UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________.
Commission file number 018597
NSC CORPORATION
(Exact name of registrant as specified in its Charter)
DELAWARE 31-1295113
(State of incorporation) (IRS Employer Identification Number)
49 DANTON DRIVE, METHUEN, MA 01844
(Address of principal executive offices) (ZIP code)
(508) 557-7300
Registrant's telephone number, including area code
Securities registered pursuant to Section
12(g) of the Act:
Common Stock, $0.01 par value
(Title of each class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant on March 27, 1997 was $4,877,938.
The number of shares of Common Stock outstanding on March 27, 1997 was 9,971,175
shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders are incorporated by reference into Part III.
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NSC Corporation
1996 Annual Report on Form 10-K
Table of Contents
Part I
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Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Executive Officers of the Registrant 12
Part II
- ------------------------------------------------------------------------------
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters 13
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
Item 8. Financial Statements and Supplementary Data 18
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 33
Part III
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Item 10. Directors and Executive Officers of the Registrant 33
Item 11. Executive Compensation 33
Item 12. Security Ownership of Certain Beneficial Owners and
Management 33
Item 13. Certain Relationships and Related Transactions 33
Part IV
- ------------------------------------------------------------------------------
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 34
Signatures 37
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PART I
Item 1. Business
General
NSC Corporation (the "Company") is a leading provider of asbestos-abatement and
other specialty contracting services to a broad range of commercial, industrial
and institutional clients located throughout the United States. The Company
provides asbestos-abatement services through three of its wholly-owned
subsidiaries, National Surface Cleaning, Inc. ("NSCI"), National Service
Cleaning Corp. ("NSCC") and NSC Energy Services, Inc.("NSCESI"); demolition and
dismantling services through its wholly-owned subsidiary, Olshan Demolishing
Management, Inc. ("ODMI"); and specialty coatings applications and lead
paint-abatement through its wholly-owned subsidiary, NSC Specialty Coatings,
Inc. ("NSCSCI").
For financial information concerning the Company's two principal service
segments, asbestos-abatement (which includes specialty coatings applications and
lead paint-abatement) and demolition and dismantling, see Note 13 to the Notes
to the Consolidated Financial Statements included elsewhere herein.
The predecessor of the Company was founded in 1976 and initially provided
various cleaning services to commercial, industrial and residential real estate
properties. From the early 1980s and until the 1995 inclusion of ODMI's
activities, substantially all of the Company's revenue was derived from
asbestos-abatement services. The Company and a predecessor company to NSCC were
acquired by OHM Corporation ("OHM") in June 1988. During 1989, NSCC was
incorporated in Connecticut to provide asbestos-abatement services to clients
which generally do not require the use of unionized labor. In June 1990, the
Company completed an initial public offering of its common stock.
On May 4, 1993 pursuant to a Purchase Agreement among the Company, NSC
Industrial Services Corp. ("Industrial"), OHM, The Brand Companies, Inc.
("Brand") and Waste Management, Inc. ("WMI"), now known as WMX Technologies,
Inc., the Company acquired the asbestos-abatement division of Brand (the
"Division") in exchange for 4,010,000 shares of the Company's common stock and
all the common stock of Industrial. As of December 31, 1996 and 1995, OHM and
Rust International Inc. (a successor company to Brand and hereinafter referred
to as "Rust") each owned approximately forty percent of the Company's common
stock.
On April 20, 1995 the Company entered into an Interim Management and Operating
Agreements with Rust under which the Company, through ODMI, assumed the
management of Olshan Demolishing Company ("ODC"), a Rust subsidiary specializing
in demolition and dismantling, primarily in the industrial market.
The market for asbestos-abatement services has seen dramatic changes over the
past several years. In the mid-to-late 1980s, the demand in the marketplace was
extremely high, with many owners of buildings and facilities undertaking
large-scale abatement projects as a perceived risk reduction measure. This
demand, coupled with low barriers to entry, provided the conditions for the
development of several large, national asbestos-abatement contractors.
While demand for asbestos-abatement services has stabilized, credible estimates
for the market show steady demand over the coming years. As such demand is
dependent on the fluctuation of the national economy and the finite amount of
asbestos remaining to be removed, there can be no assurance that such demand
will remain steady. The Company, nevertheless, is positioned to increase its
share of this market through a focused sales and marketing effort. Furthermore,
through diversification into the demolition and lead paint-abatement markets,
the Company is striving to provide a full suite of specialty contracting
services to the performance-sensitive customer. The market will continue to
demand quality performance, and the Company will strive to meet these demands
through a unified focus on safety, customer satisfaction, financial performance
and personnel development.
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Asbestos-Abatement and Demolition Operations
The Company provides asbestos-abatement and other specialty contracting services
through its network of 16 offices located throughout the United States and
demolition and dismantling services through its Houston, Texas office. NSCI is
licensed to conduct asbestos-abatement services in 31 states and generally
provides its services with unionized labor, while NSCC is licensed to perform
asbestos-abatement services in 34 states and provides its services with
non-unionized labor. ODMI is licensed to conduct demolition and dismantling
services in 49 states and the District of Columbia, Canada and Puerto Rico. ODMI
provides its services with non-unionized labor; NSCC and ODMI often utilize
subcontractor and temporary labor.
An asbestos-abatement or demolition and dismantling program is focused on
meeting the needs of the facility owner or operator to manage properly the
financial, regulatory and safety-related risks associated with a demolition or
asbestos project. The Company's removal and demolition services require the
coordination of several processes: marketing, bidding and contracting, project
management, health and safety programs, and the actual asbestos removal or
dismantling and demolition. The Company's management maintains administrative
and operational control over all phases of a project, from estimating and
bidding through project completion.
The Bidding and Contract Process
While some of the Company's contracts are directly entered into with its clients
without a formal bidding process, the Company receives a significant portion of
its asbestos-abatement and demolition and dismantling contracts through a
bidding process. The majority of the Company's projects are contracted on a
fixed-price basis, while the remainder are contracted either on a time and
materials or a unit-price basis. The Company obtains work and performs services
under contract, often on the basis of plans, specifications or requirements
prepared by the client or the client's agent. Contracting opportunities are
identified by telemarketing and the local sales force and are entered into
following competitive bidding or direct negotiations with the customer or its
agent. Generally, these contracts encompass supplying project management, labor,
tools, equipment and materials. In most cases, a significant portion of the
total costs incurred by the Company's asbestos-abatement operations is
attributable to labor while a significant portion of the total costs of its
demolition and dismantling operations is attributable to equipment rental costs.
While large abatement contracts may last more than one year, the majority of the
Company's projects are completed within five months.
Project Management
Each project is coordinated and supervised by a project manager who selects the
requisite equipment, ensures contract compliance and supervises all personnel.
The Company employs a computerized job cost system which allows it to track
project profitability on an ongoing basis. The project manager reviews the
progress of the project on a regular basis with management. The estimator
continues to oversee the completion of the project, which includes any
subsequent change orders. The day-to-day documentation of air testing, lead
monitoring and final clean analysis is an important part of the process and is
generally provided by the client's consultants.
Health and Safety
The Company's written Safety Program, which is issued to all supervisory
personnel, contains specific outlines for all safety, health and regulatory
requirements associated with an asbestos-abatement project. In compliance with
the EPA's Asbestos Hazard Emergency Response Act ("AHERA") Model Accreditation
Plan ("MAP"), all asbestos-abatement supervisors and workers are required to
attend and satisfactorily pass a written examination both initially and during
annual refresher training. To meet the medical surveillance and respiratory
protection requirements of the Occupational Safety and Health Administration
("OSHA") standards, all asbestos-abatement personnel entering an asbestos
atmosphere and all demolition personnel entering a lead atmosphere, must first
undergo an initial, and then annual, medical examination, which includes a
complete medical and work history, pulmonary function testing and a chest
roentgenogram. In addition to the required wearing of protective clothing and
other personal protective equipment, all individuals leaving a contaminated area
are required to undergo stringent decontamination procedures. During the
asbestos-abatement process, the Company engages in daily personal air monitoring
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and during the demolition and dismantling process, the Company engages in lead,
heavy metal and other contaminant testing. In either process, the Company
strives to comply with all regulatory and safety requirements. Comprehensive
documentation is an important part of the asbestos-abatement and demolition and
dismantling process.
The Abatement Process
The Company's workers remove asbestos in accordance with the regulations of the
Environmental Protection Agency ("EPA") and OSHA with applicable state and local
regulations. Before any removal can begin, the work area must be sealed off from
the interior building environment as well as from the outdoor environment. The
containment of the work area requires the construction of barriers on the walls
and floors made of plastic sheeting sealed at the seams. Air locks are built for
entry of personnel and equipment, and a negative pressure air filtration system
is required to prevent the escape of any asbestos fibers from the work area. The
Company constructs a worker decontamination area which is generally comprised of
a clean area where workers prepare for the work shift and an area where the
workers shower after leaving the sealed-off work area. Workers are fitted with
respirators and disposable suits prior to entering the work area.
Throughout the abatement process, air samples are taken to indicate the level of
airborne fibers both inside and outside the work area to protect the workers and
the building occupants. The environmental consultant, engineer or industrial
hygienist tests air samples from the work area both during and upon completion
of the project to monitor compliance with job specifications.
A thorough cleaning of the work area is conducted after removal, which includes
high-efficiency particulate air filter vacuuming and wet mopping of all
surfaces. All barriers erected during the asbestos-abatement project are
dismantled and disposed of in the same manner as asbestos waste. The Company
encapsulates the area from which asbestos was removed by applying a penetrating
encapsulant in an effort to seal off any possible remaining fibers.
The Demolition and Dismantling Process
The Company performs commercial demolition and industrial dismantling for public
and private customers throughout the United States. All work is done in
accordance with the specifications prepared by the owner and in accordance with
all OSHA, EPA, and state and federal governmental regulations. The Company is
also subject to the regulations of the Mine Safety and Health Act ("MSHA") when
it conducts demolition and dismantling projects at mining locations.
The Company performs a site specific safety survey of every project prior to
beginning work. An engineering survey of the equipment, structures, or buildings
to be dismantled or demolished is prepared outlining potential hazards and
methods used to alleviate the hazards. During the course of the project, daily
safety meetings are conducted to discuss that day's activities, potential
problems and measures to overcome the problems. Industrial dismantling involves
removing structures and equipment in manufacturing facilities. The Company's
workers, utilizing specially-designed equipment and attachments, carefully
dismantle the structures and equipment from the top down. All materials
dismantled are either recycled or disposed of in a licensed landfill. Commercial
demolition involves demolishing high-rise office buildings, hospitals, apartment
complexes, and other buildings. The Company's workers, utilizing specialized
equipment and occasionally explosives, demolish the buildings and remove the
debris off site. All materials generated from demolition activities are either
recycled or disposed of in a licensed landfill.
During dismantling and demolition operations, recyclable metals and reusable
equipment are generated. Typically, the Company takes title to these materials
and sells them to brokers and end users. Sales proceeds from the recyclable
metals and the reusable equipment are generally part of the Company's
compensation to perform the work. After equipment, structures, and buildings are
removed in accordance with the owner's specification, the Company demobilizes
its equipment and personnel from the area.
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Markets and Customers
The Company's primary markets for its asbestos-abatement, demolition and
dismantling and other specialty contracting services are the states of Arizona,
California, Georgia, Illinois, Kentucky, Massachusetts, Minnesota, New York,
Pennsylvania, South Carolina and Texas. The Company's headquarters is located in
Methuen, Massachusetts, outside of Boston.
The Company believes that its primary clients, which include large industrial
processing and manufacturing corporations, insurance companies, real estate
development companies and owners and tenants of large commercial and
governmental facilities, tend to emphasize quality and safety along with price
considerations in making their decision. The Company typically contracts
directly with owners, operators or tenants of properties and works closely with
the environmental consultant of the client in performing removal services. No
single customer accounted for more than 10% of the Company's consolidated
revenue during 1996.
Following its acquisition by OHM in June 1988, the Company began performing
asbestos-abatement services for OHM, principally in connection with certain
large industrial decontamination and demolition projects performed by OHM.
Following the acquisition of the Division in May 1993, the Company began
providing asbestos-abatement services on a subcontract basis for Rust and its
affiliates in connection with certain large industrial decontamination and
demolition projects performed by Rust. The Company provides such services on a
competitive basis to both OHM and Rust. Revenue for these services to OHM and
Rust amounted to approximately $40,000 and $84,000, respectively, in 1996. The
Company expects to continue to provide services to OHM and Rust on a subcontract
basis, both inside and outside its primary market areas.
The Company divides the market for asbestos-abatement and demolition and
dismantling services into the following categories: (1) commercial/large
residential buildings; (2) industrial facilities; and (3) institutional, which
includes schools, government buildings, airports, hospitals and other buildings
not described by another category. The following table summarizes the Company's
gross revenues by category for the periods indicated:
Years Ended December 31,
-----------------------------------------------------
1996 1995 1994
--------------- --------------- ---------------
(In Thousands, Except Percentages)
Commercial ............. $ 56,299 44% $ 60,895 49% $ 63,465 48%
Industrial ............. 53,929 42 41,524 33 29,088 22
Institutional .......... 18,814 14 22,110 18 39,665 30
------ ---- -------- ---- -------- ----
$129,042 100% $124,529 100% $132,218 100%
======== ==== ======== ==== ======== ====
The Company markets its services directly to companies that are in need of
asbestos-abatement and demolition and dismantling services, to general
contractors who oversee large renovation projects and to asbestos-abatement
consulting firms from which the Company receives asbestos project referrals
because of its reputation and experience.
Seasonality
The Company's business is subject to variations in revenue and net income for
interim periods and from year to year, and increased revenue may not always
result in a corresponding increase in net income. These conditions are due to a
number of characteristics shared by the Company to varying degrees with most
other members of the industry, including the following: (1) its businesses are
seasonal (typically less activity during the winter months) and are affected by
the scheduling of work at commercial properties, fiscal funding of projects by
government entities, outages at utilities and shutdowns at other industrial
facilities; (2) its asbestos business is labor intensive whereas its demolition
business is equipment intensive; (3) its performance on a given project is often
dependent on the performance of other contractors, who are working on the same
job, over which the Company has no control; and (4) costs ultimately incurred by
the Company on a job may be materially affected by such risks as technical
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problems, labor shortages and disputes, time extensions, weather, delays caused
by external sources and fluctuations in the prices of materials. Revenue and
operating results of asbestos-abatement activities may also be affected by the
timing of large contracts, especially if all or a substantial part of the
performance of such contracts occurs within one or two quarters. The revenue and
operating results of the demolition and dismantling activities may be affected
by fluctuations in the price of scrap metals. Accordingly, quarterly results or
other interim results should not be considered indicative of results to be
expected for any other quarter or for the full fiscal year.
Competition
The market for the Company's services is highly competitive. The Company's
ability to compete as a provider of asbestos-abatement and demolition and
dismantling services depends upon pricing its services competitively, having the
ability to respond promptly and with adequate amounts of resources, having a
reputation for quality and safety, being able to obtain appropriate bonding and
insurance, and hiring, training and retaining qualified personnel, particularly
in the areas of estimating and project management. While the Company is a
significant participant in the asbestos-abatement and demolition and dismantling
services market, it continues to experience competition from national, regional
and local firms, some of which have substantial resources and experience.
Insurance and Bonding
The Company has established an insurance program that has been tailored to meet
the mutual risk management needs of its clients and the Company. The primary
package begins with commercial general liability, automobile liability and
workers' compensation policies. This plan is written with an A. M. Best Rated A+
XV carrier. When the Company's umbrella policy is used, the coverage limits are
extended to $51,000,000 per occurrence and $52,000,000 general aggregate.
Effective November 1, 1996 the Company's liability per occurrence under the
general liability policy is $100,000, under the automobile liability policy is
$350,000 and under the workers' compensation policy is $500,000.
Public asbestos-abatement and demolition and dismantling projects require that
the Company post surety bonds as guarantees of performance of the Company's
contracts. The bonds are required to protect the interests of the general
public, as public funding is utilized in project financing. Additionally, surety
bonds also guarantee that the Company will pay all of its bills, including
suppliers and subcontractors who are working on projects for the Company.
Similarly, many private projects also require surety bonds to serve as
protection and provide guarantees for private owners.
The Company has existing surety relationships with The Insurance Company of the
State of Pennsylvania (American International Group) and Reliance Insurance
Group.
Employees
As of March 14, 1997 the Company had approximately 1,320 employees, of which
approximately 80 are employed as managers or executives, approximately 30
provide technical or engineering services, approximately 60 are employed in
sales, clerical and data processing activities and approximately 1,150 are
employed in other capacities, principally hourly labor. During 1996, the number
of hourly-rate employees ranged from 750 to 1,420. As of March 14, 1997
approximately 600 of the Company's employees were represented by various unions
under numerous collective bargaining agreements. The Company is a party to a
number of collective bargaining agreements with several unions which represent
employees based upon geographic area or the nature of work performed by such
employees. Such collective bargaining agreements expire at various times. The
Company considers its relations with its employees to be satisfactory and has
not experienced any work stoppages or slowdowns.
Patents and Service Marks
The Company currently does not own any patents or service marks.
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Government Regulation
The asbestos-abatement and demolition and dismantling process is regulated by
the federal government through the EPA, OSHA and the Department of
Transportation ("DOT"). Additionally, the demolition and dismantling process is
regulated by MSHA when conducted at mining locations. EPA regulations establish
standards for the control of asbestos fiber and airborne lead emissions into the
environment during removal and demolition projects. AHERA mandates that public
schools inspect for levels of asbestos contamination and prepare a specific
management plan for appropriate remedial action. OSHA regulations establish
maximum airborne asbestos fiber, airborne lead and heavy metal exposure levels
applicable to asbestos and demolition employees and set standards for employee
protection during the demolition, removal or encapsulation of asbestos, as well
as storage, transportation and final disposition of asbestos and demolition
debris.
EPA regulations under the Clean Air Act include requirements for wetting of the
asbestos-containing material, the use of exhaust ventilation and filtration
systems meeting certain specifications, and procedures for transporting and
disposing of asbestos-containing material. Prior to commencing most removal
projects, contractors are required to provide the EPA with written notification
containing certain information, including the address of the project, the
anticipated starting and completion dates, methods to be used to comply with the
emission standards, the amount of asbestos-containing material involved in the
project and the location of the EPA-approved disposal site.
The Toxic Substances Control Act ("TSCA"), as amended by AHERA, and the
regulations promulgated pursuant thereto, require inspection of schools for
asbestos and public notice of the inspection results, which often leads to
demands for abatement. In addition, TSCA imposes asbestos exposure standards for
state and local government employees. The EPA has also adopted regulations under
AHERA which require schools to use accredited inspectors to inspect school
buildings for asbestos-containing materials. If asbestos-containing materials
are found and are damaged, the school must develop an asbestos management plan
which outlines its management practices for the materials. Response actions may
include encapsulation, enclosure, repair or removal of the asbestos-containing
materials by an accredited contractor. The AHERA regulations impose affirmative
obligations on the accredited contractor who performs the work on school
building projects. These obligations include proper worker, employee and
occupant protections. In addition, AHERA incorporated the OSHA standards for
packaging, transportation and disposal of asbestos waste. If the
asbestos-containing material is not damaged, continued inspection and monitoring
by the school is required.
OSHA regulations establish maximum airborne asbestos, airborne lead and heavy
metal exposure levels in the workplace for employees, including
asbestos-abatement and demolition and dismantling workers. Such regulations
require workplace air monitoring to ensure compliance with maximum exposure
levels and prescribe engineering controls and workplace practices intended to
reduce airborne asbestos, lead and heavy metal exposure in the workplace.
Included in the workplace practice provisions is the required use of appropriate
respirators, protective clothing and decontamination units for the
asbestos-abatement and demolition and dismantling worker exposed to certain
levels of asbestos or lead and heavy metals.
DOT regulations cover the management of the transportation of asbestos and
demolition debris and establish certain certification, labeling and packaging
requirements. In addition, under the Comprehensive Environmental Response,
Compensation and Liability Act, also known as the Superfund Act, companies which
arrange for the transportation and disposal of asbestos waste materials may be
exposed to liability relating to the disposal of such material at sites which
are or may be designated as national priority list sites.
