NSC CORPORATION
49 Danton Drive
Methuen, Massachusetts 01844
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1998
----------------------
To the Stockholders of
NSC Corporation:
The Annual Meeting of Stockholders of NSC Corporation (the "Company") will be
held at the Company's Headquarters, located at 49 Danton Drive, Methuen,
Massachusetts 01844 on Thursday, May 14, 1998 at 11:00 a.m., local time for the
purpose of (i) electing five directors to serve for the ensuing year, and (ii)
transacting such other business as may properly come before the meeting or any
adjournment thereof.
Only stockholders of record at the close of business on March 31, 1998 will be
entitled to vote at the meeting and any adjournment thereof. A list of such
stockholders will be available at the time and place of the meeting and, during
the ten days prior to the meeting, at the Company's principal office.
By Order of the Board of Directors
Efstathios A. Kouninis
Vice President of Finance, Corporate Controller,
Treasurer and Secretary
Methuen Massachusetts
April 14, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU DO NOT EXPECT TO ATTEND,
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED FORM OF PROXY IN THE ENCLOSED
PREPAID ENVELOPE AS PROMPTLY AS POSSIBLE.
<PAGE>
TABLE OF CONTENTS
Page
VOTING 1
ELECTION OF DIRECTORS 2
Information Concerning the Nominees 2
Committees of the Board of Directors and Meetings Held 4
Directors' Fees 4
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF 5
Security Ownership of the Company 5
Security Ownership of Waste Management 7
EXECUTIVE COMPENSATION 8
Summary of Cash and Certain Other Compensation 8
Option Exercises and Holdings 9
Stock Options Granted in Last Fiscal Year 9
Employment Agreements 9
Compensation Committee Interlocks and Insider Participation 10
Board Compensation Committee Report 11
Performance Graph 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 13
Other 13
INDEPENDENT AUDITORS 14
STOCKHOLDER PROPOSALS 14
OTHER MATTERS 14
<PAGE>
NSC CORPORATION
49 Danton Drive
Methuen, Massachusetts 01844
----------------------
PROXY STATEMENT FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1998
----------------------
NSC Corporation (the "Company") is mailing this Proxy Statement to the
stockholders of the Company in connection with the solicitation of proxies by
the Company's Board of Directors. These proxies will be used at the Annual
Meeting of Stockholders to be held at 11:00 a.m. on Thursday, May 14, 1998 at
the Company's headquarters, located at 49 Danton Drive, Methuen, Massachusetts
01844 and at any adjournment thereof (the "Annual Meeting").
If a stockholder properly executes and returns the enclosed form of proxy, it
will be voted according to his or her instructions. If no instructions are
given, it will be voted for the election as directors of the five nominees named
below and in the discretion of the proxies with respect to any other matter that
may come before the meeting. Any proxy may be revoked by giving notice of
revocation to the Company in writing or in open meeting before the proxy is
exercised. No appraisal rights exist for any action proposed to be taken at the
Annual Meeting.
The Company will pay the expenses of soliciting proxies, including the charges
and expenses of brokers, nominees, fiduciaries and custodians incurred in
sending proxy materials to principals and obtaining their instructions. In
addition to the use of the mail, proxies may be solicited in person or by
telephone or telegraph. Directors, officers and regular employees of the Company
may solicit proxies without additional compensation.
This Proxy Statement and the accompanying form of proxy are being mailed to
stockholders on or about April 14, 1998.
VOTING
The Board of Directors has fixed the close of business on March 31, 1998 as the
record date (the "Record Date") for determining stockholders entitled to notice
of and to vote at the Annual Meeting. On the Record Date, there were outstanding
9,971,175 shares of the Company's Common Stock, $0.01 par value (the "Common
Stock"), all of one class and all of which are entitled to be voted at the
Annual Meeting. On the Record Date, Rust International, Inc. ("Rust") and Rust
Remedial Services Holding Company, Inc. ("Rust Holding"), affiliates of Waste
Management, Inc. ("Waste Management"), were the combined owners of record of
5,380,670, or approximately 54%, of the issued and outstanding shares of Common
Stock. See "Election of Directors." Holders of issued and outstanding shares of
Common Stock are entitled to one vote for each share held by them.
