Document:

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                                                                    EXHIBIT 10.4

                           EMPLOYEE BENEFITS AGREEMENT

                                     BETWEEN

                        NATIONAL SERVICE INDUSTRIES, INC.

                                       AND

                               ACUITY BRANDS, INC.

                   Dated as of the 30th day of November, 2001

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                           EMPLOYEE BENEFITS AGREEMENT

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>           <C>     <C>                                                                                        <C>
ARTICLE I DEFINITIONS AND REFERENCES..........................................................................    2

     1.1      DEFINITIONS.....................................................................................    2
              (a)     Action..................................................................................    2
              (b)     Agreement...............................................................................    2
              (c)     Annual Incentive Plan...................................................................    2
              (d)     ASO Contract............................................................................    2
              (e)     Award...................................................................................    2
              (f)     Close of the Distribution Date..........................................................    2
              (g)     Code....................................................................................    3
              (h)     Conversion Formula......................................................................    3
              (i)     Corporate Office........................................................................    3
              (j)     Deferred Compensation Plans.............................................................    3
              (k)     Distribution............................................................................    3
              (l)     Distribution Agreement..................................................................    3
              (m)     Distribution Date.......................................................................    4
              (n)     ERISA...................................................................................    4
              (o)     Executive Programs......................................................................    4
              (p)     Foreign Plan............................................................................    4
              (q)     Governmental Authority..................................................................    4
              (r)     Granted Restricted Stock................................................................    4
              (s)     Group Insurance Policy..................................................................    4
              (t)     Health and Welfare Plans................................................................    5
              (u)     HMO.....................................................................................    5
              (v)     HMO Agreements..........................................................................    5
              (w)     Immediately after the Distribution Date.................................................    5
              (x)     Individual Agreement....................................................................    5
              (y)     Liabilities.............................................................................    5
              (z)     Long-Term Incentive Plan................................................................    6
              (aa)    Master Pension Trust....................................................................    6
              (bb)    Master Savings Trust....................................................................    6
              (cc)    Material Feature........................................................................    6
              (dd)    NSI Common Stock........................................................................    6
              (ee)    NSI Executive...........................................................................    7
              (ff)    NSI Group...............................................................................    7
              (gg)    Participating Company...................................................................    7
              (hh)    Person..................................................................................    7
              (ii)    Plan....................................................................................    7
              (jj)    Reimbursement Plans.....................................................................    7
              (kk)    Retained Corporate Employee.............................................................    7
              (ll)    Savings Plans...........................................................................    8
              (mm)    Spinco Business.........................................................................    8
              (nn)    Spinco Common Stock.....................................................................    8
              (oo)    Spinco Group............................................................................    8
              (pp)    Spinco Mirror Plan......................................................................    8
              (qq)    Spinco Pension Plans....................................................................    8
              (rr)    Spinco Stand-Alone Plan.................................................................    8
              (ss)    Stock Incentive Plan....................................................................    8
              (tt)    Subsidiary..............................................................................    9
              (uu)    Transferred Individual..................................................................    9
              (vv)    Transition Services Agreement...........................................................   10
</TABLE>

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                           EMPLOYEE BENEFITS AGREEMENT

<TABLE>
<S>           <C>     <C>                                                                                        <C>
              (ww)    Ungranted Restricted Stock..............................................................   10
     1.2      REFERENCES......................................................................................   11

ARTICLE II GENERAL PRINCIPLES.................................................................................   12

     2.1      ASSUMPTION OF LIABILITIES.......................................................................   12
     2.2      SPINCO GROUP PARTICIPATION IN NSI PLANS.........................................................   12
              (a)     Participation in NSI Plans..............................................................   12
              (b)     NSI's General Obligations as Plan Sponsor...............................................   12
              (c)     Spinco's General Obligations as Participating Company...................................   12
              (d)     Termination of Participating Company Status.............................................   13
     2.3      ESTABLISHMENT OR ASSUMPTION OF THE SPINCO PLANS.................................................   13
              (a)     Assumption of Spinco Stand-Alone Plans..................................................   13
              (b)     Establishment of Spinco Mirror Plans....................................................   13
     2.4      TERMS OF PARTICIPATION BY TRANSFERRED INDIVIDUALS...............................................   13

ARTICLE III DEFINED BENEFIT PLANS.............................................................................   15

     3.1      ASSUMPTION OF PENSION PLANS AND LIABILITIES.....................................................   15
              (a)     Assumption of Spinco Pension Plans and Related Liabilities..............................   15
              (b)     Transfer of Liabilities under NSI Pension Plan C........................................   15
     3.2      ESTABLISHMENT OF MIRROR PENSION TRUSTS..........................................................   15
     3.3      TRANSFER OF ASSETS FROM NSI MASTER PENSION TRUST................................................   15
              (a)     Pension Plan Asset Transfer.............................................................   15
              (b)     Transfer of Specific Assets.............................................................   16
     3.4      GOVERNMENTAL COMPLIANCE.........................................................................   16

ARTICLE IV DEFINED CONTRIBUTION PLANS.........................................................................   17

     4.1      SAVINGS PLANS...................................................................................   17
              (a)     Assumption of Spinco Savings Plans and Related Liabilities..............................   17
              (b)     Transfer of Liabilities under NSI Corporate 401(k) Plan.................................   17
              (c)     Savings Plan Trust......................................................................   17
              (d)     Transfer of Assets......................................................................   17
              (e)     Specific Stock Funds in the NSI and Spinco Savings Plans................................   18
     4.2      NON-EMPLOYER STOCK FUND PROCEDURES..............................................................   18
              (a)     Application of Procedures...............................................................   18
              (b)     Right of First Refusal and Notice Procedures............................................   19
              (c)     Procedures After Notice is Given........................................................   19

ARTICLE V HEALTH AND WELFARE PLANS............................................................................   20

     5.1      ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES...............................................   20
              (a)     Assumption by Spinco....................................................................   20
              (b)     Certain Audit Procedures with Respect to Health and Welfare Plans.......................   20
     5.2      VENDOR CONTRACTS................................................................................   21
              (a)     ASO Contracts, Group Insurance Policies, HMO Agreements, and Letters of Understanding...   21
              (b)     Payment and Effect of Change in Rates...................................................   22
     5.3      NSI SHORT-TERM DISABILITY ARRANGEMENTS..........................................................   22
     5.4      RETIREE HEALTH AND LIFE INSURANCE BENEFITS......................................................   23
     5.5      COBRA AND HIPAA.................................................................................   23
     5.6      LEAVE OF ABSENCE PROGRAMS.......................................................................   23
     5.7      POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS.....................................................   23
              (a)     Continuance of Elections, Co-Payments, and Maximum Benefits.............................   23
              (b)     Administration..........................................................................   24
              (c)     NSI Reimbursement Plans.................................................................   25
     5.8      APPLICATION OF ARTICLE V TO THE SPINCO GROUP....................................................   25
</TABLE>