Each of the states in which the Company currently operates have adopted laws and
regulations governing the conduct of asbestos-abatement contractors. Such laws
and regulations generally require the training and licensing of
asbestos-abatement contractors and their workers and notice before the
commencement of any asbestos-abatement project and specify standards of
performance for the asbestos removal process. In addition, some states authorize
municipalities to adopt more stringent standards.
The Company believes that additional state and local authorities will adopt
similar laws and regulations and that existing laws and regulations will become
more restrictive. The regulations concerning asbestos-abatement are primarily
promulgated on the state and local level. Although subject to change, OSHA has
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adapted the final regulations as law. Many of the regulations are complex and
frequently amended and, therefore, the Company is unable to predict what, if
any, impact such regulations will have on its results of operations or financial
condition. As a result of the extensive regulation, the Company and its
subsidiaries are, have been and may in the future be, subject to audits and
investigations by federal, state and local governmental agencies. Because of the
changing regulatory environment, there can be no assurance that violations by
the Company of federal, state or local laws and regulations applicable to
asbestos removal will not occur in the future or that changes in such laws and
regulations would not have an adverse effect on the Company's business. Failure
to comply with regulations could result in the imposition of civil and criminal
penalties, any of which could have a material adverse effect upon the Company's
business.
Licensing Requirements
Most states in which the Company operates require that the Company obtain
asbestos licenses to provide asbestos-abatement services and contractor licenses
to provide demolition and dismantling services. These licenses are generally
subject to annual renewal. The Company has been able to obtain the renewal of
its licenses without unusual difficulty or delay, and the Company believes that
it is in substantial compliance with all current state licensing requirements
where the Company intends to conduct business. In addition, certain states have
adopted regulations which require state-specific training, testing and licensing
of employees engaging in asbestos-abatement or demolition and dismantling
activities.
Backlog
The majority of the Company's asbestos-abatement and demolition and dismantling
services are contracted on a fixed-price basis, while the remainder are
contracted either on a time and materials or a unit-price basis. The unearned
services portion of the Company's asbestos-abatement and demolition and
dismantling services contracts and unfilled orders was approximately $38,875,000
for 1996 and $47,466,000 for both 1995 and 1994. Up to $1,650,000 of the
Company's backlog at December 31, 1996 may not be earned during 1997. The
remaining amount of the Company's backlog at December 31, 1996 is expected to be
completed in the current calendar year.
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Item 2. Properties
The Company currently owns and leases property to support its operations. These
facilities provide space for sales and marketing functions and operations
management and support. The Company believes that its existing facilities are
adequate to meet current requirements and that suitable additional or substitute
space will be available as needed to accommodate any expansion of operations and
for additional offices. The following table summarizes the Company's properties:
- --------------------------------- ----------------------------------------------
Location Principal Use Acreage Square Footage Own/Lease
- --------------------------------------------------------------------------------
Methuen, MA Corporate Headquarters 9 40,000 Own
Offices and Warehousing
- --------------------------------------------------------------------------------
So. Windsor, CT Offices -- * Lease
- --------------------------------------------------------------------------------
Thorofare, NJ Offices and Warehousing -- 17,570 Lease
- --------------------------------------------------------------------------------
San Antonio, FL Offices and Warehousing -- 5,400 Lease
- --------------------------------------------------------------------------------
Winfield, WV Offices and Warehousing -- 5,000 Lease
- --------------------------------------------------------------------------------
Cincinnati, OH Offices and Warehousing -- 7,400 Lease
- --------------------------------------------------------------------------------
Lombard, IL Offices -- 5,000 Lease
- --------------------------------------------------------------------------------
Arden Hills, MN Offices and Warehousing -- 8,400 Lease
- --------------------------------------------------------------------------------
Maryland Heights, MO Offices -- 1,900 Lease
- --------------------------------------------------------------------------------
Salem, NH Offices -- 3,850 Lease
- --------------------------------------------------------------------------------
Houston, TX Offices and Warehousing -- 24,240 Lease
- --------------------------------------------------------------------------------
Orange, TX Offices -- * Lease
- --------------------------------------------------------------------------------
Dallas, TX Offices -- * Lease
- --------------------------------------------------------------------------------
Oakland, CA Offices and Warehousing -- 11,100 Lease
- --------------------------------------------------------------------------------
Salisbury, NC Offices and Warehousing -- 5,400 Lease
- --------------------------------------------------------------------------------
Baton Route, LA Offices and Warehousing -- 1,250 Lease
- --------------------------------------------------------------------------------
* These facilities consist of less than 1,000 square feet.
The Company's aggregate rental payments for leased office and warehouse space
approximated $835,000 in 1996.
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Item 3. Legal Proceedings
The Company has been advised by the Department of Justice, Environmental Crimes
Section, that the previously reported grand jury investigation relating to the
operational activities involving a subsidiary of the Company as a subcontractor
at the Weldon Springs Site Remedial Action Project has been concluded. The
Company has been further advised by the Department of Justice, Environmental
Crimes Section, that no action will be forthcoming against either the Company or
its subsidiary as a result of the aforementioned investigation.
The Company is also subject to certain other legal proceedings, including those
relating to regulatory compliance, in the ordinary course of its business.
Management believes that such other proceedings are either adequately covered by
insurance or if uninsured, will not, in the aggregate, have a material adverse
effect upon the Company.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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Executive Officers of the Registrant
The executive officers of the Company as of March 14, 1997 are listed below:
Victor J. Barnhart 54 Chairman and Chief Executive Officer
Darryl G. Schimeck 36 President and Chief Operating Officer
J. Drennan Lowell 40 Vice President, Chief Financial Officer,
Treasurer and Secretary
Efstathios A. Kouninis 35 Corporate Controller
Victor J. Barnhart has been Chairman and Chief Executive Officer since December
5, 1996. Prior to joining the Company Mr. Barnhart was the President of
Integrated Environmental Services - WMX Technologies since December 1995 and
President of Rust Industrial Services Inc. and Rust Remedial Services, Inc.,
subsidiaries of WMX Technologies, since November 1990.
Darryl G. Schimeck has been President and Chief Operating Officer since December
5, 1996 and served as President of National Surface Cleaning, Inc., a
wholly-owned subsidiary of the Company, since July 10, 1995 and Vice President,
Sales and Marketing, since February 1995. Prior to joining the Company, Mr.
Schimeck served as Senior Vice President of Growth Environmental Services, Inc.
from August 1994 through January 1995. Prior to that, Mr. Schimeck was President
of Rust Scaffold Rental and Erection, Inc. from July 1993 through July 1994.
From September 1992 to July 1993 he was Vice President - Northern Region for
Brand Scaffold Services, Inc.
J. Drennan Lowell has been Vice President, Chief Financial Officer and Secretary
since November 1993 and Treasurer since May 1994. Prior to joining the Company,
Mr. Lowell served as Vice President of Finance for Wheelabrator Clean Air
Systems Inc. from December 1992 to November 1993 and for Wheelabrator Clean
Water Systems Inc. from August 1991 to November 1993.
Efstathios A. Kouninis has been Corporate Controller since February 1996 and
Director of Tax and Internal Audit since September 1994. Prior to joining the
Company, Mr. Kouninis served in positions of increasing responsibility in
accounting for Wheelabrator Technologies Inc. since November 1991.
Page 12 of 88
<PAGE>
Part II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
The Common Stock is admitted for trading on the National Association of
Securities Dealers Automatic Quotation System, National Market System
("NASDAQ"). As of March 14, 1997 there were approximately 38 holders of record
of the Common Stock. During December 1996, the Company declared and paid a cash
dividend of $0.15 per share of common stock. Pursuant to the Revolving Credit
Facility, as amended, the Company must comply with certain financial covenants
for the declaration and payment of any cash dividends. While the Company's Board
of Directors has not established a policy concerning payment of regular
dividends, it intends to review annually the feasibility of declaring additional
dividends depending upon the results of operations, financial condition and cash
needs of the Company. The Common Stock does not have any preemptive rights.
The table below sets forth, for the calendar quarters indicated, the reported
high and low closing sales prices of the Common Stock as reported by NASDAQ
based on published financial sources:
1996 1995
-------------- --------------
Quarter Ended High Low High Low
-----------------------------------------------------------------
December 31.............. 2 1/2 1 3/8 2 3/4 1 3/32
September 30............. 2 1 1/2 3 2
June 30.................. 2 1/2 1 1/4 3 3/8 2 1/2
March 31................. 2 1/2 1 1/8 3 1/2 2 1/2
Page 13 of 88
<PAGE>
<TABLE>
<CAPTION>
Item 6. Selected Financial Data
(a) The Consolidated Five year Summary of Results of Operations for each of the
five years ended December 31 is set forth below:
(In thousands, except per-share data)
Years Ended December 31, 1996 1995 1994 1993(1) 1992(2)
- -------------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue....................................................... $129,043 $124,529 $132,218 $110,254 $ 62,220
Discontinued operations, net of income tax effects:
Income from operations....................................... - - - - 174
Provision for loss on disposition............................ - - - - (600)
-------- -------- -------- -------- --------
Income (loss) before cumulative effect of accounting change - - - - (2,030)
Cumulative effect of accounting change........................ - - - - (1,000)
-------- -------- -------- -------- --------
Net income (loss).......................................... $ 1,861 $ 715 $ 2,566 $ 3,373 $ (3,030)
======== ======== ======== ======== ========
Net income (loss) per share ( 3 )
Continuing operations...................................... $ 0.19 $ 0.07 $ 0.26 $ 0.40 $ (0.28)
Discontinued operations:
From operations.......................................... - - - - 0.03
From disposition......................................... - - - - (0.10)
Cumulative effect of accounting change........................ - - - - (0.18)
-------- -------- -------- -------- --------
$ 0.19 $ 0.07 $ 0.26 $ 0.40 $ (0.53)
======== ======== ======== ======== ========
Weighted average number of common
shares outstanding........................................... 9,971 9,971 9,971 8,504 5,735
======== ======== ======== ======== ========
Cash dividends declared per common share (4).................. $ 0.15 $ 0.15 $ 0.15 $ 1.20 $ -
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
(b) The consolidated five year summary of financial position as of December 31 is set forth below:
December 31, 1996 1995 1994 1993 1992
- ------------------------------------------------------------- -------- -------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Total assets................................................. $ 85,225 $ 87,161 $ 88,287 $ 93,569 $ 68,264
Non current liabilities, including current portion
of long-term debt (5)..................................... 7,611 7,421 10,588 13,775 15,848
</TABLE>
Page 14 of 88
<PAGE>
(1) The statement of operations data for the year ended December 31, 1993
includes the results of operations from May 4, 1993 (date of acquisition) of the
Division.
(2) The results of continuing operations for the year ended December 31, 1992
include pre-tax special charges totaling $5 million ($3.1 million after-tax), or
$0.53 per share, related to restructuring of the Company's asbestos-abatement
business and reserves for insurance and certain other matters. The cumulative
effect of accounting change of $1 million, or $0.18 per share, is for early
adoption of Financial Accounting Standards Board Statement No. 109, "Accounting
For Income Taxes." In addition, the results of operations for the year ended
December 31, 1992 include the provision for loss on disposition, net of income
tax benefit, of the Company's industrial cleaning services business.
(3) The net income per share amounts have been computed by dividing net income
by the average number of common shares outstanding during the respective
periods.
(4) In December 1996, 1995 and 1994, the Company declared and paid a cash
dividend of $0.15 per common share and $1.20 per common share in December 1993.
(5) In December 31, 1992, $14,850,000 of the noncurrent liabilities are amounts
due to OHM. On May 4, 1993 all outstanding amounts due to OHM were repaid with
term loan borrowings under a senior revolving credit facility with banks. On
March 21, 1996 the amount due to the banks under the senior revolving credit
facility was repaid in full.
Page 15 of 88
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
1996 vs. 1995
Continuing Operations
Revenue. The Company's consolidated revenue for the year ended December 31, 1996
increased 3.6% to $129,043,000 from $124,529,000 for the same period in 1995.
This increase was due to the inclusion in 1996 of a full year of ODMI generated
revenue of $21,421,000 compared with $7,589,000 for the four months ended
December 31, 1995 and the $9,895,000 decline in asbestos-abatement revenue. The
decline in asbestos-abatement revenue in 1996 was primarily due to normal
fluctuations in the volume of abatement work available, as well as the Company's
increased selectivity in accepting profitable projects.
Gross Profit. Gross profit as a percentage of revenue increased to 17.5% in 1996
from 15.6% in 1995. The increase in the gross profit margin is primarily
attributable to a reduction of insurance claims and their respective settlement
reserves.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses for the year ended December 31, 1996 increased
$78,000 or less than 1% to $16,431,000 from $16,353,000 for the same period in
1995. SG&A expenses as a percentage of revenue for 1996 and 1995 remained
constant at 13%. In 1996 ODMI incurred a full year of SG&A expenses of
$1,814,000 compared with four months in 1995 of $714,000. The increase of ODMI
expenses for 1996 was offset by a general reduction in SG&A expenses resulting
from the Company's continued cost containment efforts.
Other Operating Expenses. Other operating expenses in 1996 increased to $700,000
from $169,000 in 1995 due to the inclusion of a full year of ODMI activities.
ODMI is required to pay Rust an annual fee based on operating profit, if any, in
exchange for the right to operate ODC.
Other (Income) Expenses. Other (income) expenses in 1996 increased to $635,000
from $191,000 in 1995. In the fourth quarter of 1996, the Company wrote-down to
market the value of certain real property that no longer fits its strategic
plans. The write-down of the property amounted to $625,000. This increase in
other expenses was partially offset by the reduction in interest expense
associated with the Company's long-term debt, which was repaid in full on March
21, 1996.
Net Income. Net income increased 160% to $1,861,000 in 1996 from $715,000 in
1995. Net income as a percentage of revenue increased to 1.4% in 1996 from 0.6%
in 1995. The increase in net income is attributable to higher revenue and the
reduction of interest expense and insurance settlement reserves.
1995 vs. 1994
Continuing Operations
Revenue. Revenue for the year ended December 31, 1995 decreased 6% to
$124,529,000 from $132,218,000 for the same period in 1994. The decrease in
revenue during 1995 was due in part to market fluctuations in the volume of
abatement work performed, as well as to increased selectivity in the Company's
bidding process. The decrease in revenue was offset in part by the inclusion in
1995 of $7,589,000 revenue generated by ODMI activities.
Gross Profit. Gross profit for the year ended December 31, 1995 decreased 10% to
$19,447,000 from $21,716,000 for the same period in 1994. Gross profit as a
percentage of revenue decreased to 15% for 1995 from 16% for 1994, due to a
significant extent to a change in the mix of projects undertaken and increased
provisions for indemnity and workers' compensation losses in connection with the
unfavorable resolution in 1995 of two significant claims.
Page 16 of 88
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses for the year ended December 31, 1995 increased
$805,000, or 5%, to $16,353,000 from $15,548,000 for the same period in 1994.
SG&A expenses, as a percentage of revenue, were 13% for 1995 compared to 12% for
the same period in 1994, primarily due to a reduced revenue base and legal costs
related to the Weldon Springs grand jury investigation.
(See "Item 3. Legal Proceedings".)
Other Operating Expenses. In April 1995, the Company entered into an Operating
Agreement with Rust under which the Company, through ODMI, assumed the
management of ODC, a Rust subsidiary specializing in demolition and dismantling,
primarily in the industrial market. In exchange for the right to operate ODC,
the Company is required to pay Rust an annual fee based on operating profit, if
any, which amounted to $169,000 in 1995.
Other (Income) Expenses. Other (income) expenses for the year ended December 31,
1995 were $191,000 compared to $418,000 for the same period in 1994. The net
decrease of $227,000 is primarily attributable to lower interest expense due to
scheduled and unscheduled reductions in the Company's long-term debt.
Net Income. The Company recorded net income of $715,000, or $0.07 per share, for
the year ended December 31, 1995 compared to $2,566,000, or $0.26 per share, for
the same period in 1994. Net income as a percentage of revenue for December 31,
1995 decreased by less than 1% as compared to the same period in 1994, which is
directly related to the decrease in revenue and increases in direct and SG&A
costs as a percentage of these revenues.
Liquidity and Capital Resources
Working capital at December 31, 1996 was $21,154,000 compared to $17,339,000 at
December 31, 1995. The current ratio was 2.1/1 at December 31, 1996 compared to
1.7/1 at December 31, 1995. Cash provided by operating activities was $6,752,000
for 1996 compared to $2,125,000 for 1995. The increase in cash provided by
operations is primarily due to increased billings and accounts receivable
collections. During 1996, cash of $2,024,000 was used for purchases of property
and equipment, of which $769,000 was used towards the implementation of new
software technology. During 1997 the Company estimates that it will spend
an additional $600,000 to complete the implementation and bring this software
on-line by the early part of 1998. Also in 1996, cash of $618,000 was used for
the acquisition of the assets of Safe Air Inc., a leader in the indoor air
quality industry, $100,000 was used for other acquisition activities, and
$5,850,000 was used for repayment of the Company's long-term debt. Pursuant to
the Olshan Business Operating Agreement, dated April 20, 1995, the Company has
received to date a $4,520,000 interest-free working capital loan. The loan is
payable according to the provisions contained in the Agreement and is expected
to remain outstanding for the full ten year term of the Agreement.
The Company believes that its cash flows from operations and funds available
under the existing senior revolving credit facilities, as amended on May 1,
1996, will be sufficient throughout the next twelve months to finance its
working capital needs and planned capital expenditures. While the Company's
Board of Directors has not established a policy concerning payment of regular
dividends, it intends to review annually the feasibility of declaring additional
dividends depending upon the results of operations, financial condition and cash
needs of the Company.
In connection with the acquisition of the Division, Rust (successor to Brand)
has provided the Company with a $25 million revolving credit facility. No
amounts were borrowed under this revolving credit facility during 1996, 1995 or
1994. This revolving credit facility terminated June 6, 1996.
The nature and scope of the Company's business bring it into regular contact
with the general public and a variety of businesses and government agencies.
Such activities inherently subject the Company to the hazards of litigation,
which are defended in the normal course of business. While the outcome of all
claims is not clearly determinable at the present time, management has recorded
an estimate of any losses it expects to incur in connection with the resolution
of the claims at December 31, 1996 of $5,410,000 and at December 31, 1995 of
$6,694,000.
Inflation
Historically, inflation has not had a significant impact upon the Company or its
cost of operations.
Page 17 of 88
<PAGE>
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and supplementary consolidated quarterly
financial data of the Company and its subsidiaries for the years ended December
31, 1996, 1995 and 1994 are set forth on pages 19 through 22.
