed before the Date of the Second Distribution. 5.02 Indemnified Claims in General. Spinco and NSI-Del shall promptly notify the other in writing prior to the issuance of an actual notice of assessment by the relevant Taxing Authority (for example, if by the IRS, prior to the issuance of a Form 5701 Notice of Proposed Adjustment) of any proposed adjustment to a Tax Return that may result in liability of the other party (the "Indemnitor") under this Agreement. If there is no Indemnitor other than the Controlling Party, Sections 5.02 and 5.03 are inapplicable and Section 5.01 shall govern the rights of the parties with respect to the audit or proceeding. If the Indemnitor is not also the Controlling Party (as may be the case in the Stub Period), the Controlling Party shall provide the Indemnitor with information about the nature and amounts of the proposed adjustments and shall permit the other party to participate in the proceeding at its own expense, provided, however, that the failure of the Controlling Party to notify or provide such information to the Indemnitor shall not affect the Indemnitor's indemnity obligations hereunder unless and to the extent the Indemnitor is materially prejudiced thereby. Upon a Final Determination of the assessment or proposed adjustment, the Indemnitor shall pay its pro rata share (based on its share of liability resulting from the Final Determination) of all reasonable expenses (including, but not limited to, legal and accounting fees) incurred by the Controlling Party in connection with the assessment or proposed adjustment within seven (7) days after a written request by the Controlling Party. 5.03 Certain Federal Income Tax Claims in the Stub Period. (a) Any issues raised by the IRS in any tax inquiry, audit, examination, investigation, dispute, litigation or other proceeding relating to the Stub Period which would result in federal income tax liability to the Indemnitor is defined as a "Claim". Except as provided in Sections 3.01(b), 5.03(d) and the second sentence of Section 5.02 hereof, and notwithstanding any other provision of this Agreement that may be construed to the contrary, the Controlling Party agrees to contest any Claim and not to settle any Claim without the prior written consent of the Indemnitor, provided that (i) the Controlling Party shall provide notice to Indemnitor pursuant to Section 5.02 hereof of any Claim, (ii) within thirty (30) days after notice by the Controlling Party to the Indemnitor of a Claim is received by the Indemnitor, the Indemnitor shall request in writing that such Claim be contested, (iii) within thirty (30) days after notice by the Controlling Party to the Indemnitor of such Claim is received by the Indemnitor, the Indemnitor shall have provided an opinion of independent tax counsel, selected by the Indemnitor and reasonably acceptable to the Controlling Party, to the effect that it is more likely than not that a Final Determination shall be substantially consistent with the Indemnitor's position relating to such Claim, (iv) the Indemnitor agrees to pay on demand all out-of-pocket costs, losses and expenses (including, but not limited to, legal and accounting fees) paid or incurred by the Controlling Party in connection with contesting such Claim, except for a Claim where the expenses are shared pursuant to Section 2.04(a) hereof, and (v) the Controlling Party, after reasonable consultation with the Indemnitor, shall determine in its sole discretion the nature of all actions to be taken to contest such Claim, including (1) whether any action to contest such Claim shall initially be by way of judicial or administrative proceeding, or both, (2) whether any such Claim shall be contested by resisting payment thereof or by paying the same and seeking a refund thereof, and (3) the court or other judicial body 16 before which judicial action, if any, shall be commenced. To the extent the Indemnitor is not participating, the Controlling Party shall keep the Indemnitor and, upon request by the Indemnitor, its counsel, informed as to the progress of the contest. (b) If the Indemnitor requests that the Controlling Party accept a settlement of a Claim offered by the IRS and if such Claim may, in the reasonable discretion of the Controlling Party, be settled without prejudicing any claims the IRS may have with respect to matters other than the transactions contemplated by the Distribution Agreement, the Controlling Party shall either accept such settlement offer or agree with the Indemnitor that the Indemnitor's liability with respect to such Claim shall be limited to the lesser of (i) an amount calculated on the basis of such settlement offer or (ii) the amount calculated on the basis of a Final Determination. After a settlement or a Final Determination, the Controlling Party shall reimburse the Indemnitor in an amount equal to the excess, if any, of the amount of expenses paid by the Indemnitor pursuant to clause (iv) of Section 5.03(a) over the Indemnitor's pro rata portion of such expenses based on the Indemnitor's share of the liability with respect to such Claim as determined under the first sentence of this Section 5.03(b). (c) If the Controlling Party shall elect to pay the Claim and seek a refund, the Indemnitor shall lend sufficient funds on an interest-free basis to the Controlling Party, and with no net after-tax cost to the Controlling Party, to cover any applicable indemnity obligations of the Indemnitor. To the extent such refund claim is ultimately disallowed, the loan or portion thereof equal to the amount of the refund claim so disallowed shall be applied against the Indemnitor's obligation to make indemnity payments pursuant to this Agreement. In addition if the refund is ultimately disallowed, the Controlling Party shall reimburse the Indemnitor for the Controlling Party's pro rata portion of the expenses paid by the Indemnitor under clause (iv) of Section 5.03(a) based on the Controlling Party's share of the tax previously paid. To the extent such refund claim is allowed, the Controlling Party shall pay to the Indemnitor (i) the amounts loaned or advanced to the Controlling Party with respect to the indemnity obligation (not to exceed the Indemnitor's share of any refund), and (ii) the Controlling Party's pro rata portion of the expenses paid by the Indemnitor under clause (iv) of Section 5.03(a) based on the Controlling Party's share of any refund, within ten (10) days of the receipt of such refund (or if the Controlling Party would have received such refund but for the existence of a counterclaim or other claim not indemnified by the Indemnitor under this Agreement, within ten (10) days of the final resolution of the contest), plus an amount equal to any interest received (or that would have been received) from the IRS that is properly attributable to such amount. (d) Except as provided below, the Controlling Party shall not settle a Claim that Indemnitor is entitled to require the Controlling Party to contest under Section 5.03(a) without the prior written consent of the Indemnitor. At any time, whether before or after commencing to take any action pursuant to this Section 5.03 with respect to any Claim, the Controlling Party may decline to take action with respect to such Claim and may settle such Claim without the prior written consent of the Indemnitor by notifying the Indemnitor in writing that the Indemnitor is released from its obligations to indemnify the Controlling Party with respect to such Claim (which notification shall release the Indemnitor from such obligations except to the extent the Indemnitor has agreed in writing that it would be willing to have its liability calculated on the basis of a settlement offer, as provided in Section 5.03(b), at that point 17 in the contest) and with respect to any Claim the resolution of which is based on the outcome of such Claim. If the Controlling Party settles any Claim without the consent of the Indemnitor or otherwise takes or declines to take any action pursuant to this paragraph, the Controlling Party shall (i) reimburse the Indemnitor for all the expenses paid by the Indemnitor pursuant to clause (iv) of Section 5.03(a), and (ii) pay to the Indemnitor any other amounts paid or advanced by the Indemnitor with respect to such Claim (other than amounts payable by the Indemnitor in connection with a settlement offer pursuant to Section 5.03(b)), plus interest at a rate equal to the Applicable Federal Rate from the date on which the amounts were advanced. ARTICLE VI Cooperation 6.01 General. NSI-Del and Spinco shall cooperate with each other in the filing of any Tax Returns and the conduct of any audit or other proceeding and each shall execute and deliver such powers of attorney and make available such other documents as are reasonably necessary to carry out the intent of this Agreement. Each party agrees to notify the other party in writing of any audit adjustments which do not result in tax liability but can be reasonably expected to affect Tax Returns of the other party, or any of its Subsidiaries, for the Stub Period or a Period After the Second Distribution. Each party agrees to treat the First and Second Distribution for all income tax purposes as not causing the recognition of any gain or loss. 6.02 Cooperation With Respect to Tax Return Filings, Examinations and Tax Related Controversies. (a) NSI-Del's Obligations. In addition to any obligations imposed pursuant to the Distribution Agreement, NSI-Del and each other member of the NSI-Del Group shall fully cooperate with Spinco and its representatives, in a prompt and timely manner, in connection with (i) the preparation and filing of and (ii) any inquiry, audit, examination, investigation, dispute, or litigation involving, any Tax Return filed or required to be filed by or for any member of the Spinco Group for any taxable period ending on or before the Date of the Second Distribution. Such cooperation shall include, but not be limited to, (x) the execution and delivery to Spinco by the appropriate NSI-Del Group member of any power of attorney required to allow Spinco and its counsel to participate on behalf of NSI-Del or such other NSI-Del Group member in any inquiry, audit or other administrative proceeding and to assume the defense or prosecution, as the case may be, of any suit, action or proceeding for which Spinco is the Controlling Party, (y) making available to Spinco, during normal business hours, and within thirty (30) days of any written request therefor, all books, records and information, and the assistance of all appropriate officers and employees, reasonably necessary or useful in connection with any tax inquiry, audit, examination, investigation, dispute, litigation or any other matter, and (z) use of its commercially reasonable best efforts in defending Spinco's interests in any tax inquiry, audit, examination, investigation, dispute, litigation or any other matter for which NSI-Del is the Controlling Party. 18 (b) Spinco's Obligations. In addition to any obligations imposed pursuant to the Distribution Agreement, Spinco shall fully cooperate with NSI-Del and its representatives, in a prompt and timely manner, in connection with (i) the preparation and filing of and (ii) any inquiry, audit, examination, investigation, dispute, or litigation involving, any Tax Return filed or required to be filed by or for any member of the NSI-Del Group which includes Spinco or any other member of the Spinco Group. Such cooperation shall include, but not be limited to, (x) the execution and delivery to NSI-Del by the appropriate Spinco Group member of any power of attorney required to allow NSI-Del and its counsel to participate on behalf of Spinco or such other Spinco Group member in any inquiry, audit or other administrative proceeding and to assume the defense or prosecution, as the case may be, of any suit, action or proceeding for which NSI-Del is the Controlling Party, (y) making available to NSI-Del, during normal business hours, and within thirty (30) days of any written request therefor, all books, records and information, and the assistance of all appropriate officers and employees, reasonably necessary or useful in connection with any tax inquiry, audit, examination, investigation, dispute, litigation or any other matter, and (z) the use of its commercially reasonable best efforts in defending NSI-Del's interests in any tax inquiry, audit, examination, investigation, dispute, litigation or other matter for which Spinco is the Controlling Party. (c) Remedy for Failure to Comply. If Spinco reasonably determines that NSI-Del is not for any reason fulfilling its obligations under Section 6.02(a) hereof, or if NSI-Del reasonably determines that Spinco is not for any reason fulfilling its obligations under Section 6.02(b) hereof, then NSI-Del or Spinco, as the case may be, shall have the right to appoint an independent nationally-recognized public accounting or law firm to assist the other in meeting its obligations under this Section 6.02. Such entity shall have complete access, during normal business hours to all books, records and information, and the reasonable cooperation of all appropriate officers and employees, of NSI-Del or Spinco, as the case may be. In addition, the non-fulfilling party shall be responsible for any additional tax liability caused by the non-fulfillment of its obligations under Section 6.02(a) or (b). Anything in the preceding provisions of this Section 6.02(c) to the contrary notwithstanding, if the party alleged not to have fulfilled or be fulfilling its obligations under Section 6.02(a) or 6.02(b), as applicable, shall maintain that it fulfilled its obligations under Section 6.02(a) or Section 6.02(b), as applicable, and/or that no additional liability resulted from any non-fulfillment with respect to Section 6.02(a) or Section 6.02(b), as applicable, such matter or matters shall be determined by independent counsel agreed to by both the allegedly non-fulfilling party and the party alleging non-fulfillment (which determination shall be final and binding). If such independent counsel shall determine that the allegedly non-fulfilling party in fact fulfilled its obligations under Section 6.02(a) or Section 6.02(b), as applicable: (i) the fees and expenses of the accounting or law firm appointed pursuant to the first sentence of this Section 6.02(c) as well as the fees and expenses of the independent counsel making such determination shall be paid by the party alleging non-fulfillment, and (ii) liability for taxes alleged to have resulted from such non-fulfillment shall be borne by Spinco or NSI-Del without regard to this Section 6.02(c). If such independent tax counsel shall determine that the alleged non-fulfilling party did not fulfill its obligations under Section 6.02(a) or 6.02(b), as applicable: (i) the fees and expenses referred to in clause (i) of the preceding sentence shall be borne by the party determined not to have fulfilled such obligations, and (ii) the additional tax liability alleged to have been caused by such non-fulfillment shall be borne by the non-fulfilling party, unless and to the extent that such independent counsel determines that such taxes were not caused by such non-fulfillment, in which case and to which extent liability for taxes alleged to 19 have resulted from such non-fulfillment shall be borne by Spinco or NSI-Del without regard to this Section 6.02(c). ARTICLE VII Retention of Records; Access The NSI-Del Group and the Spinco Group shall (a) in accordance with their then current record retention policy, retain records, documents, accounting data and other information (including computer data) necessary for the preparation and filing of all Tax Returns in respect of taxes of the NSI-Del Group or the Spinco Group for any Period Before the Second Distribution or any Stub Period for the audit of such Tax Returns; and (b) give to the other reasonable access to such records, documents, accounting data and other information (including computer data) and to its personnel (insuring their cooperation) and premises, for the purpose of the review or audit of such Tax Returns to the extent relevant to an obligation or liability of a party under this Agreement. At any time after the Date of the Second Distribution that either the NSI-Del Group or the Spinco proposes to destroy such material or information, it shall first notify the other Group in writing, and the other Group shall be entitled to receive such materials or information proposed to be destroyed. ARTICLE VIII Disputes If NSI-Del and Spinco cannot agree on the calculation of any liabilities under this Agreement, such calculation shall be made by any independent public accounting firm acceptable to both NSI-Del and Spinco. The decision of such firm shall be final and binding. The fees and expenses incurred in connection with such calculation shall be allocated between and borne by the parties based upon the independent public accounting firm's determination with respect to the disputed calculation. Any accounting firm engaged pursuant to this Article VIII shall be empowered to make determinations with respect to matters of calculation only and not with regard to the proper interpretation of this Agreement. ARTICLE IX Termination of Liabilities Notwithstanding any other provision in this Agreement, any liabilities determined under this Agreement shall not terminate any earlier than the expiration of the applicable statute of limitation for such liability. All other covenants under this Agreement shall survive indefinitely. 20 ARTICLE X Miscellaneous Provisions 10.01 Complete Agreement; Construction. This Agreement, together with the Ancillary Agreements, shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. 10.02 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties. 10.03 Survival of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement shall survive the Date of the Second Distribution. 10.04 Notices. All notices and other communications hereunder shall be in writing, shall reference this Agreement and shall be hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and will be deemed given on the date on which such notice is received: To NSI-Del: National Service Industries, Inc. 1420 Peachtree Street, N.E. Atlanta, Georgia 30309-3002 Attention: Carol Ellis Morgan To Spinco: Acuity Brands, Inc. 1420 Peachtree Street, N.E. Atlanta, Georgia 30309-3002 Attention: Kenyon W. Murphy 10.05 Waivers. The failure of any party to require strict performance by any other party of any provision in this Agreement shall not waive or diminish that party's right to demand strict performance thereafter of that or any other provision hereof. 10.06 Amendments. This Agreement may not be modified or amended except by an agreement in writing signed by each of the parties hereto. 21 10.07 Successors and Assigns. The provisions to this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 10.08 Subsidiaries. Each of the parties hereto shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such party or by any entity that is contemplated to be a Subsidiary of such party on and after the Distribution Date. 10.09 Third-Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and their respective Subsidiaries and Affiliates and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. 10.10 Title and Headings. Titles and headings to Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 10.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF DELAWARE. 10.12 Dispute Resolution. Any dispute arising out of or relating to the performance, breach or interpretation of this Agreement shall be handled in accordance with Article VIII of this Agreement (solely with respect to matters of computation) and Article V of the Distribution Agreement. 10.13 Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic or operational effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 22 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. ACUITY BRANDS, INC. By /s/ James S. Balloun ---------------------------------- James S. Balloun President and Chief Executive Officer Witness: /s/ Kenyon W. Murphy ---------------------------- Kenyon W. Murphy NATIONAL SERVICE INDUSTRIES, INC., a Delaware corporation By: /s/ Brock A. Hattox -------------------------------- Brock A. Hattox Executive Vice President and Chief Financial Officer Witness: /s/ Carol Morgan ---------------------------- Carol Morgan NATIONAL SERVICE INDUSTRIES, INC., a California corporation By: /s/ Brock A. Hattox -------------------------------- Brock A. Hattox Executive Vice President and Chief Financial Officer Witness: /s/ Carol Morgan ---------------------------- Carol Morgan 23 EX-10.2 4 g73258ex10-2.txt TRANSITION SERVICES AGREEMENT EXHIBIT 10.2 TRANSITION SERVICES AGREEMENT THIS TRANSITION SERVICES AGREEMENT, dated as of November 30, 2001 (this "Agreement"), is made by and between National Service Industries, Inc., a Delaware corporation ("Parent"), and Acuity Brands, Inc., a Delaware corporation ("Spinco"). WITNESSETH: WHEREAS, Parent and Spinco are parties to an Agreement and Plan of Distribution, dated as of November 30, 2001 (the "Distribution Agreement"), pursuant to which Parent will transfer certain assets to Spinco and have Spinco assume certain liabilities of Parent; WHEREAS, in connection with the transactions contemplated by the Distribution Agreement, Parent and Spinco wish to enter into this Agreement for purposes of continuity and transition; and WHEREAS, Spinco desires to cause Parent to provide the Services set forth on Schedule A to Spinco, and Parent is willing to provide such Services, and Parent desires to cause Spinco to provide the Services set forth on Schedule B to Parent, and Spinco is willing to provide such Services, all on the terms and conditions set forth below; NOW, THEREFORE, the parties hereto, in consideration of the premises and the mutual covenants contained herein, agree as follows: SECTION 1. SPECIFIC DEFINITIONS. In addition to the terms defined elsewhere in this Agreement, as used in this Agreement, the following terms have the respective meanings set forth below: "Applicable Rate" shall mean the rate of interest per annum announced from time to time by Wachovia Bank of Georgia, N.A. as its prime lending rate plus 4% per annum. "Loss" shall mean all losses, liabilities, damages, claims, demands, judgments or settlements of any nature or kind, known or unknown, fixed, accrued, absolute or contingent, liquidated or unliquidated, including all reasonable costs and expenses (legal, accounting or otherwise as such costs are incurred) relating thereto. "Parent Services" shall mean those transitional services to be provided by Parent to Spinco set forth on Schedule A hereto to assist Spinco in operating Spinco's business. "Person" shall mean any natural person, corporation, business trust, limited liability company, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. "Services" shall mean, collectively, the Parent Services and the Spinco Services. "Spinco Services" shall mean those transitional services to be provided by Spinco to Parent set forth on Schedule B hereto to assist Parent in operating Parent's business. SECTION 2. SERVICES. 2.1 Services. (a) Parent shall provide to Spinco each Parent Service for the term set forth opposite the description of such Parent Service in Schedule A. Additional services may be provided to Spinco by Parent if such arrangement is agreed to in writing and executed by Parent and Spinco. (b) Spinco shall provide to Parent each Spinco Service for the term set forth opposite the description of such Spinco Service in Schedule B. Additional services may be provided by Spinco to Parent if such arrangement is agreed in writing and executed by Parent and Spinco. 2.2 Standard of Service. In performing the Services, Parent and Spinco shall provide substantially the same level of service and use substantially the same degree of care as their respective personnel provided and used in providing such Services prior to the date hereof, subject in each case to any provisions set forth on Schedule A or Schedule B with respect to each such Service. SECTION 3. LICENSES AND PERMITS. Each party warrants and covenants that all duties and obligations (including with respect to Parent, all Parent Services and with respect to Spinco, all Spinco Services) to be performed hereunder shall be performed in compliance with all material applicable federal, state, provincial and local laws, rules and regulations. Each party shall obtain and maintain all material permits, approvals and licenses necessary or appropriate to perform its duties and obligations (including with respect to Parent, the Parent Services and with respect to Spinco, the Spinco Services) hereunder and shall at all times comply with the terms and conditions of such permits, approvals and licenses. SECTION 4. PAYMENT. 4.1 Service Fees. (a) In consideration for the provision of each of the Parent Services, Spinco shall pay to Parent the fee set forth for such Parent Service on Schedule A. (b) In consideration for the provision of each of the Spinco Services, Parent shall pay to Spinco the fee set forth for such Spinco Service on Schedule B. - 2 - 4.2 Costs and Expenses. (a) In addition to the fees payable in accordance with Section 4.1(a), Spinco shall reimburse Parent for all reasonable and necessary out-of-pocket costs and expenses (including postage and other delivery costs, telephone, telecopy and similar expenses) incurred by Parent with respect to third parties in connection with the provision of Parent Services to Spinco pursuant to the terms of this Agreement or paid by Parent on behalf of Spinco. (b) In addition to the fees payable in accordance with Section 4.1(b), Parent shall reimburse Spinco for all reasonable and necessary out-of-pocket costs and expenses (including amounts for premiums, claims, fees, postage and other delivery costs, telephone, telecopy and similar expenses) incurred by Spinco with respect to third parties in connection with the provision of Spinco Services to Parent pursuant to the terms of this Agreement or paid by Spinco on behalf of Parent. 4.3 Invoices. (a) Parent will invoice Spinco in U.S. dollars: (i) as of the last day of each calendar month for any fees payable by Spinco in accordance with Section 4.1(a) for Parent Services listed on Schedule A provided pursuant to the terms of this Agreement during such month; (ii) as of the last day of each calendar month for any amounts payable by Spinco in accordance with Section 4.2(a) for any out-of-pocket costs and expenses incurred during the immediately preceding month to the extent Parent has received an invoice from such third party; and (iii) as of the last day of each calendar month for any taxes (excluding income taxes) payable with respect to the provision of Parent Services to Spinco during such month. Parent shall deliver or cause to be delivered to Spinco each such invoice within thirty (30) days following the last day of the calendar month to which such invoice relates. Spinco shall pay each such invoice received by electronic funds transfer within thirty (30) days of the date on which such invoice was received. (b) Spinco will invoice Parent in U.S. dollars: (i) as of the last day of each calendar month for any fees payable by Parent in accordance with Section 4.1(b) for Spinco Services listed on Schedule B provided pursuant to the terms of this Agreement during such month; (ii) as of the last day of each calendar month for any amounts payable by Parent in accordance with Section 4.2(b) for any out-of-pocket costs and expenses incurred during the immediately preceding month to the extent Spinco has received an invoice from such third party; and (iii) as of the last day of each calendar month for any taxes (excluding income taxes) payable with respect to the provision of Spinco Services to Parent during such month. Spinco shall deliver or cause to be delivered to Parent each such invoice within thirty (30) days following the last day of the calendar month to which such invoice relates. Parent shall pay each such invoice received by electronic funds transfer within thirty (30) days of the date on which such invoice was received. 4.4 Late Payment. Any amount not paid when due shall be subject to a late payment fee computed daily at a rate equal to the Applicable Rate. Notwithstanding the foregoing, in the event a party disputes the accuracy of any invoice, a party shall pay the undisputed portion of such invoice as provided herein, and the parties hereto will promptly meet and seek to resolve the disputed amount of the invoice. Each party agrees to pay the other party's reasonable attorneys' fees and other costs incurred in collection of any amounts owed to such other party - 3 - hereunder and not paid when due. Notwithstanding anything to the contrary contained herein, in the event either party fails to make a payment when due hereunder, and such failure continues for a period of thirty (30) days following delivery of written notice to such non-paying party of such failure, the other party shall have the right to cease provision of Services to such non-paying party until such overdue payment (and any applicable late payment fee accrued with respect thereto) is paid in full. Such right of the party providing Services shall not in any manner limit or prejudice any of such party's other rights or remedies in the event of the non-paying party's failure to make payments when due hereunder, including any rights or remedies pursuant to Section 7. 4.5 Fees, Etc. Upon Termination of Services. In the event of a termination of Services pursuant to Section 7.1, with respect to the calendar month in which such Services cease to be provided (the "Termination Month"), the recipient of such Services shall be obligated to pay a pro rata share of the fee for such Service set forth on Schedule A or Schedule B, as applicable, equal to the product of (x) the fee set forth on Schedule A or Schedule B, as applicable, multiplied by (y) a fraction, the numerator of which is the number of days in the Termination Month such Services are provided, and the denominator of which is 30. SECTION 5. INDEMNIFICATION. 5.1 Indemnification by Principal. (a) Spinco agrees to indemnify, defend and hold Parent harmless from and against any Loss to which Parent may become subject arising out of, by reason of or otherwise in connection with the provision hereunder by Parent of Parent Services, other than Losses resulting from Parent's gross negligence, willful misconduct or material breach of its obligations pursuant to this Agreement. Notwithstanding any provision in this Agreement to the contrary, Spinco shall not be liable under this Section 5.1 for any consequential, special or punitive damages (including lost profits), except to the extent that such consequential, special or punitive damages relate to a Loss resulting from a Third-Party Claim (as defined in the Distribution Agreement). (b) Parent agrees to indemnify, defend and hold Spinco harmless from and against any Loss to which Spinco may become subject arising out of, by reason of or otherwise in connection with the provision hereunder by Spinco of Spinco Services, other than Losses resulting from Spinco's gross negligence, willful misconduct or material breach of its obligations pursuant to this Agreement. Notwithstanding any provision in this Agreement to the contrary, Parent shall not be liable under this Section 5.1 for any consequential, special or punitive damages (including lost profits), except to the extent that such consequential, special or punitive damages relate to a Loss resulting from a Third-Party Claim (as defined in the Distribution Agreement). 5.2 Indemnification by Provider. (a) Parent agrees to indemnify, defend and hold Spinco harmless from and against any Loss to which Spinco may become subject arising out of, by reason of or otherwise in connection with the provision hereunder by Parent of Parent Services to Spinco where such Losses resulted from Parent's gross negligence, willful misconduct or material breach of its obligations pursuant to this Agreement. - 4 - (b) Spinco agrees to indemnify, defend and hold Parent harmless from and against any Loss to which Parent may become subject arising out of, by reason of or otherwise in connection with the provision hereunder by Spinco of Spinco Services to Parent where such Losses resulted from Spinco's gross negligence, willful misconduct or material breach of its obligations pursuant to this Agreement. 5.3 Procedures for Indemnification. Any indemnification claims made hereunder shall be made in accordance with Article III of the Distribution Agreement. SECTION 6. CONFIDENTIALITY. Each party shall keep confidential the Schedules to this Agreement and all information received from the other party regarding the Services, including any information received with respect to Parent or Spinco, and to use such information only for the purposes set forth in this Agreement unless otherwise agreed to in writing by the party from which such information was received. In the event a party is required by any court or legislative or administrative body (by oral questions, interrogatories, requests for information or documents, subpoena, civil investigation demand or similar process) to disclose any confidential information provided pursuant to this Agreement, the party shall provide the other party with prompt notice of such requirement in order to afford the other party an opportunity to seek an appropriate protective order or other remedy. However, if the other party is unable to obtain or does not seek such protective order and the party required to disclose the confidential information is, in the opinion of its counsel, legally compelled to disclose such confidential information, disclosure of such information may be made without liability under this Agreement. The covenants in this Section 6 shall survive any termination of this Agreement indefinitely with respect to information qualifying as a trade secret under applicable law and for a period of three (3) years from the date such termination becomes effective with respect to all other information. SECTION 7. TERM. 7.1 Duration. (a) Subject to Sections 6, 7.2, 7.3 and 7.4, the term of this Agreement shall commence on the date hereof and shall continue in full force and effect with respect to each Service until the earlier of (i) the expiration of the duration or term period assigned to such Service on Schedule A or Schedule B or (ii) the termination of such Service in accordance with Section 7.1(b). (b) Each party acknowledges that the purpose of this Agreement is for Parent to provide the Parent Services to Spinco on an interim basis until Spinco can perform the Parent Services for itself, and for Spinco to provide the Spinco Services to Parent on an interim basis until Parent can perform the Spinco Services for itself. Accordingly, each of Parent and Spinco shall use its commercially reasonable efforts to make or obtain such approvals, permits and licenses and implement such systems, as shall be necessary for it to provide the appropriate Services for itself as promptly as practicable. As Spinco becomes self-sufficient or engages - 5 - other sources to provide any Parent Service, Spinco shall be entitled to release Parent from providing any or all of the Parent Services hereunder by delivering a written notice thereof to Parent at least thirty (30) days prior to the effective date of release of such Parent Service(s). At the end of such thirty (30) day period (or such shorter period as may be agreed by the parties), Parent shall discontinue the provision of the Parent Services specified in such notice and any such Parent Services shall be excluded from this Agreement, and Schedule A shall be deemed to be amended accordingly. As Parent becomes self-sufficient or engages other sources to provide any Spinco Service, Parent shall be entitled to release Spinco from providing any or all of the Spinco Services hereunder by delivering a written notice thereof to Spinco at least thirty (30) days (or in the case of Services provided under the heading "Employee Benefits" on Schedule B, at least ninety (90) days). At the end of such thirty (30) or ninety (90) day period (or such shorter period as may be agreed by the parties), Spinco shall discontinue the provision of the Spinco Services specified in such notice and any such Spinco Services shall be excluded from this Agreement, and Schedule B shall be deemed to be amended accordingly. 7.2 Early Termination by Parent. Parent may terminate this Agreement by giving written notice to Spinco if Spinco shall default in the performance of any of its material obligations under, or breach any of its warranties set forth in, this Agreement, and such default or breach shall continue and not be remedied for a period of thirty (30) days after Parent has given written notice to Spinco specifying such default or breach and requiring it to be remedied. 7.3 Early Termination by Spinco. Spinco may terminate this Agreement by giving written notice to Parent if Parent shall default in the performance of any of its material obligations under, or breach any of its warranties set forth in, this Agreement and such default or breach shall continue and not be remedied for a period of thirty (30) days after Spinco has given written notice to Parent specifying such default or breach and requiring it to be remedied. 7.4 Force Majeure. In the event the performance by Spinco or Parent of their respective duties or obligations hereunder is interrupted or interfered with by reason of any cause beyond its reasonable control, including fire, storm, flood, earthquake, explosion, war, strike or labor disruption, rebellion, insurrection, quarantine, act of God, boycott, embargo, shortage or unavailability of supplies, riot, or governmental law, regulation or edict (collectively, the "Force Majeure Events"), the party affected by such Force Majeure Event shall not be deemed to be in default of this Agreement by reason of its nonperformance due to such Force Majeure Event, but shall give prompt written notice to the other party of the Force Majeure Event. The party affected by the Force Majeure Event shall cooperate with the other party in obtaining, at the other party's sole expense, an alternative source for the affected Services, and the other party shall be released from any payment obligation to the party affected by the Force Majeure Event with respect to such Services during the period of such Force Majeure Event. Additionally, upon and during the occurrence of a Force Majeure Event, at the sole option of the party receiving the Services affected by the Force Majeure Event, the term of this Agreement shall be tolled with respect to any Services that are not being provided by a third party. 7.5 Consequences on Termination. In the event this Agreement expires or is terminated in accordance with this Section 7, then (a) all Services to be provided will promptly cease, (b) each of Parent and Spinco shall promptly return all confidential information received - 6 - from the other party in connection with this Agreement (including the return of all information received with respect to the Services of Parent or Spinco, as the case may be), without retaining a copy thereof, and (c) each of Parent and Spinco shall honor all credits and make any accrued and unpaid payment to the other party as required pursuant to the terms of this Agreement, and no rights already accrued hereunder shall be affected. SECTION 8. RECORDS. Each of the parties shall create and, for a period of six (6) years after the termination or expiration of this Agreement, maintain full and accurate books in connection with the provision of the Services, and all other records relevant to this Agreement, and upon reasonable notice from the other party shall make available for inspection and copy by such other party's agents such records during reasonable business hours. SECTION 9. DISPUTE RESOLUTION. 9.1 Dispute Resolution under Distribution Agreement. Any dispute arising out of or relating to the performance, breach or interpretation of this Agreement shall be handled in accordance with Article V of the Distribution Agreement. 9.2 Continuity of Service and Performance. Unless otherwise agreed herein or in writing, the parties will continue to provide Services and honor all other commitments under this Agreement and each Ancillary Agreement (as defined in the Distribution Agreement) during the course of dispute resolution pursuant to the provisions of this Section 9 with respect to all matters not subject to such dispute, controversy or claim. SECTION 10. NOTICES. All notices and other communications hereunder shall be in writing, shall reference this Agreement and shall be hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and will be deemed given on the date on which such notice is received: - 7 - To Parent: National Service Industries, Inc. 1420 Peachtree Street, N.E. Atlanta, Georgia 30309-3002 Attention: Carol E. Morgan Telephone: (404) 853-1000 Facsimile: (404) 853-1015 To Spinco: Acuity Brands, Inc. 1420 Peachtree Street, N.E. Atlanta, Georgia 30309-3002 Attention: Kenyon W. Murphy Telephone: (404) 853-1400 Facsimile: (404) 853-1415 SECTION 11. MISCELLANEOUS. 11.1 Waivers, Modifications, Amendments. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by Spinco, on the one hand, and Parent, on the other hand, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and in addition to other or further remedies provided by law or equity. 11.2 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF DELAWARE. 11.3 Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any person, corporation, partnership or other entity or any circumstance, is invalid and unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other persons, corporations, partnerships or other entities or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any jurisdiction. - 8 - 11.4 Reference; Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. The words "include", "includes" and "including" when used in this Agreement shall be deemed to be followed by the phrase "without limitation." Unless the context otherwise requires, references in this Agreement to Sections and Schedules shall be deemed references to Sections of, and Schedules to, this Agreement. Unless the context otherwise requires, the words "hereof", "hereby" and "herein" and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Section or provision of this Agreement. This Agreement shall not be construed against either party as the principal drafter hereof. 11.5 Entire Agreement. This Agreement (including all Schedules hereto) contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters. 11.6 Assignment. Neither Parent nor Spinco may, directly or indirectly, assign or subcontract, or attempt to assign or subcontract, any of its rights or obligations hereunder, in whole or in part, by operation of law or otherwise, except as contemplated by Schedule A or Schedule B or except with the prior written consent of the other party; it being understood that such consent shall not be unreasonably withheld if Parent or Spinco assigns or subcontracts the Agreement to one of its Affiliates (as defined in the Distribution Agreement) with the financial and other resources and expertise to perform all of the obligations of such party hereunder. Any attempted assignment or delegation not in compliance with the forgoing shall be null and void and of no effect. Nothing contained herein shall prevent a party from providing Services through or with the assistance of third parties whom such party regularly used to provide such Services prior to the date hereof. 11.7 Binding Effect. This Agreement shall be binding upon the parties hereto and their respective successors and permitted assigns, if any, and except as provided herein, shall inure to the benefit of the parties hereto and their respective successors and permitted assigns, if any. 11.8 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement. 11.9 No Agency or Partnership. Nothing in this Agreement will create, or will be deemed to create, a partnership or the relationship of principal and agent or of employer and employee between the parties. 11.10 Provisions Unaffected. Nothing contained in this Agreement shall affect the rights and obligations of Parent and Spinco pursuant to the Distribution Agreement. [SIGNATURES FOLLOW ON NEXT PAGE.] - 9 - IN WITNESS WHEREOF, this Agreement has been duly executed and delivered on behalf of the parties as of the date first herein above written. NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Brock A. Hattox ---------------------------------------- Name: Brock A. Hattox Title: Executive Vice President ACUITY BRANDS, INC. By: /s/ James S. Balloun ---------------------------------------- Name: James S. Balloun Title: President EX-10.3 5 g73258ex10-3.txt AGREEMENT AND PLAN OF DISTRIBUTION EXHIBIT 10.3 AGREEMENT AND PLAN OF DISTRIBUTION BY AND BETWEEN NATIONAL SERVICE INDUSTRIES, INC. AND ACUITY BRANDS, INC. DATED AS OF NOVEMBER 30, 2001 TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS........................................................................................1 Section 1.1. General.........................................................................1 Section 1.2. Reference; Interpretation......................................................11 ARTICLE II DISTRIBUTION AND OTHER TRANSACTIONS; CERTAIN COVENANTS...........................................12 Section 2.1. The Distribution and Other Transactions........................................12 Section 2.2. Assumption and Satisfaction of Liabilities.....................................14 Section 2.3. Resignations...................................................................14 Section 2.4. Limited Representations or Warranties..........................................14 Section 2.5. Removal of Parent Group from Certain Guarantees; Releases of Parent Group From Liabilities.........................................................15 Section 2.6. Removal of SpinCo from Certain Guarantees; Releases of SpinCo from Liabilities....................................................................16 Section 2.7. Witness Services...............................................................16 Section 2.8. Conveyancing and Assumption Instruments........................................17 Section 2.9. Ancillary Agreements...........................................................17 Section 2.10. Corporate Names; Trademarks....................................................17 Section 2.11. Post-Distribution Remittances..................................................18 Section 2.12. Non-Solicitation...............................................................18 Section 2.13. Further Assurances.............................................................19 ARTICLE III INDEMNIFICATION.................................................................................20 Section 3.1. Indemnification by Parent......................................................20 Section 3.2. Indemnification by SpinCo......................................................20 Section 3.3. Procedures for Indemnification.................................................20 Section 3.4. Indemnification Payments.......................................................22
ARTICLE IV ACCESS TO INFORMATION............................................................................22 Section 4.1. Provision of Corporate Records.................................................22 Section 4.2. Access to Information..........................................................23 Section 4.3. Reimbursement; Other Matters...................................................23 Section 4.4. Confidentiality................................................................23 Section 4.5. Privileged Matters.............................................................24 Section 4.6. Ownership of Information.......................................................25 Section 4.7. Retention of Records...........................................................25 Section 4.8. Limitation of Liability; Release...............................................26 Section 4.9. Other Agreements Providing for Exchange of Information.........................26 ARTICLE V DISPUTE RESOLUTION................................................................................27 Section 5.1. Negotiation....................................................................27 Section 5.2. Mediation......................................................................27 Section 5.3. Arbitration....................................................................27 Section 5.4. Continuity of Service and Performance..........................................28 Section 5.5. Other Remedies.................................................................28 ARTICLE VI INSURANCE........................................................................................29 Section 6.1. Policies and Rights Included Within Assets.....................................29 Section 6.2. Post-Distribution Date Claims..................................................29 Section 6.3. Administration; Other Matters..................................................29 Section 6.4. Agreement for Waiver of Conflict and Shared Defense............................31 Section 6.5. Cooperation....................................................................32 ARTICLE VII MISCELLANEOUS...................................................................................32 Section 7.1. Complete Agreement; Construction...............................................32 Section 7.2. Ancillary Agreements...........................................................32
- ii - Section 7.3. Counterparts...................................................................32 Section 7.4. Survival of Agreements.........................................................32 Section 7.5. Distribution Expenses..........................................................32 Section 7.6. Notices........................................................................32 Section 7.7. Waivers........................................................................33 Section 7.8. Amendments.....................................................................33 Section 7.9. Successors and Assigns.........................................................34 Section 7.10. Termination....................................................................34 Section 7.11. Subsidiaries...................................................................34 Section 7.12. Third Party Beneficiaries......................................................34 Section 7.13. Title and Headings.............................................................34 Section 7.14. Exhibits and Schedules.........................................................34 Section 7.15. Governing Law..................................................................34 Section 7.16. Consent to Jurisdiction........................................................34 Section 7.17. Severability...................................................................35 Section 7.18. Consolidation, Merger, Etc.....................................................35
- iii - EXHIBITS
Exhibit Description of Exhibit - ------- ---------------------- Exhibit A Limited Warranty Deed Exhibit B Employee Benefits Agreement Exhibit C Lease Agreement (Parent Corporate Headquarters) Exhibit D Tax Disaffiliation Agreement Exhibit E Transition Services Agreement
SCHEDULES
Schedule Description of Schedule - -------- ----------------------- Schedule 1.1(p) Corporate Transactions Schedule 1.1(pp) Parent Businesses/Discontinued Parent Businesses Schedule 1.1(tt)(ii) Specific Parent Liabilities Schedule 1.1(tt)(iii) Parent Business Litigation Schedule 1.1(uu) Parent Policies Schedule 1.1(vv) Parent Shared Policies Schedule 1.1(ww) Parent Subsidiaries Schedule 1.1(ggg) SpinCo Balance Sheet Schedule 1.1(hhh) SpinCo Businesses Schedule 1.1(lll)(ii) Specific SpinCo Liabilities Schedule 1.1(lll)(iv)(A) Specific SpinCo Liabilities Schedule 1.1(lll)(iv)(B) SpinCo Business Litigation Schedule 1.1(mmm) SpinCo Policies Schedule 1.1(ooo) SpinCo Subsidiaries Schedule 2.1(f) Consents Schedule 2.1(g) Registration Statement/Information Statement Liabilities (Part I and Part II) Schedule 2.5(a) Guarantees (from which Parent Group Members are to be Released) Schedule 2.6(a) Guarantees (from which SpinCo Group Members are to be Released)
- iv - AGREEMENT AND PLAN OF DISTRIBUTION This AGREEMENT AND PLAN OF DISTRIBUTION (this "Agreement"), dated as of November 30, 2001, by and between National Service Industries, Inc., a Delaware corporation ("Parent"), and Acuity Brands, Inc., a Delaware corporation ("SpinCo"); WHEREAS, SpinCo originally was a wholly owned subsidiary of NSI Enterprises, Inc., a California corporation ("Enterprises"), which is a wholly owned subsidiary of Parent; WHEREAS, on August 31, 2001, SpinCo became a wholly owned subsidiary of Parent; WHEREAS, Parent Group (as defined herein) currently conducts the Parent Business (as defined herein), owns the Parent Assets (as defined herein) and is subject to the Parent Liabilities (as defined herein); WHEREAS, as of the Effective Time SpinCo Group (as defined herein) will conduct the SpinCo Business (as defined herein), will own the SpinCo Assets (as defined herein) and will be subject to the SpinCo Liabilities (as defined herein); WHEREAS, the Board of Directors of Parent has authorized the distribution by Parent to the holders of the issued and outstanding shares of common stock, par value $1.00 per share, of Parent (the "Parent Common Stock") as of the record date of 100% of the issued and outstanding shares of common stock, par value $0.01 per share, of SpinCo (the "SpinCo Common Stock"), together with the associated preferred stock purchase rights (each share of such stock, together with the associated preferred stock purchase right, a "SpinCo Share"), on the basis of one (1) SpinCo Share for each share of Parent Common Stock (the "Distribution"); and WHEREAS, the parties hereto have determined to set forth the principal corporate and other transactions required to effect the Distribution and to set forth other agreements that will govern certain other matters prior to and following the Distribution. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, the parties hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. GENERAL. Unless otherwise defined herein or unless the context otherwise requires, as used in this Agreement, the following terms shall have the following meanings: (a) "Action" shall mean any demand, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority or any arbitration or mediation tribunal. (b) "Affiliate" shall mean, when used with respect to any specified Person, a Person that directly or indirectly controls, is controlled by, or is under common control with such specified Person; provided, however, that for purposes of this Agreement, any Person who was a member of both Groups prior to the Distribution shall be deemed to be an Affiliate only of the Group of which such Person is a member following the Distribution. As used herein, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract or otherwise. Any contrary provision of this Agreement notwithstanding, neither Parent nor any Parent Subsidiaries shall be deemed to be an Affiliate of SpinCo, and neither SpinCo nor any SpinCo Subsidiaries shall be deemed to be an Affiliate of Parent. (c) "Agent" shall have the meaning set forth in Section 2.1(b) of this Agreement. (d) "Agreement" shall mean this Agreement. (e) "Agreement Disputes" shall have the meaning set forth in Section 5.1 of this Agreement. (f) "Ancillary Agreements" shall mean all of the written agreements, instruments, understandings, assignments or other arrangements (other than this Agreement) entered into by the parties hereto or any other member of their respective Groups in connection with the transactions contemplated hereby, including the Conveyancing and Assumption Instruments, the Employee Benefits Agreement, the Tax Disaffiliation Agreement, the Transition Services Agreement, the Ancillary Workers' Compensation Agreement, Leases and the Subleases. (g) [Reserved] (h) "Applicable Rate" shall mean the rate of interest per annum announced from time to time by Wachovia Bank of Georgia, N.A., as its prime lending rate, plus four percent (4%). (i) "Assets" shall mean assets, properties and rights, wherever located (including in the possession of vendors or other third parties or elsewhere), whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person, including the following: (i) all accounting and other books, records and files, whether in paper, microfilm, microfiche, computer tape or disc, magnetic tape or any other form; (ii) all apparatus, computers and other electronic data processing equipment, fixtures, machinery, equipment, furniture, office equipment, automobiles, trucks, other transportation equipment, special and general tools, test devices, prototypes and models and other tangible personal property; (iii) all inventories of materials, parts, raw materials, supplies, work-in-process and finished goods and products; (iv) all interests in real property of whatever nature, including easements, whether as owner, mortgagee or holder of a security interest in real property, lessor, sublessor, lessee, sublessee or otherwise; - 2 - (v) all interests in any capital stock or other equity interests of any Subsidiary or any other Person; all bonds, notes, debentures or other securities issued by any Subsidiary or any other Person; all loans, advances or other extensions of credit or capital contributions to any Subsidiary or any other Person; and all other investments in securities of any Person; (vi) all customer contracts; service, maintenance, supply, vendor, consulting, transportation and consignment agreements; collective bargaining agreements; employment agreements; license agreements; leases and subleases of personal property; open purchase orders for raw materials, supplies, parts or services; unfilled orders for the manufacture and sale of products; and other contracts, agreements or commitments (collectively, "Contracts"); (vii) all deposits, letters of credit and performance and surety bonds; (viii) all written technical information, data, specifications, research and development information, engineering drawings, operating and maintenance manuals, and materials and analyses prepared by consultants and other Third Parties; (ix) all domestic and foreign patents, copyrights, trade names, trademarks, service marks, logos and registrations and applications for any of the foregoing, together with the goodwill of the business symbolized by any of the foregoing; mask works, trade secrets, inventions, data bases, and other proprietary and confidential information; and licenses from Third Parties granting the right to use any of the foregoing; (x) all computer applications, programs and other software, including operating software, network software, firmware, middleware, design software, design tools, systems documentation and instructions; (xi) all cost information, sales and pricing data, customer prospect lists, vendor records, customer and vendor lists, customer and vendor data, correspondence and lists, product literature, artwork, design, development and manufacturing files, vendor and customer drawings, formulations and specifications, quality records and reports and other books, records, studies, surveys, reports, plans and documents; (xii) all prepaid expenses, trade accounts and other accounts and notes receivable; (xiii) all rights, claims, demands, choses in action and similar rights relating to the foregoing, whether accrued or contingent; (xiv) all rights under insurance policies and all rights in the nature of insurance, indemnification or contribution; (xv) all licenses, permits, approvals and authorizations which have been issued by any Governmental Authority; - 3 - (xvi) cash or cash equivalents, bank accounts, lock boxes and other deposit arrangements; and (xvii) interest rate, currency, commodity or other swap, collar, cap or other hedging or similar agreements or arrangements. (j) "Business Day" shall mean any day other than a Saturday, Sunday or a day on which commercial banking institutions located in The City of New York are authorized or obligated by law or executive order to close. (k) "Claims Administration" shall mean the processing of claims made under the Parent Shared Policies, including the reporting of claims to the insurance carriers, management and defense of claims and providing for appropriate releases upon settlement of claims. (l) "Code" shall mean the Internal Revenue Code of 1986, as amended, and the Treasury regulations promulgated thereunder, including any successor legislation. (m) "Commission" shall mean the Securities and Exchange Commission. (n) "Contracts" shall have the meaning set forth in the definition of Assets. (o) "Conveyancing and Assumption Instruments" shall mean, collectively, the various agreements, instruments and other documents to be or heretofore entered into to effect the Corporate Transactions or otherwise to effect the transfer of Assets and the assumption of Liabilities in the manner contemplated by this Agreement, the Ancillary Agreements and the Corporate Transactions, including a limited warranty deed in the form attached hereto as Exhibit A. (p) "Corporate Transactions" shall mean, collectively, (a) each of the mergers, transfers, conveyances, contributions, assignments, dividends, assumptions, redemptions, purchases and other transactions described and set forth on Schedule 1.1(p) attached hereto, and (b) such other mergers, transfers, conveyances, contributions, assignments, dividends, assumptions, redemptions, purchases and other transactions that may be appropriate or required to be accomplished, effected or consummated by Parent or SpinCo or any of their respective Subsidiaries and Affiliates so that: (i) the SpinCo Assets, SpinCo Liabilities and SpinCo Business shall be owned, directly or indirectly, by SpinCo after giving effect to the Distribution; and (ii) the Parent Assets, Parent Liabilities and Parent Business shall be owned, directly or indirectly, by Parent after giving effect to the Distribution. (q) "Distribution" shall have the meaning set forth in the recitals to this Agreement. (r) "Distribution Date" shall mean such date as may be determined by the Board of Directors of Parent, or such committee of such Board of Directors as shall be designated by the Board of Directors of Parent, as the date as of which the Distribution shall be effected. (s) "Distribution Record Date" shall mean such date as may be determined by the Board of Directors of Parent, or such committee of such Board of Directors as shall be designated by the Board of Directors of Parent, as the record date for the Distribution. - 4 - (t) "Effective Time" shall mean 11:59 p.m., New York City time, on the Distribution Date. (u) "Employee Benefits Agreement" shall mean the Employee Benefits Agreement by and between Parent and SpinCo, which agreement shall be entered into prior to or on the Distribution Date in the form attached hereto as Exhibit B. (v) "Environmental Laws" shall mean any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, principles of common law, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions (including the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601, et seq.), whether now or hereafter in existence, relating to the environment, natural resources, human health or safety, endangered or threatened species of fish, wildlife and plants, or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment (including indoor or outdoor air, surface water, groundwater and surface or subsurface soils), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the investigation, cleanup or other remediation thereof. (w) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder. (x) "Governmental Authority" shall mean any federal, state, local, foreign or international court, government, department, commission, board, bureau, agency, official, the NYSE or other regulatory, administrative or governmental authority. (y) "Group" shall mean with respect to Parent, the Parent Group and, with respect to SpinCo, the SpinCo Group. (z) "Indemnifiable Losses" shall mean any and all Losses suffered by an Indemnitee. (aa) "Indemnifying Party" shall have the meaning set forth in Section 3.3 of this Agreement. (bb) "Indemnitee" shall have the meaning set forth in Section 3.3 of this Agreement. (cc) "Information Statement" shall mean the Information Statement filed with the Commission as part of the Registration Statement and mailed to the holders of shares of Parent Common Stock in connection with the Distribution, including any amendments or supplements thereto. (dd) "Insurance Administration" shall mean, with respect to each Parent Shared Policy, (i) the accounting for premiums, retrospectively rated premiums, defense costs, indemnity payments, deductibles and retentions, as appropriate, under the terms and conditions of each of the Parent Shared Policies; (ii) the reporting to excess insurance carriers of any losses or claims which may cause the applicable limits of any Parent Shared Policy to be exceeded; (iii) the - 5 - distribution of Insurance Proceeds as contemplated by this Agreement; and (iv) any and all other actions reasonably necessary for the administration of the Parent Shared Policies. (ee) "Insurance Proceeds" shall mean those monies (i) received by an insured from an insurance carrier or (ii) paid by an insurance carrier on behalf of an insured. (ff) "Insured Claims" shall mean those Liabilities that, individually or in the aggregate, are covered within the terms and conditions of any of the Parent Shared Policies, whether or not subject to deductibles, self-insured retentions, co-insurance, uncollectibility or retrospectively rated premium adjustments. (gg) "IRS" shall mean the Internal Revenue Service. (hh) "Law" shall mean all laws, statutes and ordinances and all regulations, rules and other pronouncements of Governmental Authorities having the effect of law of the United States, any foreign country, or any domestic or foreign state, province, commonwealth, city, country, municipality, territory, protectorate, possession or similar instrumentality, or any Governmental Authority thereof. (ii) "Leases" shall mean the leases by and between members of the Parent Group and members of the SpinCo Group, which leases shall be entered into prior to or on the Distribution Date in such form as is agreed to by Parent and SpinCo, including the lease agreement, in the form attached hereto as Exhibit C, pursuant to which Parent will lease to SpinCo a portion of Parent's corporate headquarters. (jj) "Liabilities" shall mean any and all debts, liabilities, obligations, responsibilities, response actions, losses, damages (whether compensatory, punitive or treble), fines, penalties and sanctions, absolute or contingent, matured or unmatured, liquidated or unliquidated, foreseen or unforeseen, joint, several or individual, asserted or unasserted, accrued or unaccrued, known or unknown, whenever arising, including those arising under or in connection with any Law (including any Environmental Law), Action, threatened Action, order or consent decree of any Governmental Authority, or any award of any arbitration tribunal, and those arising under any contract, guarantee, commitment or undertaking, whether sought to be imposed by a Governmental Authority, private party, or party to this Agreement, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, or otherwise, and including any costs, expenses, interest, attorneys' fees, disbursements and expenses of counsel, expert and consulting fees and costs related thereto or to the investigation or defense thereof. (kk) "Losses" shall mean all losses, liabilities, damages, claims, demands, judgments or settlements of any nature or kind, known or unknown, fixed, accrued, absolute or contingent, liquidated or unliquidated, including all reasonable costs and expenses (legal, accounting or otherwise as such costs are incurred) relating thereto. (ll) "Notices" shall have the meaning set forth in Section 7.6 of this Agreement. (mm) "NYSE" shall mean the New York Stock Exchange, Inc. (nn) "Parent" shall have the meaning set forth in the preamble to this Agreement. - 6 - (oo) "Parent Assets" shall mean, collectively, all the Assets owned or held by Parent or any Parent Subsidiary immediately after giving effect to the Corporate Transactions, except the SpinCo Assets. (pp) "Parent Business" shall mean each and every business conducted at any time by Parent Group (including those businesses set forth on Schedule 1.1(pp)), including each and every business conducted in the past and each and every business which has been discontinued, sold or transferred (including those businesses set forth on Schedule 1.1(pp)), but excluding the SpinCo Business. (qq) "Parent Common Stock" shall have the meaning set forth in the recitals to this Agreement. (rr) "Parent Group" shall mean Parent and each Person (other than any member of the SpinCo Group) that is a Parent Subsidiary. (ss) "Parent Indemnitee" shall mean: (i) Parent and each Affiliate thereof after giving effect to the Corporate Transactions and the Distribution; and (ii) each of the respective past, present and future Representatives of any of the entities described in the immediately preceding clause (i) and each of the heirs, executors, successors and assigns of any of such Representatives, except in the case of clauses (i) and (ii), the SpinCo Indemnitees. (tt) "Parent Liabilities" shall mean: (i) any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be retained or assumed by Parent or any member of the Parent Group, and all agreements, obligations and Liabilities of any member of the Parent Group under this Agreement or any of the Ancillary Agreements; (ii) all Liabilities set forth on Schedule 1.1(tt)(ii); and (iii) all Liabilities (other than Taxes and any employee-related Liabilities which are specifically covered by the Tax Disaffiliation Agreement and the Employee Benefits Agreement, respectively) primarily relating to, arising out of or resulting from: (A) the operation of the Parent Business, as conducted at any time prior to, on or after the Distribution Date (including any Liability relating to, arising out of or resulting from any act or failure to act by any Representative (whether or not such act or failure to act is or was within such Person's authority)); (B) the operation of any business conducted by Parent or any Parent Subsidiary at any time after the Distribution Date (including any Liability relating to, arising out of or resulting from any act or failure to act by any Representative - 7 - (whether or not such act or failure to act is or was within such Person's authority)); or (C) any Parent Assets, whether arising before, on or after the Distribution Date. Notwithstanding the foregoing, the Parent Liabilities shall not include: (y) any Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be retained or assumed by SpinCo or any member of the SpinCo Group; or (z) all agreements and obligations of any member of the SpinCo Group under this Agreement or any of the Ancillary Agreements. Any contrary provision of this Agreement notwithstanding, any Liabilities or Losses in respect of any Action relating to the Parent Business, including the matters set forth on Schedule 1.1(tt)(iii), shall constitute Parent Liabilities. (uu) "Parent Policies" shall mean all Policies, current or past, that are owned or maintained by or on behalf of Parent or any Parent Subsidiary that do not provide coverage to or with respect to the SpinCo Assets or the SpinCo Business, or any part thereof, including those Policies set forth on Schedule 1.1(uu). (vv) "Parent Shared Policies" shall mean all Policies, current or past, which are owned or maintained by or on behalf of Parent or any Parent Subsidiary which provide coverage to or with respect to the SpinCo Group, the SpinCo Assets or the SpinCo Business, or any part thereof, other than SpinCo Policies, including those Policies set forth on Schedule 1.1(vv). (ww) "Parent Subsidiaries" shall mean all of the Subsidiaries of Parent other than SpinCo and the SpinCo Subsidiaries. The Parent Subsidiaries shall include the entities set forth on Schedule 1.1(ww). (xx) "Person" shall mean any natural person, corporation, business trust, limited liability company, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. (yy) "Policies" shall mean insurance policies and insurance contracts of any kind (other than life and benefits policies or contracts), including primary, excess and umbrella policies, master comprehensive general liability policies, director and officer liability, fiduciary liability, automobile, aircraft, property and casualty, workers' compensation and employee dishonesty insurance policies, bonds and self-insurance and captive insurance company arrangements, together with the rights, benefits and privileges thereunder. (zz) "Records" shall have the meaning set forth in Section 4.1 of this Agreement. (aaa) "Registration Statement" shall mean the registration statement on Form 10 to effect the registration of the SpinCo Common Stock pursuant to the Exchange Act. (bbb) "Representative" shall mean, with respect to any Person, any of such Person's directors, officers, members, employees, agents, consultants, advisors, accountants, attorneys and representatives. - 8 - (ccc) "Rules" shall have the meaning set forth in Section 5.3 of this Agreement. (ddd) "Securities Act" shall mean the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder. (eee) "SpinCo" shall have the meaning set forth in the preamble to this Agreement. (fff) "SpinCo Assets" shall mean collectively, all the Assets that are owned by SpinCo or any SpinCo Subsidiaries as of the Effective Time and after giving effect to the Corporate Transactions, including: (i) the capital stock of the SpinCo Subsidiaries; (ii) all of the Assets reflected on the SpinCo Balance Sheet or the accounting records supporting such balance sheet; (iii) all of the Assets expressly allocated to SpinCo or any of the SpinCo Subsidiaries under this Agreement or any of the Ancillary Agreements; and (iv) any other Asset acquired by Parent or any of the Parent Subsidiaries from the date of the SpinCo Balance Sheet to the Effective Time that is owned by Parent, any of the Parent Subsidiaries, SpinCo or any of the SpinCo Subsidiaries as of the Effective Time and that is of a nature or type that would have resulted in such Asset being included as an Asset on the SpinCo Balance Sheet had it been acquired on or prior to the date of the SpinCo Balance Sheet, determined on a basis consistent with the determination of the Assets included on the SpinCo Balance Sheet. (ggg) "SpinCo Balance Sheet" shall mean the combined balance sheet of the SpinCo Group, including the notes thereto, as of August 31, 2001 set forth on Schedule 1.1(ggg). (hhh) "SpinCo Business" shall mean each and every business conducted from and after the Effective Time by SpinCo Group (including those businesses set forth on Schedule 1.1(hhh)), and each and every business conducted prior to the Effective Time by Parent Group that is of a nature or type that was or would have been included in Parent's lighting equipment or chemicals segments for financial reporting purposes that has been discontinued, sold or transferred by Parent Group (including those businesses set forth on Schedule 1.1(hhh)). (iii) "SpinCo Common Stock" shall have the meaning set forth in the recitals to this Agreement. (jjj) "SpinCo Group" shall mean SpinCo, the SpinCo Subsidiaries and the corporations, partnerships and other entities which are contemplated to remain or become a Subsidiary of SpinCo in connection with the Corporate Transactions and the Distribution. (kkk) "SpinCo Indemnitees" shall mean: (i) SpinCo and each Affiliate thereof after giving effect to the Corporate Transactions and the Distribution; and - 9 - (ii) each of the respective past, present and future Representatives of any of the entities described in the immediately preceding clause (i) and each of the heirs, executors, successors and assigns of any of such Representatives. (lll) "SpinCo Liabilities" shall mean (i) any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be retained or assumed by SpinCo or any member of the SpinCo Group, and all agreements, obligations and Liabilities of any member of the SpinCo Group under this Agreement or any of the Ancillary Agreements; (ii) all Liabilities set forth on Schedule 1.1(lll)(ii); (iii) all Liabilities (other than Taxes and any employee-related Liabilities which are specifically covered by the Tax Disaffiliation Agreement and the Employee Benefits Agreement, respectively), primarily relating to, arising out of or resulting from: (A) the operation of the SpinCo Business, as conducted at any time prior to, on or after the Distribution Date (including any Liability relating to, arising out of or resulting from any act or failure to act by any Representative with respect to the SpinCo Business (whether or not such act or failure to act is or was within such Person's authority)); (B) the operation of any business conducted by SpinCo or any SpinCo Subsidiary at any time after the Distribution Date (including any Liability relating to, arising out of or resulting from any act or failure to act by any Representative (whether or not such act or failure to act is or was within such Person's authority)); or (C) any SpinCo Assets, whether arising before, on or after the Distribution Date; and (iv) all Liabilities reflected as liabilities or obligations on the SpinCo Balance Sheet or the accounting records supporting such balance sheet, and all Liabilities arising or assumed after the date of such balance sheet which, had they arisen or been assumed on or before such date and been retained as of such date, would have been reflected on such balance sheet, determined on a basis consistent with the determination of the Liabilities included on the SpinCo Balance Sheet, subject to any discharge of such Liabilities subsequent to the date of the SpinCo Balance Sheet, including those liabilities set forth on Schedule 1.1(lll)(iv)(A). Notwithstanding the foregoing, the SpinCo Liabilities shall not include: (y) any Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be retained or assumed by Parent or any member of the Parent Group; or (z) all agreements and obligations of any member of the Parent Group under this Agreement or any of the Ancillary Agreements. Any contrary provision of this Agreement notwithstanding, any Liabilities or Losses in respect of any Action relating to the SpinCo - 10 - Business, including the matters set forth on Schedule 1.1(lll)(iv)(B), shall constitute SpinCo Liabilities. (mmm) "SpinCo Policies" shall mean all Policies, current or past, which are owned or maintained by or on behalf of Parent or any Parent Subsidiary, which relate specifically to the SpinCo Assets or the SpinCo Business but do not relate to the Parent Business or the Parent Assets, and which Policies are either maintained by SpinCo or a member of the SpinCo Group or assignable to SpinCo or a member of the SpinCo Group, including those Policies set forth on Schedule 1.1(mmm). (nnn) "SpinCo Share" shall have the meaning set forth in the recitals to this Agreement. (ooo) "SpinCo Subsidiaries" shall mean all of the Subsidiaries listed on Schedule 1.1(ooo). (ppp) "Subleases" shall mean the subleases, if any, by and between members of the Parent Group and members of the SpinCo Group, which subleases shall be entered into prior to or on the Distribution Date in such form as is agreed to by Parent and SpinCo. (qqq) "Subsidiary" shall mean with respect to any specified Person, any corporation or other legal entity of which such Person or any of its Subsidiaries controls or owns, directly or indirectly, more than 50% of the stock or other equity interest entitled to vote on the election of members to the board of directors or similar governing body. (rrr) "Tax" shall have the meaning set forth in the Tax Disaffiliation Agreement. (sss) "Tax Disaffiliation Agreement" shall mean the Tax Disaffiliation Agreement by and between Parent and SpinCo, which agreement shall be entered into prior to or on the Distribution Date in the form attached hereto as Exhibit D. (ttt) "Third Party" shall mean a Person who is not a party hereto or a Subsidiary thereof. (uuu) "Third-Party Claim" shall have the meaning set forth in Section 3.3 of this Agreement. (vvv) "Transition Services Agreement" shall mean the Transition Services Agreement by and between Parent and SpinCo, which agreement shall be entered into prior to or on the Distribution Date in the form attached hereto as Exhibit E. SECTION 1.2. REFERENCE; INTERPRETATION. References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. The words "include", "includes" and "including" when used in this Agreement shall be deemed to be followed by the phrase "without limitation." Unless the context otherwise requires, references in this Agreement to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Unless the context otherwise requires, the words "hereof", "hereby" and "herein" and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular - 11 - Article, Section or provision of this Agreement. Neither this Agreement nor any Ancillary Agreement shall be construed against either party as the principal draftsperson hereof or thereof. ARTICLE II DISTRIBUTION AND OTHER TRANSACTIONS; CERTAIN COVENANTS SECTION 2.1. THE DISTRIBUTION AND OTHER TRANSACTIONS. (a) Certain Transactions. On or prior to the Distribution Date: (i) Pursuant to the Corporate Transactions, Parent Group owns the Parent Assets and is subject to the Parent Liabilities. (ii) Pursuant to the Corporate Transactions, SpinCo Group owns the SpinCo Assets and is subject to the SpinCo Liabilities. (b) Distribution to Parent. (i) On or prior to the Distribution Date, Parent shall deliver to Parent's stock transfer agent (the "Agent") a certificate or certificates representing the SpinCo Shares which are to be distributed to Parent's stockholders in the Distribution, endorsed by Parent in blank, for the benefit of the holders of Parent Common Stock, and Parent shall authorize the Agent to distribute, on or as soon as practicable following the Distribution Date, such SpinCo Shares to holders of record of shares of Parent Common Stock on the Distribution Record Date as further contemplated by the Information Statement and hereby. SpinCo shall provide any share certificates that the Agent shall require in order to effect the Distribution. (ii) The SpinCo Shares distributed in the Distribution will be distributed only pursuant to a book entry system. Parent shall authorize the Agent to deliver the SpinCo Shares previously delivered to the Agent to a depositary and to mail to each holder of record of Parent Common Stock on the Distribution Record Date, a statement of the whole and fractional SpinCo Shares credited to such holder's account. If following the Distribution a holder of SpinCo Common Stock requests physical certificates instead of participating in the book entry system, the Agent will issue certificates for such shares, but only for whole numbers of SpinCo Shares. (c) Charter; Bylaws; Rights Plan. On or prior to the Distribution Date, SpinCo and Enterprises or Parent, as the case may be, shall have taken all necessary actions to provide for the adoption of the form of Certificate of Incorporation and Bylaws and the execution and delivery of a Stockholder Protection Rights Agreement, between SpinCo and Wells Fargo Bank of Minnesota, N.A., as Rights Agent, in substantially the form filed by SpinCo with the Commission as Exhibits to the Registration Statement. - 12 - (d) Directors. On or prior to the Distribution Date, SpinCo and Enterprises or Parent, as the case may be, shall have taken all necessary action to cause the Board of Directors of SpinCo to consist of the individuals identified in the Information Statement as directors of SpinCo. (e) Certain Licenses and Permits. On or prior to the Distribution Date or as soon as reasonably practicable thereafter: (i) Parent shall use its commercially reasonable efforts to transfer or cause to be transferred all transferable licenses, permits and authorizations issued by any Governmental Authority which relate solely to the SpinCo Business but which are held in the name of any member of the Parent Group, or in the name of any Representative of any such member on behalf of a member of the SpinCo Group, to the appropriate member of the SpinCo Group; and (ii) SpinCo shall use its commercially reasonable efforts to transfer or cause to be transferred all transferable licenses, permits and authorizations issued by Governmental Authorities which relate solely to the Parent Business but which are held in the name of any member of the SpinCo Group, or in the name of any Representative of any such member on behalf of a member of the Parent Group, to the appropriate member of the Parent Group. (f) Consents. The parties hereto shall use their commercially reasonable efforts to obtain those types of required consents and approvals to transfer and/or assign licenses, permits and authorizations of Governmental Authorities and those types of consents and approvals to transfer and/or assign Contracts from Third Parties set forth in Schedule 2.1(f); provided, however, that no party shall be obligated to pay any consideration therefor (except for filing fees or other similar charges) to any Third Party from whom such consent or approval is requested. Whether or not such consent or approval is obtained, nothing in this Section 2.1(f) shall in any way limit the obligations of the parties under Article III. (g) Certain Liabilities. For purposes of this Agreement, including Article III hereof, Parent and SpinCo agree that (i) any and all Liabilities arising from or based upon misstatements in or omissions from the Registration Statement or the Information Statement under the captions set forth on Part 1 of Schedule 2.1(g) to this Agreement (insofar as such information relates to Parent or the terms of the Distribution) shall be deemed to be Parent Liabilities and not SpinCo Liabilities, (ii) fifty percent (50%) of any and all Liabilities arising from or based upon misstatements in or omissions from the Registration Statement or the Information Statement under the captions set forth on Part 2 of Schedule 2.1(g) to this Agreement shall be deemed to be Parent Liabilities and fifty percent (50%) of such Liabilities shall be deemed to be SpinCo Liabilities, and (iii) any and all Liabilities arising from or based upon misstatements in or omissions from the Registration Statement or the Information Statement other than those specified in Sections 2.1(g)(i) and (ii) shall be deemed to be SpinCo Liabilities and not Parent Liabilities. (h) Election of Officers. On or prior to the Distribution Date, SpinCo shall take all actions necessary and desirable so that as of the Distribution Date the executive officers of SpinCo will be as set forth in the Information Statement. - 13 - (i) State Securities Laws. Prior to the Distribution Date, Parent and SpinCo shall take all such action as may be necessary or appropriate under the securities or blue sky laws of states or other political subdivisions of the United States in order to effect the Distribution. (j) Listing Application; Notice to NYSE. (i) Prior to the Distribution Date, Parent and SpinCo shall prepare and file with the NYSE a listing application and related documents and shall take all such other actions with respect thereto as shall be necessary or desirable in order to cause the NYSE to list on or prior to the Distribution Date, subject to official notice of issuance, the SpinCo Shares. (ii) Prior to the Distribution, Parent shall, to the extent possible, give the NYSE not less than ten (10) days advance notice of the Distribution Record Date in compliance with Rule 10b-17 under the Exchange Act. (k) Other Transactions. On or prior to the Distribution Date, the parties hereto shall have consummated those other transactions in connection with the Corporate Transactions and the Distribution that are contemplated by the Information Statement and not specifically referred to in this Section 2.1. SECTION 2.2. ASSUMPTION AND SATISFACTION OF LIABILITIES. Except as otherwise specifically set forth in any Ancillary Agreement, from and after the Effective Time, (i) Parent shall, or shall cause the applicable member of the Parent Group to, assume, pay, perform and discharge all Parent Liabilities in the ordinary course of business, consistent with past practice, and (ii) SpinCo shall, or shall cause the applicable member of the SpinCo Group to, assume, pay, perform and discharge all SpinCo Liabilities in the ordinary course of business, consistent with past practice. To the extent reasonably requested to do so by another party hereto, each party hereto agrees to execute and deliver such documents, in a form reasonably satisfactory to such party, as may be reasonably necessary to evidence the assumption of any Liabilities hereunder. SECTION 2.3. RESIGNATIONS. Parent shall cause all its employees to resign, effective as of the Effective Time, from all positions as officers or directors of any member of the SpinCo Group in which they serve, and SpinCo shall cause all its employees to resign, effective as of the Effective Time, from all positions as officers or directors of any members of the Parent Group in which they serve. SECTION 2.4. LIMITED REPRESENTATIONS OR WARRANTIES. Each of the parties hereto agrees that no party hereto is, in this Agreement or in any other agreement or document contemplated by this Agreement or otherwise, making any representation or warranty whatsoever, as to title or value of Assets being transferred. It is also agreed that all Assets either transferred to or retained by the parties, as the case may be, shall be "as is, where is" and that (subject to Section 2.13) the party to which such Assets are to be transferred hereunder shall bear the economic and legal risk that such party's or any of the Subsidiaries' title to any such Assets shall be other than good and marketable and free from encumbrances. Similarly, each party hereto agrees that no party hereto - 14 - is representing or warranting in any way that the obtaining of any consents or approvals, the execution and delivery of any agreements and the making of any filings or applications contemplated by this Agreement will satisfy the provisions of any or all applicable Contracts or other agreements or the requirements of any or all applicable Laws or judgments, it being agreed that the party to which any Assets are transferred shall bear the economic and legal risk that any necessary consents or approvals are not obtained or that any requirements of Laws or judgments are not complied with. Notwithstanding the foregoing, however, except as otherwise provided in Section 2.5 or Section 2.6 hereof, from and after the Effective Time, the Parent Group shall continue to be solely responsible for Parent Liabilities, and the SpinCo Group shall continue to be solely responsible for SpinCo Liabilities. SECTION 2.5. REMOVAL OF PARENT GROUP FROM CERTAIN GUARANTEES; RELEASES OF PARENT GROUP FROM LIABILITIES. (a) Except as otherwise specified in any Ancillary Agreement, SpinCo shall use its commercially reasonable efforts to have, on or prior to the Distribution Date, or as soon as practicable thereafter, any member of the Parent Group removed as guarantor of or obligor for any SpinCo Liability, including in respect of those guarantees set forth on Schedule 2.5(a) of this Agreement. (b) If SpinCo is unable to obtain, or to cause to be obtained, any such required removal as set forth in clause (a) of this Section 2.5, the applicable guarantor or obligor shall continue to be bound as such and, unless not permitted by law or the terms thereof, the relevant beneficiary shall or shall cause one of its Subsidiaries, as agent or subcontractor for such guarantor or obligor to pay, perform and discharge fully all the obligations or other liabilities of such guarantor or obligor thereunder from and after the date hereof. (c) If (i) SpinCo is unable to obtain, or to cause to be obtained, any such required removal as set forth in clause (a) of this Section 2.5, or (ii) SpinCo Liabilities arise from and after the Effective Time but before a member of the Parent Group which is a guarantor or obligor with reference to any such SpinCo Liability is removed pursuant to Section 2.5(a), then such guarantor or obligor shall be indemnified by SpinCo for all Liabilities incurred by it in its capacity as guarantor or obligor in accordance with Article III hereof. Without limiting the foregoing, SpinCo shall, or shall cause a member of the SpinCo Group to, reimburse any such member of the Parent Group which is a guarantor or obligor as soon as practicable (but in no event later than thirty (30) days) following delivery by Parent to SpinCo of notice of a payment made pursuant to this Section 2.5 in respect of SpinCo Liabilities. (d) In the event that, at any time before or after the Distribution Date, Parent identifies any letters of credit, interest rate or foreign exchange contracts, surety bonds or other Contracts (excluding guarantees) that relate primarily to the SpinCo Business but for which a member of the Parent Group has contingent, secondary, joint, several or other Liability of any nature whatsoever, SpinCo shall, at its expense, take such actions and enter into such agreements and arrangements as Parent may reasonably request to effect Parent's (or a member of the Parent Group's) release or substitution. - 15 - SECTION 2.6. REMOVAL OF SPINCO FROM CERTAIN GUARANTEES; RELEASES OF SPINCO FROM LIABILITIES. (a) Except as otherwise specified in any Ancillary Agreement, Parent shall use its commercially reasonable efforts to have, on or prior to the Distribution Date, or as soon as practicable thereafter, any member of the SpinCo Group removed as guarantor of or obligor for any Parent Liability, including in respect of those guarantees set forth on Schedule 2.6(a) of this Agreement. (b) If Parent is unable to obtain, or to cause to be obtained, any such required removal as set forth in clause (a) of this Section 2.6, the applicable guarantor or obligor shall continue to be bound as such and, unless not permitted by law or the terms thereof, the relevant beneficiary shall or shall cause one of its Subsidiaries, as agent or subcontractor for such guarantor or obligor to pay, perform and discharge fully all the obligations or other liabilities of such guarantor or obligor thereunder from and after the date hereof. (c) If (i) Parent is unable to obtain, or to cause to be obtained, any such required removal as set forth in clause (a) of this Section 2.6, or (ii) Parent Liabilities arise from and after the Effective Time but before a member of the SpinCo Group which is a guarantor or obligor with reference to any such Parent Liability is removed pursuant to Section 2.6(a), then such guarantor or obligor shall be indemnified by Parent for all Liabilities incurred by it in its capacity as guarantor or obligor in accordance with Article III hereof. Without limiting the foregoing, Parent shall, or shall cause a member of the Parent Group to, reimburse any such member of the SpinCo Group which is a guarantor or obligor as soon as practicable (but in no event later than thirty (30) days) following delivery by SpinCo to Parent of notice of a payment made pursuant to this Section 2.6 in respect of Parent Liabilities. (d) In the event that, at any time before or after the Distribution Date, SpinCo identifies any letters of credit, interest rate or foreign exchange contracts, surety bonds or other Contracts (excluding guarantees) that relate primarily to the Parent Business but for which a member of the SpinCo Group has contingent, secondary, joint, several or other Liability of any nature whatsoever, Parent shall, at its expense, take such actions and enter into such agreements and arrangements as SpinCo may reasonably request to effect SpinCo's (or a member of the SpinCo Group's ) release or substitution. SECTION 2.7. WITNESS SERVICES. At all times from and after the Distribution Date, each of Parent and SpinCo shall use their commercially reasonable efforts to make available to the other, upon reasonable request, its and its Subsidiaries' Representatives as witnesses to the extent that (i) such Persons may reasonably be required in connection with the prosecution or defense of any Action in which the requesting party from time to time be involved and (ii) there is no conflict in the Action between the requesting party and Parent and SpinCo, as applicable. A party providing witness services to the other party under this Section shall be entitled to receive from the recipient of such services, upon the presentation of invoices therefor, reimbursement for payments made for any out-of-pocket expenses (which shall exclude the costs of salaries and benefits of employees who are witnesses) as may be reasonably incurred in providing such witness services. Witness services - 16 - in connection with indemnification claims under Article III shall be handled as provided in Article III. SECTION 2.8. CONVEYANCING AND ASSUMPTION INSTRUMENTS. In connection with the transfers of Assets and the assumptions of Liabilities contemplated by this Agreement, on or prior to the Distribution Date, the parties shall execute or cause to be executed by the appropriate entities the Conveyancing and Assumption Instruments contemplated hereby for transfers to be effected pursuant to Delaware law or the Laws of one of the other states of the United States or, if not appropriate for a given transfer, and for transfers to be effected pursuant to non-U.S. Laws, in such other form as the parties shall reasonably agree. The transfer of capital stock shall be effected by means of delivery of stock certificates and executed stock powers and notation on the stock record books of the corporation or other legal entities involved, or by such other means as may be required in any non-U.S. jurisdiction to transfer title to stock and, to the extent required by applicable Law, by notation on public registries. SECTION 2.9. ANCILLARY AGREEMENTS. Prior to the Distribution Date, each of Parent and SpinCo shall enter into, and/or (where applicable) shall cause members of their respective Groups to enter into, the Ancillary Agreements and any other agreements in respect of the Distribution reasonably necessary or appropriate in connection with the transactions contemplated hereby and thereby. SECTION 2.10. CORPORATE NAMES; TRADEMARKS. (a) Except as otherwise specifically provided in any Ancillary Agreement: (i) as soon as reasonably practicable after the Distribution Date but in any event within twelve (12) months thereafter, SpinCo will, and will cause the SpinCo Subsidiaries to, each at its own expense, remove (or, if necessary, on an interim basis, cover up) any and all exterior signs and other identifiers located on any of its real property or premises or on the real property or premises used by SpinCo or the SpinCo Subsidiaries which refer or pertain to Parent or which include the Parent or any Parent Subsidiary name, logo or other trademark or service mark or any similar mark or any derivative thereof or other intellectual property included in the Parent Assets; (ii) as soon as is reasonably practicable after the Distribution Date but in any event within twelve (12) months thereafter, SpinCo will, and will cause the SpinCo Subsidiaries to, remove from all letterhead, envelopes, invoices, products, product labels, product literature, brochures and other communications media of any kind, all references to Parent, including the "National Service Industries, Inc." name, logo and any other trademark or service mark or other intellectual property included in the Parent Assets (except that SpinCo shall not be required to take any such action with respect to materials in the possession of Third Parties); (iii) as soon as reasonably practicable after the Distribution Date but in any event within twelve (12) months thereafter, Parent will, and will cause the Parent - 17 - Subsidiaries to, each at its own expense, remove (or, if necessary, on an interim basis, cover up) any and all exterior signs and other identifiers located on any of its real property or premises or on the real property or premises used by Parent or the Parent Subsidiaries which refer or pertain to SpinCo or which include the SpinCo or any SpinCo Subsidiary name, logo or other trademark or any similar mark or any derivative thereof or other intellectual property included in the SpinCo Assets; and (iv) as soon as is reasonably practicable after the Distribution Date but in any event within twelve (12) months thereafter, Parent will, and will cause the Parent Subsidiaries to, remove from all letterhead, envelopes, invoices, products, product labels, product literature, brochures and other communications media of any kind, all references to SpinCo and its Subsidiaries including the "Acuity Brands, Inc." name, logo and any other trademark or service mark or other intellectual property included in the SpinCo Assets (except that Parent shall not be required to take any such action with respect to materials in the possession of Third Parties). (b) Prior to January 1, 2008, Parent shall not change its corporate name from "National Service Industries, Inc.," nor shall Parent engage in any transaction that causes Parent's corporate name to change from "National Service Industries, Inc." SpinCo hereby acknowledges and agrees that the SpinCo Group shall have no right to use the name "National Service Industries, Inc." or any derivative thereof. SECTION 2.11. POST-DISTRIBUTION REMITTANCES. (a) Following the Distribution Date, Parent will promptly remit to SpinCo, or reimburse SpinCo for, all amounts, and endorse or remit to SpinCo the proceeds of all checks, drafts, notes or other documents, received by Parent or a Parent Subsidiary, that should have otherwise been paid to SpinCo or a SpinCo Subsidiary. (b) Following the Distribution Date, SpinCo will promptly remit to Parent, or reimburse Parent for, all amounts, and endorse or remit to Parent the proceeds of all checks, drafts, notes or other documents, received by Parent or a Parent Subsidiary, that should have otherwise been paid to SpinCo. SECTION 2.12. NON-SOLICITATION. (a) For the period beginning on the Distribution Date and ending on the second anniversary of the Distribution Date, SpinCo will not and will not permit any member of the SpinCo Group to, directly or indirectly, solicit or recruit for its employment any employee of the Parent Group as of the Distribution without the prior written consent of Parent; provided, however, that nothing in this Section 2.12(a) shall (i) prohibit the hiring of any natural person who applied for employment with the SpinCo Group solely in response to any public medium advertising, (ii) prohibit the hiring of any natural person referred by any Person whose principal business is the recruiting of prospective employees, or (iii) prohibit the hiring of any natural person whose employment with a member of the Parent Group terminated at least three (3) - 18 - months prior to the date of such solicitation or recruitment for a bona fide reason not designed or intended to circumvent the provisions of this Section 2.12(a) and so long as such natural person was not solicited or recruited by SpinCo or any member of the SpinCo Group prior to the expiration of such three (3) month period. (b) For the period beginning on the Distribution Date and ending on the second anniversary of the Distribution Date, Parent will not and will not permit any member of the Parent Group to, directly or indirectly, solicit or recruit for its employment any employee of the SpinCo Group as of the Distribution without the prior written consent of SpinCo; provided, however, that nothing in this Section 2.12(b) shall (i) prohibit the hiring of any natural person who applied for employment with the Parent Group solely in response to any public medium advertising, (ii) prohibit the hiring of any natural person referred by any Person whose principal business is the recruiting of prospective employees, or (iii) prohibit the hiring of any natural person whose employment with a member of the SpinCo Group terminated at least three (3) months prior to the date of such solicitation or recruitment for a bona fide reason not designed or intended to circumvent the provisions of this Section 2.12(b) and so long as such natural person was not solicited or recruited by Parent or any member of the Parent Group prior to the expiration of such three (3) month period. SECTION 2.13. FURTHER ASSURANCES. (a) In addition to the actions specifically provided for elsewhere in this Agreement, each of the parties hereto shall use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws, regulations and agreements to consummate and make effective the transactions contemplated by this Agreement. Without limiting the foregoing, each party hereto shall cooperate with the other party, and execute and deliver, or use commercially reasonable efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all consents, approvals or authorizations of, any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument, and take all such other actions as such party may reasonably be requested to take by the other party hereto from time to time, consistent with the terms of this Agreement, the Corporate Transactions, and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the transfers of Assets and assumptions of Liabilities and the other transactions contemplated hereby. (b) If any such transfer of Assets or Liabilities is not consummated prior to or at the Effective Time, then the party hereto retaining such Asset or Liability shall continue to take the actions required by Section 2.13(a) to consummate and make effective such transfer as soon as practicable after the Distribution Date and, in the case of Assets, shall use its commercially reasonable efforts to preserve the value of such Assets until the time of transfer. If and when any such Asset or Liability becomes transferable, such transfer shall be effected forthwith. The parties hereto agree that, no later than the Distribution Date, each party hereto shall be deemed to have acquired complete and sole beneficial ownership to all of the Assets, together with all rights, powers and privileges incident thereto, and shall be deemed to have assumed in accordance with the terms of this Agreement and the Ancillary Agreements all of the Liabilities, - 19 - and all duties, obligations and responsibilities incident thereto, that such party is entitled or required to hold or assume pursuant to this Agreement. (c) Any disagreement regarding whether any Asset or Liability was or should have been transferred to, retained by or assumed by the Parent Group or the SpinCo Group shall be resolved in accordance with the provisions of Article V. ARTICLE III INDEMNIFICATION SECTION 3.1. INDEMNIFICATION BY PARENT. Parent shall, and shall cause each member of the Parent Group to, indemnify, defend and hold harmless the SpinCo Indemnitees from and against any and all Indemnifiable Losses of the SpinCo Indemnitees arising out of, by reason of or otherwise in connection with the Parent Liabilities or alleged Parent Liabilities, including any breach by Parent of any provision of this Section 3.1. Parent and each member of the Parent Group shall be jointly and severally liable for the indemnification obligations imposed by this Section 3.1. Subject to the last sentence of Section 7.1, this Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the Ancillary Agreements. SECTION 3.2. INDEMNIFICATION BY SPINCO. SpinCo shall, and shall cause each member of the SpinCo Group to, indemnify, defend and hold harmless the Parent Indemnitees from and against any and all Indemnifiable Losses of the Parent Indemnitees arising out of, by reason of or otherwise in connection with the SpinCo Liabilities or alleged SpinCo Liabilities, including any breach by SpinCo of any provision of this Section 3.2. Spinco and each member of the SpinCo Group shall be jointly and severally liable for the indemnification obligations imposed by this Section 3.2. Subject to the last sentence of Section 7.1, this Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the Ancillary Agreements. SECTION 3.3. PROCEDURES FOR INDEMNIFICATION. (a) Third-Party Claims. If a claim or demand is made against a SpinCo Indemnitee or an Parent Indemnitee (each, an "Indemnitee") by any Third Party (a "Third-Party Claim") as to which such Indemnitee is entitled to indemnification pursuant to this Agreement, such Indemnitee shall notify the party which is or may be required pursuant to Section 3.1 or Section 3.2 hereof to make such indemnification (the "Indemnifying Party") in writing, and in reasonable detail, of the Third-Party Claim promptly (and in any event within fifteen (15) Business Days) after receipt by such Indemnitee of written notice of the Third-Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure. Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly (and in any event within ten (10) Business Days) after the - 20 - Indemnitee's receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim. If a Third-Party Claim is made against an Indemnitee, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so elects in accordance with this Section 3.3(a), to assume the defense thereof with counsel selected by the Indemnifying Party; provided, however, that such counsel is not reasonably objected to by the Indemnitee. Should the Indemnifying Party so elect to assume the defense of a Third-Party Claim, the Indemnifying Party shall, within thirty (30) days (or sooner if the nature of the Third-Party Claim so requires), notify the Indemnitee in writing of its intent to do so, and the Indemnifying Party shall thereafter not be liable to the Indemnitee for legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that such Indemnitee shall have the right to employ counsel to represent such Indemnitee if, in such Indemnitee's reasonable judgment, a conflict of interest between such Indemnitee and such Indemnifying Party exists in respect of such claim that would make representation of both such parties by one counsel inappropriate, and in such event the fees and expenses of such separate counsel shall be paid by such Indemnifying Party. If the Indemnifying Party elects to assume such defense, the Indemnitee shall have the right to participate in the defense thereof and to employ counsel, subject to the proviso of the preceding sentence, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party shall control such defense. The Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnitee for any period during which the Indemnifying Party has failed to assume the defense thereof (other than during the period prior to the time the Indemnitee shall have given notice of the Third-Party Claim as provided above). If the Indemnifying Party so elects to assume the defense of any Third-Party Claim, all of the Indemnitees shall cooperate with the Indemnifying Party in the defense or prosecution thereof, including by providing or causing to be provided, Records and witnesses as soon as reasonably practicable after receiving any request therefor from or on behalf of the Indemnifying Party. If an Indemnifying Party elects to assume the defense of a Third-Party Claim as provided above, in no event will the Indemnitee admit any liability with respect to, or settle, compromise or discharge, any Third-Party Claim without the Indemnifying Party's prior written consent; provided, however, that the Indemnitee shall have the right to settle, compromise or discharge such Third-Party Claim without the consent of the Indemnifying Party if the Indemnitee releases the Indemnifying Party from its indemnification obligation hereunder with respect to such Third-Party Claim and such settlement, compromise or discharge would not otherwise adversely affect the Indemnifying Party. If an Indemnifying Party elects to assume the defense of a Third-Party Claim as provided above, the Indemnitee will agree to any settlement, compromise or discharge of a Third-Party Claim that the Indemnifying Party may recommend and that by its terms obligates the Indemnifying Party to pay the full amount of the liability in connection with such Third-Party Claim and releases the Indemnitee completely in connection with such Third-Party Claim; provided, however, that, notwithstanding the foregoing, the Indemnitee shall not be required hereunder to agree to any such settlement, compromise or discharge involving the stipulation of facts or the adjudication of any question that the Indemnitee determines in its discretion would have an adverse effect on the Indemnitee in any other proceeding or otherwise would affect adversely the Indemnitee. If an Indemnifying Party elects not to assume the defense of a Third-Party Claim, or fails to notify an Indemnitee of its election to do so as - 21 - provided herein, such Indemnitee may compromise, settle or defend such Third-Party Claim, and such Indemnitee may recover the Indemnifiable Losses in connection with such compromise, settlement or defense from the Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third-Party Claim (and shall be liable for the fees and expenses of counsel incurred by the Indemnitee in defending such Third-Party Claim) if the Third-Party Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the Indemnitee which the Indemnitee reasonably determines, after conferring with its counsel, cannot be separated from any related claim for money damages. If such equitable relief or other relief portion of the Third-Party Claim can be so separated from that for money damages, the Indemnifying Party shall be entitled to assume the defense of the portion relating to money damages. (b) In the event of payment by an Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right or claim. (c) The remedies provided in this Article III shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party. SECTION 3.4. INDEMNIFICATION PAYMENTS. Unless otherwise agreed to in writing, indemnification required by this Article III shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnifiable Losses are incurred. If the Indemnifying Party fails to make an indemnification payment required by this Article III within thirty (30) days after receipt of a bill therefor or notice that an Indemnifiable Loss has been incurred, the Indemnifying Party shall also be required to pay interest on the amount of such indemnification payment, from the date of receipt of the bill or notice of the Indemnifiable Loss to, but not including the date of payment, at the Applicable Rate. ARTICLE IV ACCESS TO INFORMATION SECTION 4.1. PROVISION OF CORPORATE RECORDS. (a) Except as otherwise provided in Article III, after the Distribution Date, upon the prior written request by SpinCo for specific and identified agreements, documents, books, records or files (collectively, "Records") which relate to (x) SpinCo, the conduct of the SpinCo Business up to the Effective Time or the ownership of the SpinCo Assets up to the Effective Time, or (y) any - 22 - Ancillary Agreement (other than the Tax Disaffiliation Agreement), Parent shall arrange, as soon as reasonably practicable following the receipt of such request, to provide such Records (or appropriate copies thereof if Parent has a reasonable need to retain the originals) in the possession or control of Parent or any of the Parent Subsidiaries, but only to the extent such items are not already in the possession or control of SpinCo. (b) Except as otherwise provided in Article III, after the Distribution Date, upon the prior written request by Parent for specific and identified Records which relate to (x) Parent, the conduct of the Parent Business up to the Effective Time or the ownership of the Parent Assets up to the Effective Time, or (y) any Ancillary Agreement (other than the Tax Disaffiliation Agreement), SpinCo shall arrange, as soon as reasonably practicable following the receipt of such request, to provide such Records (or appropriate copies thereof if SpinCo has a reasonable need to retain the originals) in the possession or control of SpinCo or any of the SpinCo Subsidiaries, but only to the extent such items are not already in the possession or control of Parent. SECTION 4.2. ACCESS TO INFORMATION. Except as otherwise provided in Article III, from and after the Distribution Date, each of Parent and SpinCo shall afford to the other and its authorized Representatives reasonable access during normal business hours, subject to appropriate restrictions for classified, privileged or confidential information, to the personnel, properties, and Records of such party and its Subsidiaries insofar as such access is reasonably required by the other party and relates to (x) such other party or the conduct of its business or ownership of its Assets prior to the Effective Time or (y) any Ancillary Agreement. SECTION 4.3. REIMBURSEMENT; OTHER MATTERS. Except to the extent otherwise contemplated by any Ancillary Agreement, a party providing Records or access to information to the other party under this Article IV shall be entitled to receive from the recipient, upon the presentation of invoices therefor, reimbursement for payments made for supplies, disbursements and other out-of-pocket expenses (including attorneys' fees and disbursements), as may be reasonably incurred in providing such Records or access to information. SECTION 4.4. CONFIDENTIALITY. Neither (i) Parent nor the Parent Subsidiaries nor (ii) SpinCo nor the SpinCo Subsidiaries shall use or permit the use of (without the prior written consent of the other) and each such entity shall keep, and shall cause its Representatives to keep, confidential all information concerning the other party in its possession, its custody or under its control (except to the extent that (A) such information has been in the public domain through no fault of such party or (B) such information has been later lawfully acquired from other sources by such party or (C) this Agreement or any other Ancillary Agreement or any other agreement entered into pursuant hereto permits the use or disclosure of such information) to the extent such information, (w) relates to or was acquired during the period up to the Effective Time, (x) relates to any Ancillary Agreement, (y) is obtained in the course of performing services for the other party pursuant to any Ancillary Agreement, or (z) is based upon or is derived from information described in the preceding clauses (w), (x) or (y), and each party shall not (without the prior written consent of the other) otherwise release or disclose such information to any other Person, except such party's - 23 - Representatives, unless compelled to disclose such information by judicial or administrative process or unless such disclosure is required by Law and such party has provided the other party with prompt notice of such requirement in order to afford the other party the opportunity to seek an appropriate protective order or other remedy. SECTION 4.5. PRIVILEGED MATTERS. The parties hereto recognize that legal and other professional services that have been and will be provided prior to the Distribution Date have been and will be rendered for the benefit of each of the members of the Parent Group, and each of the members of the SpinCo Group, and that each of the members of the Parent Group, and each of the members of the SpinCo Group should be deemed to be the client for the purposes of asserting all privileges which may be asserted under applicable Law. Except as otherwise specifically provided in the Tax Disaffiliation Agreement with respect to tax matters, to allocate the interests of each party in the information as to which any party is entitled to assert a privilege, the parties agree as follows: (a) Parent shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information which relates solely to the Parent Business, whether or not the privileged information is in the possession of or under the control of Parent or SpinCo. Parent shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information that relates solely to the subject matter of any claims constituting Parent Liabilities, now pending or which may be asserted in the future, in any Action initiated against or by Parent, whether or not the privileged information is in the possession of or under the control of Parent or SpinCo. (b) SpinCo shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information which relates solely to the SpinCo Business, whether or not the privileged information is in the possession of or under the control of Parent or SpinCo. SpinCo shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information which relates solely to the subject matter of any claims constituting SpinCo Liabilities, now pending or which may be asserted in the future, in any Action initiated against or by SpinCo, whether or not the privileged information is in the possession of SpinCo or under the control of Parent or SpinCo. (c) The parties hereto agree that they shall have a shared privilege, with equal right to assert or waive, subject to the restrictions in this Section 4.5, with respect to all privileges not allocated pursuant to the terms of Sections 4.5(a) and (b). All privileges relating to any Action, disputes or other matters which involve Parent and SpinCo in respect of which such parties retain any responsibility or liability under this Agreement, shall be subject to a shared privilege among them. (d) No party hereto may waive any privilege which could be asserted under any applicable Law, and in which any other party hereto has a shared privilege, without the consent of the other party, which consent shall not be unreasonably withheld or delayed, except to the extent reasonably required in connection with any Action with Third Parties or as provided in subsection (e) below. Consent shall be in writing, or shall be deemed to be granted unless written objection is made within twenty (20) days after notice upon the other party requesting such consent. - 24 - (e) In the event of any Action or dispute between any of the parties hereto, any party and a Subsidiary of another party hereto, or a Subsidiary of one party hereto and a Subsidiary of another party hereto, either such party, to the extent necessary in connection with such Action or dispute, may waive a privilege in which the other party has a shared privilege, without obtaining the consent of the other party, provided that such waiver of a shared privilege shall be effective only as to the use of information with respect to such Action or dispute between the relevant parties and/or their Subsidiaries, and shall not operate as a waiver of the shared privilege with respect to Third Parties. (f) If a dispute arises between or among the parties hereto or their respective Subsidiaries regarding whether a privilege should be waived to protect or advance the interest of any party, each party agrees that it shall negotiate in good faith, shall endeavor to minimize any prejudice to the rights of the other parties, and shall not unreasonably withhold consent to any request for waiver by another party. Each party hereto specifically agrees that it will not withhold consent to waiver for any purpose except to protect its own legitimate interests. (g) Upon receipt by any party hereto or by any Subsidiary thereof of any subpoena, discovery or other request which arguably calls for the production or disclosure of information subject to a shared privilege or as to which another party has the sole right hereunder to assert a privilege, or if any party obtains knowledge that