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                           EMPLOYEE BENEFITS AGREEMENT

<TABLE>
<S>           <C>     <C>                                                                                        <C>
ARTICLE VI EXECUTIVE PROGRAMS.................................................................................   27

     6.1      ASSUMPTION OF OBLIGATIONS.......................................................................   27
     6.2      ANNUAL INCENTIVE AWARDS.........................................................................   27
     6.3      LONG-TERM INCENTIVE PLAN........................................................................   27
              (a)     Award 4 (for the performance period 9/1/99-8/31/02).....................................   27
              (b)     Stock Options...........................................................................   27
              (c)     Restricted Stock Awards.................................................................   28
     6.4      EMPLOYEE STOCK PURCHASE PLAN....................................................................   29
     6.5      DEFERRED COMPENSATION PLANS.....................................................................   29
              (a)     Assumption or Establishment of Spinco Deferred Compensation Plans.......................   29
              (b)     Transfer of Corporate-Owned Life Insurance..............................................   30
     6.6      SUPPLEMENTAL RETIREMENT BENEFIT PLANS...........................................................   30
     6.7      BENEFITS PROTECTION TRUST AND EXECUTIVE BENEFITS TRUST..........................................   30
     6.8      SEVERANCE PROTECTION AGREEMENTS.................................................................   30
     6.9      EMPLOYMENT AGREEMENTS...........................................................................   31
     6.10     AUTOMOBILE PROGRAM..............................................................................   31
     6.11     OTHER EXECUTIVE BENEFITS/PROGRAMS...............................................................   31
     6.12     NON-EMPLOYEE DIRECTOR BENEFITS..................................................................   31
              (a)     Non-Employee Director Deferred Stock Unit Plan..........................................   31
              (b)     Non-Employee Directors' Stock Option Plan...............................................   31

ARTICLE VII GENERAL...........................................................................................   33

     7.1      PAYMENT OF AND ACCOUNTING TREATMENT FOR EXPENSES AND BALANCE SHEET AMOUNTS......................   33
              (a)     Expenses................................................................................   33
              (b)     Balance Sheet Amounts...................................................................   33
     7.2      SHARING OF PARTICIPANT INFORMATION..............................................................   33
     7.3      RESTRICTIONS ON EXTENSION OF OPTION EXERCISE PERIODS, AMENDMENT OR MODIFICATION OF
              OPTION TERMS AND CONDITIONS.....................................................................   33
     7.4      REPORTING AND DISCLOSURE AND COMMUNICATIONS TO PARTICIPANTS.....................................   34
     7.5      PLAN AUDITS.....................................................................................   34
              (a)     Audit Rights with Respect to the Allocation or Transfer of Plan Assets..................   34
              (b)     Audit Rights With Respect to Information Provided.......................................   35
              (c)     Audits Regarding Vendor Contracts.......................................................   35
              (d)     Audit Assistance........................................................................   35
     7.6      BENEFICIARY DESIGNATIONS/RELEASE OF INFORMATION/RIGHT TO REIMBURSEMENT..........................   36
     7.7      REQUESTS FOR INTERNAL REVENUE SERVICE RULINGS AND UNITED STATES DEPARTMENT OF LABOR OPINIONS....   36
     7.8      FIDUCIARY AND RELATED MATTERS...................................................................   36
     7.9      NO THIRD-PARTY BENEFICIARIES; NON-TERMINATION OF EMPLOYMENT.....................................   36
     7.10     COLLECTIVE BARGAINING...........................................................................   37
     7.11     CONSENT OF THIRD PARTIES........................................................................   37
     7.12     FOREIGN PLANS...................................................................................   37
     7.13     EFFECT IF DISTRIBUTION DOES NOT OCCUR...........................................................   37
     7.14     RELATIONSHIP OF PARTIES.........................................................................   37
     7.15     AFFILIATES......................................................................................   38
     7.16     DISPUTE RESOLUTION..............................................................................   38
     7.17     INDEMNIFICATION.................................................................................   38
     7.18     W-2 MATTERS.....................................................................................   40
     7.19     CONFIDENTIALITY.................................................................................   40
     7.20     NOTICES.........................................................................................   40
     7.21     INTERPRETATION..................................................................................   40
     7.22     SEVERABILITY....................................................................................   40
     7.23     GOVERNING LAW/EXECUTION.........................................................................   41
</TABLE>

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                           EMPLOYEE BENEFITS AGREEMENT

                                      -iv-

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                           EMPLOYEE BENEFITS AGREEMENT

         THIS EMPLOYEE BENEFITS AGREEMENT, dated as of the 30th day of November,
2001, is by and between National Service Industries, Inc., a Delaware
corporation ("NSI" or the "Corporation"), and Acuity Brands, Inc., a Delaware
corporation ("Spinco").

         WHEREAS, NSI's Board of Directors has determined that separation from
the Corporation of substantially all of the Corporation's lighting equipment and
chemicals assets and businesses and public ownership of such assets and
businesses is in the best interests of NSI and its stockholders; and

         WHEREAS, NSI has consolidated the assets and operations of
substantially all of the lighting equipment and chemicals businesses owned by it
and its Subsidiaries into Spinco and its Subsidiaries; and

         WHEREAS, NSI intends to accomplish the separation of Spinco through a
distribution of the stock of Spinco to the stockholders of NSI that is intended
to be tax free pursuant to section 355 of the Internal Revenue Code of 1986, as
amended (the "Distribution"); and

         WHEREAS, NSI and Spinco have entered into an Agreement and Plan of
Distribution, dated as of November 30, 2001 (the "Distribution Agreement"), and
several other agreements that will govern certain matters relating to the
Distribution and the relationship of NSI and Spinco and their respective
Subsidiaries following the Distribution; and

         WHEREAS, pursuant to the Distribution Agreement, NSI and Spinco have
agreed to enter into this Agreement for the purpose of allocating assets,
liabilities, and responsibilities with respect to certain employee compensation
and benefit plans and programs between them.