Page 18 of 88
<PAGE>
NSC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per-Share Data)
December 31,
---------------------
1,996 1995
ASSETS ------- -------
Current assets:
Cash and cash equivalents.......................... $ 3,975 $ 4,094
Accounts receivable, net........................... 26,859 27,125
Costs and estimated earnings on contracts
in process in excess of billings................. 7,739 7,894
Inventories........................................ 878 1,041
Prepaid expenses and other current assets.......... 1,672 1,559
Refundable income taxes............................ - 92
------- -------
41,123 41,805
Property and equipment, net........................... 7,352 8,484
Other noncurrent assets:
Goodwill, net of accumulated amortization of
$6,884 and $5,787 in 1996 and 1995, respectively.. 36,275 36,872
Other assets..................................... 475 -
------- -------
36,750 36,872
------- -------
Total assets....................................... $85,225 $87,161
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................... $ 3,448 $ 3,063
Billings in excess of costs and estimated
earnings on contracts in process................. 5,237 3,932
Accrued compensation and related costs............. 3,898 3,751
Federal, state and local taxes..................... 887 250
Other accrued liabilities.......................... 1,089 926
Reserve for self insurance claims
and other contingencies.......................... 5,410 6,694
Current portion of noncurrent liabilities.......... - 5,850
------- -------
19,969 24,466
Noncurrent liabilities:
Payable to affiliate............................... 4,520 1,571
Deferred income taxes.............................. 3,090 3,843
Stockholders' equity:
Preferred stock $.01 par value, 10,000,000 shares
authorized, none issued and outstanding.......... - -
Common stock $.01 par value, 20,000,000 shares
authorized, 9,971,175 shares issued and
outstanding in both 1996 and 1995................ 100 100
Additional paid-in capital......................... 56,079 56,079
Retained earnings.................................. 1,467 1,102
------- -------
57,646 57,281
------- -------
Total liabilities and stockholders' equity......... $85,225 $87,161
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
Page 19 of 88
<PAGE>
<TABLE>
<CAPTION>
NSC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per-Share Data)
Years Ended December 31,
--------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenue............................................... $129,043 $124,529 $132,218
Cost of services..................................... 106,454 105,082 110,502
-------- -------- --------
Gross profit....................................... 22,589 19,447 21,716
Selling, general and administrative expenses.......... 16,431 16,353 15,548
Other operating expenses.............................. 700 169 -
Goodwill amortization................................. 1,097 1,066 1,067
-------- -------- --------
4,361 1,859 5,101
-------- -------- --------
Other:
Interest expense.................................... 112 587 804
Other expenses...................................... 523 (396) (386)
-------- -------- --------
635 191 418
-------- -------- --------
Income before income taxes......................... 3,726 1,668 4,683
Income taxes.......................................... 1,865 953 2,117
-------- -------- --------
Net income......................................... $ 1,861 $ 715 $ 2,566
======== ======== ========
Net income per share.................................. $ 0.19 $ 0.07 $ 0.26
======== ======== ========
Weighted-average number of common shares outstanding.. 9,971 9,971 9,971
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 20 of 88
<PAGE>
<TABLE>
<CAPTION>
NSC CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands, Except Per-Share Data)
Common Stock
-------------------- Additional Total
Number of Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
------- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994.................. 9,971 $ 100 $ 56,079 $ 813 $ 56,992
Net income.................................. - - - 2,566 2,566
Cash dividend declared ($0.15 per share).... - - - (1,496) (1,496)
------- ------ -------- -------- --------
Balance at December 31, 1994................ 9,971 $ 100 $ 56,079 $ 1,883 $ 58,062
------- ------ -------- -------- --------
Net income.................................. - - - 715 715
Cash dividend declared ($0.15 per share).... - - - (1,496) (1,496)
------- ------ -------- -------- --------
Balance at December 31, 1995................ 9,971 $ 100 $ 56,079 $ 1,102 $ 57,281
------- ------ -------- -------- --------
Net income.................................. - - - 1,861 1,861
Cash dividend declared ($0.15 per share).... - - - (1,496) (1,496)
------- ------ -------- -------- --------
Balance at December 31, 1996................ 9,971 $ 100 $ 56,079 $ 1,467 $ 57,646
======= ====== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 21 of 88
<PAGE>
<TABLE>
<CAPTION>
NSC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Years Ended December 31,
--------------------------------------
1996 1995 1994
-------- -------- --------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income ......................................... $ 1,861 $ 715 $ 2,566
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................... 1,716 1,830 2,160
Goodwill amortization.......................... 1,097 1,066 1,067
Deferred income taxes.......................... (771) (1,034) 1,072
Loss (gain) on disposition of property
and equipment................................ 194 (36) (123)
Loss on impairement of assets held for sale.... 625 - -
Changes in assets and liabilities, net of effects
of acquired business:
Accounts receivable, net............................ 266 (984) 2,943
Costs and estimated earnings on contracts
in process in excess of billings................... 155 (2,283) (1,048)
Other current assets................................ 235 487 3,884
Accounts payable.................................... 385 (176) (1,677)
Billings in excess of costs and estimated
earnings on contracts in process................... 1,305 (1,559) (471)
Other current liabilities........................... (316) 4,061 (2,197)
Other............................................... - 38 14
------- ------- -------
Net cash provided by operating activities...... 6,752 2,125 8,190
------- ------- -------
Cash flows from investing activities:
Purchases of property and equipment................. (2,024) (759) (814)
Proceeds from sale of property and equipment........ 268 144 350
Acquisiton of other assets.......................... (718) - -
------- ------- -------
Net cash used in investing activities.......... (2,474) (615) (464)
------- ------- -------
Cash flows from financing activities:
Payments on long-term debt.......................... (5,850) (4,738) (3,187)
Proceeds of loan from affiliate..................... 2,949 - -
Cash dividend paid.................................. (1,496) (1,496) (1,496)
------- ------- -------
Net cash used in financing activities.......... (4,397) (6,234) (4,683)
------- ------- -------
Net increase (decrease) in cash
and cash equivalents......................... (119) (4,724) 3,043
Cash and cash equivalents at beginning of periods... 4,094 8,818 5,775
------- ------- -------
Cash and cash equivalents at end of periods......... 3,975 4,094 8,818
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 22 of 88
<PAGE>
NSC Corporation
Notes to Consolidated Financial Statements
December 31, 1996
Note 1 - Organization and Summary of Significant Accounting Policies
Organization and Basis of Presentation. The accompanying consolidated financial
statements include the accounts of NSC Corporation (the "Company") and its
wholly-owned subsidiaries, National Surface Cleaning, Inc. ("NSCI"), National
Service Cleaning Corp. ("NSCC"), NSC Energy Services, Inc. ("NSCESI"), NSC
Specialty Coatings, Inc. ("NSCSCI") and since September 4, 1995 Olshan
Demolishing Management, Inc. ("ODMI") - see Note 9 - "Transactions with
Affiliates". All intercompany transactions have been eliminated in
consolidation. The Company is a Delaware corporation and was a seventy
percent-owned subsidiary of OHM Corporation ("OHM") through May 3, 1993. On May
4, 1993 pursuant to a Purchase Agreement among the Company, Industrial, OHM, The
Brand Companies, Inc. ("Brand") and Waste Management, Inc. ("WMI"), now known as
WMX Technologies, Inc., the Company acquired the asbestos-abatement division of
Brand (the "Division") in exchange for 4,010,000 shares of the Company's common
stock and all the common stock of Industrial. As of December 31, 1996 and 1995,
OHM and Rust International Inc. (a successor company to Brand and hereinafter
referred to as "Rust") each owned approximately forty percent of the Company's
common stock.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates, and such
differences may or may not be material.
Revenue and Cost Recognition. The Company primarily derives its revenues from
providing asbestos-abatement, demolition and dismantling and other specialty
contracting services under fixed-price, time and materials and unit price
contracts. In addition, certain revenue is derived from the sale of scrap metals
and processing equipment removed from demolition sites. The Company recognizes
revenues and related income from its fixed- and unit-price contracts in process
using the percentage-of-completion method of accounting. The Company determines
the percentage-of-completion of its contracts by comparing costs incurred to
date to total estimated costs. Revenues from time and material-type contracts
are recorded based on cost incurred. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. Revenues are recognized for amounts under pending claims when
management believes it is probable the claim will result in additional contract
revenues and the amount can be reliably estimated. Contract costs include all
direct labor, material, per diem, subcontract and other direct and indirect
costs related to the contract performance. Selling, general and administrative
expenses are charged to expense as incurred. The asset, "costs and estimated
earnings on contracts in process in excess of billings," represents revenues
recognized in excess of amounts billed. The liability, "billings on contracts in
process in excess of costs and estimated earnings," represents billings in
excess of revenues recognized.
Direct Subcontract Costs. The Company incurs a substantial amount of direct
subcontract costs which are passed through to its clients. These costs result
from the use of subcontractors on projects for labor, transportation and
disposal of asbestos materials, analytical and restoration services, and other
removal-related services. The direct subcontract costs were $25,240,000,
$24,426,000 and $23,672,000 for 1996, 1995 and 1994, respectively, and are
included in Costs of Services in the 1996 Consolidated Statement of Income.
Inventories. Inventories primarily consist of operating supplies and are stated
at the lower of cost or market. Cost is determined using the first-in, first-out
(FIFO) method.
Property and Equipment. Property and equipment are stated at cost. Depreciation
is provided over the estimated useful lives (3 to 30 years) of the respective
assets using the straight-line method.
Goodwill. Goodwill is amortized, generally, on a straight-line basis over a
40-year life and is reviewed on an ongoing basis by the Company's management
based on several factors, including the Company's projection of undiscounted
operating cash flows. If an impairment of the carrying value were to be
indicated by this review, the Company would adjust the carrying value of
goodwill to its estimated fair value.
Page 23 of 88
<PAGE>
Long-Lived Assets. The adoption by the Company in 1996 of SFAS No. 121,
"Accounting for the impairment of Long-Lived Assets to be Disposed Of" did not
materially affect the Company's consolidated financial statements. In the event
that facts and circumstances indicate that any of the Company's long-lived
assets may be impaired, an evaluation of recoverability would be performed. If
after such evaluation it is determined that an asset is impaired, the carrying
value of the asset would be reduced to fair value.
Income Taxes. The Company provides for income taxes based upon earnings reported
for financial statement purposes. Deferred tax assets and liabilities are
determined based on temporary differences between the financial reporting and
tax base of assets and liabilities.
Stock Compensation. Effective January 1, 1996 the Company adopted SFAS No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 123 requires the recognition
of, or disclosure of, compensation expense for grants of stock options or other
equity instruments issued to employees based on the fair value at the date of
grant. As permitted by SFAS No. 123, the Company elected the disclosure
requirements instead of recognition of compensation expense and therefore will
continue to apply existing accounting rules.
Cash Equivalents and Cash Flow Information. The Company considers all
investments having a maturity of three months or less when purchased to be cash
equivalents. Cash equivalents are stated at cost which approximates fair market
value. Cash paid for income taxes was $2,007,000, $1,702,000 and $263,000 for
1996, 1995, and 1994, respectively. Cash paid for interest was $112,000,
$587,000 and $802,000 for 1996, 1995 and 1994, respectively. The effects of the
Company's cash and non-cash transactions with ODMI are described in Note 9,
"Transactions with Affiliates."
Net Income Per Share. The net income per share amounts for 1996, 1995 and 1994
have been computed by dividing net income by the weighted-average number of
common shares outstanding during the respective periods.
Reclassifications. Certain reclassifications have been made to prior year
financial statements to conform with the current year presentation.
Note 2 - Accounts Receivable
Accounts receivable are summarized as follows:
December 31,
------------------------
1996 1995
---------- ----------
(In Thousands)
Accounts billed and due currently ................. $24,861 $24,479
Retained .......................................... 2,555 3,195
------- -------
27,416 27,674
Allowance for uncollectible accounts .............. (557) (549)
------- -------
$26,859 $27,125
======= =======
The retained receivables at December 31, 1996 are expected to be collected
within one year.
Page 24 of 88
<PAGE>
Note 3 - Properties and Equipment
Properties and equipment were as follows:
December 31,
-----------------------
1996 1995
-------- --------
(In Thousands)
Land............................................. $ 767 $ 998
Buildings and improvements....................... 4,311 5,588
Machinery and equipment.......................... 9,868 8,813
Projects in progress............................. 558 -
-------- --------
15,504 15,399
Accumulated depreciation......................... (8,152) (6,915)
-------- --------
Properties and equipment, net.................... $ 7,352 $ 8,484
======== ========
In 1995, the Company removed from its books fully depreciated assets with a
total cost of $3,334,000.
In 1996, the Company wrote-down to market the carrying value of its Hammond, IN
property which no longer fits in its strategic plans and is currently held for
sale. The write-down of the property amounted to $625,000 and is included in
other expenses in the 1996 Consolidated Statement of Income. Also in 1996, cash
of $769,000 was used towards the implementation of new software technology.
During 1997 the Company estimates that it will spend additional an $600,000 to
complete the implementation and bring this software on-line by the early part of
1998.
Note 4 - Costs and Estimated Earnings on Contracts in Process
The consolidated balance sheets include the following amounts:
December 31,
------------------------
1996 1995
---------- ----------
(In Thousands)
Costs incurred on contracts in process............. $106,327 $98,882
Estimated earnings................................. 18,427 19,481
-------- --------
124,754 118,363
Less billing to date............................... 122,252 114,401
-------- --------
$ 2,502 $ 3,962
======== ========
Costs and estimated earnings on contracts in
process in excess of billings................ $ 7,739 $ 7,894
Billings on contracts in process in excess of
costs and estimated earnings................. (5,237) (3,932)
-------- --------
$ 2,502 $ 3,962
======== ========
Costs and estimated earnings on contracts in process in excess of billings
included reserves for contract revenue adjustments of $152,000 and $442,000 at
December 31, 1996 and 1995, respectively. The Company recognizes revenue from
its fixed and unit price contracts in process using the percentage of completion
method of accounting, which requires the use of estimates. Such estimates are
subject to changes throughout the duration of the contract, due to factors such
as technical problems, disputes, weather, delays caused by external sources and
fluctuations in the prices of materials and scrap metals.
Page 25 of 88
<PAGE>
Note 5 - Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 1996 and
1995 are as follows:
December 31,
---------------------
1996 1995
--------- --------
(In Thousands)
Deferred tax assets:
Accrued liabilities ............................. $2,390 $1,840
Allowance for uncollectible accounts ............ 223 219
------ ------
Total deferred tax assets .................... 2,613 2,059
Deferred tax liabilities:
Tax over book depreciation ..................... 572 932
Goodwill ....................................... 3,698 3,542
Contract revenue recognition ................... 458 515
Prepaid expenses and other assets .............. 641 597
------ ------
Total deferred tax liabilities ............... 5,369 5,586
------ ------
Net deferred tax liabilities ................. $2,756 $3,527
====== ======
Significant components of the provision for income taxes (benefit) are as
follows:
Years Ended December 31,
----------------------------------
1996 1995 1994
--------- --------- --------
(In Thousands)
Current:
Federal ............................... $2,269 $1,404 $ 768
State ................................ 367 583 277
------ ------ ------
Total current taxes.................. 2,636 1,987 1,045
------ ------ ------
Deferred:
Federal................................ (825) (664) 831
State ................................. 54 (370) 241
------ ------ ------
Total deferred taxes (benefit)....... (771) (1,034) 1,072
------ ------ ------
Total income tax provision........... $1,865 $ 953 $2,117
====== ====== ======
The reasons for differences between income taxes attributable to continuing
operations and the amount computed by applying the federal statutory tax rate
(34% is the statutory tax rate for companies that have less than $10 million of
taxable income) to income from continuing operations before income taxes are:
Years Ended December 31,
-------------------------------
Liability Method
-------------------------------
1996 1995 1994
------ ------ ------
Federal statutory rate ........................ 34.0% 34.0% 34.0%
Add (deduct):
State income taxes, net of federal
tax benefit............................. 7.4 8.2 7.1
Goodwill amortization ...................... 4.8 10.9 3.9
Other ...................................... 3.9 4.0 0.2
----- ----- -----
50.1% 57.1% 45.2%
===== ===== =====
Page 26 of 88
<PAGE>
Note 6 - Long-Term Debt
On March 21, 1996 the Company repaid the full $5,850,000 outstanding amount
under the $25,000,000 revolving credit facility (the "Facility") dated May 4,
1993. Subsequently, on May 1, 1996 the Company amended its May 4, 1993 revolving
credit facility. Under this amendment, the Company can borrow up to $25,000,000
on a revolving basis for a term expiring April 30, 1999. The amended revolving
credit facility contains debt service coverage, leverage and interest convenants
and allows for payment of dividends subject to certain conditions. Amounts
outstanding under the facility bear interest of 150 to 225 basis points above
the Eurodollar rate (the 90 day Eurodollar rate at December 31, 1996 was 5.56%)
and are secured by substantially all of the Company's assets. As of December 31,
1996 the Company had outstanding $8,000,000 in letters of credit.
Note 7 - Capital Stock
The Company's Certificate of Incorporation authorizes the Board of Directors to
issue up to 10,000,000 shares of preferred stock, $0.01 par value, without any
further vote or action by the stockholders. As of December 31, 1996 no preferred
stock has been issued.
Pursuant to an agreement among the Company, Rust and OHM dated May 4, 1993 each
of Rust and OHM has the right to demand registration, at their own expense, of
all or a portion of the common stock of the Company held by it. In the event
either Rust or OHM demands such registration, the other entity has the right to
participate. This agreement is subject to certain conditions and limitations,
including limitations as to the frequency of exercise and Rust's and OHM's right
to participate in other registrations of the Company.
Note 8 - Stock Option Plan
The Company has a stock option plan (the "1990 Plan") which provides for the
granting of options to acquire up to 860,000 shares of the Company's common
stock. The options are issuable to directors, officers and key employees at an
exercise price not less than the fair market value of the Company's common stock
on the date of grant. The stock options granted under the 1990 Plan are
exercisable in either cumulative ratable annual installments over a four year
period or altogether three years after the date of grant, and expire ten years
thereafter. Shares available for grants of additional stock options, under the
1990 Plan, were 151,250, 656,750 and 478,680 for the years ended December 31,
1996, 1995 and 1994 respectively.
The following tables summarize information about the Company stock options.
1990 Plan
-------------------------------
Number of Option Price
Options Range Per Share
---------- -----------------
Outstanding at January 1, 1994 ................ 449,420 4.00 - 8.75
Canceled.................................. (224,100) 4.00 - 8.75
--------
Outstanding at December 31, 1994............... 225,320 4.00 - 8.50
Canceled.................................. (178,070) 4.00 - 6.00
--------
Outstanding at December 31, 1995............... 47,250 4.00 - 8.50
Granted................................... 690,000 2.00 - 2.06
Canceled.................................. (184,500) 2.00 - 8.50
--------
Outstanding at December 31, 1996............... 552,750 2.00 - 6.00
========
Page 27 of 88
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Option Outstanding at Exercisable at Remaining Option
Grant Date 12/31/96 12/31/96 Contractual Life Price Range
- ------------------- ------------------- ------------------ ------------------- -----------------
<S> <C> <C> <C> <C> <C>
March 1991 3,000 3,000 4.0 years $6.00
May 1991 10,000 10,000 4.2 years $6.00
November 1991 1,250 1,250 4.5 years $4.00
November 1992 1,000 1,000 5.5 years $5.75
May 1993 10,000 10,000 6.2 years $4.05
February 1996 207,500 0 9.1 years $2.00
December 1996 320,000 0 9.8 years $2.06
</TABLE>
Effective January 1, 1996 the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 requires the recognition of, or
disclosure of, compensation expenses for grants of stock options or other equity
instruments issued to employees based on the fair value at the date of grant.
Although SFAS No. 123 requires the presentation of pro forma information to
reflect the fair value method of accounting for employee stock option grants,
such information has not been presented because the pro forma effects are not
material. The initial impact on pro forma net income may not be representative
of compensation expense in future periods when the effect of amortization of
multiple awards would be reflected in the pro forma calculation. The fair value
of these options was estimated at the date of the grant using the
"Black-Scholes" method prescribed by SFAS No. 123. The following
weighted-average assumptions were used to determine the fair value for 1996:
market price of the Company's common stock of $2.00 and $2.06, a risk-free rate
of 5% and 6%, an expected dividend yield of 6% and a weighted-average expected
life of the option of 5 years.
Note 9 - Transactions with Affiliates
In April 1995, the Company entered into an Interim Management Agreement and
Operating Agreement (the "Agreements") with Rust under which the Company,
through ODMI, assumed the management of Olshan Demolishing Company ("ODC"), a
Rust subsidiary specializing in demolition and dismantling, primarily in the
industrial market. The term of the Operating Agreement extends through April
2005, although the occurrence of certain conditions or events could trigger
early termination. Pursuant to the provisions of the Operating Agreement, Rust
provided the Company a non-interest bearing working capital loan, payable upon
termination of the Operating Agreement, with a possible maximum of $4,520,000 by
transferring to the Company current assets of $3,062,000 and current liabilities
of $1,491,000. In 1996, Rust paid an additional $2,949,000 to the Company,
raising the outstanding balance of the working capital loan to $4,520,000. The
results of operations of ODMI are consolidated with the Company's results of
operations. In exchange for the right to operate ODC, the Company is required to
pay Rust an annual fee based on operating profit, if any. This fee amounted to
$700,000 in 1996 and $169,000 in 1995. In the event that ODC incurs operating
losses, Rust would be required to reimburse the Company for a portion of those
losses.
The Company has, from time to time, provided asbestos-abatement and related
services to OHM and its affiliates on a subcontract basis. Revenues recognized
from these affiliates for such services were $40,000, $212,000 and $1,377,000
for 1996, 1995 and 1994, respectively. Also, OHM provided in 1996 removal and
cleaning services of waste material to the Company on a subcontract basis. The
cost for such services was $121,000.
In addition, the Company has, from time to time, provided asbestos-abatement and
related services to Rust and certain of its affiliates on a subcontract basis.