At the Annual Meeting, the results of stockholder voting will be tabulated by
the inspector of elections appointed for the Annual Meeting. Under Delaware law
and the Company's Certificate of Incorporation and By-laws, properly executed
proxies either marked "abstain" or held in "street name" by brokers that are not
voted on one or more particular proposals (if otherwise voted on at least one
proposal) will be counted for purposes of determining whether a quorum has been
achieved at the Annual Meeting but will not be treated as either a vote for or a
vote against any of the proposals to which such abstention or broker non-vote
applies.
1
<PAGE>
ELECTION OF DIRECTORS
Information Concerning the Nominees
Five directors will be elected at the Annual Meeting. Each director elected at
the Annual Meeting will hold office until the next Annual Meeting and until his
successor is duly elected and qualified, or until earlier death, resignation or
removal from office. The Company's management intends that the shares
represented by the enclosed proxy will be voted, unless the stockholder
executing the proxy otherwise instructs, for the election to the Board of
Directors of each of the five nominees below.
On May 4, 1993 the Company purchased substantially all the assets of the
asbestos-abatement division of The Brand Companies, Inc. ("Brand") pursuant to a
Purchase Agreement, dated as of December 23, 1992 as amended, by and among the
Company, NSC Industrial Services Corp., OHM, Brand and Waste Management that
resulted in each of OHM and Rust owning approximately 40% of the Company's
outstanding Common Stock. On March 6, 1998 OHM completed a special pro rata
distribution (the "Special Distribution") in which it distributed to its
shareholders its shares of the Company's Common Stock. The Company believes that
a wholly owned subsidiary of Rust was the owner of approximately 35% of the
outstanding OHM common stock on the record date for the Special Distribution. As
a result of the Special Distribution, Waste Management and its affiliates
beneficially own approximately 54% of the outstanding Common Stock of the
Company. Waste Management and its affiliates have informed the Company that they
intend to vote all the shares of Common Stock owned by them (collectively,
approximately 54% of the outstanding Common Stock) in favor of the election of
the nominees named below.
The Company has no reason to believe that any of such nominees will be unable,
if elected, to serve as a director. However, if such an event should occur, the
Company's management intends that the shares represented by the enclosed proxy
will be voted for the remainder of the nominees, and for such substitute nominee
or nominees as may be selected by the Company's current Board of Directors.
All of the nominees for director named below are currently serving as directors
of the Company for terms expiring at the Annual Meeting. Ms. Pamela K. M. Beall
and Mr. Robert J. Blackwell will not stand for re-election.
<TABLE>
<CAPTION>
Positions and Other
Relationships with the Company
Name Age and Business Experience
---- --- ------------------------------
<S> <C> <C>
Eugene L. Barnett 69 Director. Mr. Barnett is retired and was Vice President of Pittway
Corp., a diversified conglomerate, from 1976 to 1992. He was formerly
Chairman and Chief Executive Officer of Brand from 1976 through
February 1991. Mr. Barnett is a Director of Aptar Group, Inc. and
Pittway Corp.
Victor J. Barnhart 55 Director. Mr. Barnhart has been Chairman and Chief Executive Officer of
the Company since December 5, 1996. Prior to joining the Company, Mr.
Barnhart was the President of Integrated Environmental Services - Waste
Management since December 1995 and President of Rust Industrial
Services, Inc., a subsidiary of Rust since May 1993. Prior to that
time, he was the Chief Executive Officer of Brand from March 1991 to
May 1993. Mr. Barnhart also served as President of Rust Remedial
Services (RRS) from June 1994 to May 1995. RRS was sold to OHM
Corporation in May of 1995.
Herbert A. Getz 42 Director. Mr. Getz has been Senior Vice President and General Counsel
of Waste Management since May 1995 and before that Vice President and
General Counsel of Waste Management since August 1992 and Secretary of
Waste Management since January 1988. Mr. Getz also served as the Vice
President, General Counsel and Secretary
2
<PAGE>
of Wheelabrator Technologies, Inc. from November 1990 to May 1993. In
addition, Mr. Getz had been Vice President and Secretary of Rust from
December 1992 until May 1994.