         NOW, THEREFORE, in consideration of the mutual promises contained
herein and in the Distribution Agreement, the parties agree as follows:

                                      -1-

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                           EMPLOYEE BENEFITS AGREEMENT

                      ARTICLE I DEFINITIONS AND REFERENCES

1.1      DEFINITIONS

         For purposes of this Agreement, capitalized terms used (other than the
formal names of NSI Plans (as defined below)) and not otherwise defined shall
have the respective meanings assigned to them below or as assigned to them in
the Distribution Agreement (as defined above):

         (A)      ACTION

         "Action" means any demand, action, cause of action, suit, countersuit,
arbitration, inquiry, proceeding, or investigation by or before any Governmental
Authority or any arbitration or mediation tribunal, pending or threatened, known
or unknown.

         (B)      AGREEMENT

         "Agreement" means this Employee Benefits Agreement, including all the
attached Appendices.

         (C)      ANNUAL INCENTIVE PLAN

         "Annual Incentive Plan," when immediately preceded by "NSI" means the
National Service Industries, Inc. Management Compensation and Incentive Plan,
and any other short-term compensation, bonus, or incentive compensation programs
established or maintained by the NSI Group. When immediately preceded by
"Spinco," "Annual Incentive Plan" means any short-term compensation, bonus, or
incentive compensation programs to be established or maintained by Spinco
pursuant to Section 2.3.

         (D)      ASO CONTRACT

         "ASO Contract" means an administrative services contract, related prior
practice, or related understanding with a third-party administrator that
pertains to any NSI Health and Welfare Plan or any Spinco Health and Welfare
Plan.

         (E)      AWARD

         "Award" means a long-term or short-term award under a Long-Term
Incentive Plan or a Short-Term Incentive Plan or, as the context or facts may
require, any other award under another incentive or special bonus, incentive, or
award program or arrangement.

         (F)      CLOSE OF THE DISTRIBUTION DATE

         "Close of the Distribution Date" means 11:59 P.M., Eastern Time, on the
Distribution Date.

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                           EMPLOYEE BENEFITS AGREEMENT

         (G)      CODE

         "Code" means the Internal Revenue Code of 1986, as amended, or any
successor federal income tax law. Reference to a specific Code provision also
includes any proposed, temporary, or final regulation in force under that
provision.

         (H)      CONVERSION FORMULA

         "Conversion Formula" means the appropriate formula which shall be
applied in adjusting the exercise price and award size of NSI options under the
NSI Stock Incentive Plans and in determining the exercise price and number of
Spinco options under the Spinco Stock Incentive Plans. The Conversion Formula
shall be based on the closing per share prices of NSI Common Stock (with a due
bill) and Spinco Common Stock (on a when-issued basis) as traded on the New York
Stock Exchange on the Distribution Date or such other prices as jointly agreed
upon by Spinco and NSI, and shall be determined and applied in such a manner as
to maintain (1) the aggregate spread (or, if there is no such spread, the
economic value) of such options, which is the difference between the exercise
price per share of NSI Common Stock covered by the option and the price per
share of NSI Common Stock (with a due bill) immediately preceding the
Distribution, multiplied by the total number of shares covered by the option;
and (2) the ratio of the exercise price per share covered by the option to the
price per share of NSI Common Stock (with a due bill) immediately preceding the
Distribution.

         (I)      CORPORATE OFFICE

         "Corporate Office" means the corporate office of NSI, including certain
individuals employed by National Service Industries, Inc., a California
corporation and Spinco.

         (J)      DEFERRED COMPENSATION PLANS

         "Deferred Compensation Plans," when immediately preceded by "NSI" means
the National Service Industries, Inc. Supplemental Deferred Savings Plan, the
National Service Industries, Inc. Senior Management Benefit Plan, National
Service Industries, Inc. Executive Savings Plan and the National Service
Industries, Inc. Executives' Deferred Compensation Plan. When immediately
preceded by "Spinco," "Deferred Compensation Plans" means the executive deferred
compensation plans to be assumed, established or maintained by Spinco pursuant
to Section 2.3.

         (K)      DISTRIBUTION

         "Distribution" has the meaning given that term under the Distribution
Agreement.

         (L)      DISTRIBUTION AGREEMENT

         "Distribution Agreement" is defined in the preamble of this Agreement.

                                      -3-

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                           EMPLOYEE BENEFITS AGREEMENT

         (M)      DISTRIBUTION DATE

         "Distribution Date" has the meaning given that term under the
Distribution Agreement.

         (N)      ERISA

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended. Reference to a specific provision of ERISA also includes any proposed,
temporary, or final regulation in force under that provision.

         (O)      EXECUTIVE PROGRAMS

         "Executive Programs," when immediately preceded by "NSI" means the
executive benefit and nonqualified plans, programs, and arrangements
established, maintained, agreed upon, or assumed by a member of the NSI Group
for the benefit of employees and former employees of members of the NSI Group
before the Close of the Distribution Date. When immediately preceded by
"Spinco," "Executive Programs" means the executive benefit plans and programs to
be established, assumed or maintained by Spinco or a member of the Spinco Group,
including those plans and programs listed and designated as such in Appendix B.

         (P)      FOREIGN PLAN

         "Foreign Plan," when immediately preceded by "NSI," means a Plan
maintained by the NSI Group or when immediately preceded by "Spinco," a plan to
be established or which is maintained by the Spinco Group, in either case for
the benefit of employees who are compensated under a payroll which is
administered outside the 50 United States, its territories and possessions, and
the District of Columbia, including those Plans described in Appendix D.

         (Q)      GOVERNMENTAL AUTHORITY

         "Governmental Authority" means any federal, state, local, foreign, or
international court, government, department, commission, board, bureau, agency,
official, or other regulatory, administrative, or governmental authority,
including the Department of Labor, the Securities and Exchange Commission, the
Internal Revenue Service, and the Pension Benefit Guaranty Corporation.

         (R)      GRANTED RESTRICTED STOCK

         "Granted Restricted Stock" is defined in Section 6.3(c)(1).

         (S)      GROUP INSURANCE POLICY

         "Group Insurance Policy" means a group insurance policy issued in
connection with any NSI Health and Welfare Plan or any Spinco Health and Welfare
Plan, as applicable.