Revenues recognized for such services were $84,000, $302,000, and $4,509,000 for
the years ended December 31, 1996, 1995, and 1994, respectively. Also, Rust and
certain of its affiliates provided scaffolding, disposal, demolition and other
related services to the Company on a subcontract basis. The cost for such
services provided by Rust and its affiliates was $1,503,000, $1,719,000 and
$940,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
Rust rented demolition equipment to the Company for which it was charged
$527,000 and $209,000 for the year ended December 31, 1996 and 1995,
respectively.
Page 28 of 88
<PAGE>
Note 10 - Employee Benefit Plans
Effective October 1, 1992 the Company adopted the NSC Corporation Retirement
Savings Plan (the "Plan"). The Plan allows eligible employees to make
contributions, up to a certain limit, to a trust on a tax-deferred basis under
Section 401(k) of the Internal Revenue Code. The Company may, at its discretion,
make profit-sharing contributions to the Plan out of its profits for the plan
years. The Company made matching contributions of $105,000 and $89,000 for 1996
and 1995, respectively. No matching contribution was made in 1994.
The Company's subsidiary, NSC, has certain union employees which are covered by
union-sponsored, collectively - bargained, multi-employer retirement plans.
Contributions to the plans were $1,828,000, $1,575,000 and $2,379,000 for 1996,
1995 and 1994, respectively.
Note 11 - Litigation, Commitments and Contingencies
The nature and scope of the Company's business bring it into regular contact
with the general public and a variety of businesses and government agencies.
Such activities inherently subject the Company to the hazards of litigation,
which are defended in the normal course of business.
The Company effectively self insures its auto, commercial general liability and
workers' compensation risks up to $350,000, $100,000 and $500,000 per occurrence
respectively. For claims that may exceed the self-insured amounts, the Company
has obtained commercial/excess umbrella and excess workers' compensation stop
loss coverage on a fully-insured basis. Factors affecting the ultimate
resolution of these claims against the Company, particularly those claims
related to personal injuries, are to some degree outside the control of the
Company and include, among other items, determination of the extent of an injury
or disability, the amount of ongoing medical expenses that are necessary to
treat the injury or disability, and the uncertainty associated with damages that
may be awarded in the event of a jury trial.
In connection with the claims described in the preceding paragraphs, the Company
has an accrual balance of $5,410,000 and $6,694,000 for 1996 and 1995,
respectively, which represents its estimate of loss associated with the
resolution of these claims. However, the ultimate outcome of these claims cannot
presently be determined.
The Company occupies office and warehouse space and utilizes equipment in
various locations under operating leases the last of which expires in 2000.
Rental expense under operating leases amounted to $956,267, $908,000 and
$830,000 for 1996, 1995 and 1994, respectively. The lease agreements generally
contain renewal provisions and escalation clauses. Future minimum lease payments
under non cancelable operating leases as of December 31, 1996 are: 1997,
$597,000; 1998, $379,000, 1999, $121,000 and 2000, $86,000.
The Company had $8,000,000 letters of credit outstanding at both December 31,
1996 and 1995. These letters of credit were issued in support of the Company's
insurance programs.
Note 12 - Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance sheet for
cash and cash equivalents approximates their fair value.
Accounts receivable and accounts payable: The carrying amounts reported in the
balance sheet for accounts receivable and accounts payable approximate their
fair value.
Long-debt: The fair value of the Company's long-term debt is estimated using
discounted cash flow analyses, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.
Page 29 of 88
<PAGE>
The carrying amounts and fair values of the Company's financial instruments at
December 31, 1996 are as follows:
Carrying Fair
Amount Value
-------- --------
(In Thousands)
Cash and cash equivalents........................ $ 3,975 $ 3,975
Accounts receivable.............................. 26,859 26,859
Accounts payable................................. (3,448) (3,448)
Long-term debt................................... (4,520) (2,261)
Note 13- Industry Segment Data
The Company operates in two principal industries - asbestos-abatement services
and beginning in September 1995, demolition and dismantling services. The
Company's asbestos-abatement divisions provide asbestos removal, insulation and
restoration primarily to private sector clients at commercial and industrial
properties, while the Company's demolition and dismantling division provides
industrial dismantling and commercial demolition for public and private sector
customers. Intersegment sales are generally priced on a basis comparable to
sales to unaffiliated companies.
December 31,
--------------------------
1996 1995
----------- -----------
(In Thousands)
Revenue
Asbestos-Abatement.......................... $107,622 $116,940
Demolition and Dismantling.................. 21,421 7,589
-------- --------
Total revenue.......................... $129,043 $124,529
======== ========
Operating profit
Asbestos-Abatement.......................... $ 7,455 $ 6,932
Demolition and Dismantling.................. 1,101 827
-------- --------
Total operating profit................. 8,556 7,759
Corporate expenses............................ (4,195) (5,731)
Interest expense.............................. (112) (587)
Other......................................... (523) 227
-------- --------
Income before income taxes............. $ 3,726 $ 1,668
======== ========
Identifiable assets
Asbestos-Abatement.......................... $ 66,919 $ 74,958
Demolition and Dismantling.................. 8,681 7,370
-------- --------
75,600 82,328
Corporate assets.............................. 9,625 4,833
-------- --------
Total assets.......................... $ 85,225 $ 87,161
======== ========
Depreciation
Asbestos-Abatement.......................... $ 1,407 $ 1,571
Demolition and Dismantling.................. 63 2
Corporate ................................. 246 257
-------- --------
Total depreciation.................... $ 1,716 $ 1,830
======== ========
Amortization
Asbestos-Abatement.......................... $ 31 $ -
Demolition and Dismantling.................. - -
Corporate ................................. 1,068 1,066
-------- --------
Total amortization.................... $ 1,099 $ 1,066
======== ========
Page 30 of 88
<PAGE>
Capital Expenditures
Asbestos-Abatement.......................... $ 394 $ 486
Demolition and Dismantling.................. 699 79
Corporate ................................. 931 195
-------- --------
Total capital expenditures............ $ 2,024 $ 760
======== ========
Note 14 - Quarterly Financial Data (Unaudited)
The following is an analysis of certain items in the consolidated statements of
operations by quarter for 1996 and 1995:
First Second Third Fourth
1996 Quarter Quarter Quarter Quarter
---- ------- ------- ------- -------
(In Thousands, Except Per-Share Data)
Revenue............................. $35,823 $32,147 $30,014 $31,059
Gross profit........................ 5,960 5,331 5,321 5,977
Net income.......................... 560 557 454 290
Net income per share ............... $ 0.06 $ 0.06 $ 0.04 $ 0.03
======= ======== ======= =======
First Second Third Fourth
1995 Quarter Quarter Quarter Quarter
---- ------- ------- ------- -------
(In Thousands, Except Per-Share Data)
Revenue............................ $29,545 $31,965 $29,452 $33,567
Gross profit....................... 4,700 5,203 4,562 4,982
Net income......................... 220 493 2 -
Net income per share .............. $ 0.02 $ 0.05 $ 0.00 $ 0.00
======= ======= ======= =======
In the fourth quarter of 1996, the Company wrote-down to market the value of the
Hammond,IN facility which no longer fits in its strategic plans and is currently
being held for sale - see Note 3 "Properties and Equipment."
The Company's results of operations for the fourth quarter of 1995 reflect
additional provisions for workers' compensation losses in connection with the
unfavorable resolution of two significant claims.
Page 31 of 88
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
NSC Corporation
We have audited the accompanying consolidated balance sheets of NSC Corporation
and subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the Index at Item 14 (a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of NSC
Corporation and subsidiaries at December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
January 31, 1997
Page 32 of 88
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
Not applicable.
Part III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item, in addition to that set forth above in
Part I under the caption "Executive Officers of the Registrant," is set forth in
the section entitled "Information Concerning Directors and Nominees" contained
in the Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission (the "Proxy Statement") in connection with the Company's
1997 Annual Meeting of Stockholders, and such information is incorporated herein
by reference.
Item 11. Executive Compensation
Remuneration of the directors and officers and information related thereto is
included in the section entitled "Executive Compensation and Other Information"
contained in the Proxy Statement, and said information is incorporated herein by
reference except for information contained under the captions "Board
Compensation Committee Report" and "Performance Graph."
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security ownership of management and certain beneficial owners and information
related thereto is included in the section entitled "Voting Securities and
Principal Holders Thereof" contained in the Proxy Statement, and said
information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Transactions with management and related parties and information related thereto
is included in the section entitled "Certain Relationships and Related
Transactions" contained in the Proxy Statement, and said information is
incorporated herein by reference.
Page 33 of 88
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) The following consolidated financial statements of the Company and its
subsidiaries for the years ended December 31, 1996, 1995 and 1994 are
included at the pages indicated below:
Page
Consolidated Balance Sheets 19
-As of December 31, 1996 and 1995
Consolidated Statements of Operations 20
-For the Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Changes in Stockholders' Equity 21
-For the Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows 22
-For the Years Ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements 23
Report of Independent Auditors 32
(a)(2) The following consolidated financial statement schedule is included
herein at the pages indicated below:
Page
Schedule II Valuation and Qualifying Accounts 39
-For the Years Ended December 31, 1996, 1995 and 1994
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are not applicable, and therefore have been omitted.
(a)(3)The following Exhibits are included in this Annual Report on Form 10-K:
Exhibit Exhibit
Number Description
3(i)(a) Amended and Restated Certificate of Incorporation of the Registrant
dated April 24, 1990 [incorporated by reference to Exhibit 3(a) to the
Registrant's Form S-1, Registration Statement No. 33-34702].
3(ii)(a) By-Laws of the Registrant [incorporated by reference to Exhibit 3(b) to
the Registrant's Form S-1, Registration Statement No. 33-34702].
4 Specimen Common Stock Certificate [incorporated by reference to Exhibit 4 to
the Registrant's Annual Report on Form 10-K for the year ended December 31,
1990].
* 10(a) NSC Corporation 1990 Stock Option Plan, As Amended and Restated
[incorporated by reference to Exhibit 10(a) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1991].
Page 34 of 88
<PAGE>
* 10(b) NSC Corporation Retirement Savings Plan and NSC Corporation Retirement
Savings Plan Trust Agreement [incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30,
1992].
* 10(c) Indemnification Agreement, dated as of May 1, 1990 by and between the
Registrant and William M. R. Mapel [incorporated by reference to Exhibit 10(i)
of the Registrant's Form S-1, Registration Statement No. 33-34702].
10(d) Purchase Agreement, dated as of December 23, 1992 and related amendments
made thereto, by and among OHM Corporation, NSC Corporation, NSC Industrial
Services Corp., The Brand Companies, Inc., Chemical Waste Management, Inc. and
Waste Management, Inc. [incorporated by reference to Exhibit 10(ff) to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1992].
* 10(e) NSC Corporation 1993 Restricted Stock Plan [incorporated by reference to
Exhibit 10(gg) to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992].
10(f) Revolving Credit Agreement, dated as of May 4, 1993 by and among NSC
Corporation, its Subsidiaries named therein, The First National Bank of Boston
and Fleet Bank of Massachusetts [incorporated by reference to Exhibit 10(l) to
the Registrant's Annual Report on Form 10-K for the year ended December 31,
1993].
10(g) Security and Pledge Agreement, dated as of May 4, 1993 by and among NSC
Corporation, its Subsidiaries named therein, The First National Bank of Boston
and Fleet Bank of Massachusetts [incorporated by reference to Exhibit 10(m) to
the Registrant's Annual Report on Form 10-K for the year ended December 31,
1993].
10(h) First Amendment to Revolving Credit Agreement, dated as of December 2,
1993 by and among NSC Corporation, its Subsidiaries named therein, The First
National Bank of Boston and Fleet Bank of Massachusetts [incorporated by
reference to Exhibit 10(n) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993].
10(i) Revolving Credit Agreement and Promissory Note, dated as of May 4, 1993 by
and between NSC Corporation, and the Brand Companies, Inc., as succeeded by Rust
International Inc. [incorporated by reference to Exhibit 10(o) to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1993].
10(j) Second Amendment to Revolving Credit Agreement, dated as of May 1, 1996 by
and among NSC Corporation, its Subsidiaries named therein, The First National
Bank of Boston and Fleet National Bank, formerly known as Fleet Bank of
Massachusetts [incorporated by reference to Exhibit 10 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996].
10(k) Registration Rights Agreement, dated as of May 4, 1993 by and between NSC
Corporation, OHM Corporation and The Brand Companies, Inc., as succeeded by Rust
International Inc. [incorporated by reference to Exhibit 10(p) to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1993].
* 10(l) Independent Sales Representative Agreement, dated as of November 29,
1993 by and between NSC Corporation and Gary P. Snoonian [incorporated by
reference to Exhibit 10(q) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993].
- ------------------------------------
* Indicates a management contract or compensatory plan or arrangement required
to be filed pursuant to Item 14(c) of Form 10-K.
Page 35 of 88
<PAGE>
* 10(m) NSC Corporation's 1994 Management Incentive Compensation Plan
[incorporated by reference to Exhibit 10(q) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994].
* 10(n) Consulting Agreement, dated as of November 30, 1993 by and between
Anthony Mesiti and NSC Corporation [incorporated by reference to Exhibit 10(s)
to the Registrant's Annual Report on Form 10-K for the year ended December 31,
1994].
10(o) Olshan Interim Management and Operating Agreements dated January 1, 1995
and April 20, 1995 [incorporated by reference to Exhibit 10(a) to the
Registrant's Annual Report on Form 10-Q for the quarter ended June 30, 1995].
* 10(p) Employment Agreement, dated March 12, 1997 by and between Victor J.
Barnhart and NSC Corporation.
* 10(q) Employment Security Agreement, dated October 2, 1996 by and between J.
Drennan Lowell and NSC Corporation.
* 10(r) Employment Security Agreement, dated October 2, 1996 by and between
Darryl G. Schimeck and NSC Corporation.
* 10(s) Employment Security Agreement, dated October 2, 1996 by and between
David R. Krache and NSC Corporation.
* 10(t) Employment Security Agreement, dated October 2, 1996 by and between
Thomas W. Bartlett, Jr. and NSC Corporation.
* 10(u) Employment Security Agreement, dated October 2, 1996 by and between
Thomas W. Gilmore and NSC Corporation.
11 Statement re computation of per share earnings.
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
24 Powers of Attorney of certain directors of the Registrant.
(b) The Company filed one Current Report on Form 8-K during the three-month
period ended December 31, 1996: The Current Report, dated December 6, 1996
described the appointment of Victor J. Barnhart as Chairman and Chief Executive
Officer and the promotion of Darryl G. Schimeck as President and Chief Operating
Officer.
- ------------------------------------
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14(c) of Form 10-K.
Page 36 of 88
<PAGE>
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, thereunto duly authorized.
NSC CORPORATION
By /s/ EFSTATHIOS A. KOUNINIS
Efstathios A. Kouninis, Corporate Controller
March 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date
* VICTOR J. BARNHART March 28, 1997
Victor J. Barnhart - Chairman and Chief Executive Officer
(Principal Executive Officer)
* DARRYL G. SCHIMECK March 28, 1997
Darryl G. Schimeck - President and Chief Operating Officer
* J. DRENNAN LOWELL March 28, 1997
J. Drennan Lowell - Vice President, Chief Financial Officer
Treasurer and Secretary
(Principal Financial Officer)
/s/ EFSTATHIOS A. KOUNINIS March 28, 1997
Efstathios A. Kouninis, Corporate Controller
(Principal Accounting Officer)
* EUGENE L. BARNETT March 28, 1997
Eugene L. Barnett - Director
* PAMELA K.M. BEALL March 28, 1997
Pamela K.M. Beall - Director
Page 37 of 88
<PAGE>
* ROBERT J. BLACKWELL March 28, 1997
Robert J. Blackwell - Director
* HERBERT A. GETZ March 28, 1997
Herbert A. Getz - Director
* WILLIAM P. HULLIGAN March 28, 1997
William P. Hulligan - Director
* WILLIAM M. R. MAPEL March 28, 1997
William M. R. Mapel - Director
* The undersigned, by signing his name hereto does sign and execute this report
pursuant to Powers of Attorney executed on behalf of the above-named officers
and directors and contemporaneously herewith filed with the Securities and
Exchange Commission.
/s/ EFSTATHIOS A. KOUNINIS March 28, 1997
Efstathios A. Kouninis - Attorney-in-Fact
Page 38 of 88
<PAGE>
<TABLE>
<CAPTION>
NSC CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
- -----------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- -----------------------------------------------------------------------------------------------------
Balance at Charged to
Beginning Costs and Deductions Balance at
Description of Period Expenses (2) Describe (1) End of Period
- -----------------------------------------------------------------------------------------------------
Year Ended December 31, 1996
Deducted from assets accounts:
<S> <C> <C> <C> <C>
Allowance for uncollectible accounts $ 549 $ 67 $ 59 $ 557
Reserve for contract revenue adjustments 442 111 401 152
- -----------------------------------------------------------------------------------------------------
Year Ended December 31, 1995
Deducted from assets accounts:
Allowance for uncollectible accounts $ 782 $ - $ 233 $ 549
Reserve for contract revenue adjustments 530 401 489 442
- -----------------------------------------------------------------------------------------------------
Year Ended December 31, 1994
Deducted from assets accounts:
Allowance for uncollectible accounts $ 1,165 $ 390 $ 773 $ 782
Reserve for contract revenue adjustments 1,546 332 1,348 530
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Uncollectible accounts written off and adjustments to unbilled revenues on
contracts in process.
(2) Reduction of revenues on contracts in process and amounts charged to bad
debt expense.
Page 39 of 88
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________________
FORM 10-K
ANNUAL REPORT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
December 31, 1996
____________________
NSC CORPORATION
(Exact name of registrant as specified in its charter)
_____________________
Exhibits
_____________________
Page 40 of 88
<PAGE>
EXHIBIT INDEX
The following Exhibits are included in this Annual Report on Form 10-K:
Exhibit Exhibit Exhibit
Number Description Page
* 10(p) Employment Agreement, dated March 12, 1997 by and 42
between Victor J. Barnhart and NSC Corporation.
* 10(q) Employment Security Agreement, dated October 2, 1996 55
by and between J. Drennan Lowell and NSC Corporation.
* 10(r) Employment Security Agreement, dated October 2, 1996 61
by and between Darryl G. Schimeck and NSC Corporation.
* 10(s) Employment Security Agreement, dated October 2, 1996 67
by and between David R. Krache and NSC Corporation.
* 10(t) Employment Security Agreement, dated October 2, 1996 73
by and between Thomas W. Bartlett, Jr.and NSC
Corporation.
* 10(u) Employment Security Agreement, dated October 2, 1996 79
by and between Thomas W. Gilmore and NSC Corporation.
11 Statement re computation of per share earnings. 84
21 Subsidiaries of the Registrant. 85
23 Consent of Independent Auditors. 86
24 Powers of Attorney of certain directors of the Registrant. 87
27 Fiancial Data Schedule, Article 5 88
(b) The Company filed one Current Report on Form 8-K during
the three-month period ended December 31, 1996: The
Current Report, dated December 6, 1996 described the
appointment of Victor J. Barnhart as Chairman and Chief
Executive Officer and the promotion of Darryl G. Schimeck
as President and Chief Operating Officer.
- -----------------------------------------------
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14(c) of Form 10-K.
Page 41 0f 88
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made this 12th day of March, 1997, effective as of January 1,
1997, by and between NSC CORPORATION, a corporation duly organized and existing
under the laws of the State of Delaware, with a principal place of business at
49 Danton Drive, Methuen, Massachusetts 01844 (hereinafter referred to as
"Employer") and VICTOR J. BARNHART, an individual residing at 10 Tartan Lakes,
Westmont, Illinois 60559 (hereinafter referred to as "Employee").
WHEREAS, Employer wishes to retain Employee's skill, knowledge and
experience for the management of its business and operations and Employee wishes
to make such skills, knowledge and experience available to Employer;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Employer and Employee hereby agree
as follows:
Section 1. Employment.
1.1 Term. Employer shall employ Employee, and Employee shall serve Employer
as Chairman and Chief Executive Officer for a term of three (3) years beginning
on January 1, 1997 and ending on December 31, 1999 (the "Initial Period of
Employment"), which employment shall thereafter continue on an at-will basis
(collectively the "Term of Employment"), unless earlier terminated pursuant to
the provisions of Section 5 of this Agreement.