William P. Hulligan 54 Director. Mr. Hulligan served as Vice President of Waste Management
from February 1997 until his retirement in November 1997 and now serves
as a consultant to Waste Management. Prior to this position, he was
Executive Vice President of Waste Management - North America from
January 1996, President of Waste Management - Midwest from March 1993
and President of Waste Management - East from September 1992.
William M. R. Mapel 66 Director. Mr. Mapel is a private investor and was formerly a Senior
Vice President of Citibank, N.A. from 1969 to 1988, where he was
employed for more than 30 years. Mr. Mapel is a Director of Brundage,
Churchill Capital Partners, Galey & Lord, Atlantic Salmon Federation,
Quebec-Labrador Foundation and USLIFE Income Fund, Inc.
</TABLE>
3
<PAGE>
Committees of the Board of Directors and Meetings Held
During 1997, the Board of Directors of the Company held a total of five
meetings.
Messrs. Barnhart (Chairman), Blackwell and Hulligan are currently members of the
Executive Committee, the function of which is to exercise, when the full Board
is not in session, and except as otherwise may be provided by law, all of the
powers and authority of the Board of Directors in the management of the business
and affairs of the Company. The Executive Committee did not meet during 1997.
Messrs. Mapel (Chairman) and Barnett are members of the Stock Option Committee,
the primary function of which is to administer the Company's 1990 Stock Option
Plan and approve awards of stock options made thereunder. The Stock Option
Committee met three times during 1997.
Messrs. Getz (Chairman), Blackwell and Mapel are currently members of the
Compensation Committee, the primary function of which is to review and approve
salaries and other benefits for executive officers of the Company and to make
recommendations to the Board of Directors with respect to the adoption of
employee benefit programs. The Compensation Committee met two times during 1997.
The Company has a standing Audit Committee, the primary function of which is to
oversee the accounting and auditing affairs of the Company. Mr. Barnett
(Chairman), Ms. Beall and Mr. Hulligan currently serve as members of the Audit
Committee. The Audit Committee met one time during 1997.
No director attended less than 75% of Board and applicable committee meetings.
The Company has no standing nominating committee or committee performing similar
functions.
Directors' Fees
Directors of the Company who are not employees of the Company or Waste
Management or their affiliates receive $22,000 per annum.
4
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Security Ownership of the Company
The Company's Common Stock trades on The Nasdaq Stock Market under the symbol
"NSCC" and is the Company's only outstanding class of voting securities. The
following table sets forth certain information as of March 17, 1998, except as
otherwise indicated, with respect to the beneficial ownership of the Company's
Common Stock (i) by holders of 5% or greater, (ii) each director of the Company,
(iii) each executive officer identified under the caption "Executive
Compensation -- Summary of Cash and Certain Other Compensation -- Summary
Compensation Table," and (iv) by all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
Amount and
Name of Nature of
Beneficial Beneficial Percentage
Owner (1) Ownership (2) of Class
--------- ------------- --------
<S> <C> <C>
Waste Management, Inc. 5,380,670 53.97%
3003 Butterfield Road
Oakbrook, IL 60521
FMR Corp. (3) 550,400 5.52%
82 Devonshire Street
Boston, MA 02109-3614
Dimensional Fund Advisors, Inc. (4) 518,300 5.20%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Eugene L. Barnett (5) 10,000 *
Victor J. Barnhart 5,000 *
Herbert A. Getz 500 *
William P. Hulligan 0 -
William M. R. Mapel (5) 11,000 *
Darryl G. Schimeck (5) 34,500 *
Efstathios A. Kouninis (5) 6,875 *
All directors and executive officers as a
group (7 persons) (6) 67,875 *
</TABLE>
* Less than 1%
(1) Except as otherwise indicated, the address of each stockholder is c/o NSC
Corporation, 49 Danton Drive, Methuen, Massachusetts 01844.
(2) Information with respect to beneficial ownership is based on information
furnished to the Company by each stockholder included in this table. Except
as indicated in the notes to the table, each stockholder included in the
table has sole voting and investment power with respect to the shares shown
to be beneficially owned.