                                      -4-

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                           EMPLOYEE BENEFITS AGREEMENT

         (T)      HEALTH AND WELFARE PLANS

         "Health and Welfare Plans," when immediately preceded by "NSI" means
the health and welfare benefit plans, programs, and policies (including the
Reimbursement Plans) which are sponsored by NSI. When immediately preceded by
"Spinco," "Health and Welfare Plans" means the benefit plans, programs, and
policies (including the Reimbursement Plans) corresponding to those plans,
programs, and policies sponsored by NSI as of the Distribution Date, including
those plans, programs, and policies listed in Appendix C to this Agreement which
will be sponsored by a member of the Spinco Group Immediately after the
Distribution Date.

         (U)      HMO

         "HMO" means a health maintenance organization that provides benefits
under the NSI Health and Welfare Plans or the Spinco Health and Welfare Plans,
as applicable.

         (V)      HMO AGREEMENTS

         "HMO Agreements" means contracts, letter agreements, practices, and
understandings with HMOs that provide medical, dental, prescription drug, or
vision services under the NSI Health and Welfare Plans and the Spinco Health and
Welfare Plans, as applicable.

         (W)      IMMEDIATELY AFTER THE DISTRIBUTION DATE

         "Immediately after the Distribution Date" means 12:00 A.M., Eastern
Time, on the day after the Distribution Date.

         (X)      INDIVIDUAL AGREEMENT

         "Individual Agreement" means an individual contract or agreement
(whether written or unwritten) entered into between a member of the NSI Group or
a member of the Spinco Group and any employee or individual who will be an
employee of, or otherwise assigned to, the Spinco Group Immediately after the
Distribution Date that establishes the right of such individual to special
compensation or benefits, special bonuses, supplemental pension benefits, hiring
bonuses, loans, guaranteed payments, special allowances, tax equalization
payments, special expatriate compensation payments, disability benefits, or
other forms of compensation and benefits.

         (Y)      LIABILITIES

         "Liabilities" means any and all losses, claims, charges, debts,
premiums, demands, actions, costs, and expenses (including any current or future
benefit payments or other entitlements, and administrative and related costs and
expenses of any Plan, program, service or consulting agreement, or arrangement),
of any nature whatsoever, whether absolute or contingent, matured or unmatured,
liquidated or unliquidated, accrued or unaccrued, known or unknown, whether or
not imposed or determined by a court, whenever arising.

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                           EMPLOYEE BENEFITS AGREEMENT

         (Z)      LONG-TERM INCENTIVE PLAN

         "Long-Term Incentive Plan," when immediately preceded by "NSI" means
the National Service Industries, Inc. Long-Term Achievement Incentive Plan, the
National Service Industries, Inc. Long-Term Incentive Program, and any other
long-term incentive plans established or maintained by a member of the NSI
Group. When immediately preceded by "Spinco," "Long-Term Incentive Plan" means
the long-term incentive plan to be established or assumed by Spinco pursuant to
Section 2.3.

         (AA)     MASTER PENSION TRUST

         "Master Pension Trust," when immediately preceded by "NSI," means the
trust evidenced by the National Service Industries, Inc. Defined Benefit Plans
Master Trust Agreement, as amended from time to time, and currently associated
with the defined benefit plans that are sponsored by NSI or one of its
affiliates. When immediately preceded by "Spinco," "Master Pension Trust" means
the trust to be established or maintained by Spinco pursuant to Section 3.2 that
corresponds to the NSI Master Pension Trust and that will be associated with the
Spinco Pension Plans.

         (BB)     MASTER SAVINGS TRUST

         "Master Savings Trust," when immediately preceded by "NSI," means the
trust evidenced by the National Service Industries, Inc. Defined Contribution
Plans Master Trust Agreement, as amended from time to time, and currently
associated with the defined contribution plans that are sponsored by NSI or one
of its affiliates. When immediately preceded by "Spinco," "Master Savings Trust"
means the trust to be established or maintained by Spinco pursuant to Section
4.1 that corresponds to the NSI Master Savings Trust and that will be associated
with the Spinco Savings Plans.

         (CC)     MATERIAL FEATURE

         "Material Feature" means any feature of a Plan that could reasonably be
expected to be of material importance to the sponsoring employer or the
participants and beneficiaries of the Plan, which could include, depending on
the type and purpose of the particular Plan, the class or classes of employees
eligible to participate in such Plan, the nature, type, form, source, and level
of benefits provided by the employer under such Plan and the amount or level of
contributions, if any, required or permitted to be made by participants (or
their dependents or beneficiaries) to such Plan.

         (DD)     NSI COMMON STOCK

         "NSI Common Stock" has the same meaning as the term "Parent Common
Stock" under the Distribution Agreement.

                                      -6-

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                           EMPLOYEE BENEFITS AGREEMENT

         (EE)     NSI EXECUTIVE

         "NSI Executive" means an employee or former employee of a member of the
NSI Group or a member of the Spinco Group who, as of the Close of the
Distribution Date, is or was eligible to participate in or receive a benefit
under any NSI Executive Program.

         (FF)     NSI GROUP

         "NSI Group" has the same meaning as the term "Parent Group" under the
Distribution Agreement.

         (GG)     PARTICIPATING COMPANY

         "Participating Company" means any Person (other than an individual)
that is participating in a Plan sponsored by a member of the NSI Group or a
member of the Spinco Group, as the context requires.

         (HH)     PERSON

         "Person" means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a limited
liability entity, any other entity, or any Governmental Authority.

         (II)     PLAN

         "Plan," when immediately preceded by "NSI" or "Spinco," means any plan,
policy, program, payroll practice, on-going arrangement, contract, trust,
insurance policy, or other agreement or funding vehicle, whether written or
unwritten, providing benefits to employees or former employees of the NSI Group
or the Spinco Group, as applicable.

         (JJ)     REIMBURSEMENT PLANS

         "Reimbursement Plans," when immediately preceded by "NSI," means the
NSI Health Care Flexible Spending Account and the NSI Dependent Care Flexible
Spending Account, as applicable. When immediately preceded by "Spinco,"
"Reimbursement Plans" means the health care flexible spending account plan and
the dependent care flexible spending account plan to be established or
maintained by Spinco pursuant to Section 2.3 that corresponds to the
corresponding NSI Reimbursement Plans.

         (KK)     RETAINED CORPORATE EMPLOYEE

         "Retained Corporate Employee" means an employee of the Corporate Office
who, pursuant to an agreement between NSI and Spinco, is designated to remain an
employee of NSI or a member of the NSI Group after the Distribution.