1.2 Duties. (a) Capacity. During the Term of Employment, Employee shall
assume and perform such managerial and executive duties and responsibilities
commensurate with his positions, including responsibility for sales, operations
staffing, budgets, pricing, personnel, training, advertising, market expansion,
business development, acquisitions, and profits and losses and Employee shall
further assume and perform such other reasonable executive and managerial
responsibilities and duties as may be assigned to him hereafter from time to
time by the Board of Directors of Employer. Employee will report directly to the
Board of Directors of Employer.
(b) Schedule. During the Term of Employment, Employee shall be employed on
a full-time basis. Employee's working schedule during the Term of Employment
shall correspond with the requirements of his position.
(c) Exclusivity. Without limiting the generality of the foregoing, during
the Term of Employment, Employee shall not, without the prior written approval
of Employer, render services of a business, professional or commercial nature
Page 42 of 88
<PAGE>
for compensation to any other entity or person; provided, however, this clause
shall not prohibit Employee from making investments of a passive nature (other
than investments of more than one (1%) percent of the outstanding shares of
companies engaged in any business which is directly or indirectly competitive
with or similar to the business now or hereafter conducted by the Employer)
which do not detract from the full-time nature of Employee's employment
hereunder.
1.3 Compensation and Benefits. During the Term of Employment, as
compensation for the services to be rendered during such period and the other
obligations undertaken by Employee hereunder, Employee shall be entitled to the
following compensation:
(a) Salary. Employer shall pay to Employee weekly in equal installments an
annual minimum Base Salary of Two Hundred Fifty Thousand ($250,000.00) Dollars,
or such greater amount as may be determined by Employer, in its sole discretion,
upon a review of Employee's performance.
(b) Expenses. During the Term of Employment, Employer shall reimburse
Employee for reasonable and necessary travel and entertainment expenses in
connection with his employment hereunder in accordance with the policies of
Employer in effect from time to time and upon Employee timely submitting such
expenses for reimbursement and providing the Employer with such documentation
substantiating such expenses as Employer may reasonably require. Employer shall
provide to Employee an annual allowance for reimbursement of private club dues
and financial/tax planning expenses in an amount equal to two (2%) percent of
Employee's then annual Base Salary, such expenses to be reimbursed by Employer
to Employee through Employee's expense reports.
(c) Car Allowance. During the Term of Employment, Employer shall pay a
monthly car allowance to Employee in the amount of Eight Hundred ($800.00)
Dollars per month. It is acknowledged and understood by the parties that said
car allowance shall be in lieu of any reimbursement for Employee's expenses for
local auto travel, including, but not limited to, any mileage reimbursement.
(d) Benefits. During the Term of Employment, Employee shall be entitled to
such other fringe benefits, including vacation, paid holidays, health, life and
disability insurances, etc. in accordance with such plans and policies as may be
maintained by Employer from time to time. In addition to the foregoing benefits,
Employer shall provide to Employee, or reimburse Employee for the cost of, a
term life insurance policy upon the Employee's life providing for a death
benefit of two (2) times Employee's then base salary.
(e) Relocation Expenses. In the event that Employer shall require Employee
to relocate from Oak Brook, Illinois to the Company's headquarters in Methuen,
Page 43 of 88
<PAGE>
Massachusetts during the Term of Employment, Employer shall reimburse Employee
for Employee's cost of relocating in accordance with the Employer's Relocation
Policy, Policy No. 602, a copy of which is attached hereto as Exhibit A.
(f) Incentive Compensation. During the Term of Employment, Employee shall
be entitled to participate in Employer's Management Incentive Compensation Plan
and such other incentive compensation plans as may be made available by Employer
to similarly situated executives from time to time during the Term of
Employment. For the calendar year of 1997, Employee's target bonus under the
Employer's Management Incentive Compensation Plan (the "Plan") shall be fifty
(50%) percent of Employee's annual Base Salary to be earned and paid in
accordance with the terms of said Plan; and thereafter, Employee's target bonus
under said Plan shall be determined by the Employer's Compensation Committee, in
said committee's discretion.
Section 2. Development of Inventions, Improvements or Know-How.
2.1 Information. During the Term of Employment, Employee shall keep
Employer informed of any and all promotional and advertising materials,
catalogs, brochures, plans, customer lists, supplier lists, manuals,
handbooks, inventions, discoveries, improvements, trade secrets, secret
processes, and any technology, know-how or intellectual property made or
developed by him, in whole or in part, or conceived of by him, alone or
with others, which results from any work he may do for, or at the request
of Employer, or which relates in any way to the business operations,
activities, research, investigations or obligations of Employer
(collectively the "Information").
2.2 Assignment of Rights. Employee, and his heirs, assigns and
representatives shall assign, transfer and set over, and do hereby assign,
transfer and set over, to Employer, and its successors and assigns, all of his
and their right, title and interest in and to any and all Information, and any
patents, patent applications, copyrights, trademarks, tradenames or other
intellectual property rights relating thereto, provided or conceived by Employee
during the Term of Employment. For purposes of this Section 2, any Information
developed, conceived or provided by the Employee within six (6) months after the
date of the termination of Employee's employment with Employer hereunder shall
be conclusively presumed to have been developed, conceived or provided during
the Employee's Term of Employment with the Employer.
2.3 Further Assurances. To the extent Employer deems necessary
or desirable to affect the intent of the assignments, transfers and set-overs
provided for in Sections 2.1 and 2.2 hereinabove, Employee, and his heirs,
assigns or representatives, shall, at the expense of Employer, assist Employer
or its nominees to obtain patents, copyrights, trademarks and tradename or
similar rights of protection (including any renewals or continuations thereof)
for any and all Information in any country or countries throughout the world.
Employee, and his heirs, assigns and representatives shall execute and deliver
any and all applications, assignments or other instruments necessary or
Page 44 of 88
<PAGE>
desirable to secure United States or foreign patents, copyrights, trademarks and
tradenames or similar rights of protection (including any renewals or
continuations thereof), and to transfer to Employer, upon request, any and all
right, title or interest in and to any and all such Information. Employee, and
his heirs, assigns and representatives shall give Employer, upon request, any
and all facts known to him or them reflecting such Information with respect to
any of the foregoing, including, without limitation, any and all formulae,
processes, sketches, drawings, models and figures.
Section 3. Non-Disclosure.
Employee hereby acknowledges that Employer possesses certain
confidential and proprietary information, including, but not limited to client
and customer lists, supplier lists, data, figures, sales figures, projections,
estimates, tax records, personnel history, accounting procedures, bids, and
other information relating to the Employer's employees, clients, customers,
client and customer requirements, methods of client development, suppliers,
contractors, bidding techniques, pricing, research, and development and other
activities, services and business of the Employer (the foregoing being
hereinafter referred to collectively as "Confidential Information") and that
maintaining the confidential and proprietary nature of said Confidential
Information is essential to the continued commercial success of the Employer's
business and that said Confidential Information constitutes valuable and unique
assets which provide the Employer with a distinct competitive advantage over
competing businesses. Therefore, Employee hereby agrees that Employee shall not
disclose, divulge, or use in any manner any such Confidential Information except
as is specifically required in the performance of Employee's duties pursuant to
this Employment Agreement, and that Employee will not, under any circumstances,
communicate any such Confidential Information to any one not employed by the
Employer and/or specifically authorized in writing by the Employer to receive
such Confidential Information. It is expressly agreed that the foregoing
restrictions upon use, disclosure or communication of the aforementioned
Confidential Information shall be in full force and effect forever and shall
survive any termination of this Agreement, whether voluntary or involuntary, and
regardless of the reason for or manner of termination. Upon the termination of
this Agreement and Employee's employment hereunder, regardless of the reason for
or manner of termination, Employee agrees that Employee will deliver to the
Company all originals and all copies in the Employee's possession of any and all
documents of any nature containing, evidencing, or in any manner relating to any
Confidential Information as defined herein and shall not take any such
documentation with Employee upon said termination.
Section 4. Covenant Not To Compete.
4.1 Acknowledgment. Employee acknowledges that he is being
employed by the Employer in a position in which he will be expected to
independently develop and maintain close relationships with customers and
clients of the Employer and in which he will be provided with access to
confidential information of Employer, and that such customer relationships and
confidential information constitute a significant part of the goodwill of the
Employer, the preservation of which are essential to the success of the
Employer, and that the Employer has a legitimate interest in restricting
Page 45 of 88
<PAGE>
Employee's ability to take advantage of such relationships and confidential
information. Employee further acknowledges that, in conjunction with this
Employment Agreement, and in further consideration of the covenants of Employee
set forth hereinbelow, Employee has been granted certain stock options by
Employer.
4.2 Non-Competition Agreement. In light of the foregoing, and
in consideration of the employment of Employee hereunder, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by Employee, Employee hereby covenants and agrees that, during the
Term of Employment and, upon termination, for a period equal to the then
remaining balance of the Term of Employment or one (1) year, whichever is
greater immediately following any termination of this Employment Agreement
and/or Employee's employment hereunder, whether voluntary or involuntary, and
regardless of the reason for or manner of termination, Employee shall not, alone
or with others, directly or indirectly (as owner, stockholder, partner, lender,
other investor, director, officer, employee, consultant, or otherwise):
(i) Solicit, perform or engage in any business of the same or similar
nature to the business of Employer anywhere within the Employer's territories as
hereinafter defined;
(ii) Solicit, engage in, perform, divert or accept any business of the same
or similar nature to the business of Employer with or from any customer or
potential customer of Employer; or
(iii) Induce or attempt to induce any customer of Employer to reduce such
customer's business with Employer or divert such customer's business from the
Employer, by direct advertising, solicitation or otherwise;
(iv) Disclose the names of any customers or potential customers of Employer
to any other person, firm, corporation or other entity; or
(v) Employ, hire, cause to be employed or hired, entice away, solicit, or
establish a business with any then current officer, employee, servant or agent
of Employer, or any other person who was employed by Employer within the twelve
(12) months immediately prior to such employment or establishment, or in any
manner persuade or attempt to persuade any officer, employee, servant or agent
of Employer to leave the employ of the Employer; or
(vi) Assist any person, firm, entity, employer, business associate or
member of Employee's family to commit any of the foregoing acts.
4.3 Definitions. For purposes of this Section 4, the following terms shall
have the meanings hereinafter set forth:
Page 46 of 88
<PAGE>
(i) The term "customer" shall mean any person, firm, corporation or other
entity or any parent, subsidiary or affiliate thereof with which Employer has
had a contract, engaged in any business with or for which Employer has performed
any work or services during the twelve (12) months immediately preceding
Employee's termination and up to and including the date of Employee's
termination;
(ii) The term "potential customer" shall mean any person, firm, corporation
or other entity or any parent, subsidiary or affiliate thereof from which
Employer has solicited or attempted to solicit any business or to which Employer
has submitted any written or oral proposal within the twelve (12) months
immediately preceding Employee's termination and up to and including the date of
Employee's termination.
(iii) The term "Employer's territories" shall mean the United States of
America, including without limitation, each and every state or territory in
which Employer has conducted or solicited any business within the twelve (12)
months immediately preceding the date of Employee's termination and up to and
including the date of Employee's termination.
(iv) The phrase "business of the same or similar nature to the business of
Employer" shall mean the supplying of products, work or services which have the
same or similar characteristics as, or is competitive with, any products, work
or services engaged in, performed by or rendered by Employer at the time of the
termination of this Agreement and/or within the twelve (12) months immediately
preceding such termination and/or any products, work or services which have been
the subject of any solicitation or proposal by Employer within the twelve (12)
months immediately preceding such termination.
4.4 Enforcement. The covenants and obligations of Employee
pursuant to this Section 4 shall be specifically enforceable in addition to and
not in limitation of any other legal or equitable remedies, including monetary
damages, which Employer may have. Employee recognizes and acknowledges that
irreparable injury may result to Employer in its business in the event of any
breach by Employee of any covenant or agreement contained herein, and, by reason
of the foregoing, Employee consents and agrees that in the event of any such
breach, Employer shall be entitled, in addition to any other remedies that it
may have, including monetary damages, to an injunction to restrain Employee from
committing or continuing any violation of any covenant or agreement set forth in
this Section 4. It is the intent of the parties hereto that this Agreement
contains covenants which are valid and enforceable, which are reasonable and
necessary to safeguard the interests of Employer and which will be binding upon
Employee. Therefore, in the event that any of the obligations of Employee are
determined to be unreasonable or unenforceable because of the duration of such
provision, the area covered thereby or the scope thereof so as to render any of
the foregoing covenants unenforceable, then such a covenant shall be interpreted
as to require only a reasonable duration, area or scope, and any Court making
any such determination shall have the power to reduce the duration, area or
Page 47 of 88
<PAGE>
scope of such provision and/or to delete or revise specific words and phrases,
and, in its reduced or revised form, such provisions shall be enforceable and
shall be enforced. In the event that Employer alleges that Employee has violated
any of the covenants contained herein and Employer seeks enforcement of such
covenants in any Court having jurisdiction thereof, Employer shall be entitled
to recover from Employee all reasonable attorney's fees and costs incurred by
Employer in prosecuting such litigation.
Section 5. Termination of Agreement.
5.1. Right to Terminate.
(a) Death. This Agreement shall terminate immediately upon Employee's
death.
(b) Disability. In the event that Employee, because of accident, disability
or physical or mental illness, is incapable of performing his duties hereunder,
unless otherwise prohibited by applicable law, Employer shall have the right to
terminate Employee's employment hereunder upon thirty (30) days prior written
notice to Employee. For purposes of this Section 5.1 (b), Employee shall be
deemed to have become incapable of performing his duties hereunder if he shall
have been incapable of so doing for (i) a continuous period of one hundred
eighty (180) days and remains so incapable at the end of such one hundred eighty
(180) day period; or (ii) periods amounting in the aggregate to one hundred
eighty (180) days within any one period of three hundred sixty-five (365) days
and remains so incapable at the end of such aggregate period of one hundred
eighty (180) days.
(c) Breach of Agreement. In the event that Employee breaches in any
material respect, or fails to comply in any material respect with, any of the
provisions of this Agreement, Employer shall, upon thirty (30) days prior
written notice to Employee specifying the nature of such breach or failure to
comply, have the right to terminate this Agreement and Employee's employment
hereunder, (i) if Employee fails to cure such breach or failure to comply, if
curable, within thirty (30) days after the giving of such notice; and (ii) upon
the expiration of such thirty (30) day period if such breach or failure to
comply cannot be cured.
(d) Cause. Employer shall have the right to terminate Employee's employment
hereunder for cause immediately without prior notice to Employee. The term
"cause" shall mean (i) Employee's willful failure or refusal to comply with
explicit directives of the Employer or to render the services required herein;
or (ii) misappropriation of any business opportunities; or (iii) dishonesty,
fraud, embezzlement, or misappropriation of funds, involving assets of the
Employer, its customers, suppliers, or any of their affiliates; or (iv)
indictment or charge of Employee by applicable governmental authorities with, or
Page 48 of 88
<PAGE>
being convicted of, any criminal offense which adversely affects Employee's
ability to perform his duties hereunder or the reputation of Employer; or (v)
the willful and repeated breach or habitual neglect by Employee of his duties
under this Agreement or his duties as an Employee of Employer; or (vi) Employee
engaging in any acts or making statements which reflect adversely upon Employer,
its affiliates or subsidiaries or their business.
(e) Other. Employer shall have the right to terminate Employee's employment
hereunder for any other reason not specified in this Section 5.1, at Employer's
sole discretion, upon ten (10) days prior written notice to Employee; provided,
however, that in the event that Employer shall terminate the Employee's
employment pursuant to this Section 5.1(e), then Employee shall be entitled to
the following severance benefits:
(i) In the event that Employer shall terminate Employee's employment
pursuant to this Section 5.1(e) during the Initial Period of Employment,
Employer shall continue to pay Employee his Base Salary as set forth herein or
as then established, payable in accordance with Employer's normal payroll
procedures, and shall provide Employee with continued coverage under Employer's
medical and dental plans at the rate applicable to active employees, from the
effective date of termination until the later of (x) one (1) year following the
effective date of termination or (y) the remaining portion of the Initial Period
of Employment.. In addition to the aforementioned salary continuation, Employer
shall pay to Employee any deferred portion of any bonus awarded to Employee
under Employer's Management Incentive Compensation Plan and shall pay to
Employee a pro-rated portion of the bonus payable under said Plan for the
calendar year in which such termination occurs when, and if and only if, such
bonus is payable in accordance with the terms and conditions of the Plan.
(ii) In the event that Employer shall terminate Employee's employment
pursuant to this Section 5.1(e) at any time after the Initial Period of
Employment, Employer shall continue to pay Employee his Base Salary as set forth
herein or as then established, payable in accordance with Employer's normal
payroll procedures, and shall provide Employee with continued coverage under
Employer's medical and dental plans at the rate applicable to active employees,
for a period of one (1) year following the effective date of termination. In
addition to the aforementioned salary continuation, Employer shall pay to
Employee any deferred portion of any bonus awarded to Employee under Employer's
Management Incentive Compensation Plan and shall pay to Employee a pro-rated
portion of the bonus payable under said Plan for the calendar year in which such
termination occurs when, and if and only if, such bonus is payable in accordance
Page 49 of 88
<PAGE>
with the terms and conditions of the Plan. Notwithstanding anything to the
contrary set forth herein, the provisions of this Section 5.1(e)(ii) shall be
void and of no further force and effect upon Employee attaining the age of sixty
(60) years.
(iii) In the event that a "Terminating Event," as defined hereinafter,
shall occur within one (1) year after a "Change in Control," as defined
hereinafter, then (i) Employer shall provide all severance benefits to Employee
in accordance with Section 5.1(e)(i) hereinabove in the event that such
Terminating Event shall occur during the Initial Period of Employment or such
severance benefits as provided for in Section 5.1(e)(ii) in the event such
Terminating Event shall occur any time after the Initial Period of Employment
and (ii) Employer shall reimburse Employee for the expenses of relocating to a
location within the State of South Carolina in accordance with the Employer's
Relocation Policy, Policy No. 602 attached hereto as Exhibit A. For purposes
hereof, a Change in Control shall be deemed to have occurred in the following
events: (i) as a direct result of any tender or exchange, merger,
reorganization, consolidation, or other business combination, any person, firm,
or entity, other than OHM Corporation or Rust International, Inc., shall hold a
majority of the then issued and outstanding shares of the Employer or (ii) the
sale or other disposition of all or substantially all of the assets of the
Employer (in one transaction or in a series of transactions). Further, for
purposes hereof, a Terminating Event shall mean (i) termination by the Employer
(or by any successor entity) of the employment of the Employee with the Employer
for any reason other than (A) death or (B) for cause, as defined in Section
5.1(d) hereinabove; or (ii) resignation of the Employee from the Employer,
within ninety (90) days after the occurrence of any of the following events: (A)
a reasonable determination by the Employee in good faith that there has been a
significant and substantial reduction in the scope of the Employee's
responsibilities, authorities, powers, functions, or duties from the
responsibilities, authorities, powers, functions, or duties exercised by the
Employee immediately prior to a Change in Control; (B) a ten (10%) percent
reduction in the Employee's total monetary compensation, including base salary,
bonuses, incentive compensation, material benefit plans, and all non-cash
personal benefits and perquisites which are susceptible of accurate and
objective measurement, as all of the same shall be in effect on the date of this
Agreement or as the same may be increased from time to time; or (C) the
relocation of the Employee from the office where the Employee is principally
employed immediately prior to the date of the Change in Control to a location
more than fifty (50) away. Notwithstanding anything to the contrary contained
herein, in the event that Employer shall become obligated to pay any severance
Page 50 of 88
<PAGE>
benefits as specified in Sections 5.1(e)(i) or 5.1(e)(ii) due to the occurrence
of a Terminating Event after a Change in Control, Employee, at his option, may,
upon written notice to Employer, elect to accelerate the severance benefits
payable hereunder and to have said severance benefits payable in one (1) lump
sum within thirty (30) days of the date of Employee's termination, said
severance benefits to be discounted to present value utilizing such discount
rate as shall be reasonably designated by Employer.