any of its or any of its Subsidiaries' current or former Representatives has received any subpoena, discovery or other requests which arguably calls for the production or disclosure of such privileged information, such party shall promptly notify the other party of the existence of the request and shall provide the other party a reasonable opportunity to review the information (to the extent such information is available to such party) and to assert any rights it or they may have under this Section 4.5 or otherwise to prevent the production or disclosure of such privileged information. (h) The transfer of all Records and other information pursuant to this Agreement is made in reliance on the agreement of Parent and SpinCo, as set forth in Sections 4.4 and 4.5, to maintain the confidentiality of privileged information and to assert and maintain all applicable privileges. The access to information being granted pursuant to Sections 4.1 and 4.2 hereof, the agreement to provide witnesses and individuals pursuant to Sections 2.7 and 3.3 hereof, the furnishing of notices and documents and other cooperative efforts contemplated by Section 3.3 hereof, and the transfer of privileged information between and among the parties and their respective Subsidiaries pursuant to this Agreement shall not be deemed a waiver of any privilege that has been or may be asserted under this Agreement or otherwise. SECTION 4.6. OWNERSHIP OF INFORMATION. Any information owned by one party or any of its Subsidiaries that is provided to a requesting party pursuant to Article III or this Article IV shall be deemed to remain the property of the providing party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such information. - 25 - SECTION 4.7. RETENTION OF RECORDS. (a) Parent shall deliver to SpinCo upon SpinCo's request all Records that are specifically identified by SpinCo and known by Parent, after reasonable inquiry, to be in its control or possession relating to SpinCo Assets, SpinCo Liabilities or the SpinCo Business. Except (a) as provided in the Tax Disaffiliation Agreement or (b) when a longer retention period is otherwise required by Law or agreed to in writing, the Parent Group and the SpinCo Group shall retain in a reasonably retrievable format, for a period of at least six (6) years, all Records relating to the SpinCo Business as of the Effective Time. Notwithstanding the foregoing, in lieu of retaining any specific Records, Parent may offer in writing to deliver such Records to SpinCo and, if such offer is not accepted within ninety (90) days, the offered Records may be destroyed or otherwise disposed of at any time. If SpinCo shall request in writing prior to the expiration of such 90-day period that any of Records proposed to be destroyed or disposed of be delivered to SpinCo, Parent shall promptly arrange for delivery of such requested Records (at SpinCo's cost). (b) SpinCo shall deliver to Parent upon Parent's request all Records that are specifically identified by Parent and known by SpinCo, after reasonable inquiry, to be in its control or possession relating to Parent Assets, Parent Liabilities or the Parent Business. Except (a) as provided in the Tax Disaffiliation Agreement or (b) when a longer retention period is otherwise required by Law or agreed to in writing, the Parent Group and the SpinCo Group shall retain in a reasonably retrievable format, for a period of at least six (6) years, all Records relating to the Parent Business as of the Effective Time. Notwithstanding the foregoing, in lieu of retaining any specific Records, SpinCo may offer in writing to deliver such Records to Parent and, if such offer is not accepted within ninety (90) days, the offered Records may be destroyed or otherwise disposed of at any time. If Parent shall request in writing prior to the expiration of such 90-day period that any of Records proposed to be destroyed or disposed of be delivered to Parent, SpinCo shall promptly arrange for delivery of such requested Records (at Parent's cost). SECTION 4.8. LIMITATION OF LIABILITY; RELEASE. (a) No party shall have any liability to any other party in the event that any information exchanged or provided pursuant to this Agreement which is an estimate or forecast, or which is based on an estimate or forecast, is found to be inaccurate. (b) Effective upon the Distribution and except as otherwise specifically set forth in this Agreement, each of Parent and SpinCo releases and forever discharges the other and its Representatives and Subsidiaries, of and from all Liabilities against such other party, its Representatives and Subsidiaries or any of its successors or assigns, which the releasing party has or ever had, which arise out of or relate to events, circumstances or actions taken by such other party prior to the Distribution; provided, however, that the foregoing general release shall not apply to this Agreement, the Ancillary Agreements or the transactions contemplated hereby or thereby and shall not affect either party's right to enforce this Agreement or any of the Ancillary Agreements in accordance with their terms. SECTION 4.9. OTHER AGREEMENTS PROVIDING FOR EXCHANGE OF INFORMATION. The rights and obligations granted under this Article IV are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of information set forth in any Ancillary Agreement. - 26 - ARTICLE V DISPUTE RESOLUTION SECTION 5.1. NEGOTIATION. In the event of a controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any way related to this Agreement or the transactions contemplated hereby, including any claim based on contract, tort, statute or constitution (but excluding any controversy, dispute or claim arising out of any agreement relating to the use or lease of real property if any Third Party is a party to such controversy, dispute or claim) (collectively, "Agreement Disputes"), the management of the parties shall negotiate in good faith for a reasonable period of time to settle such Agreement Dispute; provided, however, such reasonable period shall not, unless otherwise agreed by the parties in writing, exceed sixty (60) days from the time the parties began such negotiations; and provided further, however, that in the event of any mediation or arbitration in accordance with Sections 5.2 and 5.3 hereof, (i) the parties shall not assert the defenses of statute of limitations and laches arising for the period beginning after the date the parties began negotiations hereunder, and (ii) any statute of limitations or any contractual time period or deadline under this Agreement or any Ancillary Agreement shall not be deemed to have passed with respect to such Agreement Dispute until such Agreement Dispute has been resolved. SECTION 5.2. MEDIATION. If after such reasonable period such management are unable to settle such Agreement Dispute (and in any event, unless otherwise agreed in writing by the parties, after ninety (90) days have elapsed from the time the parties began such negotiations) and the Agreement Dispute involves a controversy, dispute or claim of less than $500,000, such Agreement Dispute shall be determined, at the request of any party, by mediation conducted in Wilmington, Delaware or at another location which the parties mutually select, before a retired judge sitting on the panel of Judicial Arbitration & Mediation Services, Inc. The mediation process shall continue as the exclusive method of resolving the Agreement Dispute (other than negotiation between the parties) until the earlier of the Agreement Dispute being resolved or the mediator finding in good faith that all settlement possibilities have been exhausted and that the matter is not resolvable through mediation. If the mediator makes such a finding, at the request of any party, the Agreement Dispute shall then be determined by binding arbitration in accordance with Section 5.3 hereof. SECTION 5.3. ARBITRATION. If after such reasonable period such management are unable to settle such Agreement Dispute (and in any event, unless otherwise agreed in writing by the parties, after ninety (90) days have elapsed from the time the parties began such negotiations) and the Agreement Dispute involves a controversy, dispute or claim of $500,000 or more, or a mediator makes a finding under Section 5.2 hereof that all settlement possibilities have been exhausted and that a matter is not resolvable through mediation, such Agreement Dispute shall be determined, at the demand of any party, by binding arbitration conducted in Wilmington, Delaware or at another location which the parties mutually select, before and in accordance with the then-existing Commercial Arbitration Rules of the - 27 - American Arbitration Association (the "Rules"). In any Agreement Dispute between the parties hereto, the numbers of arbitrators shall be three (3) (one selected by Parent, one selected by SpinCo, and one jointly selected by the two arbitrators so selected). Any judgment or award rendered by the arbitrator shall be final, binding and nonappealable (except upon grounds specified in 9 U.S.C. Section 10(a) as in effect on the date hereof). If the parties are unable to agree on the arbitrators, the arbitrators shall be selected in accordance with the Rules. Except as otherwise provided herein, any controversy concerning whether an Agreement Dispute is an arbitrable Agreement Dispute, whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the interpretation of enforceability of this Article V shall be determined by the arbitrators. In resolving any Agreement Dispute, the parties intend that the arbitrators apply the terms and conditions of this Agreement and the substantive laws of the State of Delaware, without regard to the choice of law principles thereof. The parties intend that the provisions to arbitrate set forth herein be valid, enforceable and irrevocable. The parties agree to comply with any award made in any such arbitration proceedings that has become final in accordance with the Rules and agree to enforcement of or entry of judgment upon such award, by any court of competent jurisdiction, including (a) the state courts of the State of Delaware, located in Wilmington, or (b) the United States District Court for the District of Delaware, in accordance with Section 7.16 hereof. The arbitrators shall be entitled, if appropriate, to award any remedy in such proceedings, including monetary damages, specific performance and all other forms of legal and equitable relief; provided, however, the arbitrators shall not be entitled to award punitive damages. Without limiting the provisions of the Rules, unless otherwise agreed in writing by or among the parties or permitted by this Agreement, the parties shall keep confidential all matters relating to the arbitration or the award, provided such matters may be disclosed (i) to the extent reasonably necessary in any proceeding brought to enforce the award or for entry of a judgment upon the award and (ii) to the extent otherwise required by Law. Nothing contained herein is intended to or shall be construed to prevent any party, in accordance with Article 21(3) of the Rules or otherwise, from applying to any court of competent jurisdiction for interim measures or other provisional relief in connection with the subject matter of any Agreement Disputes. SECTION 5.4. CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in writing, the parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Article V with respect to all matters not subject to such dispute, controversy or claim. SECTION 5.5. OTHER REMEDIES. Nothing in this Article V shall limit the right that any party may otherwise have to seek to obtain from any court to which the parties consent to jurisdiction under Section 7.16 (a) preliminary injunctive relief in order to preserve the status quo pending the resolution of a dispute or (b) temporary or permanent injunctive relief from any breach of any provisions of this Agreement. By seeking such relief, a party in no way waives its arbitration rights under this Agreement. - 28 - ARTICLE VI INSURANCE SECTION 6.1. POLICIES AND RIGHTS INCLUDED WITHIN ASSETS. The SpinCo Assets shall include (a) any and all rights of an insured party under each of the Parent Shared Policies, subject to the terms of such Parent Shared Policies and any limitations or obligations of SpinCo contemplated by this Article VI, specifically including rights of indemnity and the right to be defended by or at the expense of the insurer, with respect to all claims, suits, actions, proceedings, injuries, losses, liabilities, damages and expenses incurred or claimed to have been incurred prior to the Effective Time by any party in or in connection with the conduct of the SpinCo Business or the ownership of the SpinCo Assets or, to the extent any claim is made against SpinCo or any of the SpinCo Subsidiaries, the conduct of the Parent Business or the ownership of the Parent Assets, and which claims, suits, actions, proceedings, injuries, losses, liabilities, damages and expenses may arise out of an insured or insurable occurrence under one or more of such Parent Shared Policies, and (b) the SpinCo Policies. SECTION 6.2. POST-DISTRIBUTION DATE CLAIMS. If, subsequent to the Distribution Date, any Person shall assert a claim against SpinCo or any of the SpinCo Subsidiaries (including where SpinCo or the SpinCo Subsidiaries are joint defendants with other Persons) with respect to any claim, suit, action, proceeding, injury, loss, liability, damage or expense incurred or claimed to have been incurred prior to the Effective Time in or in connection with the conduct of the SpinCo Business or the ownership of the SpinCo Assets or, to the extent any claim is made against SpinCo or any of the SpinCo Subsidiaries (including where SpinCo or the SpinCo Subsidiaries are joint defendants with other Persons), the conduct of the Parent Business or the ownership of the Parent Assets, and which claim, suit, action, proceeding, injury, loss, liability, damage or expense may arise out of an insured or insurable occurrence under one or more of the Parent Shared Policies, Parent shall assert and collect any related Insurance Proceeds under such Parent Shared Policy on behalf of SpinCo and remit promptly to SpinCo any Insurance Proceeds so collected, and Parent shall further on behalf of SpinCo assert any and all rights of an insured party under such Parent Shared Policy with respect to such asserted claim, specifically including rights of indemnity and the right to be defended by or at the expense of the insurer and the right to any applicable Insurance Proceeds thereunder. The parties hereby acknowledge and agree that nothing herein shall limit SpinCo's right to assert directly and collect any related Insurance Proceeds under any Parent Shared Policy and that, should SpinCo become liable for any Parent Liabilities covered by any Parent Shared Policy or any Parent Policy, SpinCo shall have the right to assert directly and collect any related Insurance Proceeds under any such Parent Shared Policy or Parent Policy. SECTION 6.3. ADMINISTRATION; OTHER MATTERS. (a) Administration. Subject to Section 6.3(c) and Section 6.3(d), from and after the Distribution Date, (i) Parent shall be responsible for (A) Insurance Administration of the Parent Shared Policies with respect to all Liabilities except SpinCo Liabilities and (B) Claims Administration (except as provided below) under such Parent Shared Policies with respect to all Liabilities except SpinCo Liabilities, and (ii) SpinCo shall be responsible for (A) Insurance - 29 - Administration of the Parent Shared Policies with respect to all SpinCo Liabilities and (B) Claims Administration (except as provided below) under such Parent Shared Policies with respect to all SpinCo Liabilities; provided, however, that the retention of such responsibilities by Parent or SpinCo, as the case may be, is in no way intended to limit, inhibit or preclude (i) any right to insurance coverage for any Insured Claim of a named insured under such Policies as contemplated by the terms of this Agreement or (ii) the sharing between Parent and SpinCo of information relating to the matters addressed in this Article VI; and provided further that Parent's retention or SpinCo's retention, as the case may be, of the administrative responsibilities for the Parent Shared Policies shall not relieve the party submitting any Insured Claim of the primary responsibility for reporting such Insured Claim accurately, completely and in a timely manner or of such party's authority to settle any such Insured Claim within any period permitted or required by the relevant Policy. Parent or SpinCo, as the case may be, may discharge its administrative responsibilities under this Section 6.3 by contracting for the provision of services by independent parties. Each of the parties hereto shall administer and pay any costs relating to defending its respective Insured Claims under Parent Shared Policies to the extent such defense costs are not covered under such Policies and shall be responsible for obtaining or reviewing the appropriateness of releases upon settlement of its respective Insured Claims under Parent Shared Policies. SpinCo shall reimburse Parent promptly for all disbursements, out-of-pocket expenses and direct and indirect costs of employees or agents of Parent relating to Claims Administration and Insurance Administration contemplated by this Section 6.3(a) on behalf of SpinCo. Likewise, Parent shall reimburse SpinCo promptly for all disbursements, out-of-pocket expenses and direct and indirect costs of employees or agents of SpinCo relating to Claims Administration and Insurance Administration contemplated by this Section 6.3(a) on behalf of Parent. (b) Claims. Where a Parent Shared Policy specifically covers SpinCo Liabilities for periods prior to the Distribution Date or covers claims made after the Distribution Date with respect to an occurrence prior to the Distribution Date, then from and after the Distribution Date SpinCo may, subject to Section 6.3(c) and Section 6.3(d), claim coverage for Insured Claims under such Parent Shared Policy as and to the extent that such insurance is available up to the full extent of the applicable limits of liability of such Parent Shared Policy (and may receive any Insurance Proceeds with respect thereto as contemplated by Section 6.2 or Section 6.3(c) hereof), subject to the terms of this Section 6.3. (c) Allocation of Insurance Proceeds. Insurance Proceeds received with respect to claims, costs and expenses under the Parent Shared Policies shall be paid directly to the appropriate Person or to Parent, which shall thereafter administer the Parent Shared Policies by paying the Insurance Proceeds, as appropriate, to Parent with respect to Parent Liabilities and to SpinCo with respect to the SpinCo Liabilities. Payment of the allocable portions of indemnity costs of Insurance Proceeds resulting from such Policies will be made by Parent to the appropriate Person upon receipt from the insurance carrier. In the event that the applicable limits on any particular Parent Shared Policy are exceeded by the amount of outstanding Insured Claims by the relevant parties hereto, such parties agree to allocate the Insurance Proceeds received thereunder based upon their respective percentage of the total of their bona fide claims (measured as of the date costs related to such bona fide claims were incurred, such incurrence to be measured, (i) in the case of fees and expenses incurred for services performed that are attributable to the defense or disposition of Insured Claims, as of the date such fees and expenses are billed to an insurance carrier, and (ii) in the case of sums payable in settlement or satisfaction - 30 - of a judgment attributable to Insured Claims, as of the date of any such judgment) which were covered under such Parent Shared Policy (their "allocable portion of Insurance Proceeds"), and any party who has received Insurance Proceeds in excess of such party's allocable portion of Insurance Proceeds shall pay to the other party the appropriate amount so that each party will have received its allocable portion of Insurance Proceeds pursuant hereto. Each of the parties agrees to use commercially reasonable efforts to maximize available coverage under those Parent Shared Policies applicable to it, and to take all commercially reasonable steps to recover from all other responsible parties in respect of an Insured Claim to the extent coverage limits under a particular Parent Shared Policy have been exceeded or would be exceeded as a result of such Insured Claim. (d) Allocation of Deductibles, Etc. In the event that the parties have bona fide claims under any Parent Shared Policy for which a deductible or a retrospectively rated premium adjustment is payable or for which a self-insurance retention amount has been applied, the parties agree that the aggregate amount of the deductible or retrospectively rated premium adjustment paid or retention amount applied shall be borne by the parties in the same proportion which the Insurance Proceeds received by each such party bears to the total Insurance Proceeds received under the applicable Parent Shared Policy (their "allocable share of the deductible, premium adjustment or retention amount"), and any party who has paid more than its allocable share of the deductible, premium adjustment or retention amount shall be entitled to receive from the other party an appropriate amount so that each party has borne its allocable share of the deductible, premium adjustment or retention amount pursuant hereto. Further, if a party receives no Insurance Proceeds under that applicable Parent Shared Policy, that party shall have no allocable share of the deductible, premium adjustment or retention amount under that applicable Parent Shared Policy, and the other party shall bear all of the allocable share of the deductible, premium adjustment or retention amount under that applicable Parent Shared Policy. (e) Workers Compensation. With respect to any workers compensation claims for the period prior to the Effective Time, the terms of the Ancillary Workers Compensation Agreement shall govern. (f) Continued Responsibility. Notwithstanding anything in this Article VI to the contrary, the Parent Group shall remain liable to the SpinCo Indemnitees for the indemnification obligations contemplated by Section 3.1, and the SpinCo Group shall remain liable to the Parent Indemnitees for the indemnification obligations contemplated by Section 3.2, in each case, to the extent any Loss or Liability is not fully paid to or on behalf of the applicable party by Insurance Proceeds. SECTION 6.4. AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE. In the event that Insured Claims of more than one of the parties hereto exist relating to the same occurrence, the parties shall jointly defend and waive any conflict of interest necessary to the conduct of the joint defense. Nothing in this Article VI shall be construed to limit or otherwise alter in any way the obligations of the parties to this Agreement, including those created by this Agreement, by operation of Law or otherwise. - 31 - SECTION 6.5. COOPERATION. The parties agree to use their commercially reasonable efforts to cooperate with respect to the various insurance matters contemplated by this Agreement. ARTICLE VII MISCELLANEOUS SECTION 7.1. COMPLETE AGREEMENT; CONSTRUCTION. This Agreement, including the Exhibits and Schedules, and the Ancillary Agreements shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. In the event of any inconsistency between this Agreement and any Schedule hereto, the Schedule shall prevail. Other than Section 2.4, Section 4.5 and Article V, which shall prevail over any inconsistent or conflicting provisions in any Ancillary Agreement, notwithstanding any other provisions in this Agreement to the contrary, in the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of any Ancillary Agreement, such Ancillary Agreement shall control. SECTION 7.2. ANCILLARY AGREEMENTS. Subject to the last sentence of Section 7.1, this Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the Ancillary Agreements. SECTION 7.3. COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties. SECTION 7.4. SURVIVAL OF AGREEMENTS. Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement shall survive the Distribution Date. SECTION 7.5. DISTRIBUTION EXPENSES. Except as otherwise set forth in this Agreement or any Ancillary Agreement, all costs and expenses incurred on or prior to the Distribution Date and which are outstanding as of the Distribution Date or arise after the Distribution Date in connection with the preparation, execution, delivery, printing and implementation of this Agreement and any Ancillary Agreement, the Information Statement (including the Registration Statement) and the Distribution and the consummation of the transactions contemplated thereby (including (i) costs and expenses incurred pursuant to Sections 2.1(e), 2.1(i), and 2.10 and (ii) any transfer taxes imposed on the transfer of real or personal property in the Corporate Transactions) shall be charged to and paid by SpinCo, and such costs and expenses shall be deemed to be SpinCo Liabilities. Further, except as otherwise set forth in this Agreement or any Ancillary Agreement (including the retention and assumption by the Parent Group of the Parent Liabilities and the retention and assumption by the SpinCo Group of the SpinCo Liabilities in accordance with Section 2.2 hereof), all other Liabilities (to the extent not otherwise satisfied prior to the - 32 - Effective Time) directly resulting from actions taken prior to the Effective Time in connection with the preparation, execution, delivery, printing and implementation of this Agreement and any Ancillary Agreement, the Information Statement (including the Registration Statement) and the Distribution and the consummation of the transactions contemplated thereby shall be deemed to be SpinCo Liabilities. Except as otherwise set forth in this Agreement or any Ancillary Agreement, each party shall bear its own costs and expenses incurred after the Distribution Date, and any amount or expense to be paid or reimbursed by any party hereto to any other party hereto shall be so paid or reimbursed promptly after the existence and amount of such obligation is determined and written demand therefor is made. SECTION 7.6. NOTICES. All notices and other communications hereunder shall be in writing, shall reference this Agreement and shall be hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and will be deemed given on the date on which such notice is received ("Notices"): To Parent: National Service Industries, Inc. 1420 Peachtree Street, NE Atlanta, Georgia 30309-3002 Attention: Carol E. Morgan Telephone: (404) 853-1000 Facsimile: (404) 853-1015 To SpinCo: Acuity Brands, Inc. 1420 Peachtree Street, NE Atlanta, Georgia 30309-3002 Attention: Kenyon W. Murphy Telephone: (404) 853-1400 Facsimile: (404) 853-1415 SECTION 7.7. WAIVERS. The failure of any party to require strict performance by any other party of any provision in this Agreement will not waive or diminish that party's right to demand strict performance thereafter of that or any other provision hereof. SECTION 7.8. AMENDMENTS. Subject to the terms of Section 7.10 hereof, this Agreement may not be modified or amended except by an agreement in writing signed by each of the parties hereto. - 33 - SECTION 7.9. SUCCESSORS AND ASSIGNS. The provisions to this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. SECTION 7.10. TERMINATION. This Agreement (including Article III hereof) may be terminated and the Distribution may be amended, modified or abandoned at any time prior to the Distribution by and in the sole discretion of Parent without the approval of SpinCo or the stockholders of Parent. In the event of such termination, no party shall have any liability of any kind to any other party or any other Person. After the Distribution, this Agreement may not be terminated except by an agreement in writing signed by the parties; provided, however, that Article III shall not be terminated or amended after the Distribution in respect of any Indemnitees not a party to this Agreement without the consent of such Persons. SECTION 7.11. SUBSIDIARIES. Each of the parties hereto shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such party or by any entity that is contemplated to be a Subsidiary of such party on and after the Distribution Date. SECTION 7.12. THIRD-PARTY BENEFICIARIES. Except for the right of Indemnitees to enforce the provisions of Article III hereof, this Agreement is solely for the benefit of the parties hereto and their respective Subsidiaries and Affiliates and should not be deemed to confer upon Third Parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement. SECTION 7.13. TITLE AND HEADINGS. Titles and headings to Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. SECTION 7.14. EXHIBITS AND SCHEDULES. The Exhibits and Schedules shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. SECTION 7.15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF DELAWARE. SECTION 7.16. CONSENT TO JURISDICTION. Without limiting the provisions of Article V hereof, each of the parties irrevocably submits to the exclusive jurisdiction of (a) the state courts of the State of Delaware, located in the City of Wilmington, and (b) the United States District Court for the District of Delaware, for the purposes of any suit, action or other proceeding arising out of this Agreement, the Ancillary Agreements or any transaction contemplated hereby or thereby. Each of the parties agrees to commence any action, suit or proceeding relating hereto either in the United States - 34 - District Court for the District of Delaware or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the state courts of the State of Delaware, located in the City of Wilmington. Each of the parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, the Ancillary Agreements or the transactions contemplated hereby or thereby in (i) the state courts of the State of Delaware, located in the City of Wilmington, or (ii) the United States District Court for the District of Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. SECTION 7.17. SEVERABILITY. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic or operational effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7.18. CONSOLIDATION, MERGER, ETC. (a) Involving SpinCo. SpinCo shall not consolidate with or merge into any other Person or convey, transfer or lease all or any substantial portion of its properties and assets to any Person, and SpinCo shall not permit any Person to consolidate with or merge into SpinCo or convey, transfer or lease all or any substantial portion of its properties and assets to SpinCo, unless, in each case such Person is a corporation, partnership, limited liability company or trust and expressly assumes, by a written agreement, executed and delivered to Parent, in form reasonably satisfactory to Parent, all of the liabilities, obligations and expenses to be assumed by SpinCo under this Agreement and the due and punctual performance or observance of every agreement and covenant of this Agreement and the Ancillary Agreements on the part of SpinCo to be performed or observed. (b) Involving Parent. Parent shall not consolidate with or merge into any other Person or convey, transfer or lease all or any substantial portion of its properties and assets to any Person, and Parent shall not permit any Person to consolidate with or merge into Parent or convey, transfer or lease all or any substantial portion of its properties and assets to Parent, unless, in each case such Person is a corporation, partnership, limited liability company or trust and expressly assumes, by a written agreement, executed and delivered to SpinCo, in form reasonably satisfactory to SpinCo, all of the liabilities, obligations and expenses to be assumed by Parent under this Agreement and the due and punctual performance or observance of every agreement and covenant of this Agreement and the Ancillary Agreements on the part of Parent to be performed or observed. [SIGNATURES FOLLOW ON NEXT PAGE.] - 35 - IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. NATIONAL SERVICE INDUSTRIES, INC. By /s/ Brock A. Hattox ----------------------------------------- Name: Brock A. Hattox Title: Executive Vice President Witness: /s/ Carol Ellis Morgan - -------------------------------- Name: Carol Ellis Morgan ACUITY BRANDS, INC. By /s/ James S. Balloun ----------------------------------------- Name: James S. Balloun Title: President Witness: /s/ Kenyon W. Murphy - -------------------------------- Name: Kenyon W. Murphy EX-10.4 6 g73258ex10-4.txt EMPLOYEE BENEFITS AGREEMENT EXHIBIT 10.4 EMPLOYEE BENEFITS AGREEMENT BETWEEN NATIONAL SERVICE INDUSTRIES, INC. AND ACUITY BRANDS, INC. Dated as of the 30th day of November, 2001 EMPLOYEE BENEFITS AGREEMENT TABLE OF CONTENTS ARTICLE I DEFINITIONS AND REFERENCES..............................................................................2 1.1 DEFINITIONS.........................................................................................2 (a) Action......................................................................................2 (b) Agreement...................................................................................2 (c) Annual Incentive Plan.......................................................................2 (d) ASO Contract................................................................................2 (e) Award.......................................................................................2 (f) Close of the Distribution Date..............................................................2 (g) Code........................................................................................3 (h) Conversion Formula..........................................................................3 (i) Corporate Office............................................................................3 (j) Deferred Compensation Plans.................................................................3 (k) Distribution................................................................................3 (l) Distribution Agreement......................................................................3 (m) Distribution Date...........................................................................4 (n) ERISA.......................................................................................4 (o) Executive Programs..........................................................................4 (p) Foreign Plan................................................................................4 (q) Governmental Authority......................................................................4 (r) Granted Restricted Stock....................................................................4 (s) Group Insurance Policy......................................................................4 (t) Health and Welfare Plans....................................................................5 (u) HMO.........................................................................................5 (v) HMO Agreements..............................................................................5 (w) Immediately after the Distribution Date.....................................................5 (x) Individual Agreement........................................................................5 (y) Liabilities.................................................................................5 (z) Long-Term Incentive Plan....................................................................6 (aa) Master Pension Trust........................................................................6 (bb) Master Savings Trust........................................................................6 (cc) Material Feature............................................................................6 (dd) NSI Common Stock............................................................................6 (ee) NSI Executive...............................................................................7 (ff) NSI Group...................................................................................7 (gg) Participating Company.......................................................................7 (hh) Person......................................................................................7 (ii) Plan........................................................................................7 (jj) Reimbursement Plans.........................................................................7 (kk) Retained Corporate Employee.................................................................7 (ll) Savings Plans...............................................................................8 (mm) Spinco Business.............................................................................8 (nn) Spinco Common Stock.........................................................................8 (oo) Spinco Group................................................................................8 (pp) Spinco Mirror Plan..........................................................................8 (qq) Spinco Pension Plans........................................................................8 (rr) Spinco Stand-Alone Plan.....................................................................8 (ss) Stock Incentive Plan........................................................................8 (tt) Subsidiary..................................................................................9 (uu) Transferred Individual......................................................................9 (vv) Transition Services Agreement..............................................................10
-i- EMPLOYEE BENEFITS AGREEMENT (ww) Ungranted Restricted Stock.................................................................10 1.2 REFERENCES.........................................................................................11 ARTICLE II GENERAL PRINCIPLES....................................................................................12 2.1 ASSUMPTION OF LIABILITIES..........................................................................12 2.2 SPINCO GROUP PARTICIPATION IN NSI PLANS............................................................12 (a) Participation in NSI Plans.................................................................12 (b) NSI's General Obligations as Plan Sponsor..................................................12 (c) Spinco's General Obligations as Participating Company......................................12 (d) Termination of Participating Company Status................................................13 2.3 ESTABLISHMENT OR ASSUMPTION OF THE SPINCO PLANS....................................................13 (a) Assumption of Spinco Stand-Alone Plans.....................................................13 (b) Establishment of Spinco Mirror Plans.......................................................13 2.4 TERMS OF PARTICIPATION BY TRANSFERRED INDIVIDUALS..................................................13 ARTICLE III DEFINED BENEFIT PLANS................................................................................15 3.1 ASSUMPTION OF PENSION PLANS AND LIABILITIES........................................................15 (a) Assumption of Spinco Pension Plans and Related Liabilities.................................15 (b) Transfer of Liabilities under NSI Pension Plan C...........................................15 3.2 ESTABLISHMENT OF MIRROR PENSION TRUSTS.............................................................15 3.3 TRANSFER OF ASSETS FROM NSI MASTER PENSION TRUST...................................................15 (a) Pension Plan Asset Transfer................................................................15 (b) Transfer of Specific Assets................................................................16 3.4 GOVERNMENTAL COMPLIANCE............................................................................16 ARTICLE IV DEFINED CONTRIBUTION PLANS............................................................................17 4.1 SAVINGS PLANS......................................................................................17 (a) Assumption of Spinco Savings Plans and Related Liabilities.................................17 (b) Transfer of Liabilities under NSI Corporate 401(k) Plan....................................17 (c) Savings Plan Trust.........................................................................17 (d) Transfer of Assets.........................................................................17 (e) Specific Stock Funds in the NSI and Spinco Savings Plans...................................18 4.2 NON-EMPLOYER STOCK FUND PROCEDURES.................................................................18 (a) Application of Procedures..................................................................18 (b) Right of First Refusal and Notice Procedures...............................................19 (c) Procedures After Notice is Given...........................................................19 ARTICLE V HEALTH AND WELFARE PLANS...............................................................................20 5.1 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES..................................................20 (a) Assumption by Spinco.......................................................................20 (b) Certain Audit Procedures with Respect to Health and Welfare Plans..........................20 5.2 VENDOR CONTRACTS...................................................................................21 (a) ASO Contracts, Group Insurance Policies, HMO Agreements, and Letters of Understanding......21 (b) Payment and Effect of Change in Rates......................................................22 5.3 NSI SHORT-TERM DISABILITY ARRANGEMENTS.............................................................22 5.4 RETIREE HEALTH AND LIFE INSURANCE BENEFITS.........................................................23 5.5 COBRA AND HIPAA....................................................................................23 5.6 LEAVE OF ABSENCE PROGRAMS..........................................................................23 5.7 POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS.......................................................23 (a) Continuance of Elections, Co-Payments, and Maximum Benefits................................23 (b) Administration.............................................................................24 (c) NSI Reimbursement Plans....................................................................25
-ii- EMPLOYEE BENEFITS AGREEMENT 5.8 APPLICATION OF ARTICLE V TO THE SPINCO GROUP.......................................................25 ARTICLE VI EXECUTIVE PROGRAMS....................................................................................27 6.1 ASSUMPTION OF OBLIGATIONS..........................................................................27 6.2 ANNUAL INCENTIVE AWARDS............................................................................27 6.3 LONG-TERM INCENTIVE PLAN...........................................................................27 (a) Award 4 (for the performance period 9/1/99-8/31/02)........................................27 (b) Stock Options..............................................................................27 (c) Restricted Stock Awards....................................................................28 6.4 EMPLOYEE STOCK PURCHASE PLAN.......................................................................29 6.5 DEFERRED COMPENSATION PLANS........................................................................29 (a) Assumption or Establishment of Spinco Deferred Compensation Plans..........................29 (b) Transfer of Corporate-Owned Life Insurance.................................................30 6.6 SUPPLEMENTAL RETIREMENT BENEFIT PLANS..............................................................30 6.7 BENEFITS PROTECTION TRUST AND EXECUTIVE BENEFITS TRUST.............................................30 6.8 SEVERANCE PROTECTION AGREEMENTS....................................................................30 6.9 EMPLOYMENT AGREEMENTS..............................................................................31 6.10 AUTOMOBILE PROGRAM.................................................................................31 6.11 OTHER EXECUTIVE BENEFITS/PROGRAMS..................................................................31 6.12 NON-EMPLOYEE DIRECTOR BENEFITS.....................................................................31 (a) Non-Employee Director Deferred Stock Unit Plan.............................................31 (b) Non-Employee Directors' Stock Option Plan..................................................31 ARTICLE VII GENERAL..............................................................................................33 7.1 PAYMENT OF AND ACCOUNTING TREATMENT FOR EXPENSES AND BALANCE SHEET AMOUNTS.........................33 (a) Expenses...................................................................................33 (b) Balance Sheet Amounts......................................................................33 7.2 SHARING OF PARTICIPANT INFORMATION.................................................................33 7.3 RESTRICTIONS ON EXTENSION OF OPTION EXERCISE PERIODS, AMENDMENT OR MODIFICATION OF OPTION TERMS AND CONDITIONS........................................................................33 7.4 REPORTING AND DISCLOSURE AND COMMUNICATIONS TO PARTICIPANTS........................................34 7.5 PLAN AUDITS........................................................................................34 (a) Audit Rights with Respect to the Allocation or Transfer of Plan Assets.....................34 (b) Audit Rights With Respect to Information Provided..........................................35 (c) Audits Regarding Vendor Contracts..........................................................35 (d) Audit Assistance...........................................................................35 7.6 BENEFICIARY DESIGNATIONS/RELEASE OF INFORMATION/RIGHT TO REIMBURSEMENT.............................36 7.7 REQUESTS FOR INTERNAL REVENUE SERVICE RULINGS AND UNITED STATES DEPARTMENT OF LABOR OPINIONS.......36 7.8 FIDUCIARY AND RELATED MATTERS......................................................................36 7.9 NO THIRD-PARTY BENEFICIARIES; NON-TERMINATION OF EMPLOYMENT........................................36 7.10 COLLECTIVE BARGAINING..............................................................................37 7.11 CONSENT OF THIRD PARTIES...........................................................................37 7.12 FOREIGN PLANS......................................................................................37 7.13 EFFECT IF DISTRIBUTION DOES NOT OCCUR..............................................................37 7.14 RELATIONSHIP OF PARTIES............................................................................37 7.15 AFFILIATES.........................................................................................38 7.16 DISPUTE RESOLUTION.................................................................................38 7.17 INDEMNIFICATION....................................................................................38 7.18 W-2 MATTERS........................................................................................40 7.19 CONFIDENTIALITY....................................................................................40 7.20 NOTICES............................................................................................40 7.21 INTERPRETATION.....................................................................................40 7.22 SEVERABILITY.......................................................................................40 7.23 GOVERNING LAW/EXECUTION............................................................................41
-iii- EMPLOYEE BENEFITS AGREEMENT THIS EMPLOYEE BENEFITS AGREEMENT, dated as of the 30th day of November, 2001, is by and between National Service Industries, Inc., a Delaware corporation ("NSI" or the "Corporation"), and Acuity Brands, Inc., a Delaware corporation ("Spinco"). WHEREAS, NSI's Board of Directors has determined that separation from the Corporation of substantially all of the Corporation's lighting equipment and chemicals assets and businesses and public ownership of such assets and businesses is in the best interests of NSI and its stockholders; and WHEREAS, NSI has consolidated the assets and operations of substantially all of the lighting equipment and chemicals businesses owned by it and its Subsidiaries into Spinco and its Subsidiaries; and WHEREAS, NSI intends to accomplish the separation of Spinco through a distribution of the stock of Spinco to the stockholders of NSI that is intended to be tax free pursuant to section 355 of the Internal Revenue Code of 1986, as amended (the "Distribution"); and WHEREAS, NSI and Spinco have entered into an Agreement and Plan of Distribution, dated as of November 30, 2001 (the "Distribution Agreement"), and several other agreements that will govern certain matters relating to the Distribution and the relationship of NSI and Spinco and their respective Subsidiaries following the Distribution; and WHEREAS, pursuant to the Distribution Agreement, NSI and Spinco have agreed to enter into this Agreement for the purpose of allocating assets, liabilities, and responsibilities with respect to certain employee compensation and benefit plans and programs between them. NOW, THEREFORE, in consideration of the mutual promises contained herein and in the Distribution Agreement, the parties agree as follows: -1- ARTICLE I DEFINITIONS AND REFERENCES 1.1 DEFINITIONS For purposes of this Agreement, capitalized terms used (other than the formal names of NSI Plans (as defined below)) and not otherwise defined shall have the respective meanings assigned to them below or as assigned to them in the Distribution Agreement (as defined above): (A) ACTION "Action" means any demand, action, cause of action, suit, countersuit, arbitration, inquiry, proceeding, or investigation by or before any Governmental Authority or any arbitration or mediation tribunal, pending or threatened, known or unknown. (B) AGREEMENT "Agreement" means this Employee Benefits Agreement, including all the attached Appendices. (C) ANNUAL INCENTIVE PLAN "Annual Incentive Plan," when immediately preceded by "NSI" means the National Service Industries, Inc. Management Compensation and Incentive Plan, and any other short-term compensation, bonus, or incentive compensation programs established or maintained by the NSI Group. When immediately preceded by "Spinco," "Annual Incentive Plan" means any short-term compensation, bonus, or incentive compensation programs to be established or maintained by Spinco pursuant to Section 2.3. (D) ASO CONTRACT "ASO Contract" means an administrative services contract, related prior practice, or related understanding with a third-party administrator that pertains to any NSI Health and Welfare Plan or any Spinco Health and Welfare Plan. (E) AWARD "Award" means a long-term or short-term award under a Long-Term Incentive Plan or a Short-Term Incentive Plan or, as the context or facts may require, any other award under another incentive or special bonus, incentive, or award program or arrangement. (F) CLOSE OF THE DISTRIBUTION DATE "Close of the Distribution Date" means 11:59 P.M., Eastern Time, on the Distribution Date. -2- (G) CODE "Code" means the Internal Revenue Code of 1986, as amended, or any successor federal income tax law. Reference to a specific Code provision also includes any proposed, temporary, or final regulation in force under that provision. (H) CONVERSION FORMULA "Conversion Formula" means the appropriate formula which shall be applied in adjusting the exercise price and award size of NSI options under the NSI Stock Incentive Plans and in determining the exercise price and number of Spinco options under the Spinco Stock Incentive Plans. The Conversion Formula shall be based on the closing per share prices of NSI Common Stock (with a due bill) and Spinco Common Stock (on a when-issued basis) as traded on the New York Stock Exchange on the Distribution Date or such other prices as jointly agreed upon by Spinco and NSI, and shall be determined and applied in such a manner as to maintain (1) the aggregate spread (or, if there is no such spread, the economic value) of such options, which is the difference between the exercise price per share of NSI Common Stock covered by the option and the price per share of NSI Common Stock (with a due bill) immediately preceding the Distribution, multiplied by the total number of shares covered by the option; and (2) the ratio of the exercise price per share covered by the option to the price per share of NSI Common Stock (with a due bill) immediately preceding the Distribution. (I) CORPORATE OFFICE "Corporate Office" means the corporate office of NSI, including certain individuals employed by National Service Industries, Inc., a California corporation and Spinco. (J) DEFERRED COMPENSATION PLANS "Deferred Compensation Plans," when immediately preceded by "NSI" means the National Service Industries, Inc. Supplemental Deferred Savings Plan, the National Service Industries, Inc. Senior Management Benefit Plan, National Service Industries, Inc. Executive Savings Plan and the National Service Industries, Inc. Executives' Deferred Compensation Plan. When immediately preceded by "Spinco," "Deferred Compensation Plans" means the executive deferred compensation plans to be assumed, established or maintained by Spinco pursuant to Section 2.3. (K) DISTRIBUTION "Distribution" has the meaning given that term under the Distribution Agreement. (L) DISTRIBUTION AGREEMENT "Distribution Agreement" is defined in the preamble of this Agreement. -3- (M) DISTRIBUTION DATE "Distribution Date" has the meaning given that term under the Distribution Agreement. (N) ERISA "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific provision of ERISA also includes any proposed, temporary, or final regulation in force under that provision. (O) EXECUTIVE PROGRAMS "Executive Programs," when immediately preceded by "NSI" means the executive benefit and nonqualified plans, programs, and arrangements established, maintained, agreed upon, or assumed by a member of the NSI Group for the benefit of employees and former employees of members of the NSI Group before the Close of the Distribution Date. When immediately preceded by "Spinco," "Executive Programs" means the executive benefit plans and programs to be established, assumed or maintained by Spinco or a member of the Spinco Group, including those plans and programs listed and designated as such in Appendix B. (P) FOREIGN PLAN "Foreign Plan," when immediately preceded by "NSI," means a Plan maintained by the NSI Group or when immediately preceded by "Spinco," a plan to be established or which is maintained by the Spinco Group, in either case for the benefit of employees who are compensated under a payroll which is administered outside the 50 United States, its territories and possessions, and the District of Columbia, including those Plans described in Appendix D. (Q) GOVERNMENTAL AUTHORITY "Governmental Authority" means any federal, state, local, foreign, or international court, government, department, commission, board, bureau, agency, official, or other regulatory, administrative, or governmental authority, including the Department of Labor, the Securities and Exchange Commission, the Internal Revenue Service, and the Pension Benefit Guaranty Corporation. (R) GRANTED RESTRICTED STOCK "Granted Restricted Stock" is defined in Section 6.3(c)(1). (S) GROUP INSURANCE POLICY "Group Insurance Policy" means a group insurance policy issued in connection with any NSI Health and Welfare Plan or any Spinco Health and Welfare Plan, as applicable. -4- (T) HEALTH AND WELFARE PLANS "Health and Welfare Plans," when immediately preceded by "NSI" means the health and welfare benefit plans, programs, and policies (including the Reimbursement Plans) which are sponsored by NSI. When immediately preceded by "Spinco," "Health and Welfare Plans" means the benefit plans, programs, and policies (including the Reimbursement Plans) corresponding to those plans, programs, and policies sponsored by NSI as of the Distribution Date, including those plans, programs, and policies listed in Appendix C to this Agreement which will be sponsored by a member of the Spinco Group Immediately after the Distribution Date. (U) HMO "HMO" means a health maintenance organization that provides benefits under the NSI Health and Welfare Plans or the Spinco Health and Welfare Plans, as applicable. (V) HMO AGREEMENTS "HMO Agreements" means contracts, letter agreements, practices, and understandings with HMOs that provide medical, dental, prescription drug, or vision services under the NSI Health and Welfare Plans and the Spinco Health and Welfare Plans, as applicable. (W) IMMEDIATELY AFTER THE DISTRIBUTION DATE "Immediately after the Distribution Date" means 12:00 A.M., Eastern Time, on the day after the Distribution Date. (X) INDIVIDUAL AGREEMENT "Individual Agreement" means an individual contract or agreement (whether written or unwritten) entered into between a member of the NSI Group or a member of the Spinco Group and any employee or individual who will be an employee of, or otherwise assigned to, the Spinco Group Immediately after the Distribution Date that establishes the right of such individual to special compensation or benefits, special bonuses, supplemental pension benefits, hiring bonuses, loans, guaranteed payments, special allowances, tax equalization payments, special expatriate compensation payments, disability benefits, or other forms of compensation and benefits. (Y) LIABILITIES "Liabilities" means any and all losses, claims, charges, debts, premiums, demands, actions, costs, and expenses (including any current or future benefit payments or other entitlements, and administrative and related costs and expenses of any Plan, program, service or consulting agreement, or arrangement), of any nature whatsoever, whether absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whether or not imposed or determined by a court, whenever arising. -5- (Z) LONG-TERM INCENTIVE PLAN "Long-Term Incentive Plan," when immediately preceded by "NSI" means the National Service Industries, Inc. Long-Term Achievement Incentive Plan, the National Service Industries, Inc. Long-Term Incentive Program, and any other long-term incentive plans established or maintained by a member of the NSI Group. When immediately preceded by "Spinco," "Long-Term Incentive Plan" means the long-term incentive plan to be established or assumed by Spinco pursuant to Section 2.3. (AA) MASTER PENSION TRUST "Master Pension Trust," when immediately preceded by "NSI," means the trust evidenced by the National Service Industries, Inc. Defined Benefit Plans Master Trust Agreement, as amended from time to time, and currently associated with the defined benefit plans that are sponsored by NSI or one of its affiliates. When immediately preceded by "Spinco," "Master Pension Trust" means the trust to be established or maintained by Spinco pursuant to Section 3.2 that corresponds to the NSI Master Pension Trust and that will be associated with the Spinco Pension Plans. (BB) MASTER SAVINGS TRUST "Master Savings Trust," when immediately preceded by "NSI," means the trust evidenced by the National Service Industries, Inc. Defined Contribution Plans Master Trust Agreement, as amended from time to time, and currently associated with the defined contribution plans that are sponsored by NSI or one of its affiliates. When immediately preceded by "Spinco," "Master Savings Trust" means the trust to be established or maintained by Spinco pursuant to Section 4.1 that corresponds to the NSI Master Savings Trust and that will be associated with the Spinco Savings Plans. (CC) MATERIAL FEATURE "Material Feature" means any feature of a Plan that could reasonably be expected to be of material importance to the sponsoring employer or the participants and beneficiaries of the Plan, which could include, depending on the type and purpose of the particular Plan, the class or classes of employees eligible to participate in such Plan, the nature, type, form, source, and level of benefits provided by the employer under such Plan and the amount or level of contributions, if any, required or permitted to be made by participants (or their dependents or beneficiaries) to such Plan. (DD) NSI COMMON STOCK "NSI Common Stock" has the same meaning as the term "Parent Common Stock" under the Distribution Agreement. -6- (EE) NSI EXECUTIVE "NSI Executive" means an employee or former employee of a member of the NSI Group or a member of the Spinco Group who, as of the Close of the Distribution Date, is or was eligible to participate in or receive a benefit under any NSI Executive Program. (FF) NSI GROUP "NSI Group" has the same meaning as the term "Parent Group" under the Distribution Agreement. (GG) PARTICIPATING COMPANY "Participating Company" means any Person (other than an individual) that is participating in a Plan sponsored by a member of the NSI Group or a member of the Spinco Group, as the context requires. (HH) PERSON "Person" means an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity, or any Governmental Authority. (II) PLAN "Plan," when immediately preceded by "NSI" or "Spinco," means any plan, policy, program, payroll practice, on-going arrangement, contract, trust, insurance policy, or other agreement or funding vehicle, whether written or unwritten, providing benefits to employees or former employees of the NSI Group or the Spinco Group, as applicable. (JJ) REIMBURSEMENT PLANS "Reimbursement Plans," when