                                      -7-

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                           EMPLOYEE BENEFITS AGREEMENT

         (LL)     SAVINGS PLANS

         "Savings Plans," when immediately preceded by "NSI," means the defined
contribution plans that are sponsored by a member of the NSI Group other than
the Spinco Savings Plans. When immediately preceded by "Spinco," "Savings Plans"
means the defined contribution plans listed in Appendix A to this Agreement that
will be sponsored by a member of the Spinco Group for periods immediately after
the Distribution Date.

         (MM)     SPINCO BUSINESS

         "Spinco Business" has the meaning given that term under the
Distribution Agreement.

         (NN)     SPINCO COMMON STOCK

         "Spinco Common Stock" has the meaning given that term under the
Distribution Agreement.

         (OO)     SPINCO GROUP

         "Spinco Group" has the meaning given that term under the Distribution
Agreement.

         (PP)     SPINCO MIRROR PLAN

         "Spinco Mirror Plan" means any of the Spinco Health and Welfare Plans,
and any Spinco Executive Program that will be substantially similar to an NSI
Executive Program, as set forth on Appendix B hereto.

         (QQ)     SPINCO PENSION PLANS

         "Spinco Pension Plans," means the defined benefit pension plans listed
and further defined in Appendix A to this Agreement that will be sponsored by a
member of the Spinco Group for periods immediately after the Distribution Date.

         (RR)     SPINCO STAND-ALONE PLAN

         "Spinco Stand-Alone Plan" means any Plan maintained by NSI or an
affiliate of NSI, that, no later than the Close of the Distribution Date, will
be assumed, sponsored and maintained by Spinco or a member of the Spinco Group
for the exclusive benefit of Transferred Individuals, including but not limited
to the Spinco Pension Plans set forth on Appendix A, the Spinco Savings Plans
set forth on Appendix A, and those Executive Plans set forth and designated as
Stand-Alone Plans on Appendix B hereto.

         (SS)     STOCK INCENTIVE PLAN

         "Stock Incentive Plan," when immediately preceded by "NSI," means the
National Service Industries, Inc. Long-Term Achievement Incentive Plan, the
National Service Industries, Inc. Long-Term Incentive Plan, the National Service
Industries, Inc. Non-Employee Directors

                                      -8-
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                           EMPLOYEE BENEFITS AGREEMENT

Stock Option Plan and any other stock-based incentive plan established or
maintained by a member of the NSI Group. When immediately preceded by "Spinco,"
"Stock Incentive Plan" means the stock incentive plans to be established or
assumed by Spinco pursuant to Section 2.3.

         (TT)     SUBSIDIARY

         "Subsidiary" of any Person means any corporation or other organization,
whether incorporated or unincorporated, of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect at least a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is, directly or
indirectly, owned or controlled by such Person or by any one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries; provided,
however, that no Person that is not directly or indirectly wholly owned by any
other Person shall be a Subsidiary of such other Person unless such other Person
controls, or has the right, power, or ability to control, that Person.

         (UU)     TRANSFERRED INDIVIDUAL

         "Transferred Individual" means any individual who, as of the Close of
the Distribution Date:

         (1)      is actively employed by, or on a leave of absence (including
those individuals receiving short-term disability benefits and those taking
leave pursuant to the Family and Medical Leave Act of 1993, as amended) from, a
member of the Spinco Group (or is deemed to be so employed or on leave in
accordance with an agreement between NSI and Spinco);

         (2)      is actively employed by, or on a leave of absence (including
those individuals receiving short-term disability benefits and those taking
leave pursuant to the Family and Medical Leave Act of 1993, as amended) from,
the Corporate Office, unless such individual is a Retained Corporate Employee;
or

         (3)      is not actively employed by, nor on a leave of absence
(including those individuals receiving short-term disability benefits and those
taking leave pursuant to the Family and Medical Leave Act of 1993, as amended)
from, NSI or a member of the NSI Group, or Spinco or a member of the Spinco
Group, and:

                  (A)      whose most recent (through the Close of the
         Distribution Date) active employment with NSI or a past or present
         affiliate of NSI was with a member of the Spinco Group or the Spinco
         Business, or the predecessors of such business, or was with the
         Corporate Office; or

                  (B)      who otherwise is identified pursuant to a methodology
         approved by NSI and Spinco, which methodology shall be consistent with
         the intent of the parties that former employees of NSI or a past or
         present affiliate of NSI and such other individuals who performed
         services for NSI (including non-employees) will only be aligned with

                                      -9-

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                           EMPLOYEE BENEFITS AGREEMENT

         Spinco if they provided services to the Spinco Group or Spinco
         Business, and, for such purposes, aligning former employees of the
         Corporate Office with Spinco.

         An alternate payee under a qualified domestic relations order (within
the meaning of Code ss. 414(p) and ERISA ss. 206(d)), alternate recipient under
a qualified medical child support order (within the meaning of ERISA ss.
609(a)), beneficiary, or covered dependent, in each case, of an employee or
former employee described in (1), (2) or (3) above shall also be a Transferred
Individual with respect to the interest of such alternate payee, alternate
recipient, beneficiary, or covered dependent in that employee's or former
employee's benefit under the applicable Plans. Such an alternate payee,
alternate recipient, beneficiary, or covered dependent shall not otherwise be
considered a Transferred Individual with respect to his or her own benefits
under any applicable Plans, unless he or she is a Transferred Individual by
virtue of either of subparagraphs (1), (2) or (3) above. In addition, NSI and
Spinco may agree to designate any other individuals, or group of individuals, as
Transferred Individuals.

         Subject to the other provisions of this definition, an individual may
be a Transferred Individual pursuant to this definition regardless of whether
such individual is, as of the Distribution Date, alive, actively employed, on a
temporary leave of absence from active employment, on layoff, terminated from
employment, retired or on any other type of employment, post-employment, or
independent contractor status relative to NSI or Spinco or to an NSI or Spinco
Plan. Transferred Individual includes any individual who is on an international
assignment whether paid on a U.S. payroll or a payroll outside the U.S. if such
individual otherwise falls within any of the above categories.