(iv) It is the intention of the Employee and of the Employer that no
payments by the Employer to or for the benefit of the Employee under this
Agreement or any other agreement or plan, if any, pursuant to which Employee is
entitled to receive payments or benefits shall be non-deductible to the Employer
by reason of the operation of Section 280G of the Internal Revenue Code of 1986,
as amended ("Code") relating to parachute payments. Accordingly, and
notwithstanding any other provision of this Agreement or any other such
agreement of plan, if by reason of the operation of said Section 280G, any such
payments exceed the amount which can be deducted by the Employer, such payments
shall be reduced to the maximum amount which can be deducted by the Employer. To
the extent that payments exceeding such maximum deductible amount have been made
to or for the benefit of the Employee, such excess payment shall be refunded to
the Employer with interest thereon at the applicable federal rate determined
under Section 1274(d) of the Code, compounded annually, or at such other rate as
may be required in order that no such payment shall be non-deductible to the
Employer by reason of the operation of said Section 280G. To the extent that
there is more than one method of reducing the payments to bring them within the
limitation of said Section 280G, the Employee shall determine which method shall
be followed provided that if the Employee fails to make such a determination
within forty-five (45) days after the Employer has provided Employee written
notice of the need for such reduction, the Employer may determine the method of
such reduction in its sole discretion. If any dispute between the Employer and
the Employee as to any of the amounts to be determined under this Section
5(e)(v) or the method of calculating such amounts, cannot be resolved by the
Employer and the Employee, either the Employer or the Employee, after giving
three (3) days written notice to the other party, may refer the dispute to a
partner in the Boston office of a firm of independent certified public
accountants selected jointly by the Employer and the Employee. The determination
of such partner as to the amount to be determined under this Section 5(e)(v) and
the method of calculating such amount shall be final and binding on both the
Employer and the Employee. The Employer shall bear the costs of any such
determination.
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<PAGE>
` f) Rights and Obligations of Employee Upon Termination.
(i) Upon the termination of Employee's employment pursuant to Sections 5.1
(a), (b), (c), (d), or (e) of this Agreement, Employer shall not have any
further obligation to Employee under this Agreement except (other than as
provided in Section 5.1 (e) above) to distribute to Employee his Base Salary due
pursuant to Section 1.3 (a) hereof (and accrued vacation pay) up to the date of
termination. Notwithstanding the foregoing, in the event that Employee's
employment pursuant to this Agreement shall be terminated pursuant to Sections
5.1(a) and 5.1(b), then Employer shall pay to Employee or the Employee's heirs
or personal representatives, as applicable, a pro-rated portion of the bonus
payable under the Employer's Management Incentive Compensation Plan for the
calendar year in which such termination occurs when, and if and only if, such
bonus is payable in accordance with the terms and conditions of the Plan.
(ii) Upon the termination of this Agreement and Employee's employment
hereunder, whether voluntary or involuntary, and regardless of the reason for or
manner of termination, all of the obligations of Employee under Sections 2.2,
2.3, 3, and 4 shall remain in full force and effect and shall survive the
termination of this Agreement to the extent set forth herein.
Section 6. Miscellaneous.
6.1 Remedies.
(a) Injunctions. Inasmuch as any breach of, or failure to comply with, this
Agreement will cause serious and substantial damage to Employer, if Employee
should in any way breach or fail to comply with the terms of this Agreement,
Employer shall be entitled to an injunction restraining Employee from such
breach or failure.
(b) Cumulative Remedies. All remedies of Employer expressly provided for
herein are cumulative of any and all other remedies now existing at law or in
equity. Employer shall, in addition to the remedies herein provided, be entitled
to avail itself of all such other remedies as may now or hereafter exist at law
or in equity for compensation, and for the specific enforcement of the covenants
contained herein. Resort to any remedy provided for hereunder or provided by law
shall not prevent the concurrent or subsequent employment of any other
appropriate remedy or remedies, or preclude the recovery by Employer of monetary
damages.
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<PAGE>
6.2 Amendment. This Agreement may be amended only by a writing duly
executed by the parties hereto.
6.3 Entire Agreement. This Agreement and any other agreements expressly
referred to herein set forth the entire understanding of the parties hereto
regarding the subject matter hereof and supersede all prior contracts,
agreements, arrangements, communications, discussions, representations and
warranties, whether oral or written, between the parties regarding the subject
matter hereof.
6.4 Notice. For purposes of this Agreement, notices and communications
provided or permitted to be given hereunder shall be deemed to have been given
when (i) made by telex, telecopy or facsimile transmission; or (ii) sent by
overnight courier or mailed by United States registered or certified mail,
return receipt requested, postage prepaid to the parties at their addresses set
forth above, or at such other addresses as either may designate in writing as
aforesaid from time to time.
6.5 Assignment. This Agreement is personal as to Employee and shall not be
assignable by Employee. Employer may assign its rights under this Agreement to
any person, firm, corporation, or other entity which may acquire all or
substantially all of the business which is now or hereafter conducted by
Employer or which may require substantially all of the assets of Employer or
with or into which Employer may be consolidated or merged, provided, that any
such assignment shall be subject to the express terms and conditions hereof.
6.6 Governing Law. This Agreement shall in all respects be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts.
6.7 Severability. Each section and subsection of this Agreement constitutes
a separate and distinct provision hereof. It is the intent of the parties hereto
that the provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applicable in each jurisdiction
in which enforcement is sought. Accordingly, if any provision of this Agreement
shall be adjudicated to be invalid, ineffective or unenforceable, the remaining
provisions shall not be affected thereby. The invalid, ineffective or
unenforceable provisions shall, without further action by the parties, be
automatically amended to affect the original purpose and intent of the invalid,
ineffective and unenforceable provision; provided, however, that such amendment
shall apply only with respect to the operation of such provision in the
particular jurisdiction with respect to which such adjudication is made.
6.8. Waiver. The failure of Employer to insist upon strict adherence to any
term of this Agreement on any occasion shall not be construed as a waiver of or
deprive Employer of the right thereafter to insist upon strict adherence to that
term or any other term of this Agreement. Any waiver by Employer must be in
writing and signed by a duly authorized representative of Employer other than
Employee.
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<PAGE>
6.9 Headings. The headings of this Agreement are solely for convenience of
reference and shall not be given any effect in the construction or
interpretation of this Agreement.
6.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
together will constitute one and the same instrument.
6.11 Third Parties. Nothing expressed or implied in this Agreement is
intended, or shall be construed, to confer upon or give any person or entity
other than Employer and Employee any rights or remedies under, or by reason of,
this Agreement.
6.12 Income Tax Reporting. As a condition to Employee's entitlement to all
amounts to be paid hereunder, Employee shall report the Base Salary, portion of
the allowances attributable to personal use and any bonuses paid to Employee as
earned income for federal, state or local income tax purposes.
6.13 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the respective parties hereto and their heirs, personal
representatives, successors and permitted assigns.
IN WITNESS WHEREOF, NSC Corporation has caused this Agreement to be duly
executed and delivered by its duly authorized officer, and Employee has duly
executed and delivered this Agreement, as of the date first above written, the
parties intending this document to take effect as a sealed instrument.
Employer:
NSC CORPORATION
By: /S/ HERBERT A. GETZ
Name: Herbert A. Getz
Title: Chairman, Compensation Committee
Employee:
/s/ VICTOR J. BARNHART
Victor J. Barnhart
Page 54 of 88
<PAGE>
PERSONAL AND CONFIDENTIAL
October 2, 1996
Mr. J. Drennan Lowell
c/o NSC Corporation
49 Danton Drive
Methuen, MA 01844
Re: Employment Security Agreement
Dear Drennan:
In light of the recent developments at NSC Corporation ("NSC"), NSC
wishes to offer you this Employment Security Agreement in appreciation of your
past dedicated service and to provide you with peace of mind.
In consideration of the payments and other security listed below, you
agree to continue your employment with NSC and provide your full cooperation and
assistance to NSC.
1. Term. The Term of the Agreement shall be for a period commencing on the
date hereof and ending on December 31, 1998.
2. Base Salary. Your current base salary will not be reduced during the
Term and will be subject to normal increases which are in the discretion of
management.
3. Execution Bonus. Upon the execution and delivery of this agreement by
you, NSC shall pay to you, in one single lump sum, a one-time execution bonus in
the amount of Twenty Thousand ($20,000.00) Dollars.
4. Supplemental Bonus and Guaranteed Minimum Bonus. With respect to any
bonus payable to you under the NSC Corporation Management Incentive Compensation
Plan (the "Plan"), (i) if you remain employed with NSC through December 31,
1997, NSC agrees to pay you a supplemental bonus in an amount equal to
thirty-five (35%) percent of any bonus payable to you under the 1997 Plan and
(ii) if you remain employed with NSC through the end of the Term, NSC agrees to
pay you a supplemental bonus in an amount equal to thirty-five (35%) percent of
any bonus payable to you under the 1998 Plan; provided, however, that,
regardless of the amount of any bonuses payable to you under the 1997 and 1998
Plans, the amount of each supplemental bonus to be paid to you by NSC for each
such year shall in no event be less than Fifteen Thousand ($15,000.00) Dollars,
or Thirty Thousand ($30,000.00) in the aggregate for both years ( the
"Guaranteed Minimum Bonus").
5. Transaction Bonus. In the event of a sale of NSC during the term to an
entity unrelated to NSC or its major shareholders, Rust International, Inc. and
OHM Corporation, if you remain employed with NSC through the closing of the
sale, NSC will pay you a transaction bonus equal to two (2) times your monthly
Page 55 of 88
<PAGE>
base salary for your assistance and cooperation in facilitating the closing of
the sale. NSC shall pay said transaction bonus to you as soon as reasonably
practicable following the date of the closing. Payment of such bonus will be
subject to normal withholding.
6. Stock Options. Any otherwise exercisable stock options will remain in
effect, in accordance with the terms of the stock option plan under which they
were issued, during any period of employment with NSC and any subsequent period
during which you may be receiving severance pay. However, in the event of a
transaction involving NSC, which under the terms of the stock option plan would
cause the options to terminate, NSC will use its reasonable efforts to cause the
exercisability of the options to be accelerated.
7. (a) Termination Without Cause. If you are terminated by NSC without
Cause prior to the end of the Term, NSC will pay you (i) an amount equal to the
greater of (a) the amount of the base salary remaining to be paid during the
Term, or (b) one year of continued base salary (payable in the same manner as
regular salary), measured by your base salary in effect on the date of your
termination and (ii) the Guaranteed Minimum Bonus payment(s) (as provided for in
paragraph 4) for the balance of the Term. NSC will also provide you with one
year's continued coverage under NSC's medical and dental plans at the rate
applicable to active employees. (The foregoing period of continued salary and
benefits is hereinafter referred to as the "Severance Period.") Notwithstanding
the foregoing, your payments under this paragraph 7(a) can, at your election, be
paid in a single lump sum.
(b) Severance. If you are terminated by NSC without Cause after the
expiration of the Term of this Agreement, you shall be entitled to receive
severance pay for a period of one (1) year from the date of your termination at
your annual base salary then in effect, payable in the same manner as regular
salary, together with one year's continued coverage under NSC's medical and
dental plans at the rate applicable to active employees.
(c) Cause. For purposes of this Agreement, Cause shall mean any act of
dishonesty or theft, willful misconduct, acts of gross negligence, or the
willful and continued failure or your refusal to perform assigned duties (other
than caused by a disability, which for purposes of this Agreement shall mean
your total and permanent incapacity to perform the duties you were performing
immediately prior to the onset of such disability).
8. Survivor's Benefit. In the event of your death before the end of the
Term, or during the course of any applicable Severance Period, your spouse, if
any, shall receive the full (or, if your death occurs during any applicable
Severance Period, the remainder of the) period of continued base salary and
medical and dental coverage set forth in paragraph 6 or 7 above. Further, your
spouse, if any, shall receive the Guaranteed Minimum Bonus due with respect to
the year of your death under paragraph 4 above.
9. Affirmation. As further consideration for the payments and other
security set forth above, by signing this Agreement you agree to continue to
abide by the covenants and agreements set forth in Exhibit A attached hereto.
10. Assignment. You may not assign your rights or obligations hereunder.
The rights and obligations of NSC hereunder shall inure to the benefit of and
shall be binding upon its respective successors and assigns. NSC shall use its
Page 56 of 88
<PAGE>
reasonable efforts to ensure that any purchaser of the business of NSC offers
the same or substantially equivalent plans as the medical, dental, and vehicle
allowance plans currently offered by NSC.
11. General Provisions.
(a) This Agreement shall be subject to and governed by the laws of the
Commonwealth of Massachusetts without regard to its choice of law principles.
(b) Failure to insist upon strict compliance with any provision(s) hereof
shall not be deemed a waiver of such provision(s) or any other provision hereof.
If all or any part of this Agreement is declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall not
serve to invalidate any portion of this Agreement not declared to be unlawful or
invalid. Any paragraph or a part of a paragraph so declared to be unlawful or
invalid shall, if possible, be construed in a manner which will give effect to
the terms of such paragraph or part of a paragraph to the fullest extent
possible while remaining lawful and valid.
(c) This Agreement shall not be altered, amended, or modified except by
written instrument executed by NSC and you. A waiver of any term, covenant,
agreement, or condition contained in this Agreement shall not be deemed a waiver
of any other term, covenant, agreement, or condition, and any waiver of any
default in any such term, covenant, agreement, or condition shall not be deemed
a waiver of any later default thereof or of any other term, covenant, agreement,
or condition.
(d) For purposes of this Agreement and each of the Exhibits attached
hereto, the term "NSC" shall mean and include NSC Corporation and each of its
subsidiaries, including, but not limited to, National Surface Cleaning, Inc.,
National Service Cleaning Corp., Olshan Demolishing Management, Inc., NSC Energy
Services, Inc. and NSC Specialty Coatings, Inc.
Page 57 of 88
<PAGE>
(e) NSC's obligation to pay amounts hereunder are subject to its
withholding obligations under applicable federal, state, and local laws.
NSC CORPORATION
By: /s/ VICTOR J. BARNHART
Victor J. Barnhart,
Acting President and Chief Executive Officer
ACCEPTANCE
Agreed to and accepted this ____ day of ____________, 1996.
By: /S/ J. DRENNAN LOWELL
J. Drennan Lowell
Page 58 of 88
<PAGE>
EXHIBIT A
(A) I agree that while I am employed by NSC, I will not, directly or
indirectly, compete with the business conducted by NSC.
(B) I agree that for a period of twelve (12) months after the termination
of employment, whether voluntary or involuntary, and regardless of the reason
for or manner of termination, I will not, alone or with others, directly or
indirectly (as owner, stockholder, partner, lender, other investor director,
officer, employee, consultant or otherwise):
(1) Solicit, perform or engage in any business of the same or similar
nature to the business of NSC, or which is competitive with the business of NSC,
anywhere within the Restricted Area as hereinafter defined; and
(2) Sell, attempt to sell, provide or attempt to provide any products or
services (in competition with those products or services which I sold or
provided on behalf of NSC) to, or solicit, perform, engage in, divert or accept
any business of the same or similar nature to the business of NSC from, any
person, firm or entity:
(a) residing, maintaining a principal place of business or located within
the Restricted Area;
(b) who was a customer of NSC within the Restricted Area during the last
twenty-four (24) months of my employment; or
(c) to whom I sold, attempted to sell, provided or attempted to provide
such products or services during the last twenty-four (24) months of my
employment with NSC.
(3) Induce or attempt to induce any customer of NSC to reduce such
customer's business with NSC or divert such customer's business from NSC, by
direct advertising, solicitation or otherwise.
(4) Disclose the names of any customers or potential customers of NSC to
any other person, firm, corporation or other entity.
I agree that I will comply with the most restrictive of the provisions
specified in subsections (1), (2)(a) through (c), (3) and (4) which is allowed
by applicable state law. The parties agree that if enforcement of this Agreement
is sought, the enforcing court should select the most restrictive provisions
appropriate under applicable state law.
(C) I agree that while I am employed by NSC and for a period of twelve (12)
months after termination of my employment for any reason, voluntary or
involuntary, with or without Cause, I will not directly or indirectly hire, or
attempt to hire any employee of NSC nor will I encourage or induce any employee
of NSC to terminate employment with NSC.
(D) "Restricted Area" shall mean and include each and every state or
territory in which NSC has conducted or solicited any business within the
twenty-four (24) months immediately preceding the termination of my employment
and up to and including the date of the termination of my employment. "Customer"
shall mean any person, firm or other entity, or any parent, subsidiary or
Page 59 of 88
<PAGE>
affiliate thereof, with which NSC has had a contract, engaged in any business
with or for which NSC has performed any services within the twenty-four (24)
months immediately preceding the termination of my employment and up to and
including the date of the termination of my employment. "Potential Customer"
shall mean any person firm or other entity, or any parent, subsidiary or
affiliate thereof, from which NSC has solicited or attempted to solicit any
business, or to which NSC has submitted any bid or written or oral proposal,
within the twenty-four (24) months immediately preceding the termination of my
employment and up to and including the date of the termination of my employment.
(E) I acknowledge that during the term of my employment, I will be making
use of, acquiring, or adding to NSC's Classified Information. In order to
protect the Classified Information, I will not, during the term of my employment
with NSC or thereafter, in any way utilize any of the Classified Information
except in connection with my employment by NSC. I will not copy, reproduce, or
remove from NSC's premises the original or any copies of the Classified
Information and I will not disclose any of the Classified Information to anyone.
Page 60 of 88
<PAGE>
PERSONAL AND CONFIDENTIAL
October 2, 1996
Mr. Darryl G. Schimeck
c/o National Surface Cleaning, Inc.
160 Eisenhower Lane North
Lombard, IL 60148
Re: Employment Security Agreement
Dear Darryl:
In light of the recent developments at NSC Corporation ("NSC"), NSC wishes
to offer you this Employment Security Agreement in appreciation of your past
dedicated service and to provide you with peace of mind.
In consideration of the payments and other security listed below, you agree
to continue your employment with NSC and provide your full cooperation and
assistance to NSC.
1. Term. The Term of the Agreement shall be for a period commencing on the
date hereof and ending on December 31, 1998.
2. Base Salary. Your current base salary will not be reduced during the
Term and will be subject to normal increases which are in the discretion of
management.
3. Execution Bonus. Upon the execution and delivery of this agreement by
you, NSC shall pay to you, in one single lump sum, a one-time execution bonus in
the amount of Twenty Thousand ($20,000.00) Dollars.
4. Supplemental Bonus and Guaranteed Minimum Bonus. With respect to any
bonus payable to you under any incentive compensation plan provided by NSC for
its senior personnel ("Plan"), (i) if you remain employed with NSC through
December 31, 1997, NSC agrees to pay you a supplemental bonus in an amount equal
to thirty-five (35%) percent of any bonus payable to you under the 1997 Plan and
(ii) if you remain employed with NSC through the end of the Term, NSC agrees to
pay you a supplemental bonus in an amount equal to thirty-five (35%) percent of
any bonus payable to you under the 1998 Plan; provided, however, that,
regardless of the amount of any bonuses payable to you under the 1997 and 1998
Plans, the amount of each supplemental bonus to be paid to you by NSC for each
such year shall in no event be less than Fifteen Thousand ($15,000.00) Dollars,
or Thirty Thousand ($30,000.00) in the aggregate for both years ( the
"Guaranteed Minimum Bonus").
Page 61 of 88
<PAGE>
5. Transaction Bonus. In the event of a sale of NSC during the Term to an
entity unrelated to NSC or its major shareholders, Rust International, Inc. and
OHM Corporation, if you remain employed with NSC through the closing of the
sale, NSC will pay you a transaction bonus equal to two (2) times your monthly
base salary for your assistance and cooperation in facilitating the closing of
the sale. NSC will pay said transaction bonus to you as soon as reasonably
practicable following the date of the closing. Payment of such bonus will be
subject to normal withholding.
6. Stock Options. Any otherwise exercisable stock options will remain in
effect, in accordance with the terms of the stock option plan under which they
were issued, during any period of employment with NSC and any subsequent period
during which you may be receiving severance pay. However, in the event of a
transaction involving NSC, which under the terms of the stock option plan would
cause the options to terminate, NSC will use its reasonable efforts to cause the
exercisability of the options to be accelerated.