(3) According to Amendment No. 1 to Schedule 13G, dated February 14, 1998, FMR
Corp. has sole or shared voting power as to none of such shares of Common
Stock and sole investment power as to 550,400 shares of Common Stock.
(4) According to Schedule 13G, dated February 6, 1998, Dimensional Fund
Advisors, Inc. ("Dimensional") has sole voting power with respect to
351,900 shares of Common Stock and sole investment power with respect to
518,300 shares of Common Stock. Dimensional, a registered investment
advisor, is deemed to have beneficial
5
<PAGE>
ownership of 418,300 shares of Common Stock as of December 31, 1997, all of
which shares are held in portfolios of DFA Investment Dimensions Group,
Inc., a registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group Trust
and DFA Participation Group Trust, investment vehicles for qualified
employee benefit plans, all of which Dimensional serves as investment
advisor. Dimensional disclaims beneficial ownership of all such shares.
(5) Assumes the exercise of options, presently exercisable or exercisable
within 60 days, to purchase up to 10,000, 10,000, 32,500 and 6,875 shares
of Common Stock by Messrs. Barnett, Mapel, Schimeck and Kouninis,
respectively, granted pursuant to the Company's 1990 Stock Option Plan.
(6) Assumes the exercise of options, presently exercisable or exercisable
within 60 days, to purchase up to 59,375 shares.
6
<PAGE>
Security Ownership of Waste Management
The following table sets forth certain information as of March 17, 1998, except
as otherwise noted, with respect to the beneficial ownership of Waste Management
common stock by (i) each director of the Company, (ii) each executive officer
identified under the caption "Executive Compensation -- Summary of Cash and
Certain Other Compensation -- Summary Compensation Table," and (iii) by all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and
Name of Nature of
Beneficial Beneficial Percentage
Owner (1) Ownership (2) of Class
--------- ------------- --------
<S> <C> <C>
Eugene L. Barnett 0 -
Victor J. Barnhart (3) 47,998 *
Herbert A. Getz (4) 264,921 *
William P. Hulligan (5) 261,243 *
William M. R. Mapel 0 -
Darryl G. Schimeck (6) 32 *
Efstathios A. Kouninis 0 -
All directors and executive officers as a
group (7 persons) (7) 574,194 *
</TABLE>
* Less than 1%
(1) The address of each stockholder is c/o NSC Corporation, 49 Danton Drive,
Methuen, Massachusetts 01844.
(2) Information with respect to beneficial ownership is based on information
furnished to the Company by each stockholder included in this table. Except
as indicated in the notes to the table, each stockholder included in the
table has sole voting and investment power with respect to the shares shown
to be beneficially owned.
(3) Assumes the exercise of options, presently exercisable or exercisable
within 60 days, to purchase 47,728 shares. Includes 270 shares held under
the Waste Management Profit Sharing and Savings Plan.
(4) Assumes the exercise of options, presently exercisable or exercisable
within 60 days, to purchase 182,762 shares, but does not include 240 shares
held by Mr. Getz's wife and 165 shares held on behalf of one of his
children as to which he disclaims beneficial ownership. Includes 2,857
shares held under the Waste Management Profit Sharing and Savings Plan.
(5) Assumes the exercise of options, presently exercisable or exercisable
within 60 days, to purchase 218,609 shares. Includes 13,982 and 25,737
shares held under the Waste Management Retirement and Non-qualified
Retirement Savings Plans, respectively.
(6) Consists of 32 shares held under the Waste Management Profit Sharing and
Savings Plan.