immediately preceded by "NSI," means the NSI Health Care Flexible Spending Account and the NSI Dependent Care Flexible Spending Account, as applicable. When immediately preceded by "Spinco," "Reimbursement Plans" means the health care flexible spending account plan and the dependent care flexible spending account plan to be established or maintained by Spinco pursuant to Section 2.3 that corresponds to the corresponding NSI Reimbursement Plans. (KK) RETAINED CORPORATE EMPLOYEE "Retained Corporate Employee" means an employee of the Corporate Office who, pursuant to an agreement between NSI and Spinco, is designated to remain an employee of NSI or a member of the NSI Group after the Distribution. -7- (LL) SAVINGS PLANS "Savings Plans," when immediately preceded by "NSI," means the defined contribution plans that are sponsored by a member of the NSI Group other than the Spinco Savings Plans. When immediately preceded by "Spinco," "Savings Plans" means the defined contribution plans listed in Appendix A to this Agreement that will be sponsored by a member of the Spinco Group for periods immediately after the Distribution Date. (MM) SPINCO BUSINESS "Spinco Business" has the meaning given that term under the Distribution Agreement. (NN) SPINCO COMMON STOCK "Spinco Common Stock" has the meaning given that term under the Distribution Agreement. (OO) SPINCO GROUP "Spinco Group" has the meaning given that term under the Distribution Agreement. (PP) SPINCO MIRROR PLAN "Spinco Mirror Plan" means any of the Spinco Health and Welfare Plans, and any Spinco Executive Program that will be substantially similar to an NSI Executive Program, as set forth on Appendix B hereto. (QQ) SPINCO PENSION PLANS "Spinco Pension Plans," means the defined benefit pension plans listed and further defined in Appendix A to this Agreement that will be sponsored by a member of the Spinco Group for periods immediately after the Distribution Date. (RR) SPINCO STAND-ALONE PLAN "Spinco Stand-Alone Plan" means any Plan maintained by NSI or an affiliate of NSI, that, no later than the Close of the Distribution Date, will be assumed, sponsored and maintained by Spinco or a member of the Spinco Group for the exclusive benefit of Transferred Individuals, including but not limited to the Spinco Pension Plans set forth on Appendix A, the Spinco Savings Plans set forth on Appendix A, and those Executive Plans set forth and designated as Stand-Alone Plans on Appendix B hereto. (SS) STOCK INCENTIVE PLAN "Stock Incentive Plan," when immediately preceded by "NSI," means the National Service Industries, Inc. Long-Term Achievement Incentive Plan, the National Service Industries, Inc. Long-Term Incentive Plan, the National Service Industries, Inc. Non-Employee Directors -8- Stock Option Plan and any other stock-based incentive plan established or maintained by a member of the NSI Group. When immediately preceded by "Spinco," "Stock Incentive Plan" means the stock incentive plans to be established or assumed by Spinco pursuant to Section 2.3. (TT) SUBSIDIARY "Subsidiary" of any Person means any corporation or other organization, whether incorporated or unincorporated, of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is, directly or indirectly, owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; provided, however, that no Person that is not directly or indirectly wholly owned by any other Person shall be a Subsidiary of such other Person unless such other Person controls, or has the right, power, or ability to control, that Person. (UU) TRANSFERRED INDIVIDUAL "Transferred Individual" means any individual who, as of the Close of the Distribution Date: (1) is actively employed by, or on a leave of absence (including those individuals receiving short-term disability benefits and those taking leave pursuant to the Family and Medical Leave Act of 1993, as amended) from, a member of the Spinco Group (or is deemed to be so employed or on leave in accordance with an agreement between NSI and Spinco); (2) is actively employed by, or on a leave of absence (including those individuals receiving short-term disability benefits and those taking leave pursuant to the Family and Medical Leave Act of 1993, as amended) from, the Corporate Office, unless such individual is a Retained Corporate Employee; or (3) is not actively employed by, nor on a leave of absence (including those individuals receiving short-term disability benefits and those taking leave pursuant to the Family and Medical Leave Act of 1993, as amended) from, NSI or a member of the NSI Group, or Spinco or a member of the Spinco Group, and: (A) whose most recent (through the Close of the Distribution Date) active employment with NSI or a past or present affiliate of NSI was with a member of the Spinco Group or the Spinco Business, or the predecessors of such business, or was with the Corporate Office; or (B) who otherwise is identified pursuant to a methodology approved by NSI and Spinco, which methodology shall be consistent with the intent of the parties that former employees of NSI or a past or present affiliate of NSI and such other individuals who performed services for NSI (including non-employees) will only be aligned with -9- Spinco if they provided services to the Spinco Group or Spinco Business, and, for such purposes, aligning former employees of the Corporate Office with Spinco. An alternate payee under a qualified domestic relations order (within the meaning of Code ss. 414(p) and ERISA ss. 206(d)), alternate recipient under a qualified medical child support order (within the meaning of ERISA ss. 609(a)), beneficiary, or covered dependent, in each case, of an employee or former employee described in (1), (2) or (3) above shall also be a Transferred Individual with respect to the interest of such alternate payee, alternate recipient, beneficiary, or covered dependent in that employee's or former employee's benefit under the applicable Plans. Such an alternate payee, alternate recipient, beneficiary, or covered dependent shall not otherwise be considered a Transferred Individual with respect to his or her own benefits under any applicable Plans, unless he or she is a Transferred Individual by virtue of either of subparagraphs (1), (2) or (3) above. In addition, NSI and Spinco may agree to designate any other individuals, or group of individuals, as Transferred Individuals. Subject to the other provisions of this definition, an individual may be a Transferred Individual pursuant to this definition regardless of whether such individual is, as of the Distribution Date, alive, actively employed, on a temporary leave of absence from active employment, on layoff, terminated from employment, retired or on any other type of employment, post-employment, or independent contractor status relative to NSI or Spinco or to an NSI or Spinco Plan. Transferred Individual includes any individual who is on an international assignment whether paid on a U.S. payroll or a payroll outside the U.S. if such individual otherwise falls within any of the above categories. Notwithstanding anything to the contrary in this definition, the term Transferred Individual under this Agreement shall not include any individual who was otherwise directly transferred from former employment with a member of the NSI Group to employment with any other Person, whether by sale or transfer of the assets and liabilities or stock of a business or otherwise, unless such individual has been re-employed as an active employee of a member of the NSI Group subsequent to such event and prior to the Close of the Distribution Date. Nothing contained in this Agreement shall permit, or be construed or interpreted to permit, any non-employee of NSI or Spinco to participate, at any time, in any Plan of NSI or Spinco. (VV) TRANSITION SERVICES AGREEMENT "Transition Services Agreement" means the Transition Services Agreement entered into by NSI and Spinco governing certain matters related to the relationship of the parties after the Distribution. (WW) UNGRANTED RESTRICTED STOCK "Ungranted Restricted Stock" is defined in Section 6.3(c)(1). -10- 1.2 REFERENCES Unless the context clearly indicates otherwise, reference to a particular Article, Section, subsection or paragraph means the Article, Section, subsection or paragraph so delineated in this Agreement. -11- ARTICLE II GENERAL PRINCIPLES 2.1 ASSUMPTION OF LIABILITIES Except for each Liability that is expressly retained in writing by NSI or excluded in writing by NSI from those being assumed by Spinco and unless otherwise provided for elsewhere in this Agreement, Spinco hereby assumes and agrees to pay, perform, fulfill, and discharge, in accordance with their respective terms and conditions, all of the following (regardless of when or where such Liabilities arose or arise or were or are incurred): (i) all Liabilities to or relating to Transferred Individuals arising out of or resulting from employment by, or the performance of services for, a member of the NSI Group before becoming Transferred Individuals and thereafter (including Liabilities under NSI Plans and Spinco Plans), (ii) all other Liabilities to or relating to Transferred Individuals, and their dependents and beneficiaries, to the extent relating to, arising out of or resulting from future, present, or former employment with, or the provision of services for, a member of the Spinco Group or the Spinco Business (including Liabilities under NSI Plans and Spinco Plans), (iii) all Liabilities under any Individual Agreements relating to Transferred Individuals, and (iv) all other Liabilities relating to, arising out of, or resulting from obligations, liabilities, and responsibilities expressly assumed or retained by a member of the Spinco Group or a Spinco Plan pursuant to this Agreement. 2.2 SPINCO GROUP PARTICIPATION IN NSI PLANS (A) PARTICIPATION IN NSI PLANS Subject to the terms and conditions of this Agreement, each member of the Spinco Group that is, as of the date of this Agreement, a Participating Company in any of the NSI Plans shall continue as such through the Close of the Distribution Date unless, for periods before the Distribution Date, the parties mutually agree otherwise. Effective as of any date before the Distribution Date, a member of the Spinco Group not described in the preceding sentence may, at its request and with the consent of NSI (which consent shall not be unreasonably withheld), become a Participating Company in any or all of the NSI Plans in which Transferred Individuals participate. (B) NSI'S GENERAL OBLIGATIONS AS PLAN SPONSOR NSI shall continue through the Close of the Distribution Date to administer, or cause to be administered, in accordance with their terms and applicable law, the NSI Plans and NSI (or its designee) shall have the sole discretion and authority to interpret the NSI Plans through such date and during any subsequent period. (C) SPINCO'S GENERAL OBLIGATIONS AS PARTICIPATING COMPANY Spinco shall perform with respect to its participation in the NSI Plans, and shall cause each other member of the Spinco Group that is a Participating Company in any NSI Plan to perform the duties of a Participating Company as set forth in such Plans, and any written or oral procedures adopted pursuant thereto, including: (i) assisting in the administration of claims, to -12- the extent requested by the claims administrator or plan administrator of the applicable NSI Plan, (ii) cooperating fully with NSI Plan auditors, benefit personnel and benefit vendors, (iii) preserving the confidentiality of all financial and business arrangements NSI has or may have with any vendors, claims administrators, trustees or any other entity or individual with whom NSI has entered into an agreement relating to the NSI Plans, and (iv) preserving the confidentiality of participant health information (including health information in relation to leaves under the Family and Medical Leave Act of 1993, as amended). (D) TERMINATION OF PARTICIPATING COMPANY STATUS Unless otherwise provided in this Agreement, to the extent applicable, effective as of the Close of the Distribution Date, Spinco and each member of the Spinco Group shall cease to be a Participating Company in any of the NSI Plans remaining with NSI, and NSI and each member of the NSI Group shall cease to be a Participating Company in any Plan assumed by Spinco or a member of the Spinco Group. 2.3 ESTABLISHMENT OR ASSUMPTION OF THE SPINCO PLANS (A) ASSUMPTION OF SPINCO STAND-ALONE PLANS Unless otherwise provided in this Agreement, effective no later than the Close of the Distribution Date, Spinco or a member of the Spinco Group shall assume or cause to be assumed, the Spinco Stand-Alone Plans for the benefit of Transferred Individuals and other current, future and former employees of the Spinco Group. Spinco and NSI shall take all action necessary to provide for such assumption of the Spinco Stand-Alone Plans, including any necessary amendments, and the name of the Plans shall be changed as and where appropriate. (B) ESTABLISHMENT OF SPINCO MIRROR PLANS Unless otherwise provided in this Agreement, effective no later than the Close of the Distribution Date, Spinco or a member of the Spinco Group shall adopt or cause to be adopted, the Spinco Mirror Plans for the benefit of Transferred Individuals and other current, future, and former employees of the Spinco Group. The foregoing Spinco Mirror Plans as in effect Immediately after the Distribution Date shall be substantially identical in all Material Features to the corresponding NSI Plans as in effect as of the Close of the Distribution Date. 2.4 TERMS OF PARTICIPATION BY TRANSFERRED INDIVIDUALS The Spinco Plans shall be, with respect to Transferred Individuals, in all respects the successors in interest to, shall recognize all rights and entitlements as of the Close of the Distribution Date under, and shall not provide benefits that duplicate benefits provided by, the corresponding NSI Plans for such Transferred Individuals. NSI and Spinco shall agree on methods and procedures, including amending the respective Plan documents, to prevent Transferred Individuals from receiving duplicative benefits from the NSI Plans and the Spinco Plans. Spinco shall not permit any Spinco Plan to commence benefit payments to Transferred Individuals until it receives written notice from NSI regarding the date on which payments under -13- the corresponding NSI Plan shall cease. With respect to Transferred Individuals, each Spinco Plan shall provide that all benefit or other elections, all designations of beneficiaries, all service, all compensation, and all other benefit-affecting determinations that, as of the Close of the Distribution Date, were recognized under the corresponding NSI Plan (for periods immediately before the Close of the Distribution Date) shall, as of Immediately after the Distribution Date, receive full recognition, credit, and validity and be taken into account under such Spinco Plan to the same extent as if such items originally occurred under such Spinco Plan, except to the extent that duplication of benefits would result. The provisions of this Agreement for the transfer of assets, if any, from certain trusts relating to NSI Plans (including Foreign Plans) to the corresponding trusts relating to Spinco Plans (including Foreign Plans) are based upon the understanding and agreement of the parties that each such Spinco Plan will assume all Liabilities of the Transferred Individuals and corresponding NSI Plan to or relating to Transferred Individuals, as provided for herein. If there are any legal or other authoritative reasons that any such Liabilities are not effectively assumed by the appropriate Spinco Plan, then the amount of assets transferred to the trust relating to such Spinco Plan from the trust relating to the corresponding NSI Plan shall be recomputed, ab initio, as set forth in this Agreement but taking into account the retention of any such Liabilities by such NSI Plan, and assets shall be transferred by the trust relating to such Spinco Plan to the trust relating to such NSI Plan so as to place each such trust in the position it would have been in, had the initial asset transfer been made in accordance with such recomputed amount of transferred Liabilities and assets. -14- ARTICLE III DEFINED BENEFIT PLANS 3.1 ASSUMPTION OF PENSION PLANS AND LIABILITIES (A) ASSUMPTION OF SPINCO PENSION PLANS AND RELATED LIABILITIES Effective no later than the Close of the Distribution Date, Spinco or a member of the Spinco Group shall take all actions necessary to become the plan sponsor of the Spinco Pension Plans and shall be responsible for all Liabilities relating to the Spinco Pension Plans, subject to the transfer of related assets as provided in Section 3.3 below. (B) TRANSFER OF LIABILITIES UNDER NSI PENSION PLAN C Effective no later than the Close of the Distribution Date: (i) all Liabilities to or relating to Retained Corporate Employees under the National Service Industries Pension Plan C ("Pension Plan C") shall cease to be Liabilities of Pension Plan C and shall be assumed in full and in all respects by one or more NSI Pension Plans; and (ii) to the extent legally required, there shall be transferred from the NSI Master Pension Trust account for Pension Plan C to one or more NSI Pension Plans, an amount of assets required to be transferred as a result of such transfer and assumption of Liabilities as reasonably determined by NSI, in accordance with the calculations of a party making actuarial or similar determinations pursuant to this Agreement, and subject to Section 414(l) of the Code, but not to include any portion of the surplus assets, if any, credited to the NSI Master Pension Trust account for Pension Plan C. 3.2 ESTABLISHMENT OF MIRROR PENSION TRUSTS Effective no later than the Close of the Distribution Date, Spinco shall establish, or cause to be established, the Spinco Master Pension Trust which shall be qualified under Code ss. 401(a), be exempt from taxation under Code ss. 501(a)(1), and form part of the Spinco Pension Plans. Spinco shall, prior to the end of the remedial amendment period for the Spinco Pension Plans, apply for determination letters from the Internal Revenue Service that shall provide that the Spinco Pension Plans and the Spinco Master Pension Trust satisfy the requirements for qualification under Code sections 401(a) and 501(a), and Spinco shall take all actions necessary or appropriate to obtain such letters. 3.3 TRANSFER OF ASSETS FROM NSI MASTER PENSION TRUST (A) PENSION PLAN ASSET TRANSFER Subject to Section 3.1(b), it is expected that no later than the Close of the Distribution Date, all of the assets associated with and allocated to the accounts of each Spinco Pension Plan under the NSI Master Pension Trust shall be transferred from the NSI Master Pension Trust to the Spinco Master Pension Trust. If the transfer of assets does not occur prior to the Close of the Distribution Date, NSI and Spinco shall mutually reschedule the asset transfer date; provided, however, such rescheduled date must occur not later than December 31, 2001. -15- (B) TRANSFER OF SPECIFIC ASSETS The specific assets to be transferred from the NSI Master Pension Trust to the Spinco Master Pension Trust shall be made up of cash and marketable assets selected by NSI consistent with the objective of enabling Spinco to implement prospectively an investment program for the Spinco Master Pension Trust, but in no event shall NSI or the NSI Master Pension Trust be required to incur unreasonable transaction costs in the process of transferring assets and subsequently re-balancing the investment portfolio held by the NSI Master Pension Trust. Furthermore, NSI shall not be required to transfer any specific asset or any portion of any specific fund or investment manager account, and NSI shall not transfer any amount of Spinco Common Stock that would place the Spinco Pension Plans in violation of the employer stock acquisition limitations of ERISA section 407; provided, however, that NSI shall transfer interests in group annuity contracts held by the NSI Master Pension Trust to the extent such group annuity contracts (in whole or in part, as the case may be) specifically cover the accrued pension benefits of Transferred Individuals. In transferring specific assets, NSI makes no representation as to the appropriateness of the resulting asset allocation or investment performance resulting from the specific assets transferred. By accepting the assets transferred, Spinco acknowledges that it and not NSI is serving as the fiduciary for the Spinco Master Pension Trust with respect to the determination and actual transfer of assets from the NSI Master Pension Trust and that, acting as fiduciary for the Spinco Pension Plans, Spinco further acknowledges that it is able to change the asset allocation as it deems appropriate at any time. Once the assets have been transferred to and received by the Spinco Master Pension Trust, such event shall fully and finally foreclose any issue or matter of any nature whatsoever by Spinco, the Spinco Master Pension Trust, the Spinco Pension Plans, or any other trust(s) related to such Plans against NSI, the NSI Master Pension Trust, the NSI Pension Plans, or any other trust(s) related to such Plans with respect to the condition, identity, or value of such assets and Spinco shall fully indemnify NSI, its employees, officers, directors, and the NSI Pension Plans, the NSI Master Pension Trust, and any trustees or fiduciaries thereof regarding any Liability or legal or regulatory issue of any nature with respect thereto. 3.4 GOVERNMENTAL COMPLIANCE Notwithstanding any provision of this Agreement to the contrary, in the event that at any time any Governmental Authority challenges or seeks to prevent the transfer of assets and Liabilities provided for in Sections 3.1 and 3.3, NSI and Spinco shall reach such other agreement as may be mutually satisfactory to NSI and Spinco respecting the matters covered by this Article III. -16- ARTICLE IV DEFINED CONTRIBUTION PLANS 4.1 SAVINGS PLANS (A) ASSUMPTION OF SPINCO SAVINGS PLANS AND RELATED LIABILITIES Effective no later than the Close of the Distribution Date, Spinco or a member of the Spinco Group shall take all action necessary to assume and become the plan sponsor of the Spinco Savings Plans and shall be responsible for all Liabilities relating to the Spinco Savings Plans. The Spinco Savings Plans shall recognize and maintain all contribution and investment elections made by Transferred Individuals under the Spinco Savings Plans as such elections were last in effect during the period immediately prior to the Distribution Date and shall apply such elections under the Spinco Savings Plans for the remainder of the period or periods for which such elections are by their terms applicable (subject in all cases to applicable election change rights of the Transferred Individuals). (B) TRANSFER OF LIABILITIES UNDER NSI CORPORATE 401(K) PLAN Effective no later than the Close of the Distribution Date: (i) all Liabilities to or relating to Retained Corporate Employees under the National Service Industries Retirement and 401(k) Plan ("Corporate 401(k) Plan") shall cease to be Liabilities of the Corporate 401(k) Plan and shall be assumed in full and in all respects by one or more NSI Savings Plans; (ii) the appropriate NSI Savings Plan(s) shall assume and be solely responsible for all ongoing rights of or relating to these Retained Corporate Employees for future participation (including the right to make contributions through payroll deductions in the NSI Savings Plan(s); and (iii) the accounts of the Retained Corporate Employees under the Corporate 401(k) Plan which are held by its related trust shall be transferred to the account(s) of the appropriate NSI Savings Plan under the NSI Master Savings Trust. (C) SAVINGS PLAN TRUST Effective no later than the Close of the Distribution Date, Spinco shall establish, or cause to be established, the Spinco Master Savings Trust which shall be qualified under Code ss. 401(a), be exempt from taxation under Code ss. 501(a)(1), and form part of the Spinco Savings Plans. Spinco shall, prior to the end of the remedial amendment period for the Spinco Savings Plans, apply for determination letters from the Internal Revenue Service that shall provide that the Spinco Savings Plans and the Spinco Master Savings Trust satisfy the requirements for qualification under Code sections 401(a) and 501(a), and Spinco shall take all actions necessary or appropriate to obtain such letters. (D) TRANSFER OF ASSETS Effective on a date selected by NSI, which is expected to be no later than the Close of the Distribution Date (the "Savings Plans Transfer Date"), all of the assets associated with and allocated to the accounts of each Spinco Savings Plan under the NSI Master Savings Trust shall be transferred from the NSI Master Savings Trust to the Spinco Master Savings Trust. If the -17- transfer of assets does not occur prior to the Close of the Distribution Date, NSI and Spinco shall mutually reschedule the asset transfer date; provided, however, such rescheduled date must occur not later than December 31, 2001. (E) SPECIFIC STOCK FUNDS IN THE NSI AND SPINCO SAVINGS PLANS Effective no later than Immediately after the Distribution Date, a Spinco Common Stock fund shall be added as an investment option to any NSI Savings Plan or Spinco Savings Plan that has an NSI Common Stock fund. The Spinco Common Stock fund in the NSI Savings Plans and the NSI Common Stock fund in the Spinco Savings Plans are each referred to as a "Non-Employer Stock Fund" with respect to the applicable Plan. Unless NSI and Spinco agree otherwise, each Non-Employer Stock Fund shall be maintained under the respective Plan through December 31, 2002. After such date, NSI and Spinco agree to cooperate with each other with respect to the disposition of the stock when either party decides to liquidate or otherwise terminate the Non-Employer Stock Fund in its Savings Plans. In the absence of any agreement regarding such liquidation, the liquidation of the Non-Employer Stock Fund shall be made in a ratable manner over a period of six months. Furthermore, at any time that NSI or Spinco decides to sell or otherwise dispose of any amount of shares in their Non-Employer Stock Fund (other than sales or dispositions required to satisfy the investment directions from participants, for liquidity reasons or other general operational purposes), the selling party shall follow the procedures of Section 4.2 (except to the extent waived in writing by an authorized representative of the other party). The NSI Savings Plans and the Spinco Savings Plans shall each provide that, after the Distribution Date, no new contributions may be invested in, and no amounts may be transferred from other investment options to the Non-Employer Stock Fund under the respective Plan; but, subject to the terms of the respective Plan, participants may direct that amounts be transferred out of the Non-Employer Stock Fund to other investment options. To the extent the parties determine it is necessary to preserve the tax status of the Distribution under the Code, the NSI Savings Plans shall provide that no earnings or dividends under its Non-Employer Stock Fund may be reinvested in Spinco Common Stock and the Spinco Savings Plans shall provide that no earnings or dividends under its Non-Employer Stock Fund may be reinvested in NSI Common Stock; provided, however, this requirement shall not prohibit such earnings and dividends from remaining in the applicable Non-Employer Stock Fund as cash or as an amount that is invested in any non-stock investment in such fund. 4.2 NON-EMPLOYER STOCK FUND PROCEDURES (A) APPLICATION OF PROCEDURES Whenever NSI or Spinco (the "Selling Party") desires to sell or otherwise dispose of any or all of the shares of stock of the other party (the "Notice Party") in their respective Non-Employer Stock Funds (other than sales or dispositions required to satisfy the investment directions from participants, for liquidity reasons or other general operational purposes), the Selling Party shall follow the procedures for selling or otherwise disposing of such stock set forth in this Section 4.2, and the Notice Party shall be entitled to advance notice and a right of -18- first refusal to purchase such stock all as provided in this Section 4.2. The provisions of this Section 4.2 shall be subject to the provisions of Section 7.8. (B) RIGHT OF FIRST REFUSAL AND NOTICE PROCEDURES When the Selling Party desires to sell or otherwise dispose of any or all of the shares of stock in their Non-Employer Stock Fund (other than sales or dispositions required to satisfy the investment directions from participants, for liquidity reasons or other general operational purposes), the Selling Party shall first offer such stock for sale to the Notice Party by delivering to the Notice Party's Chief Financial Officer, or his or her designee, a written offer of such shares of stock for sale to the Notice Party. The offer for sale to the Notice Party shall designate the total number of shares of stock desired to be sold (the "Offered Shares") and any special terms of sale, if the Offered Shares will not be sold on the market. (C) PROCEDURES AFTER NOTICE IS GIVEN The Notice Party shall within 30 days after receipt of notice advise the Selling Party in writing whether it desires to purchase the Offered Shares (which notice must confirm that it agrees to purchase all of the Offered Shares), and the terms upon which such purchase would be consummated. Failure to so notify the Selling Party shall be deemed a rejection of the offer, and the Selling Party after the close of the 30-day period may sell or otherwise dispose of the Offered Shares in its sole discretion. In the event that the Notice Party advises the Selling Party of its acceptance of the offer for sale, such acceptance shall specify a purchase date (the "Purchase Date") that is not less than ten nor more than 30 days after the date of such acceptance, and on which the New York Stock Exchange is scheduled to be open for trading. The purchase price paid for the Offered Shares and the terms and conditions of the payment shall be negotiated and agreed upon between the Selling Party and the Notice Party before the Purchase Date. If the Selling Party and the Notice Party have not agreed upon the price and the terms and conditions for payment by the Purchase Date, the Notice Party shall have the right to purchase all of the Offered Shares for cash immediately following the close of the New York Stock Exchange on the Purchase Date, at a price per Offered Share equal to its closing price on the New York Stock Exchange (but with any adjustment for the size of the block that is necessary, in the judgment of the valuation expert designated by NSI and Spinco for this purpose, to accomplish the sale at fair market value). If the Notice Party does not purchase and pay for all of the Offered Shares on the Purchase Date, it shall be deemed to have completely rejected the offer and all of the Offered Shares may be sold or otherwise disposed of by the Selling Party in its sole discretion. -19- ARTICLE V HEALTH AND WELFARE PLANS 5.1 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES (A) ASSUMPTION BY SPINCO Effective no later than the Close of the Distribution Date, Spinco shall establish or cause to be established, the Spinco Health and Welfare Plans. Immediately after the Distribution Date, all Liabilities for or relating to Transferred Individuals under the NSI Health and Welfare Plans, shall cease to be Liabilities of NSI or the NSI Health and Welfare Plans and shall be assumed by Spinco and the corresponding Spinco Health and Welfare Plans. Thus, Spinco and the Spinco Health and Welfare Plans shall be responsible for all Liabilities that pertain to Transferred Individuals regardless of when incurred, including all reported claims that are unpaid, all incurred but not reported claims as of the Close of the Distribution Date, and all claims incurred after the Close of the Distribution Date that pertain to Transferred Individuals under the NSI Health and Welfare Plans and the Spinco Health and Welfare Plans. Spinco shall be required to make all payments due or payable to Transferred Individuals under the appropriate Spinco Health and Welfare Plans for the period beginning Immediately after the Distribution Date, including all reported claims that are unpaid and all incurred but not reported claims as of the Close of the Distribution Date. All treatments which have been pre-certified for or are being provided on an on-going basis to a Transferred Individual under the NSI Health and Welfare Plans as of the Close of the Distribution Date shall continue to be provided without interruption under the appropriate Spinco Health and Welfare Plan until such treatment is concluded or discontinued pursuant to applicable plan rules and limitations, and Spinco and the Spinco Health and Welfare Plans shall be responsible for all Liabilities relating to, arising out of, or resulting from such pre-certified or on-going treatments as of the Close of the Distribution Date. Notwithstanding the preceding provisions of this Section 5.1, neither Spinco nor a Spinco Health and Welfare Plan shall assume any Liability with respect to: (i) a claim incurred on or prior to the Close of the Distribution Date for which NSI or an NSI Health and Welfare Plan has insurance coverage, and (ii) any benefit claim for which NSI is responsible under Section 5.4. Furthermore, NSI shall pay to Spinco a portion of any prescription drug rebates received by NSI under the NSI Major Medical Plan which relate to periods prior to the Distribution Date, which portion shall be determined by the number of Transferred Individuals compared to the total number of participants in the NSI Major Medical Plan as of the Distribution Date. (B) CERTAIN AUDIT PROCEDURES WITH RESPECT TO HEALTH AND WELFARE PLANS At periodic intervals beginning Immediately after the Distribution Date, NSI and Spinco shall examine their respective payments and receipts for health and welfare coverages to ascertain whether NSI has mistakenly made or received payments for coverages with respect to Transferred Individuals and whether Spinco has mistakenly made or received payments for coverages with respect to participants and beneficiaries in the NSI Health and Welfare Plans (other than Transferred Individuals). If any such mistaken payments have been made or received by NSI or Spinco, such mistaken payments and receipts shall first be netted against each other by NSI and Spinco and thereafter such net payments or net receipts shall be further -20- netted against the other party's net payments or net receipts. The party with the remaining amount of mistaken payments shall transfer such amount in cash to the other party at such time or times as agreed upon by NSI and Spinco, but not less than semi-annually. Furthermore, at periodic intervals beginning Immediately after the Distribution Date, NSI and Spinco shall examine the payment of benefits and claims, and reimbursements for expenses, by their respective Health and Welfare Plans to ascertain whether any NSI Health and Welfare Plan has mistakenly paid claims or benefits, or reimbursed expenses, with respect to Transferred Individuals and whether any Spinco Health and Welfare Plan has mistakenly paid claims or benefits, or reimbursed expenses, with respect to participants and beneficiaries in the NSI Health and Welfare Plans (other than Transferred Individuals). If any such mistaken payments or reimbursements have been made by any NSI or Spinco Health and Welfare Plan, such mistaken payments and reimbursements shall be netted against the other corresponding Health and Welfare Plan's mistaken payments and reimbursements. The Health and Welfare Plan with the remaining amount of mistaken payments and reimbursements shall transfer such amount in cash to the other party's corresponding Health and Welfare Plan at such time or times as agreed upon by NSI and Spinco, but not less than semi-annually. 5.2 VENDOR CONTRACTS (A) ASO CONTRACTS, GROUP INSURANCE POLICIES, HMO AGREEMENTS, AND LETTERS OF UNDERSTANDING (1) Before the Distribution Date, NSI shall, in its sole discretion, take such steps as are necessary under each ASO Contract, Group Insurance Policy, HMO Agreement, letter of understanding, and arrangement in existence as of the date of this Agreement to permit Spinco to participate in the terms and conditions of such ASO Contract, Group Insurance Policy, HMO Agreement, letter of understanding, or arrangement from Immediately after the Distribution Date through December 31, 2002. Alternatively, NSI shall take such steps as are necessary to arrange for an ASO Contract, Group Insurance Policy, HMO Agreement, letter of understanding, or arrangement covering Spinco that mirrors substantively that covering NSI. This mirror arrangement shall apply for all or a portion of such period, as necessary under the circumstances. NSI, in its sole discretion, may cause one or more of its ASO Contracts, Group Insurance Policies, HMO Agreements, letters of understanding, and arrangements into which NSI enters after the date of this Agreement to allow Spinco to participate in the terms and conditions thereof. Nothing contained in this Section 5.2(a) shall preclude NSI from choosing to enter into ASO Contracts, Group Insurance Policies, HMO Agreements, letters of understanding, or other arrangements with new or different vendors; provided, until December 31, 2002, NSI shall give Spinco advance notice of any decision to change or add vendors. Furthermore, nothing contained in this paragraph (1) shall require NSI to use more than its reasonable best efforts in complying with the provisions of the first and second sentence of this paragraph (1). (2) NSI shall have the right to determine, and shall promptly notify Spinco of, the manner in which Spinco's participation in the terms and conditions of ASO Contracts, Group Insurance Policies, HMO Agreements, letters of understanding and arrangements as set forth above shall be effectuated; provided, however, NSI shall use its best efforts to accommodate any -21- reasonable needs communicated to NSI by Spinco that relate thereto. Such terms and conditions shall include the financial and termination provisions, performance standards, methodologies, auditing policies, quality measures, reporting requirements, and target claims. Spinco hereby authorizes NSI to act on its behalf to extend to Spinco the terms and conditions of the ASO Contracts, Group Insurance Policies, HMO Agreements, and letters of understanding and arrangements. Spinco shall fully cooperate with NSI in such efforts, and, for periods through December 31, 2002, Spinco shall not perform any act or fail to take any action that would prejudice NSI's efforts and financial arrangements under the Health and Welfare Plans (other than taking reasonable steps to enter into replacement ASO Contracts, Group Insurance Policies, HMO Agreements, and letters of understanding and arrangements for periods after December 31, 2002, which steps shall not, unless the parties otherwise agree, commence publicly prior to January 1, 2002). (B) PAYMENT AND EFFECT OF CHANGE IN RATES NSI and Spinco shall use their reasonable best efforts to cause each of the insurance companies, HMOs, paid provider organizations and third-party administrators providing services and benefits under the NSI Health and Welfare Plans and the Spinco Health and Welfare Plans to maintain the premium and/or administrative rates based on the aggregate number of participants in the NSI Health and Welfare Plans and the Spinco Health and Welfare Plans, from the Close of the Distribution Date through December 31, 2001, separately rated or adjusted for the demographics, experience or other relevant factors related to the covered participants of NSI and Spinco, respectively. To the extent they are not successful in such efforts, NSI and Spinco shall each bear the revised premium or administrative rates for health and welfare benefits attributable to the individuals covered by their respective Health and Welfare Plans. The assistance that NSI shall provide Spinco pursuant to this subsection (b) shall be provided subject to the terms and conditions of the Transition Services Agreement. 5.3 NSI SHORT-TERM DISABILITY ARRANGEMENTS Any final determinations made by NSI with respect to short-term disability claims by Transferred Individuals prior to the Distribution Date shall be final and binding. NSI shall transfer to Spinco, effective Immediately after the Distribution Date, and Spinco shall assume responsibility for (i) administering all short-term disability claims incurred by Transferred Individuals before the Close of the Distribution Date that are administered by NSI as of the Close of the Distribution Date, and (ii) all Liabilities under any NSI short-term disability arrangements to Transferred Individuals as of the Close of the Distribution Date, in the same manner, and using the same methods and procedures, as NSI used in determining and paying such claims. Effective Immediately after the Distribution Date, Spinco shall have sole discretionary authority to make any necessary determinations with respect to such claims, including entering into settlements with respect to such claims, and shall be solely responsible for any costs, Liabilities or related expenses of any nature whatsoever related to such claims, payments or obligations. -22- 5.4 RETIREE HEALTH AND LIFE INSURANCE BENEFITS Effective immediately after the Distribution Date, Spinco shall adopt a Spinco Plan or Plans to provide any retiree medical or life insurance benefits that are required to be provided to Transferred Individuals. Any retiree medical or life insurance benefits provided shall be substantially identical to the retiree medical or life insurance benefits that would have been provided under an NSI Plan for such individuals, subject to the right of Spinco to amend or terminate any such retiree benefits. In the case of any individual who is not a Transferred Individual, NSI will retain the liability for providing any retiree medical or life insurance benefits required to be provided to such individual, subject to the right of NSI to amend or terminate any such retiree benefits. 5.5 COBRA AND HIPAA Effectively Immediately after the Distribution Date, Spinco or a member of the Spinco Group shall be responsible for administering compliance and providing coverage in accordance with the health care continuation coverage requirements for "group health plans" under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), and the portability requirements (including the requirements for issuance of certificates of creditable coverage) under the Health Insurance Portability and Accountability Act of 1996 with respect to all Transferred Individuals and other employees and former employees of Spinco or a member of the Spinco Group and any beneficiaries and dependents thereof who experience a COBRA qualifying event or loss of coverage under the Spinco Health and Welfare Plans after the Close of the Distribution Date. Effective Immediately after the Distribution Date, Spinco or a member of the Spinco Group shall be responsible for filing all necessary employee change notices with respect to these persons identified in the previous sentence in accordance with applicable law. 5.6 LEAVE OF ABSENCE PROGRAMS Effective Immediately after the Distribution Date, Spinco or a member of the Spinco Group shall assume sole responsibility for the administration and compliance of all leaves of absences and related programs (including compliance with the Family and Medical Leave Act of 1993, as amended) affecting Transferred Individuals. 5.7 POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS (A) CONTINUANCE OF ELECTIONS, CO-PAYMENTS, AND MAXIMUM BENEFITS (1) Spinco shall cause the Spinco Health and Welfare Plans to recognize and maintain all coverage and contribution elections made by Transferred Individuals under the NSI Health and Welfare Plans, as such elections were last in effect during the period immediately prior to the Distribution Date, and shall apply such elections under the Spinco Health and Welfare Plans for the remainder of the period or periods for which such elections are by their terms applicable (subject to applicable election change rights). NSI shall cause the claims administrator for the NSI Health and Welfare Plans to transfer to the claims administrator for the Spinco Health and Welfare Plan all data necessary to maintain such coverage and elections. -23- (2) Spinco shall cause the Spinco Health and Welfare Plans to recognize and give credit for (A) all amounts applied to deductibles, out-of-pocket maximums, and other applicable benefit coverage limits with respect to such expenses which have been incurred by Transferred Individuals under the NSI Health and Welfare Plans for the remainder of the benefit limit year in which the Distribution occurs, and (B) all benefits paid to Transferred Individuals under the NSI Health and Welfare Plans, during and prior to the benefit limit year in which the Distribution occurs, for purposes of determining when such persons have reached their maximum benefits under the Spinco Health and Welfare Plans. (3) Spinco shall recognize and cover under the Spinco Health and Welfare Plans all eligible employee groups covered by the NSI Health and Welfare Plans (pertaining to Transferred Individuals) as of the Close of the Distribution Date (determined under the applicable Plan documents). (4) Spinco shall (A) provide coverage to Transferred Individuals under the Spinco Health and Welfare Plans without the need to undergo a physical examination or otherwise provide evidence of insurability, and (B) recognize and maintain all irrevocable assignments, elections and beneficiary designations made by Transferred Individuals in connection with their life insurance coverage under the NSI Health and Welfare Plans and any predecessor plans. (B) ADMINISTRATION (1) Coordination of Benefits for Spouses and Dependents Effective as of the earlier of the first January 1 or the first applicable change in status (as defined under the Spinco Health and Welfare Plans) that occurs after the Distribution Date, Spinco shall cause the Spinco Health and Welfare Plans to permit eligible Transferred Individuals to cover their lawful spouses as dependents if such lawful spouses are active or retired NSI employees (but were not otherwise covered as a dependent under the NSI Health and Welfare Plans or other NSI Plans due to their previous status as both employee and dependent of an NSI employee). As of the earlier of the first January 1 or the first applicable status change (as defined under the Spinco Health and Welfare Plans) that occurs Immediately after the Distribution Date, NSI shall cause the NSI Health and Welfare Plans to permit eligible NSI employees to cover their lawful spouses as dependents if such lawful spouses are active or retired Spinco employees. All benefits provided under any such Health and Welfare Plans to a lawful spouse or dependent of the other company's employees shall be coordinated pursuant to the terms and conditions of the applicable NSI and Spinco Plans. (2) Health Care Financing Administration Data Match Effective Immediately after the Distribution Date, Spinco shall assume all Liabilities relating to, arising out of or resulting from claims verified by NSI or Spinco under the Health Care Financing Administration data match reports that relate to Transferred Individuals. Spinco and NSI shall share all information necessary to verify Health Care Financing Administration data match reports regarding Transferred Individuals. Spinco shall not change any employee -24- identification numbers assigned by NSI without notifying NSI of the change and the new employee identification number. (C) NSI REIMBURSEMENT PLANS To the extent any Transferred Individual contributed to an account under the NSI Reimbursement Plans during the calendar year that includes the Distribution Date, effective Immediately after the Distribution Date, Spinco shall recognize any such Transferred Individual's account balance, determined as of the Close of the Distribution Date, and Spinco shall thereafter be solely responsible for making any and all payments relative to such account balance of the Transferred Individual for all claims during such calendar year under the applicable Spinco Reimbursement Plan. As provided in Section 5.7(a), all elections by Transferred Individuals in effect immediately prior to the Distribution Date shall continue and be recognized by Spinco, and the Distribution alone shall not be considered an event that gives any participant the right to change any prior election. As soon as practicable after the Distribution Date, NSI shall calculate as of the Close of the Distribution Date the aggregate net balance in the accounts of Transferred Individuals under the NSI Reimbursement Plans, expressed relative to the contributions received from such Transferred Individuals. If the contributions received from a Transferred Individual exceed the reimbursements made to or on behalf of such Transferred Individual, the Transferred Individual shall be deemed to have a positive account balance. In turn, if the contributions received from a Transferred Individual are less than the reimbursements made to or on behalf of such Transferred Individual, the Transferred Individual shall be deemed to have a negative account balance. If the aggregate net balance in the accounts of all such Transferred Participants is a positive number, then NSI shall pay this amount in cash to Spinco as soon as practicable after the Distribution Date, and if the aggregate net balance in the accounts of all such Transferred Participants is a negative number, then Spinco shall pay this amount in cash to NSI as soon as practicable after the Distribution Date. 5.8 APPLICATION OF ARTICLE V TO THE SPINCO GROUP Any reference in this Article V to "Spinco" shall include a reference to another member of the Spinco Group when and to the extent Spinco has caused the other member of the Spinco Group to (a) become a party to an ASO Contract, Group Insurance Policy, HMO Agreement, letter of understanding or arrangement associated with a Spinco Health and Welfare Plan, (b) become a self-insured entity for the purposes of one or more Spinco Health and Welfare Plans, (c) assume all or a portion of the Liabilities or the administrative responsibilities with respect to benefits which arose before the Close of the Distribution Date under any NSI Health and Welfare Plan and which were expressly assumed by Spinco pursuant to this Agreement, or (d) take any other action, extend any coverage, assume any other Liability or fulfill any other responsibility that Spinco would otherwise be required to take under the terms of this Article V, unless it is clear from the context that the particular reference is not intended to include another member of the Spinco Group. In all such instances in which a reference in this Article V to "Spinco" includes a reference to another member of the Spinco Group, Spinco shall be responsible to NSI for ensuring that the other member of the Spinco Group complies with the applicable terms of this Agreement and that the Transferred Individuals employed by such member of the Spinco Group shall have the same rights and entitlements to benefits under the applicable Spinco Health and Welfare Plans that the Transferred Individual would have had, if he or she had instead been employed by Spinco. -25- ARTICLE VI EXECUTIVE PROGRAMS 6.1 ASSUMPTION OF OBLIGATIONS Consistent with the principles set forth in Article II and except as otherwise specifically provided herein, effective no later than the Close of the Distribution Date, Spinco or a member of the Spinco Group shall become plan sponsor of and assume all Liabilities with respect to any Executive Program that is a Spinco Stand-Alone Plan and shall assume and be solely responsible for all Liabilities to or relating to Transferred Individuals under all NSI Executive Programs. Spinco shall be solely responsible for all such Liabilities, notwithstanding any failure by Spinco to complete its obligations under this Article. 6.2 ANNUAL INCENTIVE AWARDS Prior to the Distribution Date, NSI shall pay to participants (including Transferred Individuals) any amounts earned under the Annual Incentive Plan for the performance period ending August 31, 2001 at the time and in the manner provided under the terms of such plan. For periods after the Distribution Date, Spinco shall establish the Spinco Annual Incentive Plan covering such of its active employees as it in its sole discretion deems appropriate. 6.3 LONG-TERM INCENTIVE PLAN (A) AWARD 4 (FOR THE PERFORMANCE PERIOD 9/1/99-8/31/02) With respect to Awards under "Award 4" of the National Service Industries, Inc. Long-Term Achievement Incentive Plan to Transferred Individuals who are Corporate Office employees for the performance period ending August 31, 2002, effective as of August 31, 2001, a determination shall be made by NSI of the extent to which the Awards have been earned for the performance period as of such date and no further amounts shall be earned by such Transferred Individuals after that date. The amounts earned (if any) under the Awards as of August 31, 2001 shall be payable by NSI as promptly as practicable after the amounts are determined. With respect to Awards under Award 4 for Transferred Individuals other than Corporate Office employees, such Awards shall be assumed by Spinco and shall be paid, to the extent earned, after the close of the performance period ending on August 31, 2002, under and in accordance with the terms of the Spinco Long-Term Incentive Plan; provided, however, that Spinco will make such adjustments to the financial goals, targets, payments and forms of payments as Spinco in its sole discretion deems appropriate to reflect the Distribution. (B) STOCK OPTIONS The treatment of outstanding Awards described in this Section 6.3 shall apply to Transferred Individuals, including Transferred Individuals who have terminated employment or who are compensated under a payroll which is administered outside the 50 United States, its -26- territories and possessions, and the District of Columbia; provided, however, if such treatment is not legally permitted, or results in adverse consequences for NSI, any of its affiliates or the Transferred Individual, as determined by NSI in its sole discretion, NSI may determine, in its sole discretion, to provide for a different treatment. Effective Immediately after the Distribution Date, each Award or grant consisting of an option, regardless of the date of the grant, under an NSI Stock Incentive Plan that is outstanding as of the Close of the Distribution Date for all Transferred Individuals and all Spinco non-employee directors who were previously non-employee directors of NSI shall be converted to options for Spinco Common Stock with the same material terms and conditions under the Spinco Stock Incentive Plan, and shall be transferred to the recordkeeper of the Spinco Stock Incentive Plan. As soon as practicable after the Distribution Date, the number of options and the exercise price for such options converted to options for Spinco Common Stock shall be determined in accordance with the Conversion Formula. Such converted Spinco stock option grants shall continue to vest and become exercisable under the Spinco Stock Incentive Plan in accordance with the terms of the original grant under the NSI Stock Incentive Plan. Spinco shall be the obligor with respect to such options and shall be solely responsible for all stock option grants and payments under the Spinco Stock Incentive Plan, with respect to, but not limited to, recordkeeping, administrative costs and fees, payroll taxes, plan maintenance, option exercise and related tax filings. Spinco shall, as soon as practicable after the Distribution Date provide each Transferred Individual with an agreement or notice relating to the Transferred Individual's options under the Spinco Stock Incentive Plan. (C) RESTRICTED STOCK AWARDS (1) Determination of Status of Restricted Stock Effective as of the record date for the Distribution, NSI shall determine the extent to which shares of restricted stock awarded under an NSI Stock Incentive Plan pursuant to a restricted stock award agreement (A) have begun to vest as a result of an applicable stock price target having been achieved and have been registered in the name of the holder of such restricted stock on the books of NSI's transfer agent, but remain unvested and subject to a substantial risk of forfeiture (the "Granted Restricted Stock"), and (B) have not begun to vest and are not registered in the name of the holder of such restricted stock on the books of NSI's transfer agent, because the applicable stock price targets in the restricted stock award agreement have not been reached (the "Ungranted Restricted Stock"). (2) Treatment of Granted Restricted Stock All executives (including Transferred Individuals) who hold shares of Granted Restricted Stock shall receive the distribution of shares of Spinco Common Stock on such shares of Granted Restricted Stock. All shares of Spinco Common Stock received with respect to such Granted Restricted Stock shall be subject to the same restrictions, terms and conditions as apply to the Granted Restricted Stock pursuant to the restricted stock award agreement; provided, however, that continued employment with Spinco or a member of the Spinco Group or NSI or a member of the NSI Group shall be considered continued employment under the restricted stock -27- award agreement. NSI and Spinco agree to notify the other party when a holder of such restricted stock terminates employment prior to the date such restricted stock is fully vested and no longer subject to a substantial risk of forfeiture. (3) Treatment of Ungranted Restricted Stock All executives (including Transferred Individuals) holding shares of Ungranted Restricted Stock shall not receive the distribution of Spinco Common Stock on such shares of Ungranted Restricted Stock. Effective Immediately after the Distribution Date, all Ungranted Restricted Stock for all Transferred Individuals shall be equitably converted to restricted stock Awards for Spinco Common Stock under the Spinco Stock Incentive Plan, subject to the same restrictions and the same material terms and conditions as under the restricted stock award agreement; provided, that the number of shares and the stock price targets under the converted restricted stock award agreements shall be equitably revised to reflect the Distribution and the conversion of the Award to Spinco Common Stock and Spinco Common Stock price targets. (4) Issuance of New Agreements As soon as practicable after the Distribution Date, NSI and Spinco shall cooperate to replace each existing restricted stock award agreement held by a Transferred Individual with two restricted stock award agreements: one agreement with respect to the Granted Restricted Stock that becomes restricted stock in both NSI and Spinco and the other agreement with respect to the Ungranted Restricted Stock that is converted to a restricted stock Award of Spinco Common Stock under the Spinco Stock Incentive Plan. 6.4 EMPLOYEE STOCK PURCHASE PLAN It is intended that Spinco will establish an employee stock purchase plan that is substantially similar to the National Service Industries, Inc. Employee Stock Purchase Plan and that the NSI Common Stock, and Spinco Common Stock distributed with respect to such stock, held for Transferred Individuals will be transferred to a recordkeeper for the Spinco Plan, provided, however, Spinco, in its sole discretion, shall determine when such Plan shall become effective and may change the terms of such Plan as it deems appropriate. 6.5 DEFERRED COMPENSATION PLANS (A) ASSUMPTION OR ESTABLISHMENT OF SPINCO DEFERRED COMPENSATION PLANS Effective no later than the Close of the Distribution Date, Spinco shall take all necessary actions to assume, become plan sponsor of, and be solely responsible for all Liabilities with respect to, the Deferred Compensation Plans that are Spinco Stand-Alone Plans. Effective no later than the Close of the Distribution Date, Spinco shall also establish the Spinco Deferred Compensation Plans that are Spinco Mirror Plans, and the amounts credited to the accounts of Transferred Individuals under the NSI Deferred Compensation Plans shall be transferred to the applicable Spinco Deferred Compensation Plans. -28- The Transferred Individuals' termination of employment with the NSI Group as a result of the Distribution shall not constitute a termination of employment for purposes of the NSI or Spinco Deferred Compensation Plans. All elections by the Transferred Individuals that were controlling under the terms of the applicable NSI Deferred Compensation Plan prior to the Distribution shall continue under the applicable Spinco Plan until changed under the terms of such Plan. All investment choices of Transferred Individuals under the NSI or Spinco Deferred Compensation Plans shall also be continued in effect; provided, however, that any account balance that is deemed to be invested in whole or in part in phantom shares of NSI Common Stock shall be converted into deemed investments in phantom shares of Spinco Common Stock in an equitable manner determined by Spinco. Nothing herein shall restrict NSI's or Spinco's rights to amend or terminate their respective Plans in the future. (B) TRANSFER OF CORPORATE-OWNED LIFE INSURANCE No later than the Close of the Distribution Date, NSI shall transfer and assign to Spinco all of the corporate-owned life insurance policies owned by NSI or an affiliate of NSI that have been held by NSI to help fund its obligations under the Deferred Compensation Plans that are being assumed or adopted by Spinco; provided, however, that such transfer shall not occur (or shall be modified in an appropriate manner) unless NSI has received a satisfactory opinion of legal counsel that such transfer of corporate-owned life insurance will not jeopardize the current tax treatment of such policies. 