7. (a) Termination Without Cause. If you are terminated by NSC without
Cause prior to the end of the Term, NSC will pay you (i) an amount equal to the
greater of (a) the amount of the base salary remaining to be paid during the
Term, or (b) one year of continued base salary (payable in the same manner as
regular salary), measured by your base salary in effect on the date of your
termination and (ii) the Guaranteed Minimum Bonus payment(s) (as provided for in
paragraph 4) for the balance of the Term. NSC will also provide you with one
year's continued coverage under NSC's medical and dental plans at the rate
applicable to active employees. (The foregoing period of continued salary and
benefits is hereinafter referred to as the "Severance Period.") Notwithstanding
the foregoing, your payments under this paragraph 7(a) can, at your election, be
paid in a single lump sum.
(b) Severance. If you are terminated by NSC without Cause after the
expiration of the Term of this Agreement, you shall be entitled to receive
severance pay for a period of one (1) year from the date of your termination at
your annual base salary then in effect, payable in the same manner as regular
salary, together with one year's continued coverage under NSC's medical and
dental plans at the rate applicable to active employees.
(c) Cause. For purposes of this Agreement, Cause shall mean any act of
dishonesty or theft, willful misconduct, acts of gross negligence, or the
willful and continued failure or your refusal to perform assigned duties (other
than caused by a disability, which for purposes of this Agreement shall mean
your total and permanent incapacity to perform the duties you were performing
immediately prior to the onset of such disability).
8. Survivor's Benefit. In the event of your death before the end of the
Term, or during the course of any applicable Severance Period, your spouse, if
any, shall receive the full (or, if your death occurs during any applicable
Severance Period, the remainder of the) period of continued base salary and
medical and dental coverage set forth in paragraph 6 or 7 above. Further, your
spouse, if any, shall receive the Guaranteed Minimum Bonus due with respect to
the year of your death under paragraph 4 above.
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<PAGE>
9. Affirmation. As further consideration for the payments and other
security set forth above, by signing this Agreement you agree to continue to
abide by the covenants and agreements set forth in Exhibit A attached hereto.
10. Assignment. You may not assign your rights or obligations hereunder.
The rights and obligations of NSC hereunder shall inure to the benefit of and
shall be binding upon its respective successors and assigns. NSC shall use its
reasonable efforts to ensure that any purchaser of the business of NSC offers
the same or substantially equivalent plans as the medical, dental, and vehicle
allowance plans currently offered by NSC.
11. General Provisions.
(a) This Agreement shall be subject to and governed by the laws of the
Commonwealth of Massachusetts without regard to its choice of law principles.
(b) Failure to insist upon strict compliance with any provision(s) hereof
shall not be deemed a waiver of such provision(s) or any other provision hereof.
If all or any part of this Agreement is declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall not
serve to invalidate any portion of this Agreement not declared to be unlawful or
invalid. Any paragraph or a part of a paragraph so declared to be unlawful or
invalid shall, if possible, be construed in a manner which will give effect to
the terms of such paragraph or part of a paragraph to the fullest extent
possible while remaining lawful and valid.
(c) This Agreement shall not be altered, amended, or modified except by
written instrument executed by NSC and you. A waiver of any term, covenant,
agreement, or condition contained in this Agreement shall not be deemed a waiver
of any other term, covenant, agreement, or condition, and any waiver of any
default in any such term, covenant, agreement, or condition shall not be deemed
a waiver of any later default thereof or of any other term, covenant, agreement,
or condition.
(d) For purposes of this Agreement and each of the Exhibits attached
hereto, the term "NSC" shall mean and include NSC Corporation and each of its
subsidiaries, including, but not limited to, National Surface Cleaning, Inc.,
National Service Cleaning Corp., Olshan Demolishing Management, Inc., NSC Energy
Services, Inc. and NSC Specialty Coatings, Inc.
(e) NSC's obligation to pay amounts hereunder are subject to its
withholding obligations under applicable federal, state, and local laws.
Page 63 of 88
<PAGE>
NSC CORPORATION
By: /s/ VICTOR J. BARNHART
Victor J. Barnhart,
Acting President and Chief Executive Officer
ACCEPTANCE
Agreed to and accepted this ____ day of ____________, 1996.
By: /s/ DARRYL G. SCHIMECK
Darryl G. Schimeck
Page 64 of 88
<PAGE>
EXHIBIT A
(A) I agree that while I am employed by NSC, I will not, directly or
indirectly, compete with the business conducted by NSC.
(B) I agree that for a period of twelve (12) months after the termination
of employment, whether voluntary or involuntary, and regardless of the reason
for or manner of termination, I will not, alone or with others, directly or
indirectly (as owner, stockholder, partner, lender, other investor director,
officer, employee, consultant or otherwise):
(1) Solicit, perform or engage in any business of the same or similar
nature to the business of NSC, or which is competitive with the business of NSC,
anywhere within the Restricted Area as hereinafter defined; and
(2) Sell, attempt to sell, provide or attempt to provide any products or
services (in competition with those products or services which I sold or
provided on behalf of NSC) to, or solicit, perform, engage in, divert or accept
any business of the same or similar nature to the business of NSC from, any
person, firm or entity:
(a) residing, maintaining a principal place of business or located within
the Restricted Area;
(b) who was a customer of NSC within the Restricted Area during the last
twenty-four (24) months of my employment; or
(c) to whom I sold, attempted to sell, provided or attempted to provide
such products or services during the last twenty-four (24) months of my
employment with NSC.
(3) Induce or attempt to induce any customer of NSC to reduce such
customer's business with NSC or divert such customer's business from NSC, by
direct advertising, solicitation or otherwise.
(4) Disclose the names of any customers or potential customers of NSC to
any other person, firm, corporation or other entity.
I agree that I will comply with the most restrictive of the provisions
specified in subsections (1), (2)(a) through (c), (3) and (4) above which is
allowed by applicable state law. The parties agree that if enforcement of this
Agreement is sought, the enforcing court should select the most restrictive
provisions appropriate under applicable state law.
(C) I agree that while I am employed by NSC and for a period of twelve
(12) months after termination of my employment for any reason, voluntary or
involuntary, with or without Cause, I will not directly or indirectly hire, or
attempt to hire any employee of NSC nor will I encourage or induce any employee
of NSC to terminate employment with NSC.
(D) "Restricted Area" shall mean and include each and every state or
territory in which NSC has conducted or solicited any business within the
twenty-four (24) months immediately preceding the termination of my employment
and up to and including the date of the termination of my employment. "Customer"
shall mean any person firm or other entity, or any parent, subsidiary or
Page 65 of 88
<PAGE>
affiliate thereof, with which NSC has had a contract, engaged in any business
with or for which NSC has performed any services within the twenty-four (24)
months immediately preceding the termination of my employment and up to and
including the date of the termination of my employment. "Potential Customer"
shall mean any person firm or other entity, or any parent, subsidiary or
affiliate thereof, from which NSC has solicited or attempted to solicit any
business, or to which NSC has submitted any bid or written or oral proposal,
within the twenty-four (24) months immediately preceding the termination of my
employment and up to and including the date of the termination of my employment.
(E) I acknowledge that during the term of my employment, I will be
making use of, acquiring, or adding to NSC's Classified Information. In order to
protect the Classified Information, I will not, during the term of my employment
with NSC or thereafter, in any way utilize any of the Classified Information
except in connection with my employment by NSC. I will not copy, reproduce, or
remove from NSC's premises the original or any copies of the Classified
Information and I will not disclose any of the Classified Information to anyone.
Page 66 of 88
<PAGE>
PERSONAL AND CONFIDENTIAL
October 2, 1996
Mr. David R. Krache
c/o National Service Cleaning Corp.
3575 West 12th Street
Houston, TX 77008
Re: Employment Security Agreement
Dear Dave:
In light of the recent developments at NSC Corporation ("NSC"), NSC wishes
to offer you this Employment Security Agreement in appreciation of your past
dedicated service and to provide you with peace of mind.
In consideration of the payments and other security listed below, you agree
to continue your employment with NSC and provide your full cooperation and
assistance to NSC.
1. Term. The Term of the Agreement shall be for a period commencing on the
date hereof and ending on December 31, 1998.
2. Base Salary. Your current base salary will not be reduced during the
Term and will be subject to normal increases which are in the discretion of
management.
3. Execution Bonus. Upon the execution and delivery of this agreement by
you, NSC shall pay to you, in one single lump sum, a one-time execution bonus in
the amount of Twenty Thousand ($20,000.00) Dollars.
4. Supplemental Bonus and Guaranteed Minimum Bonus. With respect to any
bonus payable to you under any incentive compensation plan provided by NSC for
its senior personnel ("Plan"), (i) if you remain employed with NSC through
December 31, 1997, NSC agrees to pay you a supplemental bonus in an amount equal
to thirty-five (35%) percent of any bonus payable to you under the 1997 Plan and
(ii) if you remain employed with NSC through the end of the Term, NSC agrees to
pay you a supplemental bonus in an amount equal to thirty-five (35%) percent of
any bonus payable to you under the 1998 Plan; provided, however, that,
regardless of the amount of any bonuses payable to you under the 1997 and 1998
Plans, the amount of each supplemental bonus to be paid to you by NSC for each
such year shall in no event be less than Fifteen Thousand ($15,000.00) Dollars,
or Thirty Thousand ($30,000.00) in the aggregate for both years ( the
"Guaranteed Minimum Bonus").
Page 67 of 88
<PAGE>
5. Transaction Bonus. In the event of a sale of NSC during the term to an
entity unrelated to NSC or its major shareholders, Rust International, Inc. and
OHM Corporation, if you remain employed with NSC through the closing of the
sale, NSC will pay you a transaction bonus equal to two (2) times your monthly
base salary for your assistance and cooperation in facilitating the closing of
the sale. NSC will pay said transaction bonus to you as soon as reasonably
practicable following the date of the closing. Payment of such bonus will be
subject to normal withholding.
6. Stock Options. Any otherwise exercisable stock options will remain in
effect, in accordance with the terms of the stock option plan under which they
were issued, during any period of employment with NSC and any subsequent period
during which you may be receiving severance pay. However, in the event of a
transaction involving NSC, which under the terms of the stock option plan would
cause the options to terminate, NSC will use its reasonable efforts to cause the
exercisability of the options to be accelerated.
7. (a) Termination Without Cause. If you are terminated by NSC without
Cause prior to the end of the Term, NSC will pay you (i) an amount equal to the
greater of (a) the amount of the base salary remaining to be paid during the
Term, or (b) one year of continued base salary (payable in the same manner as
regular salary), measured by your base salary in effect on the date of your
termination and (ii) the Guaranteed Minimum Bonus payment(s) (as provided for in
paragraph 4) for the balance of the Term. NSC will also provide you with one
year's continued coverage under NSC's medical and dental plans at the rate
applicable to active employees. (The foregoing period of continued salary and
benefits is hereinafter referred to as the "Severance Period.") Notwithstanding
the foregoing, your payments under this paragraph 7(a) can, at your election, be
paid in a single lump sum.
(b) Severance. If you are terminated by NSC without Cause after the
expiration of the Term of this Agreement, you shall be entitled to receive
severance pay for a period of one (1) year from the date of your termination at
your annual base salary then in effect, payable in the same manner as regular
salary, together with one year's continued coverage under NSC's medical and
dental plans at the rate applicable to active employees.
(c) Cause. For purposes of this Agreement, Cause shall mean any act of
dishonesty or theft, willful misconduct, acts of gross negligence, or the
willful and continued failure or your refusal to perform assigned duties (other
than caused by a disability, which for purposes of this Agreement shall mean
your total and permanent incapacity to perform the duties you were performing
immediately prior to the onset of such disability).
8. Survivor's Benefit. In the event of your death before the end of the
Term, or during the course of any applicable Severance Period, your spouse, if
any, shall receive the full (or, if your death occurs during any applicable
Severance Period, the remainder of the) period of continued base salary and
medical and dental coverage set forth in paragraph 6 or 7 above. Further, your
spouse, if any, shall receive the Guaranteed Minimum Bonus due with respect to
the year of your death under paragraph 4 above.
Page 68 of 88
<PAGE>
9. Affirmation. As further consideration for the payments and other
security set forth above, by signing this Agreement you agree to continue to
abide by the covenants and agreements set forth in Exhibit A attached hereto.
10. Assignment. You may not assign your rights or obligations hereunder.
The rights and obligations of NSC hereunder shall inure to the benefit of and
shall be binding upon its respective successors and assigns. NSC shall use its
reasonable efforts to ensure that any purchaser of the business of NSC offers
the same or substantially equivalent plans as the medical, dental, and vehicle
allowance plans currently offered by NSC.
11. General Provisions.
(a) This Agreement shall be subject to and governed by the laws of the
Commonwealth of Massachusetts without regard to its choice of law principles.
(b) Failure to insist upon strict compliance with any provision(s) hereof
shall not be deemed a waiver of such provision(s) or any other provision hereof.
If all or any part of this Agreement is declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall not
serve to invalidate any portion of this Agreement not declared to be unlawful or
invalid. Any paragraph or a part of a paragraph so declared to be unlawful or
invalid shall, if possible, be construed in a manner which will give effect to
the terms of such paragraph or part of a paragraph to the fullest extent
possible while remaining lawful and valid.
(c) This Agreement shall not be altered, amended, or modified except by
written instrument executed by NSC and you. A waiver of any term, covenant,
agreement, or condition contained in this Agreement shall not be deemed a waiver
of any other term, covenant, agreement, or condition, and any waiver of any
default in any such term, covenant, agreement, or condition shall not be deemed
a waiver of any later default thereof or of any other term, covenant, agreement,
or condition.
(d) For purposes of this Agreement and each of the Exhibits attached
hereto, the term "NSC" shall mean and include NSC Corporation and each of its
subsidiaries, including, but not limited to, National Surface Cleaning, Inc.,
National Service Cleaning Corp., Olshan Demolishing Management, Inc., NSC Energy
Services, Inc. and NSC Specialty Coatings, Inc.
(e) NSC's obligation to pay amounts hereunder are subject to its
withholding obligations under applicable federal, state, and local laws.
Page 69 of 88
<PAGE>
NSC CORPORATION
By: /s/ VICTOR J. BARNHART
Victor J. Barnhart,
Acting President and Chief Executive Officer
ACCEPTANCE
Agreed to and accepted this ____ day of ____________, 1996.
By: /s/ DAVID R. KRACHE
David R. Krache
Page 70 of 88
<PAGE>
EXHIBIT A
(A) I agree that while I am employed by NSC, I will not, directly or
indirectly, compete with the business conducted by NSC.
(B) I agree that for a period of twelve (12) months after the termination
of employment, whether voluntary or involuntary, and regardless of the reason
for or manner of termination, I will not, alone or with others, directly or
indirectly (as owner, stockholder, partner, lender, other investor director,
officer, employee, consultant or otherwise):
(1) Solicit, perform or engage in any business of the same or similar
nature to the business of NSC, or which is competitive with the business of NSC,
anywhere within the Restricted Area as hereinafter defined; and
(2) Sell, attempt to sell, provide or attempt to provide any products or
services (in competition with those products or services which I sold or
provided on behalf of NSC) to, or solicit, perform, engage in, divert or accept
any business of the same or similar nature to the business of NSC from, any
person, firm or entity:
(a) residing, maintaining a principal place of business or located within
the Restricted Area;
(b) who was a customer of NSC within the Restricted Area during the last
twenty-four (24) months of my employment; or
(c) to whom I sold, attempted to sell, provided or attempted to provide
such products or services during the last twenty-four (24) months of my
employment with NSC.
(3) Induce or attempt to induce any customer of NSC to reduce such
customer's business with NSC or divert such customer's business from NSC, by
direct advertising, solicitation or otherwise.
(4) Disclose the names of any customers or potential customers of NSC to
any other person, firm, corporation or other entity.
I agree that I will comply with the most restrictive of the provisions
specified in subsections (1), (2)(a) through (c), (3) and (4) above which is
allowed by applicable state law. The parties agree that if enforcement of this
Agreement is sought, the enforcing court should select the most restrictive
provisions appropriate under applicable state law.
(C) I agree that while I am employed by NSC and for a period of twelve (12)
months after termination of my employment for any reason, voluntary or
involuntary, with or without Cause, I will not directly or indirectly hire, or
attempt to hire any employee of NSC nor will I encourage or induce any employee
of NSC to terminate employment with NSC.
(D) "Restricted Area" shall mean and include each and every state or
territory in which NSC has conducted or solicited any business within the
twenty-four (24) months immediately preceding the termination of my employment
and up to and including the date of the termination of my employment. "Customer"
shall mean any person firm or other entity, or any parent, subsidiary or
Page 71 of 88
<PAGE>
affiliate thereof, with which NSC has had a contract, engaged in any business
with or for which NSC has performed any services within the twenty-four (24)
months immediately preceding the termination of my employment and up to and
including the date of the termination of my employment. "Potential Customer"
shall mean any person firm or other entity, or any parent, subsidiary or
affiliate thereof, from which NSC has solicited or attempted to solicit any
business, or to which NSC has submitted any bid or written or oral proposal,
within the twenty-four (24) months immediately preceding the termination of my
employment and up to and including the date of the termination of my employment.
(E) I acknowledge that during the term of my employment, I will be making
use of, acquiring, or adding to NSC's Classified Information. In order to
protect the Classified Information, I will not, during the term of my employment
with NSC or thereafter, in any way utilize any of the Classified Information
except in connection with my employment by NSC. I will not copy, reproduce, or
remove from NSC's premises the original or any copies of the Classified
Information and I will not disclose any of the Classified Information to anyone.
Page 72 of 88
<PAGE>
PERSONAL AND CONFIDENTIAL
October 2, 1996
Mr. Thomas W. Bartlett
c/o Olshan Demolishing Management, Inc.
3575 West 12th Street
Houston, TX 77008
Re: Employment Security Agreement
Dear Bill:
In light of the recent developments at NSC Corporation ("NSC"), NSC wishes
to offer you this Employment Security Agreement in appreciation of your past
dedicated service and to provide you with peace of mind.
In consideration of the payments and other security listed below, you agree
to continue your employment with NSC and provide your full cooperation and
assistance to NSC.
1. Term. The Term of the Agreement shall be for a period commencing on the
date hereof and ending on December 31, 1998.
2. Base Salary. Your current base salary will not be reduced during the
Term and will be subject to normal increases which are in the discretion of
management.
3. Execution Bonus. Upon the execution and delivery of this agreement by
you, NSC shall pay to you, in one single lump sum, a one-time execution bonus in
the amount of Twenty Thousand ($20,000.00) Dollars.
4. Supplemental Bonus and Guaranteed Minimum Bonus. With respect to any
bonus payable to you under any incentive compensation plan provided by NSC for
its senior personnel ("Plan"), (i) if you remain employed with NSC through
December 31, 1997, NSC agrees to pay you a supplemental bonus in an amount equal
to thirty-five (35%) percent of any bonus payable to you under the 1997 Plan and
(ii) if you remain employed with NSC through the end of the Term, NSC agrees to
pay you a supplemental bonus in an amount equal to thirty-five (35%) percent of
any bonus payable to you under the 1998 Plan; provided, however, that,
regardless of the amount of any bonuses payable to you under the 1997 and 1998
Plans, the amount of each supplemental bonus to be paid to you by NSC for each
such year shall in no event be less than Fifteen Thousand ($15,000.00) Dollars,
or Thirty Thousand ($30,000.00) in the aggregate for both years ( the
"Guaranteed Minimum Bonus").
Page 73 of 88
<PAGE>
5. Transaction Bonus. In the event of a sale of NSC during the Term to an
entity unrelated to NSC or its major shareholders, Rust International, Inc. and
OHM Corporation, if you remain employed with NSC through the closing of the
sale, NSC will pay you a transaction bonus equal to two (2) times your monthly
base salary for your assistance and cooperation in facilitating the closing of
the sale. NSC will pay said transaction bonus to you as soon as reasonably
practicable following the date of the closing. Payment of such bonus will be
subject to normal withholding.
6. Stock Options. Any otherwise exercisable stock options will remain in
effect, in accordance with the terms of the stock option plan under which they
were issued, during any period of employment with NSC and any subsequent period
during which you may be receiving severance pay. However, in the event of a
transaction involving NSC, which under the terms of the stock option plan would
cause the options to terminate, NSC will use its reasonable efforts to cause the
exercisability of the options to be accelerated.