         Notwithstanding anything to the contrary in this definition, the term
Transferred Individual under this Agreement shall not include any individual who
was otherwise directly transferred from former employment with a member of the
NSI Group to employment with any other Person, whether by sale or transfer of
the assets and liabilities or stock of a business or otherwise, unless such
individual has been re-employed as an active employee of a member of the NSI
Group subsequent to such event and prior to the Close of the Distribution Date.

         Nothing contained in this Agreement shall permit, or be construed or
interpreted to permit, any non-employee of NSI or Spinco to participate, at any
time, in any Plan of NSI or Spinco.

         (VV)     TRANSITION SERVICES AGREEMENT

         "Transition Services Agreement" means the Transition Services Agreement
entered into by NSI and Spinco governing certain matters related to the
relationship of the parties after the Distribution.

         (WW)     UNGRANTED RESTRICTED STOCK

         "Ungranted Restricted Stock" is defined in Section 6.3(c)(1).

                                      -10-

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                           EMPLOYEE BENEFITS AGREEMENT

         1.2      REFERENCES

         Unless the context clearly indicates otherwise, reference to a
particular Article, Section, subsection or paragraph means the Article, Section,
subsection or paragraph so delineated in this Agreement.

                                      -11-

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                           EMPLOYEE BENEFITS AGREEMENT

                          ARTICLE II GENERAL PRINCIPLES

2.1      ASSUMPTION OF LIABILITIES

         Except for each Liability that is expressly retained in writing by NSI
or excluded in writing by NSI from those being assumed by Spinco and unless
otherwise provided for elsewhere in this Agreement, Spinco hereby assumes and
agrees to pay, perform, fulfill, and discharge, in accordance with their
respective terms and conditions, all of the following (regardless of when or
where such Liabilities arose or arise or were or are incurred): (i) all
Liabilities to or relating to Transferred Individuals arising out of or
resulting from employment by, or the performance of services for, a member of
the NSI Group before becoming Transferred Individuals and thereafter (including
Liabilities under NSI Plans and Spinco Plans), (ii) all other Liabilities to or
relating to Transferred Individuals, and their dependents and beneficiaries, to
the extent relating to, arising out of or resulting from future, present, or
former employment with, or the provision of services for, a member of the Spinco
Group or the Spinco Business (including Liabilities under NSI Plans and Spinco
Plans), (iii) all Liabilities under any Individual Agreements relating to
Transferred Individuals, and (iv) all other Liabilities relating to, arising out
of, or resulting from obligations, liabilities, and responsibilities expressly
assumed or retained by a member of the Spinco Group or a Spinco Plan pursuant to
this Agreement.

2.2      SPINCO GROUP PARTICIPATION IN NSI PLANS

         (A)      PARTICIPATION IN NSI PLANS

         Subject to the terms and conditions of this Agreement, each member of
the Spinco Group that is, as of the date of this Agreement, a Participating
Company in any of the NSI Plans shall continue as such through the Close of the
Distribution Date unless, for periods before the Distribution Date, the parties
mutually agree otherwise. Effective as of any date before the Distribution Date,
a member of the Spinco Group not described in the preceding sentence may, at its
request and with the consent of NSI (which consent shall not be unreasonably
withheld), become a Participating Company in any or all of the NSI Plans in
which Transferred Individuals participate.

         (B)      NSI'S GENERAL OBLIGATIONS AS PLAN SPONSOR

         NSI shall continue through the Close of the Distribution Date to
administer, or cause to be administered, in accordance with their terms and
applicable law, the NSI Plans and NSI (or its designee) shall have the sole
discretion and authority to interpret the NSI Plans through such date and during
any subsequent period.

         (C)      SPINCO'S GENERAL OBLIGATIONS AS PARTICIPATING COMPANY

         Spinco shall perform with respect to its participation in the NSI
Plans, and shall cause each other member of the Spinco Group that is a
Participating Company in any NSI Plan to perform the duties of a Participating
Company as set forth in such Plans, and any written or oral procedures adopted
pursuant thereto, including: (i) assisting in the administration of claims, to

                                      -12-

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                           EMPLOYEE BENEFITS AGREEMENT

the extent requested by the claims administrator or plan administrator of the
applicable NSI Plan, (ii) cooperating fully with NSI Plan auditors, benefit
personnel and benefit vendors, (iii) preserving the confidentiality of all
financial and business arrangements NSI has or may have with any vendors, claims
administrators, trustees or any other entity or individual with whom NSI has
entered into an agreement relating to the NSI Plans, and (iv) preserving the
confidentiality of participant health information (including health information
in relation to leaves under the Family and Medical Leave Act of 1993, as
amended).

         (D)      TERMINATION OF PARTICIPATING COMPANY STATUS

         Unless otherwise provided in this Agreement, to the extent applicable,
effective as of the Close of the Distribution Date, Spinco and each member of
the Spinco Group shall cease to be a Participating Company in any of the NSI
Plans remaining with NSI, and NSI and each member of the NSI Group shall cease
to be a Participating Company in any Plan assumed by Spinco or a member of the
Spinco Group.

2.3 ESTABLISHMENT OR ASSUMPTION OF THE SPINCO PLANS

         (A)      ASSUMPTION OF SPINCO STAND-ALONE PLANS

         Unless otherwise provided in this Agreement, effective no later than
the Close of the Distribution Date, Spinco or a member of the Spinco Group shall
assume or cause to be assumed, the Spinco Stand-Alone Plans for the benefit of
Transferred Individuals and other current, future and former employees of the
Spinco Group. Spinco and NSI shall take all action necessary to provide for such
assumption of the Spinco Stand-Alone Plans, including any necessary amendments,
and the name of the Plans shall be changed as and where appropriate.

         (B)      ESTABLISHMENT OF SPINCO MIRROR PLANS

         Unless otherwise provided in this Agreement, effective no later than
the Close of the Distribution Date, Spinco or a member of the Spinco Group shall
adopt or cause to be adopted, the Spinco Mirror Plans for the benefit of
Transferred Individuals and other current, future, and former employees of the
Spinco Group. The foregoing Spinco Mirror Plans as in effect Immediately after
the Distribution Date shall be substantially identical in all Material Features
to the corresponding NSI Plans as in effect as of the Close of the Distribution
Date.