(7) Assumes the exercise of options, presently exercisable or exercisable
within 60 days, to purchase 449,099 shares.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ended December 31, 1997, 1996,
and 1995, the cash compensation paid by the Company and its subsidiaries, as
well as certain other compensation paid or accrued for those years, to each of
the most highly compensated executive officers of the Company, including the
Chief Executive Officer of the Company, in all capacities in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term
Compensation
Securities All Other
Name and Annual Compensation Underlying Compensation
Principal Position Year Salary ($) Bonus ($) (1) Options (#) ($) (5)
------------------ ---- ---------- ------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Victor J. Barnhart 1997 248,093 - - 9,526
Chairman of the Board and 1996 - - 250,000 (2) -
Chief Executive Officer
Darryl G. Schimeck 1997 180,003 15,000 - -
President and Chief Operating 1996 137,954 79,519 100,000 (3) 0,340
Officer 1995 124,432 49,773 - 4,451
Efstathios A. Kouninis 1997 99,429 37,163 57,500 (3) -
Vice President of Finance, 1996 87,464 45,000 12,500 (3) -
Corporate Controller, Treasurer
and Secretary
J. Drennan Lowell 1997 106,258 - - 2,200
Former Vice President, Chief 1996 170,780 98,717 100,000 (4) 9,600
Financial Officer, Treasurer and 1995 149,354 60,000 - 8,861
Secretary
</TABLE>
- ----------
(1) Messrs. Schimeck and Kouninis received incentive payments for continued
employment, per the terms of their respective employment agreements, of
$15,000 and $7,500, respectively, for 1997 and $20,000 and $15,000,
respectively, for 1996. Messrs. Schimeck and Lowell received the full 1996
bonus and half of the 1995 bonus amounts deferred for 1996, including one
year interest on this deferred amount, in 1997.
(2) The options granted to Mr. Barnhart vest after December 5, 1999 and are
exercisable at the fair market value of the underlying securities at the
date of the grant.
(3) The options granted to Messrs. Schimeck and Kouninis vest proportionately
over a four year period and are exercisable at the fair market value of the
underlying securities at the date of the grant.
(4) Mr. Lowell resigned his employment with the Company on August 7, 1997. The
options granted to Mr. Lowell were forfeited pursuant to the terms of a
Release Agreement executed in February 1998.
(5) For 1995, 1996 and 1997, respectively, "All Other Compensation" includes
$44,451 for relocation expenses reimbursed to Mr. Schimeck, $20,340 for the
tax gross-up associated with those relocation expenses and a $25,000
payment to Mr. Lowell in connection with his termination of employment. The
remaining amounts in "All Other Compensation" represent vehicle allowances.
8
<PAGE>
Option Exercises and Holdings
The following table sets forth information with respect to the named executives
concerning the exercise of options during the last fiscal year and unexercised
options held as of the end of the fiscal year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised in the
Value Realized Underlying Unexercised Money
Shares (Market Price at Options at FY-End (#) Options at FY-End ($)
Acquired on Exercise Less ---------------------------- -------------------------
Exercise (#) Exercise Price) Exercisable Unexercisable Exercisable Unexercisable
----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Victor J. Barnhart - - - 250,000 $ - $ 187,500
Darryl G. Schimeck - - 32,500 67,500 24,375 50,625
Efstathios A. Kouninis - - 6,875 63,125 5,156 25,898
</TABLE>
Stock Options Granted in Last Fiscal Year
The following table sets forth stock options granted by the Company to the named
executive officer during 1997:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
----------------------------------------------------------------------------- Value at Assumed
Number of Shares % of Total Options Annual Rates of Stock
of Common Stock Granted to Exercise or Price Appreciation
Underlying Employees in Base Price Expiration Option Term
Options Granted (#) Fiscal Year ($/Share) Date 5% 10%
------------------- ----------- ---------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Efstathios A. Kouninis 2,500 4% $ 2.44 2/20/07 $ 3,836 $ 9,722
55,000 96% 2.38 12/10/07 82,324 208,621
</TABLE>
Employment Agreements
The Company entered into an Employment Agreement with Victor J. Barnhart dated
March 12, 1997 in order to secure his services as Chairman and Chief Executive
Officer. This Agreement provides the Company with the benefit of certain
non-competition provisions, and it assures Mr. Barnhart that his base salary of
$250,000 will not be reduced during his employment. If the Company terminates
Mr. Barnhart without cause, as defined in the Agreement, prior to December 31,
1999, he is entitled to receive, as severance, his salary until the later of
that date or one year following his termination. If he is terminated without
cause after that date, he is entitled to receive his salary for one year
following the termination. If a change of control of the Company, as defined in
the Agreement, occurs and Mr. Barnhart is then terminated without cause or
voluntarily terminates his employment after a reduction in his duties or
compensation or a request that he relocate, he is entitled to the
above-described severance benefits.