6.6 SUPPLEMENTAL RETIREMENT BENEFIT PLANS Effective no later than the Close of the Distribution Date, NSI and Spinco shall take all necessary actions (a) to allow Spinco to adopt and assume, become the plan sponsor of, and be solely responsible for all Liabilities with respect to the supplemental retirement plans previously maintained by the Holophane Corporation; and (b) to allow Spinco to establish the Spinco Supplemental Pension Plan and the Spinco Supplemental Retirement Plan for Executives and to assume all Liabilities with respect to Transferred Individuals under the Supplemental Pension Plan of National Service Industries, Inc. and the Supplemental Retirement Plan for Executives of National Service Industries, Inc. 6.7 BENEFITS PROTECTION TRUST AND EXECUTIVE BENEFITS TRUST Effective no later than the Close of the Distribution Date, NSI and Spinco shall take all actions necessary to allow Spinco or a member of the Spinco Group to adopt and assume, amend as appropriate, and replace NSI as a party to and grantor under, the National Service Industries, Inc. Benefits Protection Trust and the National Service Industries, Inc. Executive Benefits Trust ("Trusts"). 6.8 SEVERANCE PROTECTION AGREEMENTS Effective Immediately after the Distribution Date, Spinco shall enter into severance protection agreements with the Transferred Individuals listed in Appendix E which are substantially identical in all Material Features to the form of NSI severance protection agreement -29- covering such Transferred Individual as of the Distribution Date. Spinco shall be solely responsibly for all Liabilities related to the Spinco severance protection agreements with the Transferred Individuals. 6.9 EMPLOYMENT AGREEMENTS Effective Immediately after the Distribution Date, Spinco shall enter into employment agreements with the Transferred Individuals listed in Appendix E which are substantially identical in all Material Features to the corresponding NSI employment agreements or shall assume the existing agreements. Spinco shall be solely responsibly for all Liabilities related to the Spinco employment agreements with the Transferred Individuals. 6.10 AUTOMOBILE PROGRAM As of the Close of the Distribution Date, Spinco shall assume all of NSI's Liabilities and obligations with respect to the motor vehicles leased by NSI for Transferred Individuals pursuant to lease agreements under any NSI Executive automobile program. 6.11 OTHER EXECUTIVE BENEFITS/PROGRAMS Effective no later than the Close of the Distribution Date, Spinco shall establish Plans that are substantially similar to the following NSI Plans and other executive benefits: Executive physical program, corporate matching gift program, automobile allowance policy. Spinco shall assume all Liabilities for Transferred Individuals under or relating to these Plans, and any elections, benefits, balances, or limits in effect immediately prior to the Distribution shall remain in effect under the Spinco Plans. 6.12 NON-EMPLOYEE DIRECTOR BENEFITS (A) NON-EMPLOYEE DIRECTOR DEFERRED STOCK UNIT PLAN Effective not later than the Close of the Distribution Date, Spinco shall establish a Spinco non-employee director deferred stock unit plan that is substantially identical in all Material Respects to the National Service Industries, Inc. Non-Employee Director Deferred Stock Unit Plan, and Spinco shall assume and be solely responsible for all Liabilities under the NSI Non-Employee Director Deferred Stock Unit Plan relating to individuals who become non-employee directors of Spinco (and certain former non-employee directors of NSI). The deferred stock units of NSI Common Stock relating to non-employee directors of Spinco shall be converted into deferred stock units of Spinco Common Stock in an equitable manner as determined by Spinco. (B) NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN Effective not later than the Close of the Distribution Date, Spinco shall establish the Spinco, Inc. Non-Employee Directors' Stock Option Plan that is substantially identical in all Material Respects to the National Service Industries, Inc. Non-Employee Directors' Stock Option Plan. All outstanding options held by non-employee directors of Spinco who were previously non-employee directors of NSI (and certain former non-employee directors of NSI) shall be treated as provided in Section 6.3(b). -30- ARTICLE VII GENERAL 7.1 PAYMENT OF AND ACCOUNTING TREATMENT FOR EXPENSES AND BALANCE SHEET AMOUNTS (A) EXPENSES All expenses (and the accounting treatment related thereto) through the Close of the Distribution Date regarding matters addressed herein shall be handled and administered by NSI and Spinco in accordance with past NSI accounting and financial practices and procedures pertaining to such matters. To the extent expenses that pertain to Transferred Individuals are unpaid as of the Close of the Distribution Date, Spinco or any member of the Spinco Group shall be solely responsible for such payment, without regard to any accounting treatment to be accorded such expense by NSI or Spinco on their respective books and records. The accounting treatment to be accorded all expenses incurred prior to the Distribution Date, whether such expenses are paid by NSI or Spinco, shall be determined by NSI in its sole discretion. (B) BALANCE SHEET AMOUNTS Spinco shall assume any and all balance sheet liability that relates to any Liability assumed by it under this Agreement as of the Close of the Distribution Date or thereafter. The balance sheet liabilities to be assumed pursuant to this Section shall be determined by NSI in its sole discretion consistent with past accounting practices, consistently applied. 7.2 SHARING OF PARTICIPANT INFORMATION Subject to applicable laws on confidentiality, NSI and Spinco shall share, NSI shall cause each applicable member of the NSI Group to share, and Spinco shall cause each applicable member of the Spinco Group to share, with each other and their respective agents and vendors (without obtaining releases) all participant information necessary for the efficient and accurate administration of each of the NSI Plans and the Spinco Plans during the period NSI and Spinco are coordinating with respect to vendor contracts under Section 5.2. NSI and Spinco and their respective authorized agents shall, subject to applicable laws on confidentiality, be given reasonable and timely access to, and may make copies of, all information relating to the subjects of this Agreement in the custody of the other party, to the extent necessary for such administration. Until the Close of the Distribution Date, all participant information shall be provided in the manner and medium applicable to Participating Companies in the NSI Plans generally, and thereafter until December 31, 2002, all participant information shall be provided in a manner and medium that is compatible with the data processing systems of NSI as in effect on the Close of the Distribution Date, unless otherwise agreed to by NSI and Spinco. 7.3 RESTRICTIONS ON EXTENSION OF OPTION EXERCISE PERIODS, AMENDMENT OR MODIFICATION OF OPTION TERMS AND CONDITIONS Spinco agrees that, without the prior written consent of NSI, neither Spinco nor any of its affiliates or Subsidiaries shall take any action to extend the exercise period of or to provide for -31- additional vesting with respect to any Spinco options, which were received pursuant to Section 6.3(b) in replacement of NSI options, for Transferred Individuals, including providing such Transferred Individuals with leaves of absences or special termination or severance arrangements. 7.4 REPORTING AND DISCLOSURE AND COMMUNICATIONS TO PARTICIPANTS While Spinco is a Participating Company in the NSI Plans, Spinco shall take, and shall cause each other applicable member of the Spinco Group to take, all actions necessary or appropriate to facilitate the distribution of all NSI Plan-related communications and materials to employees, participants and beneficiaries, including summary plan descriptions and related summaries of material modification, summary annual reports, investment information, prospectuses, notices and enrollment materials for the Spinco Plans. Spinco shall assist, and Spinco shall cause each other applicable member of the Spinco Group to assist, NSI in complying with all reporting and disclosure requirements of ERISA for plan years ending on or before December 31, 2002, including the preparation of Form 5500 annual reports for the NSI Plans, where applicable. 7.5 PLAN AUDITS (A) AUDIT RIGHTS WITH RESPECT TO THE ALLOCATION OR TRANSFER OF PLAN ASSETS The allocation of Pension Plan assets and liabilities pursuant to Section 3.3 shall, at the election of Spinco, be audited on behalf of both NSI and Spinco by an actuarial and benefit consulting firm mutually selected by the parties; provided, however, that no audit shall be permitted after the date of the pension plan asset transfer, in the case of the Pension Plans. The scope of such audit shall be limited to the accuracy of the data and the accuracy of the computation and adherence to the methodology specified in this Agreement and, except as set forth in the penultimate sentence of this Section 7.5(a), such audit shall not be binding on the parties. The actuarial and benefit consulting firm shall provide its report to both NSI and Spinco. No other audit shall be conducted with respect to the allocation of Plan assets and no issue of any nature whatsoever may be raised by Spinco once the transfer of assets has been completed. Subject to the following two sentences, no transfer of assets shall occur unless and until Spinco agrees to the allocation of assets. To the extent such audit recommends a change to the value of assets allocated to a Spinco Plan of less than 5%, the original determination shall be binding on the parties and shall not be subject to the dispute resolution process provided in Section 7.16. To the extent such audit recommends such a change of 5% or more (a "Significant Allocation Change"), any unresolved dispute between the parties as to whether and how to make any change in response to such recommendation shall be subject to the dispute resolution process provided in Section 7.16. Spinco shall pay or shall be responsible for the payment of the full costs of such audit; provided, however, that in the event such audit recommends a Significant Allocation Change and such recommendation is attributable to variances in actuarial assumptions or simplification or modification of the allocation calculated by NSI, NSI shall be responsible for the full costs of such audit. -32- (B) AUDIT RIGHTS WITH RESPECT TO INFORMATION PROVIDED (1) Subject to Section 7.5(b)(2), each of NSI and Spinco, and their duly authorized representatives, shall have the right to conduct audits at any time upon reasonable prior notice, at their own expense, with respect to all information provided to it or to any Plan recordkeeper or third-party administrator by the other party. Subject to Sections 7.5(a) and 7.5(b)(2), the party conducting the audit shall have the sole discretion to determine the procedures and guidelines for conducting audits and the selection of audit representatives. The auditing party shall have the right to make copies of any records at its expense, subject to the confidentiality provisions set forth in the Distribution Agreement, which are incorporated by reference herein. The party being audited shall provide the auditing party's representatives with reasonable access during normal business hours to its operations, computer systems and paper and electronic files, and provide workspace to its representatives. After any audit is completed, the party being audited shall have the right to review a draft of the audit findings and to comment on those findings in writing within five business days after receiving such draft. (2) The auditing party's audit rights under this Section 7.5(b) shall include the right to audit, or participate in an audit facilitated by the party being audited, of any Subsidiaries and affiliates of the party being audited and of any benefit providers and third parties with whom the party being audited has a relationship, or agents of such party, to the extent any such persons are affected by or addressed in this Agreement (collectively, the "Non-parties"). The party being audited shall, upon written request from the auditing party, provide an individual (at the auditing party's expense) to supervise any audit of any Non-party. The auditing party shall be responsible for supplying, at its expense, additional personnel sufficient to complete the audit in a reasonably timely manner. (C) AUDITS REGARDING VENDOR CONTRACTS From Immediately after the Distribution Date through December 31, 2002, NSI and Spinco and their duly authorized representatives shall have the right to conduct joint audits with respect to any vendor contracts that relate to both the NSI Health and Welfare Plans and the Spinco Health and Welfare Plans. The scope of such audits shall encompass the review of all correspondence, account records, claim forms, canceled drafts (unless retained by the bank), provider bills, medical records submitted with claims, billing corrections, vendor's internal corrections of previous errors and any other documents or instruments relating to the services performed by the vendor under the applicable vendor contracts. NSI and Spinco shall agree on the performance standards, audit methodology, auditing policy and quality measures and reporting requirements relating to the audits described in this Section 7.5(c) and the manner in which costs incurred in connection with such audits will be shared. (D) AUDIT ASSISTANCE To the extent that either NSI or Spinco is required to respond to any Governmental Authority, vendor or recordkeeper audit, or otherwise conducts an audit with respect to any provision or obligation of the other party under this Agreement, NSI or Spinco, whichever is applicable, shall be required to fully cooperate with the audit, including providing such records -33- and data as may be necessary to respond to any document or data request that may arise by reason of such audit. The party being audited shall provide the auditing party's representatives with reasonable access during normal business hours to its operations, computer systems and paper and electronic files, and provide workspace to its representatives. To the extent the results of an audit result in any correction to the Liabilities involving any Transferred Individuals, Spinco shall be solely responsible for all such costs and expenses associated with such Liabilities and any related corrections. 7.6 BENEFICIARY DESIGNATIONS/RELEASE OF INFORMATION/RIGHT TO REIMBURSEMENT All beneficiary designations, authorizations for the release of information and rights to reimbursement made by or relating to Transferred Individuals under NSI Plans shall be transferred to and be in full force and effect under the corresponding Spinco Plans until such beneficiary designations, authorizations or rights are replaced or revoked by, or no longer apply, to the relevant Transferred Individual. 7.7 REQUESTS FOR INTERNAL REVENUE SERVICE RULINGS AND UNITED STATES DEPARTMENT OF LABOR OPINIONS Spinco shall cooperate fully with NSI on any issue relating to the transactions contemplated by this Agreement for which NSI elects to seek a determination letter or private letter ruling from the Internal Revenue Service or an advisory opinion from the United States Department of Labor. NSI shall cooperate fully with Spinco with respect to any request for a determination letter or private letter ruling from the Internal Revenue Service or advisory opinion from the United States Department of Labor with respect to any of the Spinco Plans relating to the transactions contemplated by this Agreement. 7.8 FIDUCIARY AND RELATED MATTERS The parties acknowledge that NSI will not be a fiduciary with respect to the Spinco Plans and that Spinco will not be a fiduciary with respect to the NSI Plans. The parties also acknowledge that neither party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good faith determination that to do so would violate any applicable fiduciary duties or standards of conduct under ERISA or other applicable law. Notwithstanding any other provision in this Agreement, the parties may take such actions as necessary or appropriate to effectuate the terms and provisions of this Agreement. 7.9 NO THIRD-PARTY BENEFICIARIES; NON-TERMINATION OF EMPLOYMENT This Agreement is not intended and shall not be construed as to confer upon any Person other than the parties hereto any rights or remedies hereunder. No provision of this Agreement or the Distribution Agreement shall be construed to create any right, or accelerate entitlement, to any compensation or benefit whatsoever on the part of any Transferred Individual or other future, present, or former employee of the NSI Group or the Spinco Group under any NSI Plan or Spinco Plan or otherwise. Without limiting the generality of the foregoing, except as expressly provided in this Agreement: (i) neither the Distribution nor the termination of the -34- Participating Company status of a member of the Spinco Group shall cause any employee to be deemed to have incurred a termination of employment which entitles such individual to the commencement of benefits under any of the NSI Plans, any of the Spinco Plans, or any of the Individual Agreements; and (ii) nothing in this Agreement other than those provisions specifically set forth herein to the contrary shall preclude Spinco, at any time after the Close of the Distribution Date, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any Spinco Plan, any benefit under any Plan or any trust, insurance policy or funding vehicle related to any Spinco Plan. 7.10 COLLECTIVE BARGAINING To the extent any provision of this Agreement is contrary to and violates the provisions of any applicable collective bargaining agreement to which NSI or any affiliate of NSI is a party, the terms of such collective bargaining agreement shall continue to apply to the affected employees. Should any provision of this Agreement be deemed to relate to a topic determined by an appropriate authority to be a mandatory subject of collective bargaining, NSI or Spinco may be obligated to bargain with the union representing affected employees concerning those subjects. 7.11 CONSENT OF THIRD PARTIES If any provision of this Agreement is dependent on the consent of any third party (such as a vendor) and such consent is withheld, NSI and Spinco shall use their reasonable best efforts to implement the applicable provisions of this Agreement to the full extent practicable. If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, NSI and Spinco shall negotiate in good faith to implement the provision in a mutually satisfactory manner. The phrase "reasonable best efforts" as used in this Agreement shall not be construed to require the incurrence of any non-routine or unreasonable expense or liability or the waiver of any right. 7.12 FOREIGN PLANS The treatment of Foreign Plans by NSI and Spinco shall be as set forth in Appendix D. 7.13 EFFECT IF DISTRIBUTION DOES NOT OCCUR If the Distribution does not occur, then all actions and events that are, under this Agreement, to be taken or occur before or effective as of the Close of the Distribution Date, Immediately after the Distribution Date, or otherwise in connection with the Distribution, shall not be taken or occur except to the extent specifically agreed by Spinco and NSI. 7.14 RELATIONSHIP OF PARTIES Nothing in this Agreement shall be deemed or construed by the parties or any third party as creating the relationship of principal and agent, partnership or joint venture between the parties, it being understood and agreed that no provision contained herein, and no act of the parties, shall be deemed to create any relationship between the parties other than the relationship set forth herein. -35- 7.15 AFFILIATES Each of NSI and Spinco shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by members of the NSI Group or members of the Spinco Group, respectively, where relevant. 7.16 DISPUTE RESOLUTION Any controversy or claim arising out of or relating to this Agreement, or the breach hereof, shall be settled pursuant to the dispute resolution provisions described in the Distribution Agreement. 7.17 INDEMNIFICATION Effective on the Distribution Date, Spinco and each member of the Spinco Group agrees to jointly and severally indemnify and hold harmless NSI and each member of the NSI Group and each of their respective officers, directors, employees and agents and the NSI Plans and any related trusts, including the NSI Pension Trust and the trustees thereof, from and against any and all losses, Liabilities, claims, suits, damages, costs and expenses (including without limitation, reasonable attorneys' fees and any and all expenses reasonably incurred in investigating, preparing or defending against any pending or seriously threatened litigation or claim) (collectively, "Indemnifiable Expenses") arising out of or related in any manner to Transferred Individuals, except for Indemnifiable Expenses arising solely out of a claim which is made by any Person (other than a Person who is a member of the Spinco or NSI Group) and which is related solely to NSI's exercise of its fiduciary responsibility for the investment of the assets of the NSI Plans prior to the Distribution Date (or prior to the Pension Plan Spinoff Date for purposes of the NSI Pension Plans and prior to the Savings Plan Transfer Date for purposes of the NSI Savings Plans). In addition, effective on the Distribution Date, NSI agrees to indemnify and hold harmless each member of the Spinco Group and each of their respective officers, directors, employees and agents and the Spinco Plans and any related trusts, including the Spinco Pension Trust and the trustees thereof, from and against any and all Indemnifiable Expenses arising solely out of a claim which is made by any Person (other than a Person who is a member of the Spinco or NSI Groups) and which is related solely to NSI's exercise of its fiduciary responsibility for the investment of the assets of the NSI Plans prior to the Distribution Date (or prior to the Pension Plan Spinoff Date for purposes of the NSI Pension Plans and prior to the Savings Plan Transfer Date for purposes of the NSI Savings Plans). If any action is brought or any claim is made against a party or person in respect of which indemnity may be sought pursuant to this Section 7.17 (the "Indemnitee"), the Indemnitee shall, within twenty (20) days after the receipt of information indicating that an action or claim is likely, notify in writing the party from whom indemnification is sought (the "Indemnitor") of the institution of the action or the making of the claim, and the Indemnitor shall have the right, -36- and at the request of the Indemnitee, shall have the obligation, to assume the defense of the action or claim, including the employment of counsel. If the Indemnitor assumes the defense of the action or claim, the Indemnitor shall be entitled to settle the action or claim on behalf of the Indemnitee without the prior written consent of the Indemnitee, unless such settlement would, in addition to the payment of money, materially affect the ongoing business or employment of the Indemnitee. The Indemnitee shall have the right to interpret the provisions of its own Plans and to employ its own counsel, but the fees and expenses of that counsel shall be the responsibility of the Indemnitee unless: (i) the employment of that counsel shall have been authorized in writing by the Indemnitor in connection with the defense of the action or claim; (ii) the Indemnitor shall not have employed counsel to have charge of the defense of such action or claim; or (iii) such Indemnitee shall have reasonably concluded that there may be defenses available to it which are different from or additional to those available to the Indemnitor (in which case the Indemnitor shall not have the right to direct any different defense of the action or claim on behalf of the Indemnitee). The Indemnitee shall, in any event, be kept fully informed of the defense of any such action or claim. Except as expressly provided above, in the event that the Indemnitor shall not previously have assumed the defense of an action or claim, at such time as the Indemnitor does assume the defense of the action or claim, the Indemnitor shall not thereafter be liable to any Indemnitee for legal or other expenses subsequently incurred by the Indemnitee in investigating, preparing or defending against such action or claim. Anything in this Section 7.17 to the contrary notwithstanding, the Indemnitor shall not be liable for any settlement of any claim or action effected without its written consent; provided, however, that if after due notice the Indemnitor refuses to defend a claim or action, the Indemnitee shall have the right to defend and/or settle such action, and the Indemnitee shall not be precluded from making a claim against the Indemnitor for reasonable expenses and liabilities resulting from such defense and/or settlement in accordance with this Section 7.17. Notwithstanding the foregoing provisions of this Section 7.17, there may be particular actions or claims which reasonably could result in both parties being liable to the other under the indemnification provisions of this Agreement. In such events, the Parties shall endeavor, acting reasonably and in good faith, to agree upon a manner of conducting the defense and settlement of the action or claim with a view to minimizing the legal expenses and associated costs that might otherwise be incurred by the parties, such as, by way of illustration only, agreeing to use the same legal counsel. The indemnification provisions of this Section 7.17 shall not inure to the benefit of any third party. By way of illustration only, an insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto, or, solely by virtue of the indemnification provisions, hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other third party shall be entitled to a "windfall" (i.e., a benefit they would not be entitled to receive in the absence of the indemnification provisions) by virtue of these indemnification provisions. -37- 7.18 W-2 MATTERS Pursuant to the alternative procedure set forth in Internal Revenue Service Rev. Proc. 96-60, Spinco will assume NSI's obligations to furnish Forms W-2 to all Transferred Individuals for the year in which the Distribution Date occurs. NSI will provide to Spinco the information not available to Spinco relating to periods ending on the Distribution Date necessary for Spinco to prepare and distribute Forms W-2 to Transferred Individuals for the year in which the Distribution Date occurs, which will include all remuneration earned by Transferred Individuals before the Distribution Date and Forms W-4 provided to NSI by Transferred Individuals to the extent that Spinco is not already in possession of such information. Spinco shall prepare and distribute such forms. To the extent permitted by applicable law, in particular Code Sections 3121(a)(1) and 3306(b)(1), Spinco shall be deemed a successor employer to NSI with respect to Transferred Individuals for purposes of calculating the annual wage limitation to which state and federal payroll taxes apply. 7.19 CONFIDENTIALITY Except as required by applicable law, for the purpose of satisfying any obligation under this Agreement or with the consent of the other party, neither NSI nor Spinco shall disclose to any Person (other than members of the NSI Group or the Spinco Group) any information (including, but not limited to, information regarding fees, expenses, assets, Liabilities and Plan terms) relating to the NSI Plans, Spinco Plans or Transferred Individuals. Each of NSI and Spinco shall be permitted to disclose such information within the NSI Group and Spinco Group only to the extent reasonably necessary in the ordinary course of business. 7.20 NOTICES Any notice, demand, claim, or other communication under this Agreement shall be in writing and shall be given in accordance with the provisions for giving notice under the Distribution Agreement. 7.21 INTERPRETATION Words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other genders as the context requires. The terms "hereof," "herein," and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all Appendices hereto) and not to any particular provision of this Agreement. The word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless the context otherwise requires or unless otherwise specified. The word "or" shall not be exclusive. 7.22 SEVERABILITY The provisions of this Agreement are severable and should any provision hereof be void, voidable or unenforceable under any applicable law, such provision shall not affect or invalidate any other provision of this Agreement, which shall continue to govern the relative rights and duties of the parties as though such void, voidable or unenforceable provision were not a part hereof. -38- 7.23 GOVERNING LAW/EXECUTION This Agreement shall be construed in accordance with, and governed by, the laws of the State of Delaware without regard to the conflicts of law rules of such state, may not be assigned by either party without the prior written consent of the other, and shall bind and inure to the benefit of the parties hereto and their respective successors and permitted assignees. This Agreement may not be amended or supplemented except by an agreement in writing signed by NSI and Spinco. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute one and the same Agreement. [SIGNATURE PAGE FOLLOWS] -39- IN WITNESS WHEREOF, the parties have caused this Employee Benefits Agreement to be duly executed as of the day and year first above written. NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Brock A. Hattox -------------------------------------------- Brock A. Hattox Executive Vice President and Chief Financial Officer ACUITY BRANDS, INC. By: /s/ James S. Balloun -------------------------------------------- James S. Balloun Chairman, President and Chief Executive Officer -40- APPENDIX A - QUALIFIED RETIREMENT PLANS SPINCO PENSION PLANS (all are Stand-Alone Plans) National Service Industries Pension Plan C Pension Plan for Hourly Employees of the Emergency Lighting Division of Lithonia Lighting Company Major Reflector Products Co. Employees' Pension Plan Pension Plan of Lithonia Lighting Company -- Members of Bargaining Unit Represented by International Brotherhood of Electrical Workers Local Union #613 Pension Plan of Lithonia Lighting Company -- Members of Bargaining Unit Represented by Truck Drivers and Helpers Local Union #728 International Brotherhood of Teamsters, Chauffeurs, Warehousemen, and Helpers of America Pension Plan of Lithonia Lighting Company -- Members of Bargaining Unit Represented by International Brotherhood of Electrical Workers Local Union #1132 Pension Plan of Lithonia Lighting Company - for Members of Bargaining Unit Represented by International Brotherhood of Electrical Workers Local Union #1048 (Amended and Restated Effective February 2, 1989) Lithonia Lighting Division Hourly Employees' Retirement Plan SPINCO SAVINGS PLANS (all are Stand-Alone Plans) Lithonia Lighting Profit Sharing Retirement Plan for Salaried Employees Zep Manufacturing Company Profit Sharing/401(k) Retirement Plan Selig Chemical Industries Retirement Plan National Service Industries Retirement and 401(k) Plan Lithonia Lighting 401(k) Plan for Hourly Employees Enforcer Products 401(k) Plan Holophane Division of Lithonia Lighting Group Retirement and 401(k) Plan for Hourly Employees Holophane Division of Lithonia Lighting Group Retirement and 401(k) Plan for Hourly Employees Covered by a Collective Bargaining Agreement Hydrel/Lithonia Operations 401(k) Retirement Plan -41- APPENDIX B SPINCO EXECUTIVE PROGRAMS STAND-ALONE PLANS/AGREEMENTS TO BE ASSUMED BY SPINCO (WITH APPROPRIATE NAME CHANGES) National Service Industries, Inc. Executive Savings Plan Supplemental retirement plans previously maintained by Holophane Corporation National Service Industries, Inc. Executive Benefits Trust National Service Industries, Inc. Benefits Protection Trust Individual Agreements Including employment, severance protection, and consulting agreements. NSI PLANS FOR WHICH SPINCO MIRROR PLANS WILL BE ESTABLISHED Supplemental Retirement Plan for Executives of National Service Industries, Inc. National Service Industries, Inc. Long-Term Achievement Incentive Plan National Service Industries, Inc. Supplemental Deferred Savings Plan National Service Industries, Inc. Executives' Deferred Compensation Plan National Service Industries, Inc. Senior Management Benefit Plan National Service Industries, Inc. Management Compensation and Incentive Plan National Service Industries, Inc. Non-Employee Directors' Deferred Stock Unit Plan National Service Industries, Inc. Non-Employee Director Stock Option Plan National Service Industries, Inc. Employee Stock Purchase Plan Supplemental Pension Plan of National Service Industries, Inc. NSI EXECUTIVE PROGRAMS THAT WILL REMAIN AT NSI AND NOT BE MIRRORED AT SPINCO Supplemental Retirement Plan for Eligible Employees of AECO Products Division of National Service Industries, Inc. Deferred Compensation Plan for National Linen Service Officers -42- APPENDIX C SPINCO HEALTH AND WELFARE PLANS Health Plans (ERISA): Spinco Major Medical Plan (which includes medical, dental, prescription drug, various HMOs, vision, wellness programs, and employee assistance benefits). Group Insurance Plans (ERISA): Spinco Group Basic Life and Supplemental Life Insurance Plan Spinco Accidental Death and Dismemberment Insurance Plan Spinco Group 24-Hour Business Travel Accident Plan Spinco Personal Accident Plan Disability Plans (ERISA): Spinco Short-Term Disability Programs Spinco Long Term Disability Plan Cafeteria Plan (ERISA): Spinco Before Tax Premium Plan Spinco Health Care Flexible Spending Account Plan Spinco Dependent Care Flexible Spending Account Plan (non-ERISA) Miscellaneous Plans (non-ERISA): Spinco Educational Assistance Program Spinco Vacation Program Spinco Executive Financial Planning Program * Spinco shall have the right to rename, combine or disaggregate any of the above Plans for any purpose, including the satisfaction of any disclosure or reporting requirements under ERISA. -43- APPENDIX D FOREIGN PLANS This Appendix D describes the principles under which Foreign Plans shall be treated. For purposes of this Appendix, outside the U.S. means outside the 50 United States, its territories and possessions, and the District of Columbia, and employed outside the U.S. means compensated under a payroll which is administered outside the United States. D.1 PLANS COVERING ONLY EMPLOYEES OF NSI OR SPINCO Effective as of the Close of the Distribution Date or such later date as may be required by applicable law, union, or works council agreement, any Foreign Plan that covers only individuals employed outside the U.S. by the NSI Group shall be the sole responsibility of the NSI Group and no member of the Spinco Group shall have any Liability with respect to such a Plan; and any Foreign Plan that covers only individuals employed outside the U.S. by the Spinco Group shall be the sole responsibility of the Spinco Group and no member of the NSI Group shall have any Liability with respect to such a Plan. D.2 PLANS COVERING EMPLOYEES OF BOTH NSI AND SPINCO (A) TERMINATION OF PARTICIPATION To the extent legally permitted and except as otherwise provided herein, effective as of the Close of the Distribution Date, or as soon as practicable thereafter, Spinco and each other applicable member of the Spinco Group shall cease to be a Participating Company in each Foreign Plan maintained by NSI or the NSI Group and each other applicable member of the NSI Group shall cease to be a Participating Company in each Foreign Plan maintained by the Spinco Group. NSI and Spinco recognize that because of the requirements of local law or administrative considerations, a transition period extending beyond the Close of the Distribution Date may be required during which NSI or Spinco may continue to participate in each other's Foreign Plans. During such transition period, NSI and Spinco agree to cooperate in handling any and all matters with respect to the Foreign Plans. (B) MIRROR PLANS (1) Effective Immediately after the Distribution Date, Spinco shall adopt, or cause to be adopted, Foreign Plans for the benefit of employees of the Spinco Group employed outside the United States who are eligible to participate in NSI Foreign Plans and shall cause such Spinco Foreign Plans to be substantially identical in all Material Features to the corresponding NSI Foreign Plans as in effect on the Distribution Date. Notwithstanding the preceding sentence - (i) Spinco may satisfy this requirement by extending coverage to such individuals under a Foreign Plan of the Spinco Group which was in effect before the Distribution Date and which is, with respect to all Material Features, at least equal to the corresponding NSI Foreign Plan, and (ii) Spinco is not required to adopt a defined benefit pension plan for the benefit of its Canadian employees (but instead shall make an equitable adjustment to the defined contribution plan covering these employees). -44- (2) Effective Immediately after the Distribution Date, NSI shall adopt, or cause to be adopted, Plans for the benefit of any employees of the NSI Group employed outside the United States who are eligible to participate in Spinco Plans and shall cause such Plans to be substantially identical in all Material Features to the corresponding Spinco Foreign Plans as in effect on the Distribution Date; provided, however, that NSI may satisfy this requirement by extending or continuing coverage to such individuals under an NSI Foreign Plan of the NSI Group which was in effect before the Distribution Date. (3) The continuation by NSI or Spinco of separate employment terms and conditions for employees previously covered by the other entity's Plans shall not continue beyond the time legally required. (C) TRANSFER OF ASSETS As of the Close of the Distribution Date, NSI and Spinco will use their reasonable best efforts to ensure that, to the extent legally permitted: (i) Liabilities of the Foreign Plans of NSI relating to Transferred Individuals shall be assumed by the appropriate Foreign Plans of Spinco; and (ii) an appropriate portion of any assets of the Foreign Plans of NSI shall be transferred to the appropriate Foreign Plans of Spinco, and vice versa. D.3 SEVERANCE ISSUES If under applicable law, any Transferred Individual employed outside the U.S. is deemed to have incurred a termination of employment as a result of the Distribution or any other transaction contemplated by the Distribution Agreement or this Agreement, which entitles such individual to receive any payment or benefit under any Foreign Plan, governmental plan or arrangement or pursuant to any law or regulation, including severance benefits, notwithstanding such individual's continued employment by the Spinco Group, then Spinco shall be liable for any such payment or benefit and, notwithstanding any other provision hereof, to the extent legally permitted, appropriate adjustments shall be made to the treatment of such individual during such continued employment, including not giving such individual credit for prior service and/or treating such individual as having been newly hired immediately after such deemed termination, for purposes of all applicable Foreign Plans. Liability with respect to such payments shall be the responsibility of Spinco. D.4 LEGALLY PERMITTED For purposes of this Appendix D, "legally permitted" means permitted under the laws of the country, the labor union, works council, or collective agreement without adverse consequences to NSI, Spinco or Transferred Individuals, as determined by NSI, in its sole discretion, including mandated waiting periods before which working conditions (including benefits) cannot be changed, and upon receiving required agreement from individual employees and/or Plan trustees, foundation boards and members, and any other organizations having a recognized right to determine or affect benefits and/or funding of the Plan. -45- APPENDIX E Severance Protection Agreements Mark Bachmann Jim Balloun Bob Burchfield Sam Daniels Charles Darnell Kevin Davidson John Ehrie Helen Haines Jim Heagle Ken Honeycutt Jeff Kernan Richard Manning Dave McCormish Bob Mello Larry Miller John Morgan Ken Morgan Ken Murphy Tom Naramore Vern Nagel Joe Parham Wes Wittich Allan Zeitlin Employment Letters Jim Balloun Jim Heagle Vern Nagel Joe Parham -46- EX-10.5 7 g73258ex10-5.txt LEASE AGREEMENT EXHIBIT 10.5 LEASE AGREEMENT THIS LEASE AGREEMENT (this "Lease") made and entered into on this 30th day of November, 2001, by and between NATIONAL SERVICE INDUSTRIES, INC., a California corporation ("Landlord"), and ACUITY BRANDS, INC., a Delaware corporation ("Tenant"); WITNESSETH: For and in consideration of the mutual covenants set forth below, Landlord and Tenant do hereby agree as follows: 1. LEASE OF PREMISES. Subject to and upon the terms and conditions herein provided, Landlord does hereby rent, lease, and demise to Tenant approximately 50,000 square feet of space (the "Premises"), which Premises includes that office space occupied by employees of Tenant on the date of the spin-off of Tenant from Landlord located on the 2nd, 7th and 8th Floors of that certain building located at 1420 Peachtree Street, NE, Atlanta, Georgia (the "Building"), together with the common areas of the Building, including but not limited to, the underground parking facilities, lobby and 4th Floor of the Building, together with all and singular the rights, privileges, and appurtenances thereto belonging or in any wise appertaining. 2. TERM AND RENTALS. The term of this Lease shall be for a period of four (4) months, commencing on the 1st day of December, 2001, and terminating on the 31st day of March, 2002; provided that Tenant shall have the right, upon one month written notice to Landlord, to extend the term of the Lease for a period one month at the monthly rental rate set forth in the following sentence. For the entire term hereof, Tenant agrees to pay Landlord as monthly rental hereunder the sum of One Hundred Twenty Thousand Dollars and No/100 Dollars ($120,000). All rental provided for hereunder shall be due and payable on the first day of each month, with rent being prorated for partial months. 3. USE. Tenant shall use and occupy the Premises solely for general office use, and no other purpose. Tenant shall comply with all laws applicable to the use, occupancy and condition of the Premises. Tenant shall not conduct or permit any activities on or about the Premises that would constitute a nuisance or otherwise interfere with other occupants of the Building. 4. REPAIRS. Landlord shall, for the entire term of this Lease, maintain and keep in good working order, repair, and condition the structural integrity of the Building, including the roof and exterior walls. During the term of this Lease, except as otherwise provided above with respect to the maintenance and repair requirements of Landlord, Tenant will maintain the Premises in as good order and repair as at commencement of this Lease (ordinary wear and tear excepted), will remove or cause to be removed any and all rubbish and refuse matter from the Premises, and at the termination of the term, will deliver up the Premises in substantially as good condition, order, and repair as at commencement of this Lease, except for ordinary wear and tear and damage by fire or other casualties. 5. INSURANCE. Landlord shall maintain during the term of this Lease insurance against loss or damage to all of the improvements on the Premises resulting from fire, extended coverage, vandalism, malicious mischief, earthquake, flood, collapse, and other all risk perils in commercially reasonable amounts. Tenant shall, at Tenant's sole cost and expense, but for the mutual benefit of Landlord and Tenant, maintain workers' compensation coverage as required by law and general public liability insurance coverage against claims for personal injury, death, or property damage occurring upon, in, or about the Premises, such insurance to afford protection to the limit of not less than Three Million Dollars ($3,000,000) combined single limit coverage and name Landlord as additional insured. In addition, Tenant shall maintain commercially reasonable insurance coverage against loss or damage to Tenant's personal property located upon the Premises. Insurance required hereunder must be written by a company authorized to do business in Georgia, subject to the approval of Landlord, which approval shall not be unreasonably withheld. Each policy of insurance will be endorsed to provide that Landlord will receive at least thirty (30) days' prior written notice of any cancellation of, or material change in, said policy. Tenant shall not cause any insurance to be cancelled nor permit any insurance to lapse without thirty (30) days' prior written notice to Landlord. A certificate evidencing liability insurance required to be maintained by Tenant hereunder naming Landlord as an additional insured shall be delivered to Landlord upon the execution of this Lease. 6. CASUALTY LOSS. In the event the Building is damaged or destroyed during the term hereof by fire, storm, tornado, or other casualty of nature, or otherwise, so as to render the Premises wholly untenantable and unfit for use, then and in such event, Landlord or Tenant may, at the option of either, immediately terminate said Lease. If neither party terminates, then Landlord shall proceed with reasonable speed and dispatch to repair and reconstruct the Building so damaged or destroyed and shall restore the same to its former tenantable condition, in which event, the terms, provisions, and operative effect of this Lease shall be unaffected by said fire, storm, tornado, or other casualty of nature, except that the rent due and payable hereunder shall abate and cease for the period during which the restoration of the Premises is being completed, but shall become immediately payable as herein provided at such time as the Premises becomes tenantable, as determined in Landlord's reasonable discretion. Notwithstanding anything in this Lease to the contrary, there shall be no abatement of rent after a casualty to the extent that the damage occurred due to fault or neglect on the part of Tenant, its employees, servants, agents, representatives, or invitees. 7. WAIVER OF SUBROGATION. Tenant and Landlord each hereby waive any and all rights of recovery against the other, or against the officers, employees, agents, and representatives of the other, for loss of or damage to such waiving party or its property or the property of others under its control or any loss or damage, including consequential loss, to the Premises, or contents thereof belonging to either, caused by any risk required to be insured against hereunder, regardless of whether such risk was actually insured. 8. SIGNS. Tenant shall not erect any signs in or upon the Premises or the Building or the property on which they are located without Landlord's prior approval in writing. Tenant shall be liable for the payment of any municipal charges or minor privilege tax levied by reason of the erection and maintenance of such signs. At the termination of this Lease, Tenant shall remove all signs installed by Tenant and any damage resulting from the installation and/or removal of such sign will be repaired by Tenant. 9. DEFAULT BY TENANT. Tenant shall be in default under this Lease in the event that it (A) fails to pay rent for ten (10) days after it is due hereunder, or (B) fails to perform or comply with any other provision hereof for a period of thirty (30) days after receipt of written notice thereof from Landlord; provided that if, such failure cannot reasonably be cured within thirty (30) days, then Tenant shall have an additional period of time, not to exceed sixty (60) days, to cure such failure, so long as Tenant has commenced and is diligently pursuing appropriate actions to cure such failure. Upon a default by Tenant, Tenant's right to the further possession of the Premises shall terminate and Landlord shall become and be entitled to immediate possession of the Premises, provided Landlord shall so elect, but not otherwise. Landlord shall thereupon immediately have the full right of re-entry upon the Premises, by force or otherwise, to the extent permitted by the applicable law then in force, and without formal notice or demand, and without liability of any kind; and also the right, but not the obligation, to re-let the Premises for any unexpired balance of the term, and collect the rent therefor. In the event of such re-letting by Landlord, the re-letting shall be for such duration (which may extend beyond the unexpired balance of the term) and on such other terms, conditions, and rental as Landlord may deem proper, and the proceeds that may be collected from the same, less the expense of re-letting (including reasonable leasing costs, fees, and commissions and reasonable costs of renovating the Premises), shall be applied upon Tenant's rental obligation as set forth in this Lease for the unexpired portion of the Lease term. Tenant shall be liable for any balance that may be due under this Lease, although Tenant shall have no further right of possession of the Premises. Such re-entry by Landlord and any such re-letting shall not operate as a termination of this Lease, unless Landlord shall so elect, nor as a waiver or postponement of any right of Landlord against Tenant. Landlord shall have the further right, in the event of Tenant's default as aforesaid, and irrespective of whether Landlord shall have elected to terminate Tenant's right to the further possession of the Premises, to declare the entire rent for the unexpired portion of the Lease term to be immediately due and payable and to collect the same by any manner not inconsistent with applicable law. Mention in this Lease of any particular remedy shall not preclude Landlord from any other remedy, in law or in equity. To the extent permitted by law, Tenant hereby consents to summary proceedings in connection with Landlord's re-entry of the Premises, and expressly waives any and all rights of redemption, granted by or under any present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of the Premises, by reason of the violation by Tenant of any of the covenants and conditions of this Lease, or otherwise. 10. SUBLEASE AND ASSIGNMENT. Tenant shall not have the right to assign this Lease, or sublet the Premises, or any other part thereof, at any time during the term hereof, without Landlord's prior written consent which may be granted or withheld in Landlord's sole discretion. Any attempted assignment or sublease without the prior written consent of Landlord shall be of no legal force and effect. If Tenant assigns this Lease or sublets the Premises with Landlord's consent, Tenant shall remain liable for all terms and covenants of this Lease including, without limitation, the covenant to pay rent. 11. INDEMNIFICATION. Tenant shall be liable to Landlord for all liabilities, damages, costs, and expenses (including attorney's fees) which may be incurred or sustained by Landlord by reason of Tenant's breach of any of the provisions of this Lease. Landlord shall be liable to Tenant for all liabilities, damages, costs, and expenses (including attorney's fees) which may be incurred or sustained by Tenant by reason of Landlord's breach of any of the provisions of this Lease. 12. NOTICES. Notices to Landlord shall be given in writing by mail or by fax to it at: 1420 Peachtree Street, N.E., Atlanta, Georgia 30309, Attention: General Counsel, FAX Number (404) 853-1015 or such other address or number as Landlord may from time to time designate by written notice to Tenant. Notices to Tenant shall be given in writing by mail or by fax to Tenant at: 1420 Peachtree Street, N.E., Atlanta, Georgia 30309-3002, Attention: General Counsel, FAX Number (404) 853-1415, or such other address or number as it may from time to time designate by written notice to Landlord. Notices hereunder shall be effective upon receipt. 13. SUCCESSORS AND ASSIGNS. This Lease shall inure to the benefit of and be binding upon the successors and permitted assigns of Landlord and Tenant. 14. TIME. Time is and shall be of the essence hereof. 15. ENTIRE AGREEMENT. This Lease constitutes the entire agreement between Landlord and Tenant with respect to the lease of the Premises and supersedes all prior discussions, understandings, and agreements with respect thereto. 16. AMENDMENT; WAIVER. This Lease may not be modified or amended except by written instrument executed by Landlord and Tenant. No waiver of any provision hereof shall be effective unless in a writing executed by the party against whom the waiver is sought to be enforced. 17. LATE CHARGE. All payments or installments of any rent (including additional rent) hereunder and all sums whatsoever due under this Lease, shall be paid to Landlord at the address designated by Landlord, and if not paid within ten (10) days of when due, shall be subject to a late charge equal to three percent (3%) of the amount of the late payment for each late payment and shall bear interest at the rate of fifteen percent (15%) per annum (but not more than the maximum allowable legal rate applicable to Tenant) until paid. If either party engages an attorney to enforce its rights under this Lease, the nonprevailing party shall pay all reasonable fees and expenses of such attorney actually incurred by the prevailing party. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals as of the day first above written. LANDLORD: ATTEST OR WITNESS: NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Carol E. Morgan By: /s/ Brock A. Hattox --------------------- ------------------------- Carol E. Morgan Brock A. Hattox Executive Vice President and Chief Financial Officer [CORPORATE SEAL] TENANT: ATTEST OR WITNESS: ACUITY BRANDS, INC. By: /s/ Kenyon W. Murphy By: /s/ James S. Balloun --------------------- ------------------------- Kenyon W. Murphy James S. Balloun Chairman, President and CEO [CORPORATE SEAL] EX-10.6 8 g73258ex10-6.txt PUT OPTION AGREEMENT EXHIBIT 10.6 PUT OPTION AGREEMENT THIS PUT OPTION AGREEMENT, dated as of November 30, 2001 by and between NATIONAL SERVICE INDUSTRIES, INC., a California corporation ("Landlord") and ACUITY BRANDS, INC., a Delaware corporation ("Tenant"). In order to induce Landlord to enter into that certain Lease Agreement dated of even date herewith by and between Landlord and Tenant (the "Lease"), Tenant has agreed to grant to Landlord the right to require Tenant to purchase the "Property" (as hereinafter defined), subject to the terms and conditions of this Agreement, and the parties desire to provide for said option on the terms and conditions hereinafter set forth. NOW, THEREFORE, for and in consideration of TEN AND NO/100 DOLLARS ($10.00) paid by Landlord to Tenant, the execution of the Lease, the foregoing premises, the mutual covenants and agreements set forth herein, and other good and valuable consideration, all of which each party respectively agrees constitutes sufficient consideration received at or before the execution hereof, the parties hereto do hereby agree as follows: 1. DEFINITIONS AND MEANINGS. 1.1 Definitions. In addition to any other terms whose definitions are fixed and defined by this Agreement, each of the following defined terms, when used in this Agreement with an initial capital letter, shall for purposes of this Agreement have the meaning ascribed thereto by this Paragraph 1: 1.1.1 "Agreement" means this Put Option Agreement, together with all exhibits attached hereto. 1.1.2 "Closing" means the consummation of the purchase and sale of the Property contemplated by this Agreement by the deliveries required under Paragraph 7 hereof if Landlord exercises the Put Option. 1.1.3 "Closing Date" means the time and date, established under Paragraph 7 hereof, when the purchase and sale contemplated by this Agreement is to be consummated if Landlord exercises the Put Option, as such date may be extended by mutual agreement of the parties or pursuant to the provisions of this Agreement. 1.1.4 "Date of this Agreement" means the date of the Lease. 1.1.5 "Exercise Deadline" means the deadline by which Landlord must exercise the Put Option, as described in Paragraph 2 hereof. 1.1.6 "Existing Exceptions" means the encumbrances which affect Landlord's title to the Property and which are set forth in Exhibit B attached hereto, together with the Lease itself, together with such additional encumbrances on the title to the Property as are created by or at the request or with the consent of Tenant in accordance with the terms of the Lease, exclusive, however, of any mortgage, liens, deeds to secure debt or other loan documents encumbering fee title to the Property. 1.1.7 "Permitted Exceptions" means (a) the Existing Exceptions (other than any liens, mortgages, deeds to secure debt, or other loan documents encumbering fee title to the Property which shall be satisfied and canceled of record on or before the Closing) and any matters affecting title to the Property approved by Tenant in writing pursuant to Section 4.1 of this Agreement; (b) all other matters affecting title approved in writing by Tenant, and (c) ad valorem taxes for the calendar year of Closing not yet due and payable. 1.1.8 "Property" means that tract or parcel of land, as more particularly described in Exhibit "A" to this Agreement, attached hereto and made a part hereof by this reference, together with all appurtenances, rights, easements, rights-of-way, tenements and hereditaments incident thereto. 1.1.9 "Purchase Price" means the amount to be paid by Tenant to Landlord for the Property as provided in Paragraph 3 hereof. 1.1.10 "Put Option" means the option granted to Landlord to require Tenant to purchase the Property pursuant to Paragraph 2 hereof and the provisions of this Agreement. 1.1.11 "Survey" means the boundary survey of the Property prepared at Tenant's expense as provided in Paragraph 5 hereof. 1.1.12 "Title Objection" and "Title Objections" mean any deeds to secure debt, mortgages, deeds of trust, liens, financing statements, security interests, easements, leases, restrictive covenants, agreements, options, and other encumbrances which affect Landlord's title to the Property or impair the marketability of Landlord's title to the Property, excluding, however, the Existing Exceptions. 2. GRANT OF OPTION. Tenant hereby grants to Landlord the right and option to require Tenant to purchase the Property pursuant to the terms and conditions of this Agreement (said option being herein referred to as the "Put Option"). The Put Option shall be exercisable by Landlord giving written notice (the "Exercise Notice") to Tenant at any time after June 1, 2002 but no later than May 31, 2003 (said exercise deadline is hereinafter referred to as the "Exercise Deadline"). In the event Landlord fails to give written notice to Tenant on or before the Exercise Deadline, then the Put Option and this Agreement shall terminate and be of no further force and effect. In the event the Put Option is exercised by Landlord pursuant to the -2- provisions of this Paragraph 2, then the provisions of this Agreement relating to the Put Option shall be in force and effect, and Landlord shall sell and Tenant shall buy the Property pursuant to such terms and conditions. 3. PURCHASE PRICE. In the event that Landlord exercises the Put Option, the Purchase Price of the Property shall be Eighteen Million Seven Hundred Thousand Dollars and 00/100 ($18,700,000) (the "Purchase Price"). At Closing under the Put Option, Tenant shall pay the Purchase Price by cash, federal funds check, federal funds wire transfer or cashier's check drawn on a metropolitan Atlanta, Georgia bank. Provided Landlord has not otherwise become entitled to the same pursuant to the Lease prior to the Closing, Tenant shall receive a credit against the Purchase Price equal to any prepaid rent, prorated as of the Closing Date. 4. TITLE EXAMINATION AND OBJECTIONS. 4.1 Title Examination and Policy. Landlord shall be obligated to deliver title to the Property to Tenant such that Tenant's title company, selected by Tenant and approved by Landlord, which approval shall not be unreasonably withheld (the "Title Company") shall be willing to insure Tenant's title to the Property in the amount of the Purchase Price on the then standard Georgia form of Owner's title insurance insuring marketability of title, subject only to the Permitted Exceptions. Tenant shall have the title to the Property examined and give written notice to Landlord within thirty (30) days following Tenant's receipt of the Exercise Notice of any Title Objections disclosed by such initial examination or by a survey of the Property other than the Existing Exceptions. If Tenant fails to give any such notice with respect to any Title Objections which appear of record, then Tenant shall be deemed to have waived such Title Objections. Thereafter, Tenant may re-examine the title to the Property and may have surveys prepared or updated at any time and from time to time up to and through the Closing Date and may give Landlord written notice of any additional Title Objections which appear of record after the Exercise Deadline. 