2.4      TERMS OF PARTICIPATION BY TRANSFERRED INDIVIDUALS

         The Spinco Plans shall be, with respect to Transferred Individuals, in
all respects the successors in interest to, shall recognize all rights and
entitlements as of the Close of the Distribution Date under, and shall not
provide benefits that duplicate benefits provided by, the corresponding NSI
Plans for such Transferred Individuals. NSI and Spinco shall agree on methods
and procedures, including amending the respective Plan documents, to prevent
Transferred Individuals from receiving duplicative benefits from the NSI Plans
and the Spinco Plans. Spinco shall not permit any Spinco Plan to commence
benefit payments to Transferred Individuals until it receives written notice
from NSI regarding the date on which payments under

                                      -13-

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                           EMPLOYEE BENEFITS AGREEMENT

the corresponding NSI Plan shall cease. With respect to Transferred Individuals,
each Spinco Plan shall provide that all benefit or other elections, all
designations of beneficiaries, all service, all compensation, and all other
benefit-affecting determinations that, as of the Close of the Distribution Date,
were recognized under the corresponding NSI Plan (for periods immediately before
the Close of the Distribution Date) shall, as of Immediately after the
Distribution Date, receive full recognition, credit, and validity and be taken
into account under such Spinco Plan to the same extent as if such items
originally occurred under such Spinco Plan, except to the extent that
duplication of benefits would result. The provisions of this Agreement for the
transfer of assets, if any, from certain trusts relating to NSI Plans (including
Foreign Plans) to the corresponding trusts relating to Spinco Plans (including
Foreign Plans) are based upon the understanding and agreement of the parties
that each such Spinco Plan will assume all Liabilities of the Transferred
Individuals and corresponding NSI Plan to or relating to Transferred
Individuals, as provided for herein. If there are any legal or other
authoritative reasons that any such Liabilities are not effectively assumed by
the appropriate Spinco Plan, then the amount of assets transferred to the trust
relating to such Spinco Plan from the trust relating to the corresponding NSI
Plan shall be recomputed, ab initio, as set forth in this Agreement but taking
into account the retention of any such Liabilities by such NSI Plan, and assets
shall be transferred by the trust relating to such Spinco Plan to the trust
relating to such NSI Plan so as to place each such trust in the position it
would have been in, had the initial asset transfer been made in accordance with
such recomputed amount of transferred Liabilities and assets.

                                      -14-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

                       ARTICLE III DEFINED BENEFIT PLANS

3.1      ASSUMPTION OF PENSION PLANS AND LIABILITIES

         (A)      ASSUMPTION OF SPINCO PENSION PLANS AND RELATED LIABILITIES

         Effective no later than the Close of the Distribution Date, Spinco or a
member of the Spinco Group shall take all actions necessary to become the plan
sponsor of the Spinco Pension Plans and shall be responsible for all Liabilities
relating to the Spinco Pension Plans, subject to the transfer of related assets
as provided in Section 3.3 below.

         (B)      TRANSFER OF LIABILITIES UNDER NSI PENSION PLAN C

         Effective no later than the Close of the Distribution Date: (i) all
Liabilities to or relating to Retained Corporate Employees under the National
Service Industries Pension Plan C ("Pension Plan C") shall cease to be
Liabilities of Pension Plan C and shall be assumed in full and in all respects
by one or more NSI Pension Plans; and (ii) to the extent legally required, there
shall be transferred from the NSI Master Pension Trust account for Pension Plan
C to one or more NSI Pension Plans, an amount of assets required to be
transferred as a result of such transfer and assumption of Liabilities as
reasonably determined by NSI, in accordance with the calculations of a party
making actuarial or similar determinations pursuant to this Agreement, and
subject to Section 414(l) of the Code, but not to include any portion of the
surplus assets, if any, credited to the NSI Master Pension Trust account for
Pension Plan C.

3.2      ESTABLISHMENT OF MIRROR PENSION TRUSTS

         Effective no later than the Close of the Distribution Date, Spinco
shall establish, or cause to be established, the Spinco Master Pension Trust
which shall be qualified under Code ss. 401(a), be exempt from taxation under
Code ss. 501(a)(1), and form part of the Spinco Pension Plans. Spinco shall,
prior to the end of the remedial amendment period for the Spinco Pension Plans,
apply for determination letters from the Internal Revenue Service that shall
provide that the Spinco Pension Plans and the Spinco Master Pension Trust
satisfy the requirements for qualification under Code sections 401(a) and
501(a), and Spinco shall take all actions necessary or appropriate to obtain
such letters.

3.3      TRANSFER OF ASSETS FROM NSI MASTER PENSION TRUST

         (A)      PENSION PLAN ASSET TRANSFER

         Subject to Section 3.1(b), it is expected that no later than the Close
of the Distribution Date, all of the assets associated with and allocated to the
accounts of each Spinco Pension Plan under the NSI Master Pension Trust shall be
transferred from the NSI Master Pension Trust to the Spinco Master Pension
Trust. If the transfer of assets does not occur prior to the Close of the
Distribution Date, NSI and Spinco shall mutually reschedule the asset transfer
date; provided, however, such rescheduled date must occur not later than
December 31, 2001.

                                      -15-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

         (B)      TRANSFER OF SPECIFIC ASSETS

         The specific assets to be transferred from the NSI Master Pension
Trust to the Spinco Master Pension Trust shall be made up of cash and marketable
assets selected by NSI consistent with the objective of enabling Spinco to
implement prospectively an investment program for the Spinco Master Pension
Trust, but in no event shall NSI or the NSI Master Pension Trust be required to
incur unreasonable transaction costs in the process of transferring assets and
subsequently re-balancing the investment portfolio held by the NSI Master
Pension Trust. Furthermore, NSI shall not be required to transfer any specific
asset or any portion of any specific fund or investment manager account, and NSI
shall not transfer any amount of Spinco Common Stock that would place the Spinco
Pension Plans in violation of the employer stock acquisition limitations of
ERISA section 407; provided, however, that NSI shall transfer interests in group
annuity contracts held by the NSI Master Pension Trust to the extent such group
annuity contracts (in whole or in part, as the case may be) specifically cover
the accrued pension benefits of Transferred Individuals. In transferring
specific assets, NSI makes no representation as to the appropriateness of the
resulting asset allocation or investment performance resulting from the specific
assets transferred. By accepting the assets transferred, Spinco acknowledges
that it and not NSI is serving as the fiduciary for the Spinco Master Pension
Trust with respect to the determination and actual transfer of assets from the
NSI Master Pension Trust and that, acting as fiduciary for the Spinco Pension
Plans, Spinco further acknowledges that it is able to change the asset
allocation as it deems appropriate at any time. Once the assets have been
transferred to and received by the Spinco Master Pension Trust, such event shall
fully and finally foreclose any issue or matter of any nature whatsoever by
Spinco, the Spinco Master Pension Trust, the Spinco Pension Plans, or any other
trust(s) related to such Plans against NSI, the NSI Master Pension Trust, the
NSI Pension Plans, or any other trust(s) related to such Plans with respect to
the condition, identity, or value of such assets and Spinco shall fully
indemnify NSI, its employees, officers, directors, and the NSI Pension Plans,
the NSI Master Pension Trust, and any trustees or fiduciaries thereof regarding
any Liability or legal or regulatory issue of any nature with respect thereto.