The Company entered into Employment Security Agreements with each of Messrs.
Schimeck and Kouninis dated October 2, 1996. These agreements provide the
Company with the benefit of certain non-competition provisions, and assure
Messrs. Schimeck and Kouninis that each of their base salaries as of the date of
execution of the agreements will not be reduced below that level during the
period ending on December 31, 1998 and October 8, 1998, respectively. The
agreements also provide that Messrs. Schimeck and Kouninis will receive
supplemental incentive payments for continued employment through 1997 and 1998
which, for Mr. Schimeck, will be the greater of 35% of his actual earned
incentive payment under applicable incentive plans or $15,000 and, for Mr.
Kouninis, a lump sum of $7,500. If the executive is terminated without cause, he
is entitled to the greater of the amount of the base salary remaining to be paid
before December 31, 1998 and October 8, 1998, respectively, or one year of base
salary.
9
<PAGE>
Compensation Committee Interlocks and Insider Participation
Messrs. Getz, Blackwell and Mapel were members of the Compensation Committee of
the Board of Directors during 1997, none of whom are officers or former officers
of the Company.
10
<PAGE>
Board Compensation Committee Report *
The primary function of the Compensation Committee is to review and approve
salaries and other benefits for executive officers of the Company and to make
recommendations to the Board of Directors with respect to the adoption of
employee benefit programs. The Compensation Committee is currently composed of
three directors, Messrs. Getz, Blackwell and Mapel, who are not executive
officers of the Company. Mr. Getz, however, is an executive officer of Waste
Management which currently, through ownership of Rust, is the owner of
approximately 54% of the issued and outstanding Common Stock of the Company and
Mr. Blackwell was an executive officer of OHM, which was the owner of 40% of the
issued and outstanding Common Stock of the Company prior to the Special
Distribution. Set forth below is a report of Messrs. Getz, Blackwell and Mapel
in their capacity as the Board's Compensation Committee addressing the Company's
compensation policies for 1997 as they affected the executive officers who, for
1997, were the Company's most highly paid executive officers.
Compensation Policies Towards Executive Officers. The majority of the
compensation received by the executive officers of the Company, as reflected in
the compensation table, consisted of a base salary, and an incentive payment for
1997 as determined under the 1994 Management Incentive Compensation Plan (the
"Incentive Plan").
The base salaries of the executive officers were generally set at levels
recommended by the Chairman and Chief Executive Officer of the Company and
approved by the Compensation Committee. Each of the executive officers had the
opportunity to earn incentive payments under the Incentive Plan based on the
achievement of certain performance goals determined by the Compensation
Committee in conjunction with the Company's annual business plan. The amount of
incentive payment is targeted at a percentage of each executive's base salary
and can be increased or decreased depending on whether the operating cash flow
and operating income of the Company meet, exceed or fall below the targeted
operating cash flow and operating income set by the Compensation Committee. In
addition, the Compensation Committee, from time to time, grants stock options to
executive officers under the Company's 1990 Stock Option Plan to reward past
performance and encourage future performance. During 1997, the Compensation
Committee made two grants of stock options to one executive officer, aggregating
57,500 shares of Common Stock, at the market price on the date of grant based on
the Compensation Committee's subjective evaluation of such executive officer's
past performance and promotion.
Mr. Barnhart. Mr. Barnhart became Chairman and Chief Executive Officer on
December 5, 1996. The Company entered into an Employment Agreement dated March
12, 1997 with Mr. Barnhart, and the Employment Agreement set his base salary of
$250,000 per year with the intention that future increases would be tied to both
the future performance of the Company and to his personal performance as
assessed by the Compensation Committee. In addition, in connection with Mr.
Barnhart's Employment Agreement, he was granted options for 250,000 shares of
Common Stock, which vest in full at the expiration of the Employment Agreement
on December 31, 1999.
Messrs. Schimeck and Kouninis. In an effort to retain the services of key
employees, the Company entered into Employment Security Agreements with Messrs.
Schimeck and Kouninis dated October 2, 1996 which included execution bonuses of
$20,000 and $15,000, respectively, and provided for certain supplemental
incentive payments.