4.2 Failure to Correct Title Objections. In the event Landlord fails to satisfy or correct on or before the Closing Date any Title Objection of which Landlord is notified, as provided above in Paragraph 4.1, the Closing Date shall be extended for five (5) days and prior to the expiration of such five (5) day extension Tenant may elect by written notice to Landlord one of the following: 4.2.1 To waive such Title Objection and to close the transaction in accordance with the terms of this Agreement; provided, however, that with respect to any Title Objection that constitutes a monetary lien (including any deed to secure debt, mortgage, deed of trust or other security interest), Landlord shall be required to deposit in escrow with the Title Company (failing which Tenant may deposit with the Title Company out of the sales proceeds that would otherwise be payable to Landlord and receive a credit for the same against the Purchase Price) such amount as the Title Company shall reasonably -3- estimate to be necessary to satisfy or to remove such Title Objection so that the Title Company will insure over such Title Objection and Landlord shall thereafter diligently endeavor (which may include paying any additional sums as may be necessary) to have such Title Objection so satisfied or removed pursuant to the terms of an escrow agreement to be entered into at the Closing between Landlord, Tenant, and the Title Company. 4.2.2 To elect not to purchase the Property, in which event neither Landlord nor Tenant shall have any further rights, duties, or obligations under this Agreement with respect to the Property. 5. SURVEY. Tenant may, at Tenant's expense, have the Property accurately surveyed by a Georgia licensed surveyor or engineer reasonably acceptable to Landlord to show the actual boundaries of the Property. Upon receipt of such survey, Tenant shall promptly deliver a print of such survey to Landlord, and such survey shall constitute the "Survey" hereunder. 6. THE CLOSING. 6.1 Closing Date. The Closing shall be held at 2:00 p.m. on the forty-fifth (45th) day after Tenant receives the Exercise Notice, at the offices of King & Spalding, 191 Peachtree Street, N.E., Atlanta, Georgia 30303-1763, or at such earlier time and date and at such other location in the Atlanta, Georgia, area as the parties shall agree. 6.2 Deliveries At Closing. On the Closing Date, the Closing shall occur as follows, subject to satisfaction of all of the terms and conditions of this Agreement: 6.2.1 Landlord shall convey good and marketable title to the Property to Tenant, without exception for any Title Objections other than the Permitted Exceptions, by limited warranty deed containing warranties of title, excepting only the Permitted Exceptions from such warranty, duly executed, witnessed, and notarized and in recordable form. 6.2.2 Landlord shall deliver to Tenant an affidavit addressing such matters the Title Company shall reasonably require in order to insure Tenant's good and marketable title to the Property. 6.2.3 Landlord shall deliver to Tenant copies of such surveys, site plans, and plans and specifications relating to the Property as are in the possession of Landlord or to which Landlord has reasonable access. 6.2.4 Landlord shall deliver to Tenant either (i) a certificate duly executed by Landlord and certifying that Landlord is not a foreign person for purposes of the Foreign Investment in Real Property Tax Act (hereinafter referred to as "FIRPTA"), as amended through the date of Closing, or (ii) a withholding certificate from the Internal Revenue -4- Service to the effect that Landlord is exempt from withholding tax on the Purchase Price under FIRPTA. If neither of the above certificates is delivered, Tenant shall, at Closing, deduct and withhold such tax amounts as are required under FIRPTA. 6.2.5 Landlord shall deliver to Tenant a certificate in accordance with O.C.G.A. ss. 48-7-128, duly executed by Landlord and certifying that Landlord is a resident of the State of Georgia or is otherwise exempt from Georgia withholding tax. 6.2.6 Concurrently with Landlord's deliveries at the Closing, Tenant shall pay to Landlord the Purchase Price as provided in Paragraph 3. 6.3 Closing Costs. At the Closing, Landlord shall pay any transfer taxes, documentary stamp fees or other similar taxes or fees imposed in connection with the transfer of the Property and/or the recording of the deed. In addition, Landlord and Tenant shall respectively pay the following costs and expenses: 6.3.1 Tenant shall pay (a) rent under the Lease prorated through the date of Closing, (b) the fees and expenses of Tenant's attorneys, (c) all recording and filing fees for all recordable instruments executed and delivered by Landlord or Tenant at the Closing pursuant to the terms hereof, (d) title examination fees or charges incurred by Tenant, (e) premiums for any owner's or lender's title insurance policy or policies obtained by Tenant, (f) the cost of Survey, and (g) any other costs and expenses actually incurred by Tenant. 6.3.2 Landlord shall pay (a) the Georgia real estate transfer tax applicable to the transaction, (b) the fees and expenses of Landlord's attorneys and (c) any other costs and expenses actually incurred by Landlord. 7. CONDEMNATION. 7.1 Condemnation. In the event of any Taking that materially interferes with the use of the Property at that time, at any time after the Exercise Notice and prior to the Closing Date, then Tenant shall have the option, exercisable by notice to Landlord within thirty (30) days after receiving notice from Landlord of such event, to terminate this Agreement notwithstanding any prior exercise of the Put Option, provided that in the absence of such an election by Tenant this Agreement shall continue in full force and effect, the Purchase Price shall not be reduced, and Landlord at Closing shall pay over to Tenant all condemnation awards collected by Landlord and shall assign to Tenant all rights of Landlord in any uncollected condemnation award. 7.2 Notice of Condemnation or Casualty. Landlord shall notify Tenant upon Landlord's receiving notice of the occurrence or existence of any damage, destruction, condemnation, or threat of condemnation affecting the Property. -5- 8. NO BROKER. Tenant and Landlord represent and warrant to each other that they have not discussed this Agreement or the subject matter hereof with any real estate broker, agent, or salesman, so as to create any legal right in any such broker, agent, or salesman to claim a real estate commission or similar fee with respect to the conveyance of the Property and the other transactions contemplated by this Agreement. Tenant and Landlord hereby indemnify each other against, and agree to hold, save, and defend each other harmless from, any liability or claim (and all expenses, including attorney's fees, incurred in defending any such claim or in enforcing this indemnity) for a real estate brokerage commission or similar fee or compensation arising out of or in any way connected with any claimed agency or cooperative relationship with the indemnitor and relating to this Agreement or the purchase and sale of the Property. The foregoing indemnity shall survive the recision, cancellation, termination, or consummation of this Agreement. 9. DEFAULT. 9.1 Landlord Default. If, after the exercise of the Put Option, the purchase and sale of the Property contemplated by this Agreement is not consummated on account of a Landlord Default, then Tenant shall have the right to pursue any and all rights and remedies available to Tenant at law, in equity, or under this Agreement, including, without limitation, the right to seek specific performance of this Agreement against Landlord. 9.2 Tenant Default. If, after the exercise of the Put Option, the purchase and sale of the Property contemplated by this Agreement is not consummated because of a Tenant Default, then Landlord shall have right to pursue any and all rights available to Landlord at law, in equity, or under this Agreement, including, without limitation, the right to seek specific performance of this Agreement against Tenant. Notwithstanding anything to the contrary contained in this Agreement or the Lease, a Tenant Default shall under no circumstances be or give rise to an Event of Default under the Lease, and the Lease shall remain in full force and effect following a Tenant Default. 9.3 Definition of Landlord Default. "Landlord Default" means the default or failure or refusal of Landlord to perform under this Agreement, and the continuance of such default, failure or refusal to perform for fifteen (15) days after Tenant has given Landlord Notice of such default or failure or refusal to perform. 9.4 Definition of Tenant Default. "Tenant Default" means Tenant's default or failure or refusal to perform under this Agreement, and the continuance of such default or failure or refusal to perform for fifteen (15) days after Tenant has given Landlord Notice of such failure. 10. TERMINATION OF LEASE. Notwithstanding anything contained in this Agreement or the Lease to the contrary, in the event Tenant suffers or causes a default past applicable notice and cure periods under the Lease and Landlord terminates the Lease as a result -6- of such default, then this Agreement shall terminate and be of no further force and effect from and after the date of such termination of the Lease. 11. MISCELLANEOUS. 11.1 Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of Georgia. 11.2 Notices. Any notice, request or other communication (a "notice") required or permitted to be given hereunder shall be in writing and shall be delivered by hand delivery, by reputable courier (such as United Parcel Service or Federal Express), by telecopy or mailed by United States registered or certified mail, return receipt requested, postage prepaid and addressed to each party at its address as first set forth below. Any such notice shall be considered given on the date of (i) such hand delivery, (ii) deposit with such courier for same day or next business day delivery, (iii) actual receipt of telecopy or (iv) deposit in the United States mail, but the time period (if any is provided herein) in which to respond to such notice shall commence on the date of hand or courier delivery or on the date received following telecopy or deposit in the United States mail as provided above. Rejection or other refusal to accept or inability to deliver because of changed address of which no notice was given shall be deemed to be receipt of the notice. By giving at least five (5) days' prior written notice thereof, any party may from time to time and at any time change its mailing address hereunder. Any notice, request or other communication hereunder of any party may be given by such party's counsel. Landlord: -------- National Service Industries, Inc. 1420 Peachtree Street, N.E. Atlanta, Georgia 30309-3002 Attn: General Counsel Telecopy No.: 404-853-1015 Tenant: ------ Acuity Brands, Inc. 1420 Peachtree Street, N.E. Atlanta, Georgia 30309-3002 Attn: General Counsel Telecopy No.: 404-853-1415 -7- 11.3 Entire Agreement; Modification. This Agreement supersedes all prior discussions and agreements between Landlord and Tenant with respect to the Put Option and contains the sole and entire understanding between Landlord and Tenant with respect to the Put Option. All promises, inducements, offers, letters of intent, solicitations, agreements, commitments, representations and warranties heretofore made between such parties with regard to the Put Option are merged into this Agreement. This Agreement shall not be modified or amended in any respect except by a written instrument executed by or on behalf of each of the parties to this Agreement. 11.4 Survival. This Agreement shall not be merged into any of the instruments or documents executed and delivered at the Closing, but shall survive the Closing, and the provisions, representations and warranties made herein shall remain in full force and effect. 11.5 Exhibits. Each and every exhibit referred to or otherwise mentioned in this Agreement is attached to this Agreement and is and shall be construed to be made a part of this Agreement by such reference or other mention at each point at which such reference or other mention occurs, in the same manner and with the same effect as if each exhibit were set forth in full and at length every time it is referred to or otherwise mentioned. 11.6 Captions. All captions, headings, Article, Section and subsection numbers and letters and other reference numbers or letters are solely for the purpose of facilitating reference to this Agreement and shall not supplement, limit or otherwise vary in any respect the text of this Agreement. [SIGNATURES ON THE FOLLOWING PAGES] -8- IN WITNESS WHEREOF, the parties hereto have duly signed, sealed, and delivered this Agreement. LANDLORD: NATIONAL SERVICE INDUSTRIES, INC., a California corporation By: /s/ Brock A. Hattox -------------------------------- Brock A. Hattox Executive Vice President and Chief Financial Officer TENANT: ACUITY BRANDS, INC. a Delaware corporation By: /s/ James S. Balloun -------------------------------- James S. Balloun Chairman, President and CEO -9- EX-10.7 9 g73258ex10-7.txt FIRST SUPPLEMENTAL INDENTURE EXHIBIT 10.7 FIRST SUPPLEMENTAL INDENTURE DATED AS OF OCTOBER 23, 2001 TO INDENTURE DATED AS OF JANUARY 26, 1999 ----------------------------------- BETWEEN NATIONAL SERVICE INDUSTRIES, INC. AND SUNTRUST BANK, FORMERLY KNOWN AS SUNTRUST BANK, ATLANTA, AS TRUSTEE ----------------------------------- SENIOR DEBT SECURITIES FIRST SUPPLEMENTAL INDENTURE, dated as of October 23, 2001 (this "First Supplemental Indenture"), between NATIONAL SERVICE INDUSTRIES, INC., a Delaware corporation (said corporation, together with its successors and assigns, herein referred to as "NSI"), L & C SPINCO, INC., a Delaware corporation (said corporation, together with its successors and assigns, herein referred to as the "Company"), L & C LIGHTING GROUP, INC., a Delaware corporation and a wholly owned subsidiary of the Company (said corporation, together with its successors and assigns, herein referred to as "Lightco"), THE ZEP GROUP, INC., a Delaware corporation and a wholly owned subsidiary of the Company (said corporation, together with its successors and assigns, herein referred to as "Chemco"), and SUNTRUST BANK, formerly known as SUNTRUST BANK, ATLANTA, a Georgia banking corporation, as trustee (said corporation, together with its successors and assigns, herein referred to as the "Trustee"). W I T N E S S E T H: WHEREAS, NSI and the Trustee entered into an Indenture, dated as of January 26, 1999 (the "Indenture"), pursuant to which NSI issued its 8.375% Notes due August 1, 2010 (the "2010 Notes"), and its 6% Notes due 2009 (the "2009 Notes" and collectively with the 2010 Notes, the "Notes"); WHEREAS, NSI and its subsidiaries have transferred to the Company all of the assets comprising NSI's lighting equipment and chemicals businesses in connection with the transactions contemplated by that certain Agreement and Plan of Distribution between NSI and the Company (the "Distribution Agreement"), pursuant to which all the outstanding shares of common stock of the Company will be distributed to NSI's stockholders (the "Spin-Off"); WHEREAS, pursuant to Section 801 of the Indenture, NSI may convey, transfer or lease its properties and assets substantially as an entirety to any other corporation, partnership or trust organized and existing under the laws of the United States of America, any state thereof or the District of Columbia; provided that such Person shall expressly assume, by a supplemental indenture executed and delivered to the Trustee and in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest (including any Additional Amounts, if any) on all the Securities and the performance of every covenant of the Indenture on the part of NSI to be performed or observed; WHEREAS, the Company will assume all the rights and obligations of, and succeed to and be substituted for, NSI under the Indenture and the Securities; WHEREAS, in addition, Lightco and Chemco, jointly and severally with the Company, will assume the due and punctual payment of the principal of and interest on the Securities; WHEREAS, to evidence the assumption of the obligations under the Indenture and the Securities by the Company and the release of NSI from its liabilities and obligations under or with respect to the Notes and the Indenture in accordance with Sections 801 and 802 of the Indenture, the Company has agreed to execute and deliver this First Supplemental Indenture; 2 WHEREAS, NSI has delivered, or caused to be delivered, to the Trustee, an Officers' Certificate and an Opinion of Counsel meeting the requirements of Section 801(c) of the Indenture; WHEREAS, NSI and the Trustee have received from the holders of a majority in principal amount of the 2009 Notes and the holders of a majority in principal amount of the 2010 Notes a direction and consent to enter into this First Supplemental Indenture; NOW, THEREFORE, in consideration of the above premises, the Company, Lightco and the Trustee agree, for the benefit of the other, NSI and for the equal and ratable benefit of the Holders of the Notes, as follows: ARTICLE I ASSUMPTION OF OBLIGATIONS Section 101. Assumption of Obligations under Indenture. The Company hereby fully and unconditionally assumes the due and punctual payment of the principal of (and premium, if any) and interest (including any Additional Amounts, if any) on all the Securities and the performance of every covenant of the Indenture on the part of NSI to be performed or observed. Section 102. Assumption of Notes. Lightco and Chemco, jointly and severally with the Company, hereby fully and unconditionally assumes the due and punctual payment of the principal of and interest on the Securities. ARTICLE II RELEASE OF OBLIGATIONS Section 201. Release of NSI from Obligations. The Trustee, on behalf of the Holders of the Securities, hereby relieves NSI from all covenants and obligations under the Notes, the Securities, and the Indenture, effective upon the "Effective Time" (as defined in the Distribution Agreement). ARTICLE III MISCELLANEOUS PROVISIONS Section 301. Terms Defined. For all purposes of this First Supplemental Indenture, capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Indenture. 3 Section 302. Effect of Supplemental Indenture. Upon the execution and delivery of this First Supplemental Indenture by NSI, the Company, Lightco, Chemco and the Trustee, the Indenture shall be supplemented in accordance herewith, and this First Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Securities heretofore or hereafter authenticated and delivered under the Indenture shall be bound thereby. In accordance with Section 802 of the Indenture, upon the execution and delivery of this First Supplemental Indenture by NSI, the Company, Lightco, Chemco and the Trustee, the Company shall succeed to and be substituted for NSI with the same effect as if it had been named therein as the party of the first part and NSI shall be released and relieved as heretofore agreed. Section 303. Indenture and Supplemental Indenture Construed Together. This First Supplemental Indenture is an indenture supplemental to and in implementation of the Indenture, and the Indenture and this First Supplemental Indenture shall henceforth be read and construed together. Section 304. Confirmation of Indenture. Except as amended by this First Supplemental Indenture, the Indenture and the Notes are in all respects ratified and confirmed, and all the terms thereof shall remain in full force and effect. The Trustee has no responsibility for correctness of the recitals of facts herein contained, which shall be taken as the statements of NSI and the Company, and makes no representations as to the validity or sufficiency of this First Supplemental Indenture and shall incur no liability or responsibility in respect of the validity thereof. Section 305. Conflict with Trust Indenture Act. If any provision of this First Supplemental Indenture limits, qualifies or conflicts with any provision of the Trust Indenture Act (the "Act") that is required under the Act to be part of and govern any provision of this First Supplemental Indenture, the provision of the Act shall control. If any provision of this Supplemental Indenture modifies or excludes any provision of the Act that may be so modified or excluded, the provision of the Act shall be deemed to apply to the Indenture as so modified or to be excluded by this First Supplemental Indenture, as the case may be. Section 306. Severability. In case any provision in this First Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 307. Headings. The Article and Section headings of this First Supplemental Indenture have been inserted for convenience of reference only, are not to be considered part of this First Supplemental Indenture and shall in no way modify or restrict any of the terms or provisions hereof. Section 308. Benefits of Supplemental Indenture. Nothing in this First Supplemental Indenture or the Securities, express or implied, shall give to any Person, other than the parties hereto and thereto and their successors hereunder, any Authenticating Agent, Paying Agent and Security Registrar, and the Holders, any benefit of any legal or equitable right, remedy or claim under the Indenture, this First Supplemental Indenture or the Securities. 4 Section 309. Certain Duties and Responsible of the Trustee. In entering into this First Supplemental Indenture, the Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct of, affecting the liability of or affording protection to the Trustee, whether or not elsewhere herein so provided. Section 310. Governing Law. THIS SUPPLEMENTAL INDENTURE, THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Section 311. Successors. All agreements of the Company, NSI, Chemco and Lightco in this First Supplemental Indenture shall bind their respective successors and assigns. All agreements of the Trustee in this First Supplemental Indenture shall bind the Holders of all Securities and all successors and assigns of the Trustee or such Holders. Section 312. Multiple Counterparts. The parties may sign multiple counterparts of this First Supplemental Indenture. Each signed counterpart shall be deemed an original, but all of them together represent the same agreement. Section 313. Endorsement and Change of Form of Notes. Any Notes authenticated and delivered after the date of this First Supplemental Indenture in exchange or substitution for Notes then outstanding and all Notes presented or delivered to the Trustee on and after that date for such purpose shall (unless textually revised as hereinafter provided) be stamped or typewritten by the Trustee with a notation as follows: "L&C Spinco, Inc. a Delaware corporation (the "Company"), has assumed the obligations of National Service Industries, Inc. ("NSI") as successor to the NSI in connection with the transfer of the properties and assets of NSI substantially as an entirety. The Company has expressly assumed the due and punctual payment of the principal of and interest on all the Notes and the due and punctual performance and observance of all the covenants and obligations in the Indenture to be performed by NSI, and NSI will be relieved from all covenants and obligations under the Notes, the Securities and the Indenture in accordance with the First Supplemental Indenture referred to below. The Indenture dated as of January 26, 1999 referred to in this Note has been amended by a First Supplemental Indenture dated as of October 23, 2001 to provide for such assumptions of obligations by the Company and the release of NSI from such obligations. Reference is hereby made to said First Supplemental Indenture, copies of which are on file with SunTrust Bank, as Trustee, for a description of the amendments therein made." Any Notes hereafter authenticated and delivered in exchange or substitution for Notes then outstanding shall, if the Company so elects, be textually revised in a form approved by the 5 Trustee to make reference to the First Supplemental Indenture and to reflect the supplement of the Indenture hereby instead of being stamped or typewritten as hereinabove provided. Section 314. Effectiveness of First Supplemental Indenture. This First Supplemental Indenture shall be effective upon the execution and delivery by NSI, the Company, Lightco, Chemco and the Trustee. Section 315. Indemnification of Trustee. The Company, Lightco and Chemco (collectively, the "Companies" and individually, a "Company"), each agree, jointly and severally, to indemnify, defend and hold harmless the Trustee and its officers, directors, employees, agents, counsel, and their respective successors, assigns, heirs, personal representatives and administrators (collectively, the "Indemnified Parties") from and against, for and in respect of, any and all Losses (as hereinafter defined), including, but not limited to, those which might arise as a result of Litigation (as hereinafter defined) or Third-Party Claims (as hereinafter defined), assessed against, or paid, suffered or incurred by, any Indemnified Party which directly or indirectly result from or are based upon, or arise out of: (i) the execution, delivery and performance of this Agreement; (ii) the Transfer, the Spin-Off, the solicitation of directions from the Holders and all other transactions described herein or in the Distribution Agreement in connection therewith (collectively, the "Transactions"); (iii) the inaccuracy, untruth, or breach of any representation, warranty, statement or opinion made by any of the Companies or their respective officers, agents or counsel pursuant to this Agreement or the Indenture, or contained in any certificate, opinion or other document or paper furnished to the Trustee by any of the Companies or their respective officers, agents or counsel in connection herewith or the Indenture; (iv) any breach or failure to perform any covenant or agreement set forth in the Indenture by NSI in connection with the Transactions; or (v) any action or failure to act on the part of the Trustee or any other Indemnified Party in connection with this Agreement or the Indenture with respect to the Transactions. Notwithstanding anything else herein contained, the foregoing indemnity shall not be applicable to any Losses suffered or incurred by any Indemnified Party as result of such Indemnified Party's negligence or bad faith. For purposes of this Section, the terms "Litigation," "Losses," "Third-Party Claim" and "Indemnification Claim" shall have the following meanings: "Litigation" shall mean any demand, action, suit, cause of action, claim, complaint, prosecution, formal, informal, or threatened examination, investigation, hearing or other proceeding (whether civil, criminal or administrative or involving any arbitration) relating to or affecting an Indemnified Party. "Losses" shall mean any and all assessments, losses, diminution in value, damages, (including direct, indirect, special and consequential damages and sums paid in settlement of claims), liabilities, judgments, costs and expenses (including, without limitation, interest, penalties, fines, reasonable costs of investigation defense, and the reasonable fees and expenses of attorneys and other advisors). 6 "Third-Party Claim" shall mean any Litigation (including, without limitation, a binding arbitration or an audit by any governmental or administrative authority) that is instituted or threatened against an Indemnified Party and which, if prosecuted successfully, could result in an Indemnification Claim. "Indemnification Claim" shall mean any claim for indemnification provided under this Section 315. Section 316. Trustee's Fees and Expenses. Without duplication with respect to any obligation of the Companies under Section 315 hereof, the Companies jointly and severally agree to pay the Trustee upon the execution and delivery of this Agreement and thereafter upon receipt of a written request therefor, fees and expenses of the Trustee incurred in connection with this Agreement and the Transactions, including, without limitation, all attorney's fees and expenses in connection with (i) the review, negotiation and preparation of this Agreement and any and all documents, opinions, certificates and other papers prepared in connection herewith and with the Transactions, (ii) the administration or enforcement of the Indenture or this Agreement in connection with the Transactions, and (iii) any administrative, judicial, arbitration or other proceedings, or any investigations with respect thereto or in any way related to this Agreement or the Indenture with respect to any of the Transactions. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK 7 SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed as of the date first written above. NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Brock A. Hattox --------------------------------- Brock A. Hattox Executive Vice President and CFO L & C SPINCO, INC. By: /s/ James S. Balloun --------------------------------- James S. Balloun President and CEO L & C LIGHTING GROUP, INC. By: /s/ James S. Balloun --------------------------------- James S. Balloun President and CEO THE ZEP GROUP, INC. By: /s/ James S. Balloun --------------------------------- James S. Balloun President and CEO SUNTRUST BANK, as Trustee By: /s/ Ronald C. Painter --------------------------------- Ronald C. Painter Group Vice President 8 EX-10.8 10 g73258ex10-8.txt AMENDMENT NO. 2 TO DEFERRED SAVINGS PLAN EXHIBIT 10.8 AMENDMENT NO. 2 TO NATIONAL SERVICE INDUSTRIES, INC. SUPPLEMENTAL DEFERRED SAVINGS PLAN THIS AMENDMENT made as of this 30th day of November, 2001, by NATIONAL SERVICE INDUSTRIES, INC. (the "Company"); W I T N E S S E T H: WHEREAS, the Company previously established the National Service Industries, Inc. Supplemental Deferred Savings Plan ("Plan"), effective September 18, 1996; and WHEREAS, in connection with the planned distribution of the shares of common stock of Acuity Brands, Inc. to the stockholders of the Company (the "Spin-Off"), the Company desires to amend the Plan to provide for the transfer of accounts for certain employees and former employees of Acuity Brands, Inc. and its subsidiaries to a deferred compensation plan being established by Acuity Brands, Inc. and to provide for an appropriate adjustment of accounts to reflect the Spin-Off; and WHEREAS, the Company desires to amend the Plan to eliminate the ability to receive a distribution in shares of common stock of the Company; NOW, THEREFORE, for and in consideration of the premises, the Plan is hereby amended as follows: 1. Section 4.3(b)(ii) is hereby amended by deleting the present provision in its entirety and substituting the following in lieu thereof: "The Participant's benefits shall be paid in cash." 2. The Plan is hereby amended by inserting the following as a new Section 8.9: "8.9 Spin-Off of Acuity Brands, Inc. (a) Transfer of Accounts. Pursuant to an Employee Benefits Agreement dated as of November 30, 2001, between the Company and Acuity Brands, Inc. ("Acuity") and in connection with the distribution of the shares of Acuity to the stockholders of the Company (the "Spin-Off"), the Account (and each subaccount) of each Participant who becomes or remains an employee of Acuity or its subsidiaries as of November 30, 2001 and of each Participant (including Participants and their beneficiaries in pay status) who was formerly employed by the businesses transferred to Acuity by the Company (including former employees of the corporate office of the Company) (collectively, the "Transferred Participants"), shall be transferred to the Acuity Brands, Inc. Supplemental Deferred Savings Plan ("Acuity Plan") as of November 30, 2001 or as soon as practical thereafter. The elections made by Transferred Participants under this Plan (including, without limitation, elections regarding deferral amounts, timing and manner or payment of benefits, and designation of Beneficiaries) shall be carried over and shall apply for purposes of the Acuity Plan. (b) Adjustment of Accounts. To the extent all or any portion of the Accounts (and subaccounts) of Participants (other than the Transferred Participants described in Section 8.9(a) above) are deemed to be invested in Shares of common stock of the Company as of November 30, 2001, the Accounts (and subaccounts) shall be adjusted in accordance with and in satisfaction of the requirements of Sections 4.1(b) and (c) as follows: (i) The number of Shares in such Accounts (and subaccounts) shall first be adjusted to reflect any dividends (other than the distribution of shares of Acuity) between the last Annual Valuation Date and November 30, 2001; (ii) The adjusted number of Shares in such Accounts (and subaccounts) determined under (i) above shall be further adjusted to reflect the Spin-Off by (A) multiplying the number of Shares in each such Account (and subaccounts) by the closing per share price of Company common stock (trading with a due bill) on November 30, 2001, and (B) dividing such dollar amount by the per share price of Company common stock after the spin-off [calculated as the difference between the closing per share prices of Company common stock (trading with a due bill) and Acuity common stock (trading on a when-issued basis) on November 30, 2001 (or such other price or prices as determined by the Plan Administrator to be appropriate and equitable)]. Any additional adjustments to the portion of the Accounts (and subaccounts) invested in Shares on the Annual Valuation Date following the Spin-Off shall only reflect dividends or similar actions after December 3, 2001." 2 3. The within and foregoing amendments to the Plan shall be effective as of November 30, 2001. Except as hereby modified, the Plan shall remain in full force and effect. IN WITNESS WHEREOF, the undersigned has executed this Amendment No. 2 the day and year first above written. NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Brock A. Hattox --------------------------------- Brock A. Hattox 3 EX-10.9(A) 11 g73258ex10-9a.txt AMENDMENT NO. 4 TO MANAGEMENT BENEFIT PLAN EXHIBIT 10.9(a) AMENDMENT NO. 4 TO THE NATIONAL SERVICE INDUSTRIES, INC. SENIOR MANAGEMENT BENEFIT PLAN THIS AMENDMENT made as of the 31st day of August, 2001, by National Service Industries, Inc., a Delaware corporation ("NSI"); W I T N E S S E T H: WHEREAS, NSI has previously established the National Service Industries, Inc. Senior Management Benefit Plan (the "Plan") for the benefit of its eligible employees and their beneficiaries; and WHEREAS, effective as of August 31, 2001, NSI will restructure its business operations and form several new subsidiary corporations; and WHEREAS, NSI desires to amend the Plan in connection with the restructuring; and WHEREAS, pursuant to the power of amendment contained in Section 11.4 of the Plan, the Plan is hereby amended as follows: 1. The Plan is hereby amended by incorporating the following as the new Appendix 1: "Appendix 1 Adopting Employers National Service Industries, Inc. (CA) f/k/a NSI Enterprises, Inc. L&C Spinco, Inc. The Zep Group, Inc. L&C Lighting Group, Inc." 2. This Amendment shall be effective August 31, 2001. 3. Except as provided herein, the provisions of the Plan shall remain in full force and effect. IN WITNESS WHEREOF, NSI has caused this Amendment No. 4 to be executed by its duly authorized corporate officers as of the date and year first written above. ATTEST: NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Carol E. Morgan By: /s/ Kenyon W. Murphy ------------------------- ------------------------------- EX-10.9(B) 12 g73258ex10-9b.txt AMENDMENT NO. 5 TO MANAGEMENT BENEFIT PLAN EXHIBIT 10.9(b) AMENDMENT NO. 5 TO THE NATIONAL SERVICE INDUSTRIES, INC. SENIOR MANAGEMENT BENEFIT PLAN THIS AMENDMENT made as of the 1st day of October, 2001, by National Service Industries, Inc., a Delaware corporation ("NSI"); W I T N E S S E T H: WHEREAS, NSI has previously established the National Service Industries, Inc. Senior Management Benefit Plan (the "Plan") for the benefit of its eligible employees and their beneficiaries; and WHEREAS, in connection with the planned distribution of the shares of common stock of Acuity Brands, Inc. to the stockholders of NSI (the "Spin-Off"), NSI desires to amend the Plan to permit former employees of NSI and its subsidiaries who did not work for Acuity Brands, Inc. or its subsidiaries to make a one-time irrevocable election to receive a lump sum distribution of their benefit under the Plan; and WHEREAS, in connection with the Spin-Off, NSI also desires to amend the Plan to provide for the transfer of accounts for certain employees and former employees of Acuity Brands, Inc. and its subsidiaries to a deferred compensation plan being established by Acuity Brands, Inc.; WHEREAS, pursuant to the power of amendment contained in Section 11.4 of the Plan, the Plan is hereby amended as follows: 1. Effective as of October 1, 2001, the Plan is hereby amended by inserting the following as a new section 5.6: "5.6 Special Payment Election. In connection with, and contingent upon, the spin-off of NSI's lighting equipment and chemicals businesses ("Spin-Off Businesses") to a separate, publicly-traded company, Participants who did not work for the Spin-Off Businesses or the portion of the corporate office of the Employer being transferred in the Spin-Off (and beneficiaries of such Participants) shall have the right to make a one-time irrevocable election to receive a lump sum distribution of their Deferred Benefit Account in the Plan. The Participant may make such an election during such time period and using such form as provided by the Plan Committee. A Participant making such an election shall cease to be eligible to participate in the Plan. If no such election is made, the Participant's Retirement Benefit shall be payable as provided in Section 5.5." 2. Effective as of November 30, 2001, the Plan is hereby amended by inserting the following as a new Section 11.6: "11.6 Spin-Off of Acuity Brands, Inc. - Transfer of Accounts. Pursuant to an Employee Benefits Agreement dated as of November 30, 2001, between the Employer and Acuity Brands, Inc. ("Acuity") and in connection with the distribution of the shares of Acuity to the stockholders of the Employer (the "Spin-Off"), the Deferred Benefit Account of each Participant who becomes or remains an employee of Acuity or its subsidiaries as of November 30, 2001 and of each Participant (including Participants and their beneficiaries in pay status) who was formerly employed by the businesses transferred to Acuity by the Employer (including former employees of the corporate office of the Employer), shall be transferred to the Acuity Brands, Inc. Senior Management Benefit Plan ("Acuity Plan") as of November 30, 2001 or as soon as practical thereafter. For purposes of this Plan and the Acuity Plan, each Participant who becomes a Participant in the Acuity Plan shall not be deemed to have retired from full-time employment with the Employer solely as a result of the Spin-Off." 3. Effective as of November 30, 2001, the Plan is hereby amended by incorporating the following as the new Appendix 1: "Appendix 1 Adopting Employers National Service Industries, Inc. (CA) f/k/a NSI Enterprises, Inc." 4. Except as provided herein, the provisions of the Plan shall remain in full force and effect. IN WITNESS WHEREOF, NSI has caused this Amendment No. 5 to be executed by its duly authorized corporate officers as of the date and year first written above. ATTEST: NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Helen Haines By: /s/ Brock A. Hattox ---------------- -------------------- Secretary EX-10.10(A) 13 g73258ex10-10a.txt AMENDMENT NO. 5 TO SUPPLEMENTAL RETIREMENT PLAN EXHIBIT 10.10(a) AMENDMENT NO. 5 TO THE SUPPLEMENTAL RETIREMENT PLAN FOR EXECUTIVES OF NATIONAL SERVICE INDUSTRIES, INC. THIS AMENDMENT made as of the 31st day of August, 2001, by National Service Industries, Inc., a Delaware corporation ("NSI"); W I T N E S S E T H: WHEREAS, NSI has previously established the Supplemental Retirement Plan for Executives of National Service Industries, Inc. (the "Plan") for the benefit of its eligible employees and their beneficiaries; and WHEREAS, effective as of August 31, 2001, NSI will restructure its business operations and form several new subsidiary corporations; and WHEREAS, NSI desires to amend the Plan in connection with the restructuring; and WHEREAS, pursuant to the power of amendment contained in Article XI of the Plan, the Plan is hereby amended as follows: 1. The Plan is hereby amended by incorporating the following as the new Schedule 1: "Schedule 1 Adopting Employers National Service Industries, Inc. (CA) f/k/a NSI Enterprises, Inc. L&C Spinco, Inc. The Zep Group, Inc. L&C Lighting Group, Inc." 2. This Amendment shall be effective August 31, 2001. 3. Except as provided herein, the provisions of the Plan shall remain in full force and effect. IN WITNESS WHEREOF, NSI has caused this Amendment No. 5 to be executed by its duly authorized corporate officers as of the date and year first written above. ATTEST: NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Carol E. Morgan By: /s/ Kenyon W. Murphy ---------------------------- -------------------------------- EX-10.10(B) 14 g73258ex10-10b.txt AMENDMENT NO. 6 TO SUPPLEMENTAL RETIREMENT PLAN EXHIBIT 10.10(b) AMENDMENT NO. 6 TO SUPPLEMENTAL RETIREMENT PLAN FOR EXECUTIVES OF NATIONAL SERVICE INDUSTRIES, INC. THIS AMENDMENT made as of the 30th day of November, 2001 by NATIONAL SERVICE INDUSTRIES, INC., a Delaware corporation ("NSI"); W I T N E S S E T H: WHEREAS, NSI previously established the Supplemental Retirement Plan for Executives of National Service Industries, Inc. (the "Plan") for the benefit of its eligible executives and their beneficiaries; and WHEREAS, effective November 30, 2001, NSI is spinning off (the "Spin-Off") its lighting and chemicals businesses through a tax-free distribution of the stock of Acuity Brands, Inc. ("Acuity") to NSI's stockholders; and WHEREAS, in connection with the Spin-Off, NSI and Acuity entered into an Employee Benefits Agreement ("Benefits Agreement"), dated November 30, 2001, which, among other things provides for the transfer to a supplemental retirement plan to be established by Acuity ("Acuity SERP") of the liability for the accrued benefits of certain participants in the Plan; and WHEREAS, NSI desires to provide for the transfer of such liabilities to the Acuity SERP as provided in the Benefits Agreement and as hereinafter provided; and WHEREAS, NSI also desires to amend the Plan to change the eligibility rules for the Plan; NOW, THEREFORE, the Plan is hereby amended as follows: 1. Effective as of November 30, 2001 ("Effective Date"), the Plan's liability for the accrued benefits of employees and former employees of NSI and its subsidiaries who were participants in the Plan and (i) who became or remained employees of Acuity and its subsidiaries as of the Effective Date, or (ii) who were formerly employed by the businesses transferred to Acuity by NSI or (iii) who were formerly employed by the corporate office of NSI, shall be transferred to the Acuity SERP. This transfer shall be accomplished in accordance with the Benefits Agreement. In connection with such transfer to the Acuity SERP, current Appendices A, B, C, D, E, F, G, and H shall be deleted in their entirety and a new Appendix A and Schedule 1 in the form attached hereto shall be added to the Plan. 2. Section 1.1(w) is hereby amended by deleting the present section in its entirety and substituting the following in lieu thereof: "(w) Executive - Any officer of the Company (or an affiliated company) designated by the Board or the Chief Executive Officer of the Company as eligible to participate in the Plan and who is listed on an Appendix attached hereto. The Appendix may designate the terms and conditions of Executive's participation in the Plan." 3. This Amendment No. 6 to the Plan is effective as of November 30, 2001. Except as hereby modified, the Plan shall remain in full force and effect. IN WITNESS WHEREOF, NSI has caused this Amendment No. 6 to be executed as of the day and year first above written. NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Brock A. Hattox ------------------- ATTEST: /s/ Helen D. Haines - ------------------- APPENDIX A (Effective As Of November 30, 2001) A.1 Eligible Individual Brock A. Hattox A.2 Effective Date Pursuant to Section 2.1(b), the Eligible Individual's date of participation shall be September 18, 1996. A.3 Special Provisions The following special provisions shall apply to the Eligible Individual's participation in the Plan. (a) The Eligible Individual will qualify as a Vested Terminee if he completes 5 years of employment with NSI from September 9, 1996 to his Termination Date. (b) If the Eligible Individual terminates employment with NSI after attaining age 55, the Eligible Individual shall be eligible for Early Retirement under Sections 1.1(a)(2) and 3.3, and his benefit will be determined as if he had completed an additional five (5) years of service (including Credited Service and Eligible Service, but not to exceed a total of 20 years) and was five (5) years older (but not to exceed age 65). (c) If the Eligible Individual terminates employment with NSI after attaining age 55, he shall have the right to elect (in a manner provided by the Company) to be paid his retirement benefit (i) in an immediate lump sum payment calculated by discounting the future payment stream at an interest rate equal to the lesser of the GATT interest rate or the PBGC immediate annuity rate (or similar rate which replaces such rate), with an assumed life span to age 85, (ii) annual installments over a period of up to five (5) years or (iii) in accordance with the usual rules of the Plan. SCHEDULE 1 ADOPTING EMPLOYERS National Service Industries, Inc. (CA) f/k/a NSI Enterprises, Inc. EX-10.11(A) 15 g73258ex10-11a.txt AMENDMENT NO. 2 TO DEFERRED COMPENSATION PLAN EXHIBIT 10.11(a) AMENDMENT NO. 2 TO THE NATIONAL SERVICE INDUSTRIES, INC. EXECUTIVES' DEFERRED COMPENSATION PLAN (As Amended And Restated As Of October 4, 2000) THIS AMENDMENT made as of the 31st day of August, 2001, by National Service Industries, Inc., a Delaware corporation ("NSI"); W I T N E S S E T H: WHEREAS, NSI has previously established the National Service Industries, Inc. Executives' Deferred Compensation Plan (the "Plan") for the benefit of its eligible employees and their beneficiaries; and WHEREAS, effective as of August 31, 2001, NSI will restructure its business operations and form several new subsidiary corporations; and WHEREAS, NSI desires to amend the Plan in connection with the restructuring; and WHEREAS, the Plan is hereby amended as follows: 1. The Plan is hereby amended by incorporating the following as the new Appendix A: "Appendix A Adopting Employers National Service Industries, Inc. (CA) f/k/a NSI Enterprises, Inc. L&C Spinco, Inc. The Zep Group, Inc. L&C Lighting Group, Inc." 2. This Amendment shall be effective August 31, 2001. 3. Except as provided herein, the provisions of the Plan shall remain in full force and effect. IN WITNESS WHEREOF, NSI has caused this Amendment No. 2 to be executed by its duly authorized corporate officers as of the date and year first written above. ATTEST: NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Carol E. Morgan By: /s/ Kenyon W. Murphy ------------------------- -------------------------------- EX-10.11(B) 16 g73258ex10-11b.txt AMENDMENT NO. 3 TO DEFERRED COMPENSATION PLAN EXHIBIT 10.11(b) AMENDMENT NO. 3 TO THE NATIONAL SERVICE INDUSTRIES, INC. EXECUTIVES' DEFERRED COMPENSATION PLAN (As Amended And Restated As Of October 4, 2000) THIS AMENDMENT made as of the 28th day of November, 2001, by National Service Industries, Inc., a Delaware corporation ("Company"); W I T N E S S E T H: WHEREAS, the Company has previously established the National Service Industries, Inc. Executives' Deferred Compensation Plan (the "Plan") for the benefit of its eligible employees and their beneficiaries; and WHEREAS, in connection with the planned distribution of the shares of common stock of Acuity Brands, Inc. to the stockholders of the Company (the "Spin-Off"), the Company desires to amend the Plan to provide for the transfer of accounts for certain employees and former employees of Acuity Brands, Inc. and its subsidiaries to a deferred compensation plan being established by Acuity Brands, Inc.; NOW, THEREFORE, the Plan is hereby amended as follows: 1. The Plan is hereby amended by inserting the following as a new Section 10.02: "10.02 Spin-Off of Acuity Brands, Inc. - Transfer of Accounts. Pursuant to an Employee Benefits Agreement dated as of November 30, 2001, between the Company and Acuity Brands, Inc. ("Acuity") and in connection with the distribution of the shares of Acuity to the stockholders of the Company (the "Spin-Off"), the "Class Year Accounts" (and each sub-account) of each Participant who becomes or remains an employee of Acuity or its subsidiaries as of November 30, 2001 and of each Participant (including Participants and their beneficiaries in pay status) who was formerly employed by the businesses transferred to Acuity by the Company (including former employees of the corporate office of the Company) (collectively, the "Transferred Participants"), shall be transferred to the Acuity Brands, Inc. Executives' Deferred Compensation Plan ("Acuity Plan") as of November 30, 2001 or as soon as practical thereafter. The elections made by Transferred Participants under this Plan shall be carried over and shall apply for purposes of the Acuity Plan (subject to any change of election rights under the Acuity Plan)." 2. The Plan is hereby amended by incorporating the following as the new Appendix A: "Appendix A Adopting Employers National Service Industries, Inc. (CA) f/k/a NSI Enterprises, Inc." 3. This Amendment shall be effective November 30, 2001. Except as provided herein, the provisions of the Plan shall remain in full force and effect. IN WITNESS WHEREOF, the Company has caused this Amendment No. 3 to be executed by its duly authorized corporate officers as of the date and year first written above. ATTEST: NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Helen Haines By: /s/ Brock A. Hattox ----------------------------- ----------------------------------- 2 EX-10.12 17 g73258ex10-12.txt AMENDMENT NO. 3 TO NONEMPLOYEE STOCK UNIT PLAN EXHIBIT 10.12 AMENDMENT NO. 3 TO NATIONAL SERVICE INDUSTRIES, INC. NONEMPLOYEE DIRECTOR DEFERRED STOCK UNIT PLAN This Amendment is made as of the 28th day of November, 2001, by National Service Industries, Inc., a Delaware corporation (the "Corporation"). W I T N E S S E T H: WHEREAS, the Corporation previously established the National Service Industries, Inc. Nonemployee Director Deferred Stock Unit Plan (the "Plan") for the benefit of directors of the Corporation who are not employees of the Corporation or any Subsidiary (as defined in the Plan); and WHEREAS, in connection with the distribution of the shares of common stock of Acuity Brands, Inc. to the stockholders of the Corporation (the "Spin-Off"), the Corporation desires to amend the Plan to clarify the adjustment of Deferred Stock Units to reflect the Spin-Off and to provide for the transfer of accounts for certain directors participating in the Plan who will cease to be directors of the Corporation and will become directors of Acuity Brands, Inc.; WHEREAS, the Corporation desires to amend the Plan to delete the requirement for automatic grants to directors and automatic deferrals of directors' fees; and WHEREAS, pursuant to the power of amendment contained in Section 7.1 of the Plan, the Plan is hereby amended as follows: 1. Effective as of December 1, 2001, the Plan is hereby amended by deleting Sections 5.1, 5.2, 5.3, and 5.4 in their entirety, by renumbering Section 5.6 as Section 5.2 and by adding a new Section 5.1 as follows: "5.1. Discretionary Grant. The Board of Directors, in its discretion, may permit or require an Eligible Director to defer a portion or all of his or her Annual Fee or Chairman Fee into Deferred Stock Units (rounded to the nearest hundredth) equal to the amount deferred divided by the Fair Market Value. Any such determination by the Board of Directors to permit or require the deferral of fees into Deferred Stock Units shall be communicated in advance to each Eligible Director. The Board of Directors, in its discretion, may also grant Deferred Stock Units to an Eligible Director." 2. Effective as of November 30, 2001, the Plan is hereby amended by adding a new Article IX as follows: "9. Spin-Off of Acuity Brands, Inc. (a) Transfer of Accounts. The account of each Eligible Director other than an Eligible Director of the Corporation who continues to be an Eligible Director of the Corporation after the distribution of the shares of Acuity Brands, Inc. ("Acuity") to the stockholders of the Corporation (the "Spin-Off") shall be transferred to the Acuity Brands, Inc. Nonemployee Director Deferred Stock Unit Plan ("Acuity Plan") as of the effective date of the Spin-Off or as soon as practical thereafter. For purposes of this Plan and the Acuity Plan, each Eligible Director who becomes a director of Acuity in connection with the Spin-Off shall not be deemed to have terminated service as a director of the Corporation and shall not be deemed to have completed the last term of office to which such director was elected. (b) Adjustment of Account. Each Eligible Director who remains an Eligible Director of the Corporation following the Spin-Off shall have his or her account equitably adjusted to reflect the Spin-Off." 3. Except as provided herein, the provisions of the Plan shall remain in full force and effect. IN WITNESS WHEREOF, the undersigned Corporation has caused this Amendment No. 3 to be executed by its duly authorized corporate officers as of the day and year first written above. ATTEST: NATIONAL SERVICE INDUSTRIES, INC. /s/ Helen Haines By: /s/ Brock A. Hattox - ---------------------------------- ----------------------------- Secretary Brock A. Hattox Executive Vice President and Chief Financial Officer -2- EX-10.13 18 g73258ex10-13.txt AMENDMENT NO. 4 TO THE BENEFITS PROTECTION TRUST EXHIBIT 10.13 AMENDMENT NO. 4 TO NATIONAL SERVICE INDUSTRIES, INC. BENEFITS PROTECTION TRUST THIS AMENDMENT made and entered into as of the 27th day of November, 2001 by and between NATIONAL SERVICE INDUSTRIES, INC. (the "Company") and WACHOVIA BANK, N.A., as trustee (the "Trustee"). W I T N E S S E T H: WHEREAS, the Company has previously established a trust agreement known as the National Service Industries, Inc. Benefits Protection Trust (the "Trust"); and WHEREAS, the Company now desires to amend the Trust as hereinafter provided; NOW, THEREFORE, for and in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows: 1. Article 3 is hereby amended by deleting Sections 3.1, 3.2 and 3.3 in their entirety, renumbering Section 3.4 as Section 3.2, and adding a new Section 3.1 as follows: "3.1 At any time, the Company shall have the unlimited right to deliver cash or marketable securities reasonably acceptable to the Trustee to be credited to the Trustee Expense Account. Any amount (together with the income attributable thereto) which is credited to the Trustee Expense Account may be withdrawn by the Company by written notice to the Trustee at any time prior or subsequent to a Threatened Change in Control Period and prior to a Change in Control. Notwithstanding anything contained in this Agreement to the contrary, the Company shall not make any withdrawal from this Trust during a Threatened Change in Control Period or after the occurrence of a Change in Control." 2. Section 14.2 is hereby amended by deleting all of that portion of such section after the first sentence. 