7. (a) Termination Without Cause. If you are terminated by NSC without
Cause prior to the end of the Term, NSC will pay you (i) an amount equal to the
greater of (a) the amount of the base salary remaining to be paid during the
Term, or (b) one year of continued base salary (payable in the same manner as
regular salary), measured by your base salary in effect on the date of your
termination and (ii) the Guaranteed Minimum Bonus payment(s) (as provided for in
paragraph 4) for the balance of the Term. NSC will also provide you with one
year's continued coverage under NSC's medical and dental plans at the rate
applicable to active employees. (The foregoing period of continued salary and
benefits is hereinafter referred to as the "Severance Period.") Notwithstanding
the foregoing, your payments under this paragraph 7(a) can, at your election, be
paid in a single lump sum.
(b) Severance. If you are terminated by NSC without Cause after the
expiration of the Term of this Agreement, you shall be entitled to receive
severance pay for a period of one (1) year from the date of your termination at
your annual base salary then in effect, payable in the same manner as regular
salary, together with one year's continued coverage under NSC's medical and
dental plans at the rate applicable to active employees.
(c) Cause. For purposes of this Agreement, Cause shall mean any act of
dishonesty or theft, willful misconduct, act of gross negligence, or the willful
and continued failure or your refusal to perform assigned duties (other than
caused by a disability, which for purposes of this Agreement shall mean your
total and permanent incapacity to perform the duties you were performing
immediately prior to the onset of such disability).
8. Survivor's Benefit. In the event of your death before the end of the
Term, or during the course of any applicable Severance Period, your spouse, if
any, shall receive the full (or, if your death occurs during any applicable
Severance Period, the remainder of the) period of continued base salary and
medical and dental coverage set forth in paragraph 6 or 7 above. Further, your
spouse, if any, shall receive the Guaranteed Minimum Bonus due with respect to
the year of your death under paragraph 4 above.
Page 74 of 88
<PAGE>
9. Affirmation. As further consideration for the payments and other
security set forth above, by signing this Agreement you agree to abide by the
covenants and agreements set forth in Exhibit A attached hereto.
10. Assignment. You may not assign your rights or obligations hereunder.
The rights and obligations of NSC hereunder shall inure to the benefit of and
shall be binding upon its respective successors and assigns. NSC shall use its
reasonable efforts to ensure that any purchaser of the business of NSC offers
the same or substantially equivalent plans as the medical, dental, and vehicle
allowance plans currently offered by NSC.
11. General Provisions.
(a) This Agreement shall be subject to and governed by the laws of the
Commonwealth of Massachusetts without regard to its choice of law principles.
(b) Failure to insist upon strict compliance with any provision(s) hereof
shall not be deemed a waiver of such provision(s) or any other provision hereof.
If all or any part of this Agreement is declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall not
serve to invalidate any portion of this Agreement not declared to be unlawful or
invalid. Any paragraph or a part of a paragraph so declared to be unlawful or
invalid shall, if possible, be construed in a manner which will give effect to
the terms of such paragraph or part of a paragraph to the fullest extent
possible while remaining lawful and valid.
(c) This Agreement shall not be altered, amended, or modified except by
written instrument executed by NSC and you. A waiver of any term, covenant,
agreement, or condition contained in this Agreement shall not be deemed a waiver
of any other term, covenant, agreement, or condition, and any waiver of any
default in any such term, covenant, agreement, or condition shall not be deemed
a waiver of any later default thereof or of any other term, covenant, agreement,
or condition.
(d) For purposes of this Agreement and each of the Exhibits attached
hereto, the term "NSC" shall mean and include NSC Corporation and each of its
subsidiaries, including, but not limited to, National Surface Cleaning, Inc.,
National Service Cleaning Corp., Olshan Demolishing Management, Inc., NSC Energy
Services, Inc. and NSC Specialty Coatings, Inc.
(e) NSC's obligation to pay amounts hereunder are subject to its
withholding obligations under applicable federal, state, and local laws.
Page 75 of 88
<PAGE>
NSC CORPORATION
By: /s/ VICTOR J. BARNHART
Victor J. Barnhart,
Acting President and Chief Executive Officer
ACCEPTANCE
Agreed to and accepted this ____ day of ____________, 1996.
By: /s/ THOMAS W. BARTLETT
Thomas W. Bartlett
Page 76 of 88
<PAGE>
EXHIBIT A
(A) I agree that while I am employed by NSC, I will not, directly or
indirectly, compete with the business conducted by NSC.
(B) I agree that for a period of twelve (12) months after the termination
of employment, whether voluntary or involuntary, and regardless of the reason
for or manner of termination, I will not, alone or with others, directly or
indirectly (as owner, stockholder, partner, lender, other investor director,
officer, employee, consultant or otherwise):
(1) Solicit, perform or engage in any business of the same or similar
nature to the business of NSC, or which is competitive with the business of NSC,
anywhere within the Restricted Area as hereinafter defined; and
(2) Sell, attempt to sell, provide or attempt to provide any products or
services (in competition with those products or services which I sold or
provided on behalf of NSC) to, or solicit, perform, engage in, divert or accept
any business of the same or similar nature to the business of NSC from, any
person, firm or entity:
(a) residing, maintaining a principal place of business or located within
the Restricted Area;
(b) who was a customer of NSC within the Restricted Area during the last
twenty-four (24) months of my employment; or
(c) to whom I sold, attempted to sell, provided or attempted to provide
such products or services during the last twenty-four (24) months of my
employment with NSC.
(3) Induce or attempt to induce any customer of NSC to reduce such
customer's business with NSC or divert such customer's business from NSC, by
direct advertising, solicitation or otherwise.
(4) Disclose the names of any customers or potential customers of NSC to
any other person, firm, corporation or other entity.
I agree that I will comply with the most restrictive of the provisions
specified in subsections (1), (2)(a) through (c), (3) and (4) above which is
allowed by applicable state law. The parties agree that if enforcement of this
Agreement is sought, the enforcing court should select the most restrictive
provisions appropriate under applicable state law.
(C) I agree that while I am employed by NSC and for a period of twelve (12)
months after termination of my employment for any reason, voluntary or
involuntary, with or without Cause, I will not directly or indirectly hire, or
attempt to hire any employee of NSC nor will I encourage or induce any employee
of NSC to terminate employment with NSC.
(D) "Restricted Area" shall mean and include each and every state or
territory in which NSC has conducted or solicited any business within the
twenty-four (24) months immediately preceding the termination of my employment
and up to and including the date of the termination of my employment. "Customer"
shall mean any person, firm or other entity, or any parent, subsidiary or
Page 77 of 88
<PAGE>
affiliate thereof, with which NSC has had a contract, engaged in any business
with or for which NSC has performed any services within the twenty-four (24)
months immediately preceding the termination of my employment and up to and
including the date of the termination of my employment. "Potential Customer"
shall mean any person, firm or other entity, or any parent, subsidiary or
affiliate thereof, from which NSC has solicited or attempted to solicit any
business, or to which NSC has submitted any bid or written or oral proposal,
within the twenty-four (24) months immediately preceding the termination of my
employment and up to and including the date of the termination of my employment.
(E) I acknowledge that during the term of my employment, I will be making
use of, acquiring, or adding to NSC's Classified Information. In order to
protect the Classified Information, I will not, during the term of my employment
with NSC or thereafter, in any way utilize any of the Classified Information
except in connection with my employment by NSC. I will not copy, reproduce, or
remove from NSC's premises the original or any copies of the Classified
Information and I will not disclose any of the Classified Information to anyone.
Page 78 of 88
<PAGE>
PERSONAL AND CONFIDENTIAL
November 5, 1996
Mr. Thomas W. Gilmore
c/o NSC Energy Services, Inc.
650 Grove Street
Thorofare, NJ 08086
Re: Employment Security Agreement
Dear Tom:
In light of the recent developments at NSC Corporation ("NSC"), NSC wishes
to offer you this Employment Security Agreement in appreciation of your past
dedicated service and to provide you with peace of mind.
In consideration of the payments and other security listed below, you agree
to continue your employment with NSC and provide your full cooperation and
assistance to NSC.
1. Term. The Term of the Agreement shall be for a period commencing on the
date hereof and ending on October 8, 1997.
2. Base Salary. Your current base salary will not be reduced during the
Term and will be subject to normal increases which are in the discretion of
management.
3. Execution Bonus. Upon execution of and delivery of this Agreement, you
will receive, in a single lump sum, a one-time bonus in the amount of Ten
Thousand ($10,000.00) Dollars.
4. Stock Options. Any otherwise exercisable stock options will remain in
effect, in accordance with the terms of the stock option plan under which they
were issued, during any period of employment with NSC and any subsequent period
during which you may be receiving severance pay. However, in the event of a
transaction involving NSC which under the terms of the stock option plan would
cause the options to terminate, NSC will use its reasonable efforts to cause the
exercisability of the options to be accelerated.
5. (a) Termination Without Cause. If you are terminated by NSC without
Cause prior to the end of the Term, NSC will pay you an amount equal to (i) one
year of continued base salary (payable in the same manner as regular salary),
measured by your base salary in effect on the date of your termination and (ii)
the Completion Bonus payment (as provided for in paragraph 3). NSC will also
provide you with one year's continued coverage under NSC's medical and dental
plans at the rate applicable to active employees. (The period of continued
salary and benefits is hereinafter referred to as the "Severance Period.")
Page 79 of 88
<PAGE>
Notwithstanding the foregoing, your payments under this paragraph 5(a) can, at
your election, be paid in a single lump sum.
(b) Severance. If you are terminated by NSC without Cause after the
expiration of the Term of this Agreement, you shall be entitled to receive
severance pay for a period of six (6) months at the rate of your annual base
salary then in effect, payable in the same manner as your regular salary,
together with six (6) months continued coverage under NSC's medical and dental
plans at the rate applicable to active employees.
(c) Cause. For purposes of this Agreement, Cause shall mean any act of
dishonesty or theft, willful misconduct, acts of gross negligence, or the
willful and continued failure or your refusal to perform assigned duties (other
than caused by a disability, which for purposes of this Agreement shall mean
your total and permanent incapacity to perform the duties you were performing
immediately prior to the onset of such disability).
6. Survivor's Benefit. In the event of your death before the end of the
Term, or during the course of any applicable Severance Period, your spouse, if
any, shall receive the full (or, if your death occurs during any applicable
Severance Period, the remainder of the) period of continued base salary and
medical and dental coverage set forth in paragraph 5 above.
7. Affirmation. As further consideration for the payments and other
security set forth above, by signing this Agreement you agree to abide by the
covenants and agreements set forth in Exhibit A attached hereto.
8. Assignment. You may not assign your rights or obligations hereunder. The
rights and obligations of NSC hereunder shall inure to the benefit of and shall
be binding upon its respective successors and assigns. NSC shall use its
reasonable efforts to ensure that any purchaser of the business of NSC offers
the same or substantially equivalent plans as the medical, dental, and vehicle
allowance plans currently offered by NSC.
9. General Provisions.
(a) This Agreement shall be subject to and governed by the laws of the
Commonwealth of Massachusetts without regard to its choice of law principles.
(b) Failure to insist upon strict compliance with any provision(s) hereof
shall not be deemed a waiver of such provision(s) or any other provision hereof.
If all or any part of this Agreement is declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall not
serve to invalidate any portion of this Agreement not declared to be unlawful or
invalid. Any paragraph or a part of a paragraph so declared to be unlawful or
invalid shall, if possible, be construed in a manner which will give effect to
the terms of such paragraph or part of a paragraph to the fullest extent
possible while remaining lawful and valid.
(c) This Agreement shall not be altered, amended, or modified except by
written instrument executed by NSC and you. A waiver of any term, covenant,
agreement, or condition contained in this Agreement shall not be deemed a waiver
of any other term, covenant, agreement, or condition any waiver of any default
in any such term, covenant, agreement, or condition shall not be deemed a waiver
Page 80 of 88
<PAGE>
of any later default thereof or of any other term, covenant, agreement, or
condition.
(d) For purposes of this Agreement and each of the Exhibits attached
hereto, The term "NSC" shall mean and include NSC Corporation and each of its
subsidiaries, including, but not limited to, National Surface Cleaning, Inc.,
National Service Cleaning Corp., Olshan Demolishing Management, Inc., NSC Energy
Services, Inc. and NSC Specialty Coatings, Inc.
(e) NSC's obligation to pay amounts hereunder are subject to its
withholding obligations under applicable federal, state, and local laws.
NSC CORPORATION
BY: /s/ VICTOR J. BARNHART
Victor J. Barnhart,
Acting President and Chief Executive Officer
ACCEPTANCE
Agreed to and accepted this ____ day of ____________, 1996.
By: /s/ THOMAS W. GILMORE
Thomas W. Gilmore
Page 81 of 88
<PAGE>
EXHIBIT A
(A) I agree that while I am employed by NSC, I will not, directly or
indirectly, compete with the business conducted by NSC.
(B) I agree that for a period of six (6) months after the termination of
employment, whether voluntary or involuntary, and regardless of the reason for
or manner of termination, I will not, alone or with others, directly or
indirectly (as owner, stockholder, partner, lender, other investor director,
officer, employee, consultant or otherwise):
(1) Solicit, perform or engage in any business of the same or similar
nature to the business of NSC, or which is competitive with the business of NSC,
anywhere within the Restricted Area as hereinafter defined; and
(2) Sell, attempt to sell, provide or attempt to provide any products or
services (in competition with those products or services which I sold or
provided on behalf of NSC) to, or solicit, perform, engage in, divert or accept
any business of the same or similar nature to the business of NSC from, any
person, firm or entity:
(a) residing, maintaining a principal place of business or located within
the Restricted Area;
(b) who was a customer of NSC within the Restricted Area during the last
twenty-four (24) months of my employment; or
(c) to whom I sold, attempted to sell, provided or attempted to provide
such products or services during the last twenty-four (24) months of my
employment with NSC.
(3) Induce or attempt to induce any customer of NSC to reduce such
customer's business with NSC or divert such customer's business from NSC, by
direct advertising, solicitation or otherwise.
(4) Disclose the names of any customers or potential customers of NSC to
any other person, firm, corporation or other entity.
I agree that I will comply with the most restrictive of the provisions
specified in subsections (1), (2)(a) through (c), (3) and (4) above which is
allowed by applicable state law. The parties agree that if enforcement of this
Agreement is sought, the enforcing court should select the most restrictive
provisions appropriate under applicable state law.
(C) I agree that while I am employed by NSC and for a period of six (6)
months after termination of my employment for any reason, voluntary or
involuntary, with or without Cause, I will not directly or indirectly hire, or
attempt to hire any employee of NSC nor will I encourage or induce any employee
of NSC to terminate employment with NSC.
(D) "Restricted Area" shall mean and include each and every state or
territory in which NSC has conducted or solicited any business within the
twenty-four (24) months immediately preceding the termination of my employment
and up to and including the date of the termination of my employment. "Customer"
shall mean any person, firm or other entity, or any parent, subsidiary or
Page 82 of 88
<PAGE>
affiliate thereof, with which NSC has had a contract, engaged in any business
with or for which NSC has performed any services within the twenty-four (24)
months immediately preceding the termination of my employment and up to and
including the date of the termination of my employment. "Potential Customer"
shall mean any person firm or other entity, or any parent, subsidiary or
affiliate thereof, from which NSC has solicited or attempted to solicit any
business, or to which NSC has submitted any bid or written or oral proposal,
within the twenty-four (24) months immediately preceding the termination of my
employment and up to and including the date of the termination of my employment.
I acknowledge that during the term of my employment, I will be making use
of, acquiring, or adding to NSC's Classified Information. In order to protect
the Classified Information, I will not, during the term of my employment with
NSC or thereafter, in any way utilize any of the Classified Information except
in connection with my employment by NSC. I will not copy, reproduce, or remove
from NSC's premises the original or any copies of the Classified Information and
I will not disclose any of the Classified Information to anyone.
Page 83 of 88
<PAGE>
EXHIBIT 11
Statement Re Computation of Per Share Earnings
NSC CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(In Thousands, Except Per-Share Data)
Years Ended December 31,
-------------------------------
1996 1995 1994
------- ------- -------
Primary :
Average shares outstanding.............. 9,971 9,971 9,971
Net effect of dilutive equity
securities outstanding based on
the treasury stock method............. - - -
------- ------- -------
Total................................ 9,971 9,971 9,971
======= ======= =======
Net income ............................. 1,861 715 2,566
Per share amounts:
Net income........................... 0.19 0.07 0.26
Years Ended December 31,
-------------------------------
1996 1995 1994
------- ------- -------
Fully Diluted :
Average shares outstanding.............. 9,971 9,971 9,971
Net effect of dilutive equity
securities outstanding based on
the treasury stock method............. 87 - -
------- ------- -------
Total................................ 10,058 9,971 9,971
======= ======= =======
Net income........................... 1,861 715 2,566
Per share amounts:
Net income........................... 0.19 0.07 0.26
Page 84 of 88
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
State of Other
Name of Subsidiary Jurisdiction of Incorporation
- ---------------------------------- -----------------------------
National Surface Cleaning, Inc. New Hampshire
National Service Cleaning Corp. Connecticut
Olshan Demolishing Management, Inc. Delaware
NSC Energy Services, Inc. Delaware
NSC Specialty Coatings, Inc. Delaware
Page 85 of 88
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-35986) pertaining to the 1990 Stock Option Plan of NSC Corporation
and in the related Prospectus of our report dated January 31, 1997, with respect
to the consolidated financial statements and schedule of NSC Corporation
included in the Annual Report (Form 10-K) for the year ended December 31, 1996.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
March 28, 1997
Page 86 of 88
<PAGE>
EXHIBIT 24
DIRECTORS AND OFFICERS OF NSC CORPORATION
ANNUAL REPORT ON FORM 10-K
POWER OF ATTORNEY
The undersigned directors and officers of NSC Corporation, a Delaware
corporation (the "Company"), do hereby make, constitute and appoint Victor J.
Barnhart, J. Drennan Lowell, Efstathios A. Kouninis, and Paul C. Remus, and each
of them, with full power of substitution and resubstitution, as attorneys or
attorney of the undersigned, to execute and file, under the Securities Exchange
Act of 1934, as amended, the Company's Annual Report on Form 10-K, for the year
ended December 31, 1996 and all amendments or exhibits thereto, and any or all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report, with full power and authority to do
and perform any and all acts and things whatsoever necessary, appropriate or
desirable to be done in the premises, or in the name, place and stead of the
said directors and officers, hereby ratifying and approving the acts of said
attorneys and any of them and any substitute.
This action may be executed in counterpart.
IN WITNESS WHEREOF, the undersigned have subscribed these presents as of the
28th day of March 1997.
/s/ VICTOR J. BARNHART /s/ EUGENE L. BARNETT
Victor J. Barnhart, Chairman of the Board Eugene L. Barnett, Director
and Chief Executive Officer (Principal
Executive Officer) /s/ PAMELA K. M. BEALL
Pamela K. M. Beall, Director
/s/ DARRYL G. SCHIMECK
Darryl G. Schimeck, President and Chief /s/ ROBERT J. BLACKWELL
Operating Officer Robert J. Blackwell, Director
/s/ J. DRENNAN LOWELL /s/ HERBERT A. GETZ
J. Drennan Lowell, Vice President, Chief Herbert A. Getz, Director
Financial Officer, Treasurer and Secretary
(Principal Financial Officer) /s/ WILLIAM P. HULLIGAN
William P. Hulligan, Director
/s/ EFSTATHIOS A. KOUNINIS
Efstathios A. Kouninis, Corporate /s/ WILLIAM M. R. MAPEL
Controller (Principal Accounting Officer) William M. R. Mapel, Director
Page 87 of 88
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<CASH> 3,975
<SECURITIES> 0
<RECEIVABLES> 27,416
<ALLOWANCES> 557
<INVENTORY> 878
<CURRENT-ASSETS> 41,123
<PP&E> 15,504
<DEPRECIATION> 8,152
<TOTAL-ASSETS> 85,225
<CURRENT-LIABILITIES> 19,969
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 57,546
<TOTAL-LIABILITY-AND-EQUITY> 85,225
<SALES> 130,663
<TOTAL-REVENUES> 129,043
<CGS> 106,454
<TOTAL-COSTS> 124,682
<OTHER-EXPENSES> 523
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 112
<INCOME-PRETAX> 3,726
<INCOME-TAX> 1,865
<INCOME-CONTINUING> 1,861
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,861
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