Section 162(m) of the Internal Revenue Code of 1986, as amended, prohibits a
publicly held corporation, such as the Company, from claiming a deduction on its
federal income tax return for compensation in excess of $1,000,000 paid for a
given fiscal year to certain executives. The Compensation Committee does not
believe it is likely that the deductibility of compensation paid by the Company
will be limited by the operation of Section 162(m).
HERBERT A. GETZ
ROBERT J. BLACKWELL
WILLIAM R. MAPEL
- ----------
*Note: This report is not incorporated by reference in any prior or future
Commission filing, directly or by reference to the incorporation of the
proxy statements of the Company, unless such filing specifically
incorporates this report.
Performance Graph *
11
<PAGE>
Set forth below is a line graph comparing the yearly percentage change in the
cumulative total stockholder return on the Common Stock against the cumulative
total return for S&P Composite-500 Stock Index and a peer group of companies
selected by the Company consisting of companies in which significant amounts of
revenues are derived from the asbestos-abatement business (the "Peer Group") for
the period of five years commencing December 31, 1992 and ending December 31,
1997. The Peer Group includes American ECO Group, Inc., Foster Wheeler
Corporation, PDG Environmental, Inc., Philip Environmental, Inc. ("Philips"),
which went public February 1993, and Sevenson Environmental Services, Inc.
("Sevenson"). Allwaste, Inc. ("Allwaste"), which was included in the Peer Group
for the Performance Graph contained in the Proxy Statement for the Company's
1997 Annual Meeting, was excluded from the following Performance Graph as a
result of its purchase by Philips. Sevenson was added to the Peer Group to
replace Allwaste.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN ON
COMMON STOCK, S&P 500 AND PEER GROUP
(Market Value of $100 Invested on December 31, 1992)
[typeset representation of line chart]
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
NSC Corporation 100.00 61.22 52.20 42.68 56.10 67.07
S&P 500 100.00 110.04 111.56 152.47 186.46 244.28
Peer Group 100.00 104.18 85.48 95.83 140.76 248.96
[end line chart]
- ----------
*Note: This information is not incorporated by reference in any prior or future
Commission filing, directly or by reference to the incorporation of the
proxy statements of the Company, unless such filing specifically
incorporates this information.
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other
The Company has, from time to time, provided asbestos-abatement and related
services to OHM and its affiliates on a subcontract basis. Revenues earned from
these affiliates for such services were $237,000 for the year ended December 31,
1997. 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 earned from Rust and its affiliates for such
services were $7,000 for the year ended December 31, 1997. Rust and certain of
its affiliates also provided scaffolding, disposal, demolition, and other
related services to the Company on a subcontract basis. The costs for such
services were $770,000 for the year ended December 31, 1997. Rust also rented
demolition equipment to the Company for which it was charged $418,000 for the
year ended December 31, 1997.
13
<PAGE>
INDEPENDENT AUDITORS
Ernst & Young LLP, has been selected as the Company's independent auditors for
the fiscal year ending December 31, 1998. Ernst & Young LLP has served as the
Company's independent auditors since May 1990. A representative of Ernst & Young
LLP is expected to be present at the Annual Meeting with an opportunity to make
a statement if he desires to do so and to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Proposals for the 1999 Annual Meeting of Stockholders must be received by
December 18, 1998 to be included in the Company's proxy statement and proxy.
OTHER MATTERS
The Board of Directors knows of no other matters to be presented for action at
the forthcoming Annual Meeting. However, the proxy confers upon the persons
named therein discretionary authority to act upon any other matter that may
properly come before the meeting.
The Company will furnish a copy of its Annual Report on Form 10-K for the year
ended December 31, 1997 including financial statements and schedules thereto,
but excluding other exhibits, without charge, to any person upon written request
addressed to Efstathios A. Kouninis, Vice President of Finance, Corporate
Controller, Treasurer and Secretary, NSC Corporation, 49 Danton Drive, Methuen
Massachusetts 01844.
Efstathios A. Kouninis
Vice President of Finance, Corporate Controller,
Treasurer and Secretary
Methuen Massachusetts
April 14, 1998
14