3. This Amendment No. 4 shall be effective as of the date of this Amendment. Except as hereby modified the Trust shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 4 as of the day and year first written above. NATIONAL SERVICE INDUSTRIES, INC. BY: /s/ James S. Balloun ------------------------------- WACHOVIA BANK, N.A., AS TRUSTEE BY: /s/ John N. Smith, III ------------------------------- 2 EX-10.14(A) 19 g73258ex10-14a.txt SUPPLEMENTAL RETIREMENT PLAN EXHIBIT 10.14(a) SUPPLEMENTAL RETIREMENT PLAN FOR ELIGIBLE EMPLOYEES OF AECO PRODUCTS DIVISION OF NATIONAL SERVICE INDUSTRIES, INC. (As Amended and Restated Effective As of January 1, 1994) SUPPLEMENTAL RETIREMENT PLAN FOR ELIGIBLE EMPLOYEES OF AECO PRODUCTS DIVISION OF NATIONAL SERVICE INDUSTRIES, INC. (As Amended and Restated Effective As Of January 1, 1994) This restatement of the Supplemental Retirement Plan for Eligible Employees of AECO Products Division of National Services Industries, Inc. entered into as of the 31st day of August, 1996 by AECO Products Division of National Service Industries, Inc. (the "Company"); WITNESSETH: WHEREAS, the Company established the Supplemental Retirement Plan for Eligible Employees of AECO Products Division of National Service Industries, Inc. (the "Plan"), which Plan has heretofore been amended in a number of respects; and WHEREAS, the Company now desires to further amend the Plan, effective January 1, 1994, in accordance with the amendment and restatement attached hereto; and WHEREAS, this amended and restated Plan shall only apply to Eligible Employees who retire, die or otherwise terminate employment on or after January 1, 1994, with the rights and benefits of Eligible Employees who terminated prior to that date being governed by the prior provisions of the Plan; NOW, THEREFORE, the Plan is hereby amended and restated in the form attached hereto, effective January 1, 1994, to apply to Eligible Employees who retire, die or otherwise terminate employment on or after that date. NATIONAL SERVICE INDUSTRIES, INC. By: /s/ David Levy ----------------------------------- David Levy Executive Vice President, Administration and Counsel ARTICLE I DEFINITIONS AND CONSTRUCTION 1.1 Definitions: Where the following words and phrases appear in this Plan, they shall have the meanings set forth below, unless the context clearly indicates to the contrary: (a) Accrued Pension: A Participant as of any given date shall have an Accrued Pension, which in each case shall be reduced by the benefit, or the Actuarial Equivalent of the benefit, where appropriate, which the Participant is entitled to receive from the AECO Plan. The determination of the reduction under this Section 1.1(a) shall be made by the Committee and its decisions on such matters shall be final and binding on all parties. The appropriate Accrued Pension shall be classified as follows: (1) Normal Retirement Accrued Pension: An annual benefit determined by (i) multiplying the Participant's Pension Compensation Base by one and one-half percent (1 1/2%) for each year of Credited Service; (ii) limiting the sum determined in (i) above to an amount which does not exceed fifty percent (50%) of the Participant's Pension Compensation Base; (iii) reducing the sum determined in (ii) above by two percent (2%) of the annual Primary Old-Age Social Security Benefit for each year of Credited Service, but not more than fifty percent (50%) of such Primary Old-Age Social Security Benefit; and (iv) multiplying the sum determined in (iii) above, by a fraction, the numerator being the Participant's Credited Service and the denominator being the Participant's Eligible Service. Benefits provided hereunder will not be decreased due to subsequent increases in Social Security benefits. The Accrued Pension of any Participant who elects a refund of his contributions to the AECO Plan, will be reduced (but not below zero) by same amount that such Participant's benefits are reduced under the AECO Plan on account of such withdrawal. (2) Early Retirement Accrued Pension: A Participant's Accrued Pension as of any given date that is after the date he has attained both at least age 55 and completed at least 15 years of Credited Service, but before his Normal Retirement Date, shall be an amount determined by computing the Participant's Pension as if it were determined pursuant to Section 1.1(a)(1) above and by reducing the resulting figure by five-twelfths of one percent (5/12ths of 1%) thereof for each month by which the Pension Commencement Date precedes his Normal Retirement Date. (3) Late Retirement Accrued Pension: A Participant's Accrued Pension as of any given date that is after his Normal Retirement Date shall be an amount determined by computing the Participant's Pension as if it were calculated pursuant to Section 1.1(a)(1) above, but using the Participant's Compensation Base, Credited Service and Eligible Service as of his actual date of Retirement. (4) Death or Disability Accrued Pension: The death and disability benefits provided under Section Articles III and IV of the Plan. -1- (5) Vested Termination Accrued Pension: A Participant's Accrued Pension as of any given date when his Accrued Pension is not determined under Sections (a) (1), (2), (3) or (4) shall be an amount determined by computing the Participant's Pension as if it were calculated pursuant to Section 1.1(a)(1) above, but using the Participant's Pension Compensation Base, Credited Service and Eligible Service as of the date of determination. Notwithstanding the foregoing, when a Participant who received a distribution or distributions following his Termination Date or Retirement is re-employed and again becomes an active Participant, such Participant's Accrued Pension, as computed pursuant to the appropriate provision of this Section, shall be reduced by the monthly Accrued Pension amount that is the Actuarial Equivalent of the distribution(s) made to the Participant. (b) Act: Public Law No. 93-406, the Employee Retirement Income Security Act of 1974, as amended from time to time. (c) Actuarial (or Actuarially) Equivalent: Equality in value of the aggregate amounts expected to be received under different forms of payment, using the same basis as defined for such term in the AECO Plan. (d) Actuary: The individual actuary, or firm of actuaries, selected by the Administrator to provide actuarial services in connection with the administration of the Plan. (e) Administrator: National Service Industries, Inc. (f) AECO Plan: The Pension Plan of AECO Products Division of National Service Industries, Inc., as it may be amended from time to time. (g) Anniversary Date: January 1st of each year. (h) Authorized Leave of Absence: Any absence authorized by the Company under the Company's standard personnel practices, provided that all persons under similar circumstances shall be treated alike in the granting of such Authorized Leaves of Absence, and provided further that the Participant returns within the period specified in the Authorized Leave of Absence. (i) Board: The Board of Directors of National Service Industries, Inc. or its Executive Committee. (j) Break in Service: An event which results in the cancellation of a Participant's previous Credited Service and Eligible Service as provided in Section 2.4. (k) Break Year: A Plan Year in which an Eligible Employee failed to accrue at least 500 Service Hours. (l) Committee: The persons appointed under the provisions of Article VII. -2- (m) Company: Company shall mean the AECO Products Division of National Service Industries, Inc. (n) Credited Service: The period of a Participant's employment with the Company considered in determining his eligibility for benefits from the Plan and the amount of his Accrued Pension, in accordance with Section 2.3, or credited pursuant to Sections 2.10 and 2.11, plus, for the sole purpose of determining his eligibility for a Vested Pension, any period of employment completed prior to eligibility for participation in the AECO Plan. (o) Disability Retirement Date: The date of Retirement due to disability as specified in Section 3.4. (p) Division: A branch, division, or corporate office of National or any corporation which is a member of a controlled group of corporations (as defined in Code Section 414(b)) which includes the Company; any trade or business which is under common control (as defined in Code Section 414(c)) with the Company; any organization which is a member of an affiliated service group (as defined in Code Section 414(m)) which includes the Company; and any other entity required to be aggregated with the Company pursuant to regulations under Code Section 414(o). (q) Early Retirement Date: The date of Early Retirement as specified in Section 3.3. (r) Effective Date: This amended and restated Plan is effective January 1, 1994. (s) Eligible Earnings: With respect to a noncommissioned employee of the Company, the monthly basic and overtime compensation earned by such employee, including any cash profit sharing distributions or paid bonuses intended as compensation for services rendered. With respect to a commissioned employee of the Company, "Eligible Earnings" shall mean seventy-five percent (75%) of the monthly compensation actually paid to such employee by the Company (including advances or drawings against commissions, but not loans which are made for other purposes). Cash awards, such as Christmas bonuses or gifts, service awards, etc., and all compensation received during a period in which an employee is eligible to participate in the Plan, but does not elect to do so, shall be excluded. Eligible Earnings shall be conclusively determined by the books and records of the Company. (t) Eligible Employee: Any employee of the Company who is designated by the Chief Executive Officer of National as eligible to participate in the Plan and who is listed on the Appendix attached hereto. (u) Eligible Service: The period of a Participant's employment with the Company considered in determining the amount of his Accrued Pension, in accordance with Section 2.2. (v) Fiduciaries: The Company, National, the Plan Administrator and the Committee, but only with respect to the specific responsibilities of each for Plan administration, all as described in Article VI. -3- (w) Late Retirement Date: The date of Retirement subsequent to Normal Retirement Date as specified in Section 3.2. (x) National: National Service Industries, Inc. (y) Normal Retirement Date: The date of Retirement as specified in Section 3.1. (z) Participant: An Eligible Employee participating in the Plan in accordance with the provisions of Section 2.1. (aa) Pension: A series of monthly amounts which are payable to a person who is entitled to receive benefits under the Plan. (bb) Pension Commencement Date: The date as of which the initial payment of a Participant's Pension is due to commence, as provided in Article III, provided that such date shall, in no event, be later than the first of the month following or coincident with the last to occur of the following: (a) ten years after the commencement date of the Participant's participation in the AECO Plan or (b) the Participant's Normal or Late Retirement Date or (c) the Termination Date of the Participant. (cc) Pension Compensation Base: The Pension Compensation Base for computing the Pension of a Participant shall be twelve (12) times the average of his highest sixty (60) consecutive calendar months of Eligible Earnings received from the Company within the last one hundred twenty (120) calendar months of employment ending on the last day of the month coinciding with or next preceding the termination of his employment with the Company for any reason. (dd) Plan: The Supplemental Retirement Plan for Eligible Employees of AECO Products Division of National Service Industries, Inc., the Plan set forth herein, as amended from time to time. (ee) Plan Year: A twelve (12) month period beginning on January 1 and ending on December 31. (ff) Primary Social Security Benefit: The annual amount available to the Participant at age sixty-five (65) under the provisions of Title II of the Social Security Act (or its equivalent in the event of amendment, modification or replacement) in effect at the earliest to occur of (i) Retirement, but not later than Normal Retirement Date, (ii) death, or (iii) termination of employment, without regard to any increases in the wage base or benefit levels that take effect after the date of Disability Retirement, Early Retirement, or termination of employment; provided that (1) For the purposes of Section 1.1, if the exact Primary Social Security Benefit is not known upon termination of employment, it shall be estimated in accordance with uniform rules adopted by the Committee; -4- (2) For the purposes of Sections 1.1(a)(2) and 1.1(a)(5), if an Eligible Employee terminates employment prior to age sixty-five (65), his Primary Social Security Benefit shall be calculated by assuming continuation of his most recent Eligible Earnings until age sixty-five (65); and (3) The fact than an Eligible Employee does not actually receive such amount because of failure to apply or continuance of work, or for any other reason, shall be disregarded. (gg) Retirement: Termination of employment for reasons other than death after a Participant has fulfilled all requirements for a Normal Retirement Pension, a Late Retirement Pension, an Early Retirement Pension, or a Disability Retirement Pension. Retirement shall be considered as commencing on the day immediately following a Participant's last day of employment (or Authorized Leave of Absence, if later). (hh) Service Date: The date as of which an Eligible Employee's most recent period of continuous employment with the Company commenced. Such date shall coincide with the Eligible Employee's first date of hire with the Company unless he suffered a subsequent Break in Service, in which event the Eligible Employee's Service Date shall be the earliest date of re-employment with the Company as of which he commenced accruing Eligible Service without any cancellation thereof because of a subsequent Break in Service. (ii) Service Hours: Subject to the Break in Service provisions of Section 2.4, all hours for which an Eligible Employee is compensated by the Company. (jj) Termination Date: The date of termination of an Eligible Employee's employment with the Company for reasons other than death or Retirement. (kk) Vested Terminee: A Participant whose Termination Date occurs after the completion of at least ten (10) years of Credited Service (but exclusive of that period he was eligible to participate in the AECO Plan and did not participate), but prior to achieving eligibility for Retirement. 1.2 Construction: The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender, and the singular may include the plural, unless the context clearly indicates to the contrary. The words "hereof," "herein," "hereunder" and other similar compounds of the word "here" shall mean and refer to the entire Plan, not to any particular provision or Section. -5- ARTICLE II PARTICIPATION, CREDITED SERVICE, ELIGIBLE SERVICE AND BREAK IN SERVICE 2.1 Eligibility for Participation: (a) In General - An Eligible Employee who is a Participant in this Plan and the AECO Plan on January 1, 1994 shall continue to participate in this Plan, subject to the conditions and limitations provided for herein. Any other Eligible Employee shall be eligible to participate on the Anniversary Date following the fulfillment of the following conditions: (i) The Eligible Employee's employment did not commence on or after his sixtieth (60th) birthday; (ii) The Eligible Employee is a participant in the AECO Plan, but is not covered under any other tax-qualified non-governmental retirement plan to which the Company contributes, whether the plan is a Company plan or otherwise; (iii) The Eligible Employee has completed six (6) months of employment. After a Break in Service, a former Participant who is rehired may again become a Participant upon again fulfilling the above requirements. (b) Special Eligibility - Any Eligible Employee (or group of Eligible Employees) designated on an Appendix attached hereto shall be eligible to participate in the Plan on the date specified in the Appendix and in accordance with the conditions and limitations provided in such Appendix. 2.2 Eligible Service: Subject to the Break in Service provisions of Section 2.4 and the provisions of Sections 2.10 and 2.11, the period of employment of an Eligible Employee from the date he first became eligible to participate under the provisions of the AECO Plan to his date of Retirement, death, or Termination Date, whichever is the first to occur, excluding from such period (i) any periods during which the Eligible Employee could not make a Participant Contribution to the AECO Plan due to having no earnings from the Company as the result of a period of Authorized Leave of Absence, or, (ii) prior to December 1, 1976, any period during which the Eligible Employee did not accrue Credited Service. Eligible Service may not be less than Credited Service for any Plan Year during which a Participant earns Credited Service. 2.3 Credited Service: Subject to the Break in Service provisions of Section 2.4, and the provisions of Sections 2.10 and 2.11, the period of employment during which an Eligible Employee is a Participant in the AECO Plan, determined as of any given date as the sum of (a), if any, and (b) as follows: (a) Credited Service Prior to June 1, 1976: The period of employment of the Eligible Employee with the Company through May 31, 1976, excluding any period of time during which the Eligible Employee was eligible to contribute to the AECO Plan and did not do -6- so. Any cancellation of service under the provisions of the AECO Plan prior to June 1, 1976 is not restored by the provisions hereof. (b) Credited Service From and After June 1, 1976: A Participant shall accrue one (1) year of Credited Service for each Plan Year from and after June 1, 1976 during which he is an active Participant in the AECO Plan and in which he has 1,000 or more Service Hours. For the short Plan Year June 1, 1982 through December 31, 1982, a Participant will accrue an additional year of Credited Service if he completed at least 1000 Service Hours during such period. No Credited Service shall be granted for any Plan Year in which less than 1,000 Service Hours are completed except for the Plan Year of the Participant's Retirement or Termination Date or death; in such case, the final Plan Year shall be credited as the decimal equivalent, expressed to two decimal places, of a fraction having a numerator equal to the Participant's Service Hours accrued during such final year, if less than 1,000 in such year, and a denominator with respect to such year equal to 1,000 Service Hours. Except as provided pursuant to Sections 2.10 or 2.11, no Credited Service shall accrue for any period of employment for which an Eligible Employee did not make Participant Contributions under the AECO Plan, but only to the extent such Participant Contributions were required to be made for such period. A Participant shall accrue Credited Service for the period of employment prior to his initial date of eligibility to participate in the Plan. 2.4 Break in Service: After the Effective Date, a Plan Year during which a Participant completes less than 500 Service Hours as the result of the occurrence of a Termination Date or Retirement shall constitute a Break in Service. Upon incurring a Break in Service, an Eligible Employee's rights and benefits under the Plan shall be determined in accordance with his Credited Service and Eligible Service, and other applicable Plan provisions at the time of the Break in Service. No Pension payments shall be made during a period of employment with the Company; and if a re-employed Participant had received any Pension payments under the Plan, the Pension payable starting on the first day of the calendar month coinciding with or next following the date of his subsequent Retirement shall be reduced by the Actuarial Equivalent of any Pension payments he received prior to his Normal Retirement Date. 2.5 Method of Becoming a Participant: All Eligible Employees shall become Participants in this Plan upon satisfaction of the eligibility requirements, provided that they are Participants at such time in the AECO Plan. 2.6 Participants Bound: Each Eligible Employee becoming a Participant hereunder shall be conclusively presumed for all purposes to have consented to this Plan and any amendments, modifications or revisions hereto, and to all the terms and conditions thereof, and shall be bound thereby with the same force and effect as if he had entered into a contract to such effect and any amendments, modifications or revisions hereto. 2.7 Authorized Leave of Absence: An Authorized Leave of Absence due to service in the Armed Forces of the United States shall not constitute a Break in Service, provided that -7- the absence is caused by war or other emergency, or provided that the Eligible Employee is required to serve under the laws of conscription in time of peace, and further provided that the Eligible Employee returns to employment with the Company within the period provided by law. An Authorized Leave of Absence for other reasons shall not constitute a Break in Service if the Eligible Employee returns to active employment with the Company upon expiration of the period of such Authorized Leave of Absence. 2.8 Eligible Employee Not Actively At Work on Date of Eligibility: An Eligible Employee who is not actively at work on his date of eligibility for any reason other than a Break in Service, shall become eligible to participate on his return to active employment, provided he becomes a Participant as otherwise provided herein. 2.9 An Eligible Employee Ceases Active Participation: Except as provided in Section 2.10, if an Eligible Employee ceases to be an active Participant in the AECO Plan, he shall be treated as if his employment terminated at such time and any benefit to which he would be entitled would be computed as if there had been a termination of employment; however, any distribution of such benefit shall not commence until such time as he would otherwise become entitled (had he continued as a Participant) to benefit because of Retirement, actual termination of employment or death; provided, if such Eligible Employee withdraws within ninety (90) days after first becoming a Participant in the AECO Plan, then such Eligible Employee shall cease to be a Participant in the AECO Plan and in this Plan as of the first day of the immediately succeeding pay period and unless the Eligible Employee shall otherwise again become a Participant under this Plan, he shall have no further rights or benefits as a Participant in this Plan. 2.10 Transfers of Eligible Employee: The following rules shall apply when an Eligible Employee transfers to or from an Eligible Employee position in the Company: (a) When Employee Becomes an Eligible Employee: An Employee of the Company who becomes an Eligible Employee of the Company, may become a Participant under this Plan on the Anniversary Date as of which he has met the eligibility requirements for participation; however, the Eligible Employee's Service Date for the purpose of this Plan shall be the date of his employment with the Company, not the date he becomes an Eligible Employee. (b) Accrued Pension Upon Transfer To A Non-Eligible Status: If a Participant is transferred to a non-eligible status of employment within the Company, his Accrued Pension under this Plan will be determined as though his transfer were a termination of employment; however if the transfer occurs prior to the completion of ten (10) years of Credited Service, such Participant shall continue to accrue service for vesting purposes only until his employment with the Company shall terminate. The date of such termination of employment will be deemed to be the date of his transfer. -8- ARTICLE III RETIREMENT AND TERMINATION DATES AND PENSIONS 3.1 Normal Retirement and Pension: A Participant may retire on his 65th birthday (his "Normal Retirement Date"), at which time he shall become fully vested in his Accrued Pension. Such Participant's Pension shall commence as of the first day of the calendar month coinciding with or next following his 65th birthday and shall be payable in the normal form described in Section 3.7, unless the Participant elects an optional form of benefit in accordance with Section 3.8. 3.2 Late Retirement and Pension: When permitted by Company policy, a Participant may continue his employment beyond his Normal Retirement Date. In such event, his Late Retirement Accrued Pension shall commence as of the last day of the calendar month coinciding with or next following the date of his actual Retirement (his "Late Retirement Date"). The Participant's Late Retirement Accrued Pension shall be payable in the normal form described in Section 3.7, unless the Participant elects an optional form of benefit in accordance with Section 3.8. 3.3 Early Retirement and Pension: A Participant may retire after his 55th birthday and the date of completion of at least 15 years of Credited Service, and be entitled to an Early Retirement Accrued Pension. If he retires, the Participant's Pension shall be equal to his Accrued Pension, payable in the normal form described in Section 3.7, with payment commencing as of the first day of the calendar month coinciding with or next following the Participant's 65th birthday. A Participant may elect to commence his Early Retirement Pension as of the first day of the calendar month coinciding with or next following his Retirement, or as of the first day of any subsequent calendar month which precedes his Normal Retirement Date. In such event, the Participant's Pension, payable in the normal form, shall be reduced by five-twelfths of one percent (5/12ths of 1%) for each full month or portion thereof by which the commencement of the Early Retirement Pension precedes the Participant's Normal Retirement Date. In lieu of the normal form of benefit payment, a Participant may elect to receive his Accrued Pension in one of the optional forms of benefit payment set forth in Section 3.8, which shall be the Actuarial Equivalent of the normal form. 3.4 Disability Retirement and Pension: A Participant shall be eligible for a Disability Retirement Pension if he retires by reason of Total and Permanent Disability (as defined in Section 3.4(a) below) or Disability (as defined in Section 3.4(b) below). His Disability Retirement Date shall be the first day of the month in which the Participant is deemed to have a Total and Permanent Disability or a Disability, at which time payment of such disability benefit shall commence. (a) Definition of Total and Permanent Disability: A Participant shall be considered to have a Total and Permanent Disability if he suffers from a physical or mental condition which entitles the Participant to receipt of a Social Security Disability Insurance benefit under the Social Security Act; provided, however, that a Participant shall not be considered to be Totally and Permanently Disabled for purposes of receiving a Disability Retirement Pension hereunder if the disability (i) is due to or contributed to by the excessive and -9- habitual use of alcoholic liquors, or drug use or abuse, (ii) is the result of a self-inflicted injury, (iii) resulted from or was contracted, incurred, or suffered while the Participant was engaged in a criminal enterprise, while in any Armed Forces of the United States or any other country (including the United States Merchant Marine), or (iv) occurred while the Participant was on an unpaid absence (excluding any absence for a sickness or injury which results in disability). A Participant's Total and Permanent Disability shall be considered to have ended and entitlement to a Disability Retirement Pension on account of Total and Permanent Disability under this Plan shall cease if prior to the Participant's Normal Retirement Date, the Participant losses entitlement to Social Security Disability Insurance benefits. (b) Definition of Other Disability: A Participant shall be considered Disabled if as a result of a physical or mental condition he is unable to perform the duties of his current job with the Company. A determination as to whether a Participant is able to perform the duties of his current job shall be certified by two duly licensed and practicing physicians, one selected by the Committee and one by the Participant or his representative. A Participant shall not be considered to have a Disability for purposes of receiving a Disability Retirement Pension hereunder if the Disability (i) is due to or contributed to by the excessive and habitual use of alcoholic liquors, or drug use or abuse, (ii) is the result of a self-inflicted injury, (iii) resulted from or was contracted, incurred, or suffered while the Participant was engaged in a criminal enterprise, while in any Armed Forces of the United States or any other country (including the United States Merchant Marine), or (iv) occurred while the Participant was on an unpaid absence (excluding any absence for a sickness or injury which results in disability). Their determination shall be evidenced by appropriate written certificates delivered to the Committee. If the two physicians fail to agree, they shall appoint a third physician in the following manner: (1) the physician selected by the Committee shall prepare a list of at least three physicians qualified in his judgment to render an opinion in the case, considering the nature of the disability; (2) the physician selected by the Participant shall choose one name from the list so submitted; and (3) arrangements shall be made by the Committee to have the Participant evaluated by the physician so selected, with the report of such evaluation to be submitted to the Committee. Based upon the reports so submitted, the Committee shall determine, in its sole judgment, whether the Participant is Disabled and entitled to a Disability Retirement Pension hereunder. In the event that no report is submitted by the third physician chosen in accordance with the procedure outlined above, the physician selected by the Participant shall choose another name from the list, provided that there be at least three (3) names on the list at the time of such choosing. If the physician selected by the Participant fails to select the third physician from a list submitted to him, or the Participant fails to submit to such examinations as may be required by any of the physicians involved in the above process, the Committee may choose the third physician or, at its option, make its determination on the basis of the report submitted by the physician it had previously chosen. The Committee shall have the right to have medical examinations made from time to time by a duly licensed physician to determine whether a Participant who has not reached Normal Retirement Date remains Disabled. If the Participant refuses to submit to such medical examination, upon instruction from the Committee, payment of any further benefits shall be withheld until the Participant does so submit. If as a result of a subsequent examination, the physician selected by the Committee determines that the Participant no longer has a Disability, -10- and the Participant does not agree with his conclusion, the Participant shall have the right to an examination and opinion of his own physician, and if the physicians appointed by the Committee and the Participant fail to agree, the two physicians shall select a third physician in accordance with the procedures set forth above. Notwithstanding anything contained herein to the contrary, once a Participant reaches his Normal Retirement Date, he shall be deemed to be Disabled for the remainder of his life, regardless of whether or not he subsequently recovers. (c) Total and Permanent Disability Retirement Pension: (i) A Participant determined to be eligible for Total and Permanent Disability benefits pursuant to Section 3.4(a) shall receive as a Disability Retirement Pension the amount which would have been payable to his beneficiary pursuant to Article IV, as applicable, had his death occurred on the date of the inception of his Total and Permanent Disability. At the election of the Participant, this amount may be paid in periodic installments, in which event the aggregate amount of such installment shall be the Actuarial Equivalent of the sum which would otherwise be payable. (ii) Alternatively, a Participant determined to be eligible for Total and Permanent Disability benefits pursuant to Section 3.4(a) who, at the inception of his disability, has completed twenty-five (25) or more years of Credited Service or is eligible for Early Retirement pursuant to Section 3.3 may, at his option, elect to receive his disability benefit in the form of a monthly pension computed in accordance with Section 3.1 based on Credited Service accrued to the date of his disability, as though he had attained age sixty-five (65) on the date of his disability. (d) Disability Retirement Pension: A Participant determined to be eligible for a Disability Retirement Pension pursuant to Section 3.4(b) who at the inception of his Disability has completed twenty-five (25) or more years of Credited Service and attained the age of sixty-two (62) shall receive his Accrued Pension, which shall not be reduced to reflect the early commencement of benefits. (e) Recovery from Disability or Total and Permanent Disability: (i) Disability Payments to Cease: If a disabled Participant who is receiving disability benefits under this Section 3.4 is found to be no longer disabled as provided in Section 3.4(a) or (b), whichever is applicable, then his disability benefits shall immediately cease. (ii) Return to Active Employment: If a disabled Participant is re-employed by the Company immediately following certification of recovery, his Plan participation shall be reinstated as of the date of such re-employment with full accrued Credited Service to date of disability. He shall not receive Credited Service for the period of disability, but such period shall be counted in determining all service for vesting purposes only. The amount of any Pension to which he may subsequently become entitled shall not be reduced by any disability benefits paid to him under the Plan, but the total of such disability benefits shall be deducted from his pre-retirement death benefit and from any refund of those contributions which were made by him prior to the inception date of disability. -11- (iii) Non-Return to Active Employment: If a disabled Participant is not re-employed by the Company immediately following certification of recovery, he shall be considered as a terminated Employee and shall have no further interest in the Plan other than any benefit he may be entitled to under Section 3.5, reduced by the total of disability payments received hereunder; provided, however, that if such Participant were eligible for Early Retirement under the provisions of Section 3.3 as of the date on which he was certified disabled, he shall receive a continuing Pension (computed in accordance with Section 3.3 from the end of the month following certification of recovery, and his death benefit thereafter shall be his preretirement death benefit as of the date of disability (computed in accordance with Article IV) reduced by the total of all disability and Pension payments made since the date on which he was certified to be disabled. (f) Payment of Disability or Total and Permanent Disability Retirement Benefits: (i) Lump Sum: Except as provided in Section 3.4(c)(ii), a disability benefit computed in accordance with Section 3.4(c) shall be payable as a single lump sum payment. (ii) Annual Pension: If a disability benefit is an annual Pension payable under Section 3.4(c)(ii), it shall be paid in equal monthly installments of one-twelfth (1/12) of the annual amount payable, which monthly installment shall be computed to the nearest whole cent. Such monthly installments shall be paid on the first date of each month, commencing with the first day of the month in which the Participant is determined to be Totally and Permanently Disabled in accordance with Section 3.4(a) and continuing for life or until such payments are ceased pursuant to Section 3.4(e)(i). (iii) Other Disability: If a disability benefit is an Annual Pension payable under Section 3.4(d), it shall be paid in equal monthly installments of one-twelfth (1/12) of the annual amount payable. Such monthly installments shall be paid on the first day of the month commencing with the first day of the month in which the Participant is determined to be Disabled in accordance with Section 3.4(b) and shall continue for life or until such payments are to cease pursuant to Section 3.4(e)(i). 3.5 Vested Terminee and Pension: A Vested Terminee shall be entitled to benefits pursuant to (a) or (b), as applicable: (a) A Pension equal to his Accrued Pension, payable in the normal form described in Section 3.7, or at the election of the Participant, in an optional form described in Section 3.8. Payment of such Pension shall commence on the first day of the calendar month coinciding with or next following the Participant's 65th birthday. (b) A Participant with at least fifteen (15) years of Credited Service may request the Committee to commence the payment of his Accrued Pension as of the first day of any calendar month that is after his 55th birthday but prior to his 65th birthday. Such Pension shall be payable in the normal form described in Section 3.7 and shall commence as of the beginning of the month so requested but the amount thereof shall be reduced by 5/12ths of 1% -12- for each full month by which the actual Pension commencement date precedes the Participant's 65th birthday. In lieu of the normal form, the Participant may elect one of the optional forms of payment described in Section 3.8. Any such optional form of benefit shall be the Actuarial Equivalent of the reduced normal form described above. 3.6 Termination Prior to Completion of 10 Years of Credited Service: Subject to Article XIII, a Participant whose Termination Date occurs prior to the completion of 10 years of Credited Service shall be entitled to no benefits under this Plan. 3.7 Normal Form of Payment of Pension: The normal form of pension payment shall be a single-life annuity with sixty (60) monthly payments certain. If a Participant receiving Pension payments dies before sixty (60) monthly Pension payments have been made, Pension payments shall be continued to the Participant's beneficiary until the sum of monthly payments to both the Participant and his beneficiary is sixty (60). 3.8 Optional Forms of Benefit Payment: A Participant entitled to a Pension in the normal form may elect to receive a Pension payable under one of the options described below. An option shall be exercised in writing on a form approved by the Committee before the Participant's Pension payments commence and the aggregate of the Pension payments expected to be made shall be the Actuarial Equivalent of the normal form of Pension to which the Participant is entitled. The optional forms are: (a) Period-Certain and Life Option: A Participant may elect to receive an adjusted Pension payable until death; and if the Participant's death occurs within a period of 120 or 180 months (as elected by the Participant) after his Pension Commencement Date, payment of the Pension will be continued in the same amount to the person or persons designated by the Participant for the balance of the 120 or 180 month period. (b) Contingent Annuitant Option: A Participant may elect to receive an adjusted Pension payable during the joint lives of the Participant and a person designated by the Participant as his contingent annuitant. Under this optional form, following the death of the Participant, payment of the Pension in the same amount or in an amount equal to 75% or 50% of the Participant's Pension (as elected by the Participant) shall continue to the contingent annuitant, if surviving, with the last payment to be made as of the first day of the month in which the death of the contingent annuitant occurs. Notwithstanding any provision herein to the contrary, if the contingent annuitant (or beneficiary) is other than the Participant's spouse and if the value of the Participant's benefit under the above options will be less than 51% of the value of his life income with 60 months certain Pension, the optional benefit shall be adjusted so that the value of the Participant's benefit under the option will be equal to 51% of the value of the Participant's life income with 120 months certain Pension. Regardless of the named beneficiary, the period of distribution selected may not exceed the joint life expectancies of the Participant and his beneficiary. A Participant electing a Contingent Annuitant Option must designate a joint pensioner at the time of such election but may change such designation at any time prior to the date on which his Pension is to commence. If a joint pensioner dies before the date on which the Participant's -13- Pension is to commence, the election shall be of no effect, and the Participant shall be treated as though he had not elected such option; but if the joint pensioner dies on or after the date on which the Participant's Pension is to commence, the election shall continue in force, and the amount of the Participant's Pension shall not be increased thereby. (c) Single Life Annuity Option: A Participant may elect to receive an adjusted Pension payable for his lifetime only, with no survivorship Pension payable following his death. (d) Social Security Level Income Option: A Participant whose Pension payments commence prior to the earliest date on which Social Security payments may be commenced may elect to receive a higher monthly Pension from the Plan before his Social Security payments are to commence and a lower payment for life thereafter so that his total monthly retirement income, before and after the commencement of his Social Security payments, is approximately the same. For the purpose of this option, such Social Security payment will be determined, as nearly as may be estimated under the provisions of the Federal Social Security Act as in force on the Participant's Retirement, assuming that the Participant (1) is no longer in employment and (2) makes proper application for such benefit on the earliest possible date. This option is available only to a Participant who retires early and elects to have his Pension commence prior to his Normal Retirement Date under the provisions of Section 3.3. The effective date of any option election ("Option Effective Date") under this Section 3.8 shall be (i) the Participant's 65th birthday in the case of Normal Retirement, but only if the Participant's spouse is the beneficial or contingent annuitant, or (ii) the date the Participant's Pension commences, in any other case. Evidence of a Participant's good health shall be required by the Committee before election of an optional form of benefit will be permitted, unless the option is elected at least one year prior to the Option Effective Date. Under no circumstances may an option be elected, changed or revoked after the Option Effective Date. An election made pursuant to this Section 3.8 shall become inoperative if the Participant's employment terminated before he is eligible for either a Normal or Early Retirement Pension, or if the Participant or his beneficiary or contingent annuitant dies before the Option Effective Date. If an option under this Section becomes effective, it will be in place of any benefit otherwise payable under this Plan, and the form made available by the Committee for election of the option shall so specify. -14- ARTICLE IV DEATH BENEFITS 4.1 Death Prior to Fifteen (15) Years of Credited Service: A Participant who dies before completing fifteen (15) years of Credited Service shall be entitled to a death benefit equal to the larger of such Participant's (a) Eligible Earnings for the calendar year immediately preceding the date of his death or (b) his annual rate of pay at the date of death. 4.2 Death After Fifteen (15) Years of Credited Service: A Participant who dies after completing fifteen (15) years of Credited Service shall be entitled to a death benefit equal to the larger of (a) one and one-half (1 1/2) times such Participant's Eligible Earnings for the calendar year immediately preceding the date of his death or (b) one and one-half (1 1/2) times such Participant's annual rate of pay at the date of death. 4.3 Death During An Authorized Absence: - Subject to the provisions of Section 4.4, if a nonretired Participant dies (a) before completing twenty-five (25) years of Credited Service and (b) during an absence from active employment authorized for any cause other than sickness or accident, his death benefit shall be the amount computed in accordance with Section 4.1 reduced by ten percent (10%) for each full month of nonpaid absence. No reduction shall be made if the Participant had twenty-five (25) or more years of Credited Service or if his absence was due to sickness or accident. 4.4 Alternative Benefit For Participants Eligible For Early Retirement: In the event of the death of a Participant who has attained the age of fifty-five (55) and has completed fifteen (15) years of Credited Service, the Participant's beneficiary may elect to receive a benefit equal to the Pension the Participant would have received if he had elected to retire on the date of his death and elected to receive an immediate Pension payable in the form of a single life annuity with sixty (60) monthly payments guaranteed. 4.5 Death After Early, Normal, or Late Retirement: The post-retirement death benefit of a Participant who retires with a Pension payable in the normal form pursuant to Section 3.7 shall be a continuation of any remaining installments of the monthly Pension payable until the number of monthly payments received by the retired Participant and his beneficiaries or estate reaches a total of sixty (60). The post-retirement death benefit of a Participant who retires with a Pension payable in an optional form pursuant to Section 3.8 shall be the death benefit payable under that option. 4.6 Death After Disability Retirement: The post-retirement death benefit of a Participant who dies after he has been certified disabled shall be his pre-retirement death benefit determined as of the date of disability (computed in accordance with Sections 4.1, 4.2, 4.3 or 4.4, as applicable) reduced by the total of all disability payments made to him prior to his death. 4.7 Payment of Death Benefits: All death benefits payable pursuant to the provisions of this Article IV shall be paid in accordance with the instructions of the Committee to the deceased Participant's designated beneficiary or beneficiaries. If the Committee shall be in doubt as to the right of any beneficiary designated by a deceased Participant to take his interest, -15- any amounts so payable may be delivered to the Participant's surviving spouse, if any, or if not then to the legal representatives of the deceased Participant, in which event the Committee, the Company, and any other persons in any manner connected with the Plan shall have no further liability with respect to the amounts so paid. In the event that the deceased Participant had designated no beneficiaries, or if all of his designated beneficiaries have predeceased him, payment of any death benefits shall be made to his estate. At the sole discretion of the Committee, any post-retirement death benefit installments may be paid in one sum which is the Actuarial Equivalent of the remaining installments. -16- ARTICLE V PLAN FINANCING 5.1 Payment of Costs and Expenses: All costs of providing the benefits to the Plan and the expenses thereof, including the cost of the Committee and the Administrator and any actuary shall be paid by the Company. -17- ARTICLE VI FIDUCIARY RESPONSIBILITIES 6.1 Allocation of Responsibility Among Fiduciaries: The Fiduciaries shall have only those specific powers, duties, responsibilities and obligations as are specifically given them under this Plan. In general, the Company shall have the responsibility for providing the benefits payable under this Plan. National shall perform the responsibilities of the Plan Administrator and shall have the sole authority to appoint and remove the members of the Committee and to amend or terminate, in whole or in part, this Plan. The Committee shall have the responsibility for the duties set forth in Article VII. Each Fiduciary warrants that any directions given, information furnished, or action taken by it shall be in accordance with the provisions of the Plan authorizing or providing for such direction, information or action. Furthermore, each Fiduciary may rely upon any such direction, information or action of another Fiduciary as being proper under this Plan, and is not required under this Plan to inquire into the propriety of any such direction, information or action. It is intended under this Plan that each Fiduciary shall be responsible for the proper exercise of its own powers, duties, responsibilities and obligations under this Plan and shall not be responsible for any act or failure to act of another Fiduciary. No Fiduciary guarantees the payment of benefits under this Plan in any manner. 6.2 Fiduciary Duties: All Fiduciaries hereunder shall discharge their duties with respect to the Plan solely in the interest of the Participants and Beneficiaries and (a) for the exclusive purpose of providing benefits to Participants and their Beneficiaries and defraying reasonable expenses of administering the Plan; (b) with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; and (c) in accordance with the documents and instruments governing the Plan insofar as such documents and instruments are consistent with the provisions of Title I of the Act. 6.3 Company Filing Responsibility: To the extent not otherwise specifically provided in the Plan, the Plan Administrator shall be responsible for filing with the Internal Revenue Service and Department of Labor all returns, reports and other documentation required under the Act. -18- ARTICLE VII COMMITTEE AND ADMINISTRATION 7.1 Appointment and Term of Committee: The Committee shall consist of the Eligible Employee Compensation Committee of the Board of Directors of National or of such other Board members as the Board may choose. The Committee presently in existence shall continue to hold office until their successors have been appointed. Any member may resign by notice in writing filed with National. The Board may remove any member, with or without cause, at any time by notice in writing to the member and the other members of the Committee. Until vacancies have been filled by the Board, the remaining members of the Committee shall have full authority to act. 7.2 Selection of Secretary and Duties of Secretary: The Committee may choose from its members a Secretary. The Secretary shall keep minutes of the Committee proceedings and all records and documents pertaining to the Committee's administration of the Plan. The Committee may employ and suitably compensate such attorneys, advisory, clerical and other employees as it may deem necessary in the performance of its duties. 7.3 Majority Vote Required; Exceptions: The action of the Committee shall be determined by the vote or other affirmative expression of a majority of its members, except that the Committee may assign any or all administrative duties to one or more members or to any person designated by the Committee. Except as otherwise expressly provided in this Section, a meeting need not be called or held to make any decision, but such decision may be made by a written document signed by a majority of the then members. Either the Chairman or the Secretary may execute any certificate or other written direction on behalf of the Committee. 7.4 Payment of Expenses: It is intended that all expenses of the Committee shall be paid by the Company or National. 7.5 Limitation of Liability: 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 or unless such liability is imposed by law. The Company or National shall indemnify and save harmless each member of the Committee against any and all expenses and liabilities arising out of his membership on the Committee, excepting only expenses and liabilities arising out of his own willful misconduct or unless such indemnification is not permitted by law. 7.6 Right to Consult: Eligible Participants and Beneficiaries may consult with the Committee on any matters relating to the Plan. 7.7 General Duties: The Committee, on behalf of the Participants and their Beneficiaries, shall enforce the Plan, and shall have all powers necessary to accomplish that purpose, including, but not by way of limitation, the following: (a) to construe and interpret the Plan, decide all questions of eligibility and determine the amount, manner and time of payment of any benefits hereunder and to notify the Participant and the Company or National, where appropriate; -19- (b) to adopt By-Laws and rules as it deems necessary, desirable or appropriate; (c) to prescribe procedures to be followed by Participants or beneficiaries filing applications for benefits; (d) to prepare and distribute, in such manner as the Committee determines to be appropriate, information explaining the Plan; (e) to receive from the Company or National and from Participants such information as shall be necessary for the Committee to perform its duties hereunder; (f) to furnish the Company or National, upon request, such annual reports as are reasonable and appropriate with respect to the Committee's duties hereunder; (g) to receive, review and keep on file (as it deems convenient or proper) reports of the receipts and disbursements of the Plan; (h) to appoint or employ individuals to assist in the administration of its duties under the Plan and any other agents as it deems advisable, including legal or actuarial counsel. The Committee shall have no power to add to, subtract from, or modify any of the terms of the Plan, or to change or add to any benefits provided by the Plan, or to waive or fail to apply any requirements of eligibility for any benefits under the Plan. The 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 are final and conclusive. 7.8 Application and Forms For Pension: The Committee may require a Participant to complete and file with the Committee an application for Pension and all other forms approved by the Committee, and to furnish all pertinent information requested by the Committee. The Committee may rely upon all such information so furnished to it, including the Participant's current mailing address. 7.9 Facility of Payment: Whenever, in the Committee's opinion a person entitled to receive any payment of a benefit or installment thereof hereunder is under a legal disability or is incapacitated in any way so as to be unable to manage his financial affairs, the Committee may direct the Company or National to make payments to such person or to his legal representative or to a relative or friend of such person for his benefit, or the Committee may direct the Company or National to apply the payment for the benefit of such person in such manner as the Committee considers advisable. Any payment of a benefit or installment thereof in accordance with the provisions of this Section shall be a complete discharge of the Committee of any liability for the selection of such payee or the making of such payment under the provisions of the Plan. 7.10 Rules and Decisions: All rules and decisions of the Committee shall be uniformly and consistently applied to all Eligible Employees under similar circumstances. When making any determination, the Committee shall be entitled to rely upon information furnished by the Company or National, legal counsel for the Company, or the Actuary. -20- 7.11 Company to Furnish Information: To enable the Committee to perform its functions, the Administrator shall supply full and timely information to the Committee of all matters relating to the pay of all Participants, their retirement, death or other cause for termination of employment, and such other pertinent facts as the Committee may require. 7.12 Administrator to Furnish Other Information: To the extent not otherwise provided in the Plan, the Administrator shall be responsible for providing all notices and information required under the Act to all Participants. 7.13 Beneficiary Designations: Each Participant who may be eligible for the payment of preretirement death benefits on his behalf pursuant to Article IV or who will receive his Accrued Pension under the normal form of payment described in Section 3.7, shall have the right at any time to designate, and rescind or change any designation of, a primary and contingent beneficiary or beneficiaries to receive benefits in the event of his death. If there is no designated beneficiary alive when a death benefit becomes payable under the Plan, the benefit shall be paid to the estate of the Participant. If a primary beneficiary dies before receiving all death benefits to which he is entitled, the balance of such payments shall be paid to the contingent beneficiary, if any. If there is no contingent beneficiary, or if the contingent beneficiary dies before receiving all death benefit payments to which he is entitled, the commuted value of the balance of such payments shall be paid to the estate of the last to die of such beneficiaries. Neither the Company (in its capacity as such) nor the Administrator shall be named as beneficiary. A designation or change of beneficiary shall be made in writing on such form or forms as the Committee may require. After such notice is so filed, the designation or change will relate back and take effect as of the date the Participant signed such written notice, whether or not the Participant is living on the date such notice is received by the Committee, but without prejudice to the Committee or the Company on account of any payment made before receipt of such notice. If at the death of a Participant, there is more than one beneficiary designated and in such designation, the Participant has failed to specify their respective interests, the beneficiaries shall share equally. Anything in this Plan to the contrary notwithstanding, if an amount becomes payable hereunder to the executors or the administrators of any person and evidence satisfactory to the Committee is given to it that no petition for the appointment of such executors or administrators has been or will be filed, the Committee may, at its option, pay the amount otherwise payable, or the commuted value thereof, to the wife or husband of such person, if living; if not living, in equal shares to the then living children of such person; if not, to either the father or mother of such person, or to both equally if both are living; if neither parent is living, in equal shares to the then living brothers and sisters of such person. -21- ARTICLE VIII SUCCESSOR COMPANY 8.1 Successor Company: In the event of the dissolution, merger, consolidation or reorganization of the Company (or National), provision may be made by which the Plan will be continued by the successor; and, in that event, such successor shall be substituted for the Company (or National) under the Plan. The substitution of the successor shall constitute an assumption of Plan liabilities by the successor and the successor shall have all of the powers, duties and responsibilities of the Company (or National) under the Plan. -22- ARTICLE IX PLAN TERMINATION 9.1 Right to Terminate: National may terminate the Plan at any time by resolution of the Board. In the event of the termination or partial termination of the Plan, the rights of all affected Participants to benefits accrued to the date of such termination or partial termination shall be fully vested and nonforfeitable. Notwithstanding anything contained herein to the contrary, for a period of two (2) years following a Change in Control, as defined in Article XIII, this Plan shall not be terminated. -23- ARTICLE X TRUST There is no separate Trust involved with this Plan, nor are there any specific assets of National or the Company earmarked to provide benefits under this Plan. Notwithstanding anything contained in this Plan to the contrary, nothing herein shall prevent or prohibit National or the Company from establishing a trust or other arrangement for the purpose of providing for the payment of the benefits payable under this Plan. -24- ARTICLE XI AMENDMENTS AND ACTION BY COMPANY 11.1 Amendments: National, by action of the Board or through a committee appointed by the Board, reserves the right to make from time to time any amendment or amendments to this Plan. Notwithstanding anything contained in this Plan to the contrary, no amendment shall have the effect of reducing the Accrued Pension of any Participant and for a period of two (2) years following a Change in Control, as defined in Article XIII, this Plan shall not be amended in any way to directly or indirectly reduce the benefit levels provided under this Plan or the benefit of any Participant or his designated beneficiary. 11.2 Notices of Amendment, Modification or Revision: Any amendment to the provisions of this Plan shall be evidenced by the substitution of the page (or adding new pages for additional provisions with a new date) of this Plan setting forth the amendment and a proper recording of the same on the Register of Amendments with notice of the same to the Committee. -25- ARTICLE XII MISCELLANEOUS 12.1 Nonguarantee of Employment: Nothing contained in this Plan shall be construed as a contract of employment between the Company or National and any Participant, or as a right of any Participant to be continued in the employment of the Company or National, or as a limitation of the right of the Company or National to discharge any of its Employees, with or without cause. 12.2 Rights Under Plan: No Participant shall have any right to, or interest in, the Plan upon termination of his employment or otherwise, except as provided from time to time under this Plan, and then only to the extent of the benefits payable under the Plan to such Participant. 12.3 Nonalienation of Benefits: Benefits payable under this Plan shall not 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, including any such liability which is for alimony or other payments for the support of a spouse or former spouse, or for any other relative of the Eligible Employee, prior to actually being received by the person entitled to the benefit under the terms of the Plan; and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits payable hereunder, shall be void. The Plan shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits hereunder. 12.4 Entering Military Service: If a Participant enters the service of the Armed Forces to the United States, then during the period of such service he shall be entitled only to the vested benefits he might otherwise be entitled to upon death or disability. 12.5 Headings for Convenience Only: The headings and subheadings in this Plan are inserted for convenience of reference only and are not to be considered in construction of the provisions hereof. 12.6 Multiple Copies: This Plan may be executed in any number of counterparts, each of which shall be deemed an original, and the counterparts shall constitute one and the same instrument, which shall be sufficiently evidenced by any one thereof. 12.7 Governing Law: This Plan shall be construed and enforced in accordance with the provisions of the Act. In the event the Act is not applicable or does not preempt state law, the laws of the State of Georgia shall govern. -26- ARTICLE XIII CHANGE IN CONTROL 13.1 Cause: For purposes of this Plan, a termination for `Cause' is a termination evidenced by a resolution adopted in good faith by two-thirds of the Board 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 Executive Resource and Nominating Committee of the Board (with the assistance of the Participant's counsel if the Participant so desires). No act, or 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 Plan 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. 13.2 Change in Control: For purposes of this Plan, a Change in Control shall mean any of the following events: (a) The acquisition (other than from National 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 National's then outstanding voting securities; or (b) The individuals who, as of September 21, 1989, 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 National's stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; or (c) Approval by stockholders of National of (1) a merger or consolidation involving National if the stockholders of National, 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 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 National outstanding immediately before such -27- merger or consolidation or (2) a complete liquidation or dissolution of National or an agreement for the sale or other disposition of all or substantially all of the assets of National. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur pursuant to Section (a), solely because twenty percent (20%) or more of the combined voting power of National's then outstanding securities is acquired by (i) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by National or any of its subsidiaries or (ii) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the stockholders of National in the same proportion as their ownership of stock in National immediately prior to such acquisition. 13.3 Termination of Employment: If a Participant's employment is terminated (other than for Cause) for any reason within two (2) years following a Change in Control, the Company shall, within five (5) days, pay to the Participant a lump sum cash payment equal to the lump sum Actuarial Equivalent of his Accrued Pension as of the date of his termination of employment whether or not the Participant is otherwise vested in his Accrued Pension. 13.4 Amendment or Termination: 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. -28- APPENDIX A.1. Eligible Individual(s): J. Randolph Zook. A.2. Effective Date of Participation: January 1, 1994 A-1 Table of Contents
Page ---- ARTICLE I DEFINITIONS AND CONSTRUCTION...........................................................................1 1.1 Definitions.....................................................................................1 (a) Accrued Pension........................................................................1 (1) Normal Retirement Accrued Pension.............................................1 (2) Early Retirement Accrued Pension..............................................1 (3) Late Retirement Accrued Pension...............................................1 (4) Death or Disability Accrued Pension...........................................1 (5) Vested Termination Accrued Pension............................................2 (b) Act....................................................................................2 (c) Actuarial (or Actuarially) Equivalent..................................................2 (d) Actuary................................................................................2 (e) Administrator..........................................................................2 (f) AECO Plan..............................................................................2 (g) Anniversary Date.......................................................................2 (h) Authorized Leave of Absence............................................................2 (i) Board..................................................................................2 (j) Break in Service.......................................................................2 (k) Break Year.............................................................................2 (l) Committee..............................................................................2 (m) Company................................................................................3 (n) Credited Service.......................................................................3 (o) Disability Retirement Date.............................................................3 (p) Division...............................................................................3 (q) Early Retirement Date..................................................................3 (r) Effective Date.........................................................................3 (s) Eligible Earnings......................................................................3 (t) Eligible Employee......................................................................3 (u) Eligible Service.......................................................................3 (v) Fiduciaries............................................................................3 (w) Late Retirement Date...................................................................4 (x) National...............................................................................4 (y) Normal Retirement Date.................................................................4 (z) Participant............................................................................4 (aa) Pension................................................................................4 (bb) Pension Commencement Date..............................................................4 (cc) Pension Compensation Base..............................................................4 (dd) Plan...................................................................................4 (ee) Plan Year..............................................................................4 (ff) Primary Social Security Benefit........................................................4 (gg) Retirement.............................................................................5 (hh) Service Date...........................................................................5 (ii) Service Hours..........................................................................5 (jj) Termination Date.......................................................................5
-i- Table of Contents ----------------- (continued)
Page ---- (kk) Vested Terminee........................................................................5 1.2 Construction....................................................................................5 ARTICLE II PARTICIPATION, CREDITED SERVICE, ELIGIBLE SERVICE AND BREAK IN SERVICE................................6 2.1 Eligibility for Participation...................................................................6 2.2 Eligible Service................................................................................6 2.3 Credited Service................................................................................6 (a) Credited Service Prior to June 1, 1976.................................................6 (b) Credited Service From and After June 1, 1976...........................................7 2.4 Break in Service................................................................................7 2.5 Method of Becoming a Participant................................................................7 2.6 Participants Bound..............................................................................7 2.7 Authorized Leave of Absence.....................................................................7 2.8 Eligible Employee Not Actively At Work on Date of Eligibility...................................8 2.9 An Eligible Employee Ceases Active Participation................................................8 2.10 Transfers of Eligible Employee..................................................................8 (a) When Employee Becomes an Eligible Employee.............................................8 (b) Accrued Pension Upon Transfer To A Non-Eligible Status.................................8 ARTICLE III RETIREMENT AND TERMINATION DATES AND PENSIONS........................................................9 3.1 Normal Retirement and Pension...................................................................9 3.2 Late Retirement and Pension.....................................................................9 3.3 Early Retirement and Pension....................................................................9 3.4 Disability Retirement and Pension...............................................................9 3.5 Vested Terminee and Pension....................................................................12 3.6 Termination Prior to Completion of 10 Years of Credited Service................................13 3.7 Normal Form of Payment of Pension..............................................................13 3.8 Optional Forms of Benefit Payment..............................................................13 (a) Period-Certain and Life Option........................................................13 (b) Contingent Annuitant Option...........................................................13 (c) Single Life Annuity Option............................................................14 (d) Social Security Level Income Option...................................................14 ARTICLE IV DEATH BENEFITS.......................................................................................15 4.1 Death Prior to Fifteen (15) Years of Credited Service..........................................15 4.2 Death After Fifteen (15) Years of Credited Service.............................................15 4.3 Death During An Authorized Absence.............................................................15 4.4 Alternative Benefit For Participants Eligible For Early Retirement.............................15 4.5 Death After Early, Normal, or Late Retirement..................................................15 4.6 Death After Disability Retirement..............................................................15 4.7 Payment of Death Benefits......................................................................15
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Page ---- ARTICLE V PLAN FINANCING........................................................................................17 5.1 Payment of Costs and Expenses..................................................................17 ARTICLE VI FIDUCIARY RESPONSIBILITIES...........................................................................18 6.1 Allocation of Responsibility Among Fiduciaries.................................................18 6.2 Fiduciary Duties...............................................................................18 6.3 Company Filing Responsibility..................................................................18 ARTICLE VII COMMITTEE AND ADMINISTRATION........................................................................19 7.1 Appointment and Term of Committee..............................................................19 7.2 Selection of Secretary and Duties of Secretary.................................................19 7.3 Majority Vote Required; Exceptions.............................................................19 7.4 Payment of Expenses............................................................................19 7.5 Limitation of Liability........................................................................19 7.6 Right to Consult...............................................................................19 7.7 General Duties.................................................................................19 7.8 Application and Forms For Pension..............................................................20 7.9 Facility of Payment............................................................................20 7.10 Rules and Decisions............................................................................20 7.11 Company to Furnish Information.................................................................21 7.12 Administrator to Furnish Other Information.....................................................21 7.13 Beneficiary Designations.......................................................................22 ARTICLE VIII SUCCESSOR COMPANY..................................................................................22 8.1 Successor Company..............................................................................22 ARTICLE IX PLAN TERMINATION.....................................................................................23 9.1 Right to Terminate.............................................................................24 ARTICLE X TRUST.................................................................................................25 ARTICLE XI AMENDMENTS AND ACTION BY COMPANY.....................................................................25 11.1 Amendments.....................................................................................25 11.2 Notices of Amendment, Modification or Revision.................................................25 ARTICLE XII MISCELLANEOUS.......................................................................................26 12.1 Nonguarantee of Employment.....................................................................26 12.2 Rights Under Plan..............................................................................26 12.3 Nonalienation of Benefits......................................................................26 12.4 Entering Military Service......................................................................26 12.5 Headings for Convenience Only..................................................................26
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Page ---- 12.6 Multiple Copies.................................................................................26 12.7 Governing Law...................................................................................26 ARTICLE XIII CHANGE IN CONTROL...................................................................................27 13.1 Cause...........................................................................................27 13.2 Change in Control...............................................................................27 13.3 Termination of Employment.......................................................................28 13.4 Amendment or Termination........................................................................28 APPENDIX.........................................................................................................A-1
-iv- EX-10.14(B) 20 g73258ex10-14b.txt AMENDMENT NO. 1 TO SUPPLEMENTAL RETIREMENT PLAN EXHIBIT 10.14(b) AMENDMENT NO. 1 TO THE SUPPLEMENTAL RETIREMENT PLAN FOR ELIGIBLE EMPLOYEES OF AECO PRODUCTS DIVISION OF NATIONAL SERVICE INDUSTRIES, INC. THIS AMENDMENT made as of this 31st day of August, 1996, by National Service Industries, Inc. ("NSI"); W I T N E S S E T H: WHEREAS, NSI has previously established the Supplemental Retirement Plan for Eligible Employees of AECO Products Division of National Service Industries, Inc. (the "Plan") for the exclusive benefit of its eligible employees and their beneficiaries; and WHEREAS, effective as of July 1, 1995, NSI adopted a 401(k) plan for the benefit of the employees of AECO Products Division; and WHEREAS, NSI now desires to amend the Plan to reflect that the Accrued Pension under the Plan is offset for contributions made to the 401(k) plan; and WHEREAS, pursuant to the power of amendment contained in Section 11.1 of the Plan, the Plan is hereby amended as follows: 1. Section 1.1(a) of the Plan is hereby amended by deleting the first sentence of such section and substituting the following therefor: "A Participant as of any given date shall have an Accrued Pension, which, in each case, shall be reduced by (i) the benefit, or the Actuarial Equivalent of the benefit, where appropriate, which the Participant is entitled to receive from the AECO Plan, and (ii) the Actuarial Equivalent value of the Participant's hypothetical Account in the 401(k) Plan, assuming the Participant had contributed to the 401(k) Plan during the period he was eligible to participate in such Plan in an amount annually equal to 2% of his "Annual Compensation" (as that term is defined in the 401(k) Plan and subject to the limitation of Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the "Code")) and received related matching contributions, and that his Account had earned 8% per annum to such date." 2. Section 1.1 of the Plan is hereby amended by adding a new Section (ll) as follows: "(ll) 401(k) Plan - The AECO Employees' 401(k) Retirement and Savings Plan, which became effective July 1, 1995, as it may be amended from time to time." 3. Section 2.1(a)(ii) of the Plan is hereby amended by deleting the existing section in its entirety and substituting the following therefor: "The Eligible Employee is a Participant in the AECO Plan, but is not covered under any other tax qualified non-governmental retirement plan (other than the 401(k) Plan) to which the Company contributed, whether the Plan is a Company plan or otherwise." 4. This Amendment shall be effective July 1, 1995. Except as provided herein, the provisions of the Plan shall remain in full force and effect. IN WITNESS WHEREOF, NSI has caused this Amendment No. 1 to be executed by its duly authorized corporate officer and is hereby accepted the same as of the date and year first written above. ATTEST: NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Carol Ellis Morgan By: /s/ David Levy ------------------------ ---------------------------------------- Carol Ellis Morgan David Levy Assistant Secretary Executive Vice President Administration and Counsel EX-10.14(C) 21 g73258ex10-14c.txt AMENDMENT NO. 2 TO SUPPLEMENTAL RETIREMENT PLAN EXHIBIT 10.14(C) AMENDMENT NO. 2 TO THE SUPPLEMENTAL RETIREMENT PLAN FOR ELIGIBLE EMPLOYEES OF AECO PRODUCTS DIVISION OF NATIONAL SERVICE INDUSTRIES, INC. THIS AMENDMENT made as of this 31st day August 1996, by National Service Industries, Inc. ("NSI"); W I T N E S S E T H: WHEREAS, NSI has previously established the Supplemental Retirement Plan for Eligible Employees of AECO Products Division of National Service Industries, Inc. (the "Plan") for the exclusive benefit of its eligible employees and their beneficiaries; and WHEREAS, effective as of August 31, 1996, NSI will reorganize its operations into several newly-formed corporations and limited partnerships; and WHEREAS, NSI desires to amend the Plan in connection with the reorganization; and WHEREAS, NSI pursuant to the power of amendment contained in Section 11.1 of the Plan, the Plan is hereby amended as follows: 1. Section 1.1(m) of the Plan is hereby amended by deleting such section in its entirety and substituting the following: "1.1(m) Company: Company shall mean the AECO Products Division of National Service Industries, Inc. of Georgia and any successor company." Article X of the Plan is hereby amended by deleting such article in its entirety and substituting the following: "Article X Trust The benefits provided by this Plan shall be unfounded. 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 Participants from the assets of the trust." 3. Article XII of the Plan is hereby amended by adding the following new section 12.8: "12.8 In consideration of each Participant's performance of valuable services that inure to the financial benefit of National, National does hereby agree to perform all of the obligations and responsibilities and to pay any benefits due and owing to the Participant under the Plan if the Company fails or is unable to do so" 4. This Amendment shall be effective August 31, 1996. 5. Except as provided herein, the provisions of the Plan shall remain in full force and effect. IN WITNESS WHEREOF, NSI has caused this Amendment No. 2 to be executed by its duly authorized corporate officer and is hereby accepted the same as of the date and year first written above. ATTEST: NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Carol Ellis Morgan By: /s/ David Levy -------------------------- ------------------------------------- Carol Ellis Morgan David Levy Assistant Secretary Executive Vice President Administration and Counsel The undersigned employer does hereby agree to adopt the Plan this 31st day of August, 1996. NATIONAL SERVICE INDUSTRIES, INC. OF GEORGIA By: /s/ David Levy ------------------------------------ Executive Vice President, Administration and Counsel EX-10.14(D) 22 g73258ex10-14d.txt AMENDMENT NO. 3 TO SUPPLEMENTAL RETIREMENT PLAN EXHIBIT 10.14(d) AMENDMENT NO. 3 TO THE SUPPLEMENTAL RETIREMENT PLAN FOR ELIGIBLE EMPLOYEES OF AECO PRODUCTS DIVISION OF NATIONAL SERVICE INDUSTRIES, INC. THIS AMENDMENT made as of the 31st day of August, 2001, by National Service Industries, Inc., a Delaware corporation ("NSI"); W I T N E S S E T H: WHEREAS, NSI has previously established the Supplemental Retirement Plan for Eligible Employees of AECO Products Division of National Service Industries, Inc. (the "Plan") for the exclusive benefit of its eligible employees and their beneficiaries; and WHEREAS, effective as of August 31, 2001, NSI will restructure its business operations and form several new subsidiary corporations; and WHEREAS, NSI desires to amend the Plan in connection with the restructuring; and WHEREAS, pursuant to the power of amendment contained in Section 11.1 of the Plan, the Plan is hereby amended as follows: 1. Section 1.1(m) of the Plan is hereby amended by deleting such section in its entirety and substituting the following: "1.1(m) Company: Company shall mean the AECO Products Division of National Service Industries, Inc. (CA), formerly known as NSI Enterprises, Inc." 2. This Amendment shall be effective August 31, 2001. 3. Except as provided herein, the provisions of the Plan shall remain in full force and effect. IN WITNESS WHEREOF, NSI has caused this Amendment No. 3 to be executed by its duly authorized corporate officers as of the date and year first written above. ATTEST: NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Carol E. Morgan By: /s/ Kenyon W. Murphy ------------------------------ --------------------------------- EX-10.15 23 g73258ex10-15.txt AMENDMENT NO. 2 TO SEVERANCE PROTECTION AGREEMENT EXHIBIT 10.15 AMENDMENT NO. 2 TO SEVERANCE PROTECTION AGREEMENT THIS AMENDMENT made as of the 31st day of August, 2001, by and between National Service Industries, Inc., a Delaware corporation (the "Company"), and ________________ (the "Executive"); W I T N E S S E T H: WHEREAS, the Company entered into a Severance Protection Agreement with the Executive, dated ___________________, which was amended August 31, 1996 (the "Agreement"), providing for the payment of certain compensation and benefits to the Executive in the event his employment is terminated as a result of, or in connection with, a Change in Control of the Company; and WHEREAS, effective as of August 31, 2001, the Company is restructuring (the "Restructuring") its business operations and forming several new subsidiary corporations (each such new entity will be considered a "Subsidiary" under the Agreement); and WHEREAS, the Company and the Executive desire to amend the Agreement to reflect the fact that Executive may be primarily employed by, and/or primarily perform services for one or more of the new Subsidiaries; and WHEREAS, the Executive will continue to perform valuable services that inure to the financial benefit of the Company and its shareholders; NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties agree to amend the Agreement as follows: 1. In consideration of the Executive's performing valuable services for the Subsidiary executing this Agreement, the Subsidiary does hereby guarantee the payment and performance by the Company of all of the Company's obligations and responsibilities under the Agreement. 2. The Executive hereby agrees that under the Agreement the Restructuring (i) shall not be deemed to constitute a Change in Control, and (ii) shall not result in a termination of the Executive's employment. 3. The Appendix to the Agreement shall be replaced by the Appendix attached hereto. 4. Except as hereby modified, the terms and conditions of the Agreement shall remain in full force and effect. This Amendment shall be effective as of August 31, 2001. IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first above written. EXECUTIVE: ----------------------------------- NATIONAL SERVICE INDUSTRIES, INC. By: -------------------------------- The undersigned Subsidiary does hereby agree to the terms and conditions of the Agreement and to pay and perform all of the obligations described in Paragraph 1 of this Amendment. This 31st day of August, 2001. SUBSIDIARY: L&C SPINCO, INC. By: -------------------------------- EX-10.16(A) 24 g73258ex10-16a.txt FORM OF SEVERANCE PROTECTION AGREEMENT EXHIBIT 10.16(a) SEVERANCE PROTECTION AGREEMENT FOR KEY MANAGEMENT THIS AGREEMENT made as of the (Day) day of (Month), 2000, by and between National Service Industries, Inc., a Delaware Corporation (the "Company"), and (Name) (the "Executive"). WHEREAS, the Board of Directors of the Company (the "Board") recognizes that the possibility of a Change in Control (as hereinafter defined) exists and that the threat of or the occurrence of a Change in Control can result in significant distractions of its key management personnel because of the uncertainties inherent in such a situation; WHEREAS, the Board has determined that it is essential and in the best interest of the Company and its stockholders to retain the services of the Executive in the event of a threat or occurrence of a Change in Control and to ensure his continued dedication and efforts in such event without undue concern for his personal financial and employment security; and WHEREAS, in order to induce the Executive to remain in the employ of the Company (including its subsidiary corporations and partnerships), particularly in the event of a threat or the occurrence of a Change in Control, the Company desires to enter into this Agreement with the Executive to provide the Executive with certain benefits in the event his employment is terminated as a result of, or in connection with, a Change in Control and to provide the Executive with certain other benefits whether or not the Executive's employment is terminated. NOW, THEREFORE, in consideration of the respective agreements of the parties contained herein, it is agreed as follows: 1. Term of Agreement. (a) This Agreement shall commence as of (DateOriginal) and shall continue in effect until the earlier of (DateTwoYear) or the Executive's termination of employment prior to a Change in Control; provided, however, that commencing on (DateOneYear) and on each (Month) (Day2) thereafter, the term of this Agreement shall automatically be extended for one (1) year unless either the Company or the Executive shall have given written notice to the other at least ninety (90) days prior thereto that the term of this Agreement shall not be so extended. (b) Notwithstanding the foregoing, (1) the term of this Agreement shall not expire during a Threatened Change in Control Period or prior to the expiration of 24 months after the occurrence of a Change in Control and (2) prior to a Change in Control and other than during a Threatened Change in Control Period, the term of this Agreement shall expire on the date the Executive's employment with the Company is terminated unless such termination was at the request of a Third Party or otherwise occurred in connection with, or in anticipation of, a Change in Control. 2. Definitions. 2.1 Cause. For purposes of this Agreement, "Cause" shall mean a reasonable determination by the Company that the Executive (a) intentionally and continually failed substantially to perform his reasonably assigned duties with the Company (other than a failure resulting from the Executive's incapacity due to physical or mental illness or from the Executive's assignment of duties that would constitute "Good Reason" as hereinafter defined) which failure continued for a period of at least thirty (30) days after a written notice of demand for substantial performance has been delivered to the Executive specifying the manner in which the Executive has failed substantially to perform, or (b) intentionally engaged in conduct which is demonstrably and materially injurious to the Company or was convicted of a misdemeanor or a felony involving moral turpitude; provided, however, that no termination of the Executive's employment shall be for Cause as set forth in clause (b) above until (x) there shall have been delivered to the Executive a copy of a written notice setting forth that the Executive was guilty of the conduct set forth in clause (b) and specifying the particulars thereof in detail, and (y) the Executive shall have been provided an opportunity to be heard in person by the Board or a committee of the Board so designated (with the assistance of the Executive's counsel if the Executive so desires). Neither an act nor a failure to act, on the Executive's part shall be considered "intentional" unless the Executive has acted or failed to act with a lack of good faith and with a lack of reasonable belief that the Executive's action or failure to act was in the best interest of the Company. Notwithstanding anything contained in this Agreement to the contrary, no failure to perform by the Executive after a Notice of Termination is given by the Executive shall constitute Cause for purposes of this Agreement. 2.2 Change in Control. For purposes of this Agreement, a "Change in Control" shall mean the occurrence of any of the following: (a) An acquisition (other than directly from the Company) of any voting securities of the Company (the "Voting Securities") by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Exchange Act), immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of the then outstanding Shares or the combined voting power of the Company's then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred pursuant to this Section 2.2(a), Shares or Voting Securities which are acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interests is owned, directly or indirectly, by the Company (for purposes of this definition, a "Related Entity"), (ii) the Company or any Related Entity, or (iii) any Person in connection with a "Non-Control Transaction" (as hereinafter defined); (b) The individuals who, on (DateOriginal), are members of the Board (the "Incumbent Board"), cease for any reason to constitute at least two-thirds -2- of the members of the Board or, following a Merger which results in a Parent corporation, the board of directors of the ultimate Parent Corporation (as defined in paragraph (c)(i)(A) below); provided, however, that if the election, or nomination for election by the Company's common stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (c) The consummation of: (i) A merger, consolidation or reorganization with or into the Company or in which securities of the Company are issued ( a "Merger"), unless such Merger is a "Non-Control Transaction." A "Non-Control Transaction" shall mean a Merger where: (A) the stockholders of the Company, immediately before such Merger own directly or indirectly immediately following such Merger at least seventy percent (70%) of the combined voting power of the outstanding voting securities of (x) the corporation resulting from such Merger (the "Surviving Corporation") if seventy percent (70%) or more of the combined voting power of the then outstanding voting securities of the Surviving Corporation is not Beneficially Owned, directly or indirectly by another Person (a "Parent Corporation"), or (y) if there are one or more Parent Corporations, the ultimate Parent Corporation; and, (B) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such Merger constitute at least two-thirds of the members of the board of directors of (x) the Surviving Corporation, if there is no Parent Corporation, or (y) if there are one or more Parent Corporations, the ultimate Parent Corporation; and (C) no Person other than (1) the Company, (2) any Related Entity, (3) any employee benefit plan (or any trust forming a part thereof) that, immediately prior to such Merger was maintained by the Company or any Related Entity, or (4) any Person who, immediately prior to such Merger had Beneficial Ownership of twenty percent (20%) or more of the then outstanding Voting Securities or Shares, has Beneficial Ownership of twenty percent (20%) or more of the combined voting power of the outstanding voting securities or common stock of (x) the Surviving Corporation if there is no Parent Corporation, or (y) if there are one or more Parent Corporations, the ultimate Parent Corporation. (ii) A complete liquidation or dissolution of the Company; or -3- (iii) The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Related Entity or the distribution to the Company's stockholders of the stock of a Related Entity or any other assets). Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the then outstanding Shares or Voting Securities as a result of the acquisition of Shares or Voting Securities by the Company which, by reducing the number of Shares or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Shares or Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Shares or Voting Securities which increases the percentage of the then outstanding Shares or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur. (d) Notwithstanding anything contained in this Agreement to the contrary, if the Executive's employment is terminated prior to a Change in Control and the Executive reasonably demonstrates that such termination (1) was at the request of a Third Party (as hereinafter defined) or (2) otherwise occurred in connection with, or in anticipation of, a Change in Control (including, without limitation, during a Threatened Change in Control Period), then for all purposes of this Agreement, the date of a Change in Control shall be deemed to be the date immediately prior to the date of such termination of the Executive's employment provided a Change in Control shall actually have occurred. 2.3 Company. Each place in the Agreement where a reference to the "Company" appears that relates to the Executive's employment, termination of employment or performing services, including the definitions of "Cause" and "Good Reason", shall mean and include the Subsidiary which is the primary employer of the Executive. Further, in each place where the Agreement refers to a benefit plan or program, payment of compensation, compensation arrangement or other similar plan or program maintained by the Company, such reference shall include any plan, program or arrangement maintained or established by the Subsidiary. Notwithstanding the foregoing, the references in the definitions of "Change in Control," "Threatened Change in Control Period" and similar references to changes in ownership and control of the Company shall mean and refer to National Service Industries, Inc., a Delaware corporation. 2.4 Disability. For purposes of this Agreement, "Disability" shall mean a physical or mental infirmity which impairs the Executive's ability to substantially perform his duties under this Agreement for a period of one hundred eighty (180) consecutive days. -4- 2.5 (a) Good Reason. For purposes of this Agreement, "Good Reason" shall mean the occurrence after a Change in Control of any of the events or conditions described in Subsections (1) through (8) hereof: (1) a change in the Executive's title, position or responsibilities (including reporting responsibilities) which, in the Executive's reasonable judgment, represents an adverse change from his title, position or responsibilities as in effect immediately prior thereto; the assignment to the Executive of any duties or responsibilities which, in the Executive's reasonable judgment, are inconsistent with his title, position or responsibilities; or any removal of the Executive from or failure to reappoint or reelect him to any of such offices or positions, except in connection with the termination of his employment for Disability, Cause, as a result of his death or by the Executive other than for Good Reason; (2) a reduction in the Executive's base salary or any failure to pay the Executive any compensation or benefits to which he is entitled within five days of the date due; (3) the Company's requiring the Executive to be based at any place outside a 40-mile radius from the Executive's principal place of employment immediately prior to the Change in Control, except for reasonably required travel on the Company's business which is not greater than such travel requirements prior to the Change in Control; (4) the failure by the Company to (A) continue in effect (without reduction in benefit level, and/or reward opportunities) any compensation or employee benefit plan in which the Executive was participating immediately prior to the Change in Control, including, but not limited to, the plans listed on the Appendix, unless a substitute or replacement plan has been implemented which provides substantially identical compensation or benefits to the Executive or (B) provide the Executive with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each other compensation or employee benefit plan, program and practice as in effect immediately prior to the Change in Control (or as in effect following the change in Control, if greater); (5) the insolvency or the filing (by any party other than the Executive, including the Company) of a petition for bankruptcy of the Company; (6) any material breach by the Company of any provision of this Agreement; (7) any purported termination of the Executive's employment for Cause by the Company which does not comply with the terms of Section 2.1; or (8) the failure of the Company to obtain an agreement, satisfactory to the Executive, from any successor or assign of the Company to assume and agree to perform this Agreement, as contemplated in Section 9 hereof. (b) Any event or condition described in Section 2.5(a)(1) through (8) which occurs prior to a Change in Control but which the Executive -5- reasonably demonstrates (1) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control (a "Third Party"), or (2) otherwise arose in connection with or in anticipation of a Change in Control, shall constitute Good Reason for purposes of this Agreement notwithstanding that it occurred prior to the Change in Control, provided that a Change in Control shall actually have occurred. (c) The Executive's right to terminate his employment pursuant to this Section 2.5 shall not be affected by his incapacity due to physical or mental illness. 2.6 Threatened Change in Control. For purposes of this Agreement, a Threatened Change in Control shall mean the occurrence of any of the following events: (a) when the Company is aware of, or is contemplating, a proposal (a "Proposal") for any Person, other than any corporation owned directly or indirectly by the stockholders of the Company in the same proportion as their ownership of stock in the Company (a "Related Person"), (1) to acquire five percent (5%) or more of the voting power of the Company's outstanding securities or (2) to merge or consolidate with another entity, transfer or sell assets of the Company, or liquidate or dissolve the Company, in each case described in this clause (2) in a transaction that would constitute a Change in Control; or (b) any Person other than a Related Person, (1) acquires five percent (5%) or more of the voting power of the Company's outstanding securities, other than as a holder whose investment in the Company is eligible to be reported on Schedule 13G pursuant to Rule 13d-l(b)(1) promulgated under the Exchange Act, or (2) initiates a tender or exchange offer to acquire such number of securities as would result in such Person holding twenty percent (20%) or more of the voting power of the Company's outstanding securities, or (3) solicits proxies for votes to elect members of the Board at a shareholders' meeting of the Company. 2.7 Threatened Change in Control Period. For purposes of this Agreement, a Threatened Change in Control Period shall mean the period commencing on the date that a Threatened Change in Control has occurred and ending upon: (a) the date the Proposal referred to in Section 2.6(a) is abandoned; (b) the acquisition of five percent (5%) of the voting power of the Company's outstanding securities by the Person referred to in Section 2.6(a)(1) if such acquisition does not constitute a Threatened Change in Control under Section 2.6(b)(1); (c) the date when any Person described in Section 2.6(b), (1) shall own less than five percent (5%) of the voting power of the Company's outstanding securities, (2) shall have abandoned the tender or exchange offer, or (3) shall not have elected a member of the Board, as the case may be; or (d) the date a Change in Control occurs. -6- 3. Termination of Employment. 3.1 If, during the term of this Agreement, the Executive's employment with the Company shall be terminated within 24 months following a Change in Control, the Executive shall be entitled to the following compensation and benefits (in addition to any compensation and benefits provided for under any of the Company's employee benefit plans, policies and practices): (a) If the Executive's employment with the Company shall be terminated (1) by the Company for Cause or Disability, (2) by reason of the Executive's death, or (3) by the Executive other than for Good Reason, the Company shall pay the Executive all amounts earned or accrued through the Termination Date but not paid as of the Termination Date, including (i) base salary, (ii) reimbursement for reasonable and necessary expenses incurred by the Executive on behalf of the Company during the period ending on the Termination Date, (iii) vacation pay, and (iv) sick leave (collectively, "Accrued Compensation"). In addition to the foregoing, if the Executive's employment is terminated by the Company for Disability or by reason of the Executive's death, the Company shall pay to the Executive or his beneficiaries an amount equal to the "Pro Rata Bonus" (as hereinafter defined). The "Pro Rata Bonus" is an amount equal to the Bonus Amount (as hereinafter defined) multiplied by a fraction the numerator of which is the number of days in such fiscal year through the Termination Date and the denominator of which is 365. The term "Bonus Amount" shall mean the greatest of (x) the most recent annual bonus paid or payable to the Executive, or (y) the target annual bonus for the fiscal year during which the Termination Date occurs or, if greater, for the fiscal year in which the Change in Control occurred or (z) the average of the annual bonuses paid or payable during the three full fiscal years ended prior to the Termination Date or, if greater, the three full fiscal years ended prior to the Change in Control (or, in each case, such lesser period for which annual bonuses were paid or payable to the Executive). Executive's entitlement to any other compensation or benefits shall be determined in accordance with the Company's employee benefit plans and other applicable programs and practices then in effect. (b) If the Executive's employment with the Company shall be terminated (other than by reason of death), (1) by the Company other than for Cause or Disability, or (2) by the Executive for Good Reason, the Executive shall be entitled to the following: (1) the Company shall pay the Executive all Accrued Compensation and a Pro-Rata Bonus; (2) the Company shall pay the Executive as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, in a single payment an amount (the "Severance Amount") in cash equal to one and one-half times the sum of (A) the greater of the Executive's base salary in effect on the Termination Date or at any time during the 90-day period prior to the Change in Control ("Base Salary") and (B) the Bonus Amount. Notwithstanding the foregoing, if the Executive has attained at least age 63 1/2 on the Termination Date the Severance Amount -7- to be paid under this Subsection (2) shall be the amount described in the preceding sentence multiplied by a fraction (which in no event shall be less than one-half) the numerator of which shall be the number of months (for this purpose any partial month shall be considered as a whole month) remaining until the Executive's 65th birthday (but in no event shall be less than 9) and the denominator of which shall be 18; (3) for a number of months equal to the lesser of (A) 18 or (B) the number of months remaining until the Executive's 65th birthday (the "Continuation Period"), the Company shall at its expense continue on behalf of the Executive and his dependents and beneficiaries the life insurance, disability, medical, dental and hospitalization benefits provided (x) to the Executive at the time Notice of Termination is given, at any time during the 90-day period prior to the Change in Control or at any time thereafter, or (y) to other similarly situated executives who continue in the employ of the Company during the Continuation Period. The coverage and benefits (including deductibles and costs) provided in this Section 3.1(b)(3) during the Continuation Period shall be no less favorable to the Executive and his dependents and beneficiaries, than the most favorable of such coverages and benefits during any of the periods referred to in clauses (x) and (y) above. The Company's obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer's benefit plans, in which case the Company may reduce the coverage of any benefits it is required to provide the Executive hereunder as long as the aggregate coverages and benefits of the combined benefit plans is no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This Subsection (3) shall not be interpreted so as to limit any benefits to which the Executive or his dependents may be entitled under any of the Company's employee benefit plans, programs or practices following the Executive's termination of employment, including without limitation, retiree medical and life insurance benefits; (4) the Company shall pay in a single payment an amount in cash equal to the excess of (A) the Supplemental Retirement Benefit (as defined below) had (w) the Executive remained employed by the Company for an additional one and one-half years of credited service (or until his 65th birthday if earlier), (x) his annual compensation during such period been equal to his Base Salary and the Bonus Amount, (y) the Company and/or the Division made employer contributions to each defined contribution plan in which the Executive was a participant at the Termination Date (in an amount equal to the amount of such contribution for the plan year immediately preceding the Termination Date) and (z) he been fully (100%) vested in his benefit under each retirement plan in which the Executive was a participant, over (B) the lump sum actuarial equivalent of the aggregate retirement benefit the Executive is actually entitled to receive under such retirement plans. For purposes of this Subsection (4), the "Supplemental Retirement Benefit" shall mean the lump sum actuarial equivalent of the aggregate retirement benefit the Executive would have been entitled to receive under the Company's supplemental and other retirement plans. For purposes of -8- this Subsection (4), the "actuarial equivalent" shall be determined in accordance with the actuarial assumptions used for the calculation of benefits under each of the Company's supplemental and other retirement plans under which the Executive is entitled to benefits as applied immediately prior to the Termination Date in accordance with each such plan's past practices; and (5) (A) the restrictions on any outstanding incentive awards (including restricted stock and performance units) granted to the Executive under the Company's equity-based plans or other arrangements shall lapse and such incentive awards shall become one hundred percent (100%) vested, all stock options and stock appreciation rights granted to the Executive shall become immediately exercisable and shall become 100% vested, and all Aspiration Incentive Awards granted to the Executive shall become vested and payable as provided by and in accordance with the Aspiration Incentive Award Agreements therefor, and (B) the Executive shall have the right to require the Company to purchase, for cash, any shares of unrestricted stock or shares purchased upon exercise of any options, at a price equal to the fair market value of such shares on the date of purchase by the Company. (c) The amounts provided for in Sections 3.1(a) and 3.1(b)(1), (2), (4) and (5) shall be paid within five (5) days after the Executive's Termination Date. (d) The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment except as provided in Section 3.1(b)(3). 3.2 The severance pay and benefits provided for in Sections 3.1(a) and 3.1(b)(1) and (2) shall be in lieu of any other severance pay to which the Executive is entitled under any existing Company severance plans, programs or arrangements, except that if the severance pay of the type referenced in Section 3.1(b)(2) provided under such other plans, programs or arrangements is greater than the amount calculated under Section 3.1(b)(2), then that greater amount and not the amount under Section 3.1(b)(2) shall be paid. 4. Notice of Termination. During a Threatened Change in Control Period and following a Change in Control, any purported termination by the Company or by the Executive shall be communicated by written Notice of Termination to the other. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which indicates the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. For purposes of this Agreement, no such purported termination shall be effective without such Notice of Termination. 5. Termination Date. "Termination Date" shall mean in the case of the Executive's death, his date of death, and in all other cases, the date specified in the Notice of Termination subject to the following: -9- (a) If the Executive's employment is terminated by the Company for Cause or due to Disability, the date specified in the Notice of Termination shall be at least thirty (30) days from the date the Notice of Termination is given to the Executive, provided that in the case of Disability the Executive shall not have returned to the full-time performance of his duties during such period of at least 30 days; and (b) If the Executive's employment is terminated for Good Reason, the date specified in the Notice of Termination shall not be more than sixty (60) days from the date the Notice of Termination is given to the Company. 6. Excise Tax Limitation. (a) Notwithstanding anything contained in this Agreement to the contrary, to the extent that the payments and benefits provided under this Agreement ("Agreement Payments") and benefits provided to, or for the benefit of, the Executive under any other Company plan or agreement (such payments or benefits are collectively referred to as the "Total Payments") would be subject to the excise tax (the "Excise Tax") imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the Agreement Payments shall be reduced or eliminated if and to the extent necessary so that no Agreement Payment to be made to the Executive shall be subject to the Excise Tax. Unless the Executive shall have given prior written notice specifying a different order to the Company to effectuate the foregoing, the Company shall reduce or eliminate the Agreement Payments, by first reducing or eliminating the portion of the Agreement Payments which are payable in cash and then by reducing or eliminating non-cash payments, in each case in reverse order beginning with Agreement Payments which are to be paid the farthest in time from the Determination (as hereinafter defined). Any notice given by the Executive pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Executive's rights and entitlements to any benefits or compensation. (b) The determination of whether the Agreement Payments shall be reduced or eliminated as provided in Section 6(a) above and the amount of such reduction shall be made, at the Company's expense, by an accounting firm selected by the Company which is one of the five largest accounting firms in the United States (the "Accounting Firm"). The Accounting Firm shall provide its determination (the "Determination"), together with detailed supporting calculations and documentation to the Company and the Executive within fifteen (15) business days of the Termination Date, if applicable, or such other time as requested by the Company or by the Executive (provided the Executive reasonably believes that any of the Total Payments may be subject to the Excise Tax) and if the Accounting Firm determines that no Excise Tax is payable by the Executive with respect to the Total Agreement Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to the Total Payments. The Determination shall be binding, final and conclusive upon the Company and the Executive. -10- (c) Notwithstanding anything contained in this Agreement to the contrary, in the event that, according to the Determination, an Excise Tax will be imposed on any Payment or Payments, the Company shall pay to the applicable government taxing authorities as Excise Tax withholding the amount of the Excise Tax that the Company has actually withheld from the Payment or Payments. 7. Non-Compete. During the period that the Executive is actively employed by the Company, and for six months following the Executive's termination of employment with the Company, the Executive shall not, directly or indirectly, own, manage, operate, join, control, be employed by, have any financial interest in consult with, or participate in the ownership, management, operation or control of any entity that directly competes or seeks directly to compete with any business or line of business of the Company. Notwithstanding the foregoing, the Executive shall not be in violation of the preceding sentence due to ownership (directly or indirectly) by the Executive of not more than five percent (5%) of the issued and outstanding class of securities of a corporation whose securities are publicly traded. 8. Non-Solicitation. For six-months after termination of employment with the Company for any reason, the Executive shall not directly or indirectly solicit or hire, or assist any other person in soliciting or hiring, any employee of the Company (as of the date of termination), or induce any such employee to terminate his or her employment with the Company. 9. Successors; Binding Agreement. (a) This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns and the Company shall require any successor or assign to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. The term "the Company" as used herein shall include such successors and assigns. The term "successors and assigns" as used herein shall mean a corporation or other entity acquiring all or substantially all the assets and business of the Company (including this Agreement) whether by operation of law or otherwise. (b) Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, his beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal personal representative. 10. Fees and Expenses. The Company shall pay all legal fees and related expenses (including the costs of experts, evidence and counsel) incurred by the Executive as they become due as a result of (a) the Executive's termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment), (b) the Executive seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Executive is or may be entitled to receive benefits, or (c) the Executive's hearing before the Board as contemplated in Section 2.1 of this -11- Agreement; provided, however, that the circumstances set forth in clauses (a) and (b) (other than as a result of the Executive's termination of employment under circumstances described in Section 2.2(d)) occurred on or after a Change in Control. 11. Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement (including the Notice of Termination) shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, addressed to the respective addresses last given by each party to the other, provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company. All notices and communications shall be deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof, except that notice of change of address shall be effective only upon receipt. 12. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its subsidiaries and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company or any of its subsidiaries. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its subsidiaries shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. 13. Settlement of Claims. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others. 14. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 15. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Georgia without giving effect to the conflict of law principles thereof. Any action brought by any party to this Agreement shall be brought and maintained in a court of competent jurisdiction in Fulton County in the State of Georgia. -12- 16. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 17. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. -13- IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written. ATTEST: NATIONAL SERVICE INDUSTRIES, INC. By: - ---------------------------- ----------------------------------- Secretary James S. Balloun Chairman of the Board, President and Chief Executive Officer - -------------------------------- (Name) In consideration of the Executive's performing valuable services for the Subsidiary, the undersigned Subsidiary does hereby agree to the terms and conditions of the Agreement and does hereby guarantee the payment and performance of all the Company's obligations and responsibilities under the Agreement. This (Day) day of (Month), 2000. SUBSIDIARY: (Subsidiary) By: ----------------------- -14- APPENDIX National Service Industries, Inc. Retirement and 401(k) Plan Pension Plan C Executives' Deferred Compensation Plan Supplemental Deferred Savings Plan Senior Management Benefit Plan Long-Term Achievement Incentive Plan Employee Stock Purchase Plan -15- EX-10.16(B) 25 g73258ex10-16b.txt AMENDMENT NO. 1 TO SEVERANCE PROTECTION AGREEMENT EXHIBIT 10.6(b) AMENDMENT NO. 1 TO SEVERANCE PROTECTION AGREEMENT FOR KEY MANAGEMENT THIS AMENDMENT made as of the 31st day of August, 2001, by and between National Service Industries, Inc., a Delaware corporation (the "Company"), and ____________________ (the "Executive"); W I T N E S S E T H: WHEREAS, the Company entered into a Severance Protection Agreement for Key Management with the Executive, dated ___________________ (the "Agreement"), providing for the payment of certain compensation and benefits to the Executive in the event his employment is terminated as a result of, or in connection with, a Change in Control of the Company; and WHEREAS, effective as of August 31, 2001, the Company is restructuring (the "Restructuring") its business operations and forming several new subsidiary corporations (each such new entity will be considered a "Subsidiary" under the Agreement); and WHEREAS, the Company and the Executive desire to amend the Agreement to reflect the fact that Executive may be primarily employed by, and/or primarily perform services for one or more of the new Subsidiaries; and WHEREAS, the Executive will continue to perform valuable services that inure to the financial benefit of the Company and its shareholders; NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties agree to amend the Agreement as follows: 1. In consideration of the Executive's performing valuable services for the Subsidiary executing this Agreement, the Subsidiary does hereby guarantee the payment and performance by the Company of all of the Company's obligations and responsibilities under the Agreement. 2. The Executive hereby agrees that under the Agreement the Restructuring (i) shall not be deemed to constitute a Change in Control, and (ii) shall not result in a termination of the Executive's employment. 3. The Appendix to the Agreement shall be replaced by the Appendix attached hereto. 4. Except as hereby modified, the terms and conditions of the Agreement shall remain in full force and effect. This Amendment shall be effective as of August 31, 2001. IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first above written. EXECUTIVE: ----------------------------------- NATIONAL SERVICE INDUSTRIES, INC. By: -------------------------------- The undersigned Subsidiary does hereby agree to the terms and conditions of the Agreement and to pay and perform all of the obligations described in Paragraph 1 of this Amendment. This 31st day of August, 2001. SUBSIDIARY: ----------------------------------- By: -------------------------------- EX-10.17 26 g73258ex10-17.txt AMENDMENT NO. 2 TO EXECUTIVE SAVINGS PLAN EXHIBIT 10.17 AMENDMENT NO. 2 TO THE NATIONAL SERVICE INDUSTRIES, INC. EXECUTIVE SAVINGS PLAN THIS AMENDMENT made as of the 31st day of August, 2001, by National Service Industries, Inc., a Delaware corporation ("NSI"); W I T N E S S E T H: WHEREAS, NSI has previously established the National Service Industries, Inc. Executive Savings Plan (the "Plan") for the benefit of its eligible employees and their beneficiaries; and WHEREAS, effective as of August 31, 2001, NSI will restructure its business operations and form several new subsidiary corporations; and WHEREAS, NSI desires to amend the Plan in connection with the restructuring; and WHEREAS, pursuant to the power of amendment contained in the Plan, the Plan is hereby amended as follows: 1. The Plan is hereby amended by incorporating the following as the new Schedule 1: "Schedule 1 Adopting Employers National Service Industries, Inc. (CA) f/k/a NSI Enterprises, Inc. L&C Spinco, Inc. The Zep Group, Inc. L&C Lighting Group, Inc." 2. This Amendment shall be effective August 31, 2001. 3. Except as provided herein, the provisions of the Plan shall remain in full force and effect. IN WITNESS WHEREOF, NSI has caused this Amendment No. 2 to be executed by its duly authorized corporate officers as of the date and year first written above. ATTEST: NATIONAL SERVICE INDUSTRIES, INC. By: /s/ Carol E. Morgan By: /s/ Kenyon W. Murphy -------------------------- ---------------------------------- EX-99.1 27 g73258ex99-1.txt PRESS RELEASE, DATED DECEMBER 3, 2001 EXHIBIT 99.1 NSI COMPLETES SPIN-OFF OF ACUITY BRANDS, INC. ATLANTA, Dec. 3 /PRNewswire/ -- National Service Industries, Inc. (NYSE: NSI - news) today announced the completion of the spin-off of Acuity Brands, Inc., as an independent, publicly traded company. The spin-off was effective as of 11:59 p.m. ET on Friday, November 30, 2001. "Regular way" trading for NSI, without the right to receive Acuity Brands shares in the distribution, begins on Monday, December 3, 2001, on the New York Stock Exchange under the trading symbol "NSI." "Regular way" trading for Acuity Brands also begins on December 3, 2001, on the New York Stock Exchange under the trading symbol "AYI." Each NSI stockholder of record as of November 16, 2001, will receive a dividend of one share of Acuity Brands common stock for each share of NSI common stock held on such date. An information statement describing the spin- off and Acuity Brands was mailed to NSI shareholders on November 16, 2001. Effective December 1, 2001, Brock A. Hattox, formerly NSI's executive vice president and chief financial officer, assumed his new role of chairman, chief executive officer and president of NSI. In addition, Richard W. LeBer and J. Randolph (Randy) Zook, presidents of National Linen Service and Atlantic Envelope Company, respectively, each assumed the additional title of executive vice president of NSI. Chester J. (Chet) Popkowski, formerly NSI's vice president and treasurer, became senior vice president, chief financial officer, and treasurer. Carol Ellis Morgan, formerly NSI's vice president and deputy general counsel, became senior vice president, general counsel, and secretary. "We are optimistic about this exciting phase in our company's history," said Hattox. "With the spin-off complete and our new management team and board of directors in place, we are focusing on employee and customer satisfaction as well as improved operational performance and cash flow. Achievement of these goals will lead to consistent, steady growth and improved long-term value to our shareholders." Following the spin-off, NSI shares represent investors' interest in NSI without the right to receive shares of Acuity Brands. Record owners of NSI common stock will receive an account statement showing their ownership of Acuity Brands shares, which initially will be in book-entry form. The account statement will include information on how to request a physical stock certificate. Shareholders who hold their shares through brokers or other nominees will have their shares of Acuity Brands common stock credited to their accounts by their nominees or brokers. The listing requirements of the New York Stock Exchange require that NSI disclose that additional information is available upon which the New York Stock Exchange relied to list the company's common stock. Such information is included in NSI's listing application to the New York Stock Exchange and is available to the public upon request. Certain information contained in this press release constitutes forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are inherently uncertain and involve risks. Consequently, actual results may differ materially from those indicated by the forward-looking statements. Statements made herein that may be considered forward looking include statements concerning the impact of the spin-off transaction on future visibility into NSI's businesses and increased management focus on improving performance and reducing debt. A variety of risks and uncertainties could cause the company's actual results to differ materially from the anticipated results or other expectations expressed in the company's forward-looking statements. The risks and uncertainties include without limitation the following: (a) underlying assumptions or expectations related to the spin-off transaction proving to be inaccurate or unrealized; (b) the uncertainty of general business and economic conditions; (c) unexpected developments and outcomes in the company's legal and environmental proceedings; and (d) those factors more particularly described in NSI's filings made with the Securities and Exchange Commission from time to time, including those risks and uncertainties set forth in NSI's Annual Report on Form 10-K for the fiscal year ended August 31, 2001. National Service Industries, Inc., with fiscal year 2001 sales of $560 million, has two business segments -- textile rental and envelopes. SOURCE: National Service Industries, Inc. -----END PRIVACY-ENHANCED MESSAGE-----