3.4      GOVERNMENTAL COMPLIANCE

         Notwithstanding any provision of this Agreement to the contrary, in the
event that at any time any Governmental Authority challenges or seeks to prevent
the transfer of assets and Liabilities provided for in Sections 3.1 and 3.3, NSI
and Spinco shall reach such other agreement as may be mutually satisfactory to
NSI and Spinco respecting the matters covered by this Article III.

                                      -16-

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                           EMPLOYEE BENEFITS AGREEMENT

                     ARTICLE IV DEFINED CONTRIBUTION PLANS

4.1      SAVINGS PLANS

         (A)      ASSUMPTION OF SPINCO SAVINGS PLANS AND RELATED LIABILITIES

         Effective no later than the Close of the Distribution Date, Spinco or a
member of the Spinco Group shall take all action necessary to assume and become
the plan sponsor of the Spinco Savings Plans and shall be responsible for all
Liabilities relating to the Spinco Savings Plans. The Spinco Savings Plans shall
recognize and maintain all contribution and investment elections made by
Transferred Individuals under the Spinco Savings Plans as such elections were
last in effect during the period immediately prior to the Distribution Date and
shall apply such elections under the Spinco Savings Plans for the remainder of
the period or periods for which such elections are by their terms applicable
(subject in all cases to applicable election change rights of the Transferred
Individuals).

         (B)      TRANSFER OF LIABILITIES UNDER NSI CORPORATE 401(K) PLAN

         Effective no later than the Close of the Distribution Date: (i) all
Liabilities to or relating to Retained Corporate Employees under the National
Service Industries Retirement and 401(k) Plan ("Corporate 401(k) Plan") shall
cease to be Liabilities of the Corporate 401(k) Plan and shall be assumed in
full and in all respects by one or more NSI Savings Plans; (ii) the appropriate
NSI Savings Plan(s) shall assume and be solely responsible for all ongoing
rights of or relating to these Retained Corporate Employees for future
participation (including the right to make contributions through payroll
deductions in the NSI Savings Plan(s); and (iii) the accounts of the Retained
Corporate Employees under the Corporate 401(k) Plan which are held by its
related trust shall be transferred to the account(s) of the appropriate NSI
Savings Plan under the NSI Master Savings Trust.

         (C)      SAVINGS PLAN TRUST

         Effective no later than the Close of the Distribution Date, Spinco
shall establish, or cause to be established, the Spinco Master Savings Trust
which shall be qualified under Code ss. 401(a), be exempt from taxation under
Code ss. 501(a)(1), and form part of the Spinco Savings Plans. Spinco shall,
prior to the end of the remedial amendment period for the Spinco Savings Plans,
apply for determination letters from the Internal Revenue Service that shall
provide that the Spinco Savings Plans and the Spinco Master Savings Trust
satisfy the requirements for qualification under Code sections 401(a) and
501(a), and Spinco shall take all actions necessary or appropriate to obtain
such letters.

         (D)      TRANSFER OF ASSETS

         Effective on a date selected by NSI, which is expected to be no later
than the Close of the Distribution Date (the "Savings Plans Transfer Date"), all
of the assets associated with and allocated to the accounts of each Spinco
Savings Plan under the NSI Master Savings Trust shall be transferred from the
NSI Master Savings Trust to the Spinco Master Savings Trust. If the

                                      -17-
<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

transfer of assets does not occur prior to the Close of the Distribution Date,
NSI and Spinco shall mutually reschedule the asset transfer date; provided,
however, such rescheduled date must occur not later than December 31, 2001.

         (E)      SPECIFIC STOCK FUNDS IN THE NSI AND SPINCO SAVINGS PLANS

         Effective no later than Immediately after the Distribution Date, a
Spinco Common Stock fund shall be added as an investment option to any NSI
Savings Plan or Spinco Savings Plan that has an NSI Common Stock fund. The
Spinco Common Stock fund in the NSI Savings Plans and the NSI Common Stock fund
in the Spinco Savings Plans are each referred to as a "Non-Employer Stock Fund"
with respect to the applicable Plan. Unless NSI and Spinco agree otherwise, each
Non-Employer Stock Fund shall be maintained under the respective Plan through
December 31, 2002. After such date, NSI and Spinco agree to cooperate with each
other with respect to the disposition of the stock when either party decides to
liquidate or otherwise terminate the Non-Employer Stock Fund in its Savings
Plans. In the absence of any agreement regarding such liquidation, the
liquidation of the Non-Employer Stock Fund shall be made in a ratable manner
over a period of six months. Furthermore, at any time that NSI or Spinco decides
to sell or otherwise dispose of any amount of shares in their Non-Employer Stock
Fund (other than sales or dispositions required to satisfy the investment
directions from participants, for liquidity reasons or other general operational
purposes), the selling party shall follow the procedures of Section 4.2 (except
to the extent waived in writing by an authorized representative of the other
party). The NSI Savings Plans and the Spinco Savings Plans shall each provide
that, after the Distribution Date, no new contributions may be invested in, and
no amounts may be transferred from other investment options to the Non-Employer
Stock Fund under the respective Plan; but, subject to the terms of the
respective Plan, participants may direct that amounts be transferred out of the
Non-Employer Stock Fund to other investment options. To the extent the parties
determine it is necessary to preserve the tax status of the Distribution under
the Code, the NSI Savings Plans shall provide that no earnings or dividends
under its Non-Employer Stock Fund may be reinvested in Spinco Common Stock and
the Spinco Savings Plans shall provide that no earnings or dividends under its
Non-Employer Stock Fund may be reinvested in NSI Common Stock; provided,
however, this requirement shall not prohibit such earnings and dividends from
remaining in the applicable Non-Employer Stock Fund as cash or as an amount that
is invested in any non-stock investment in such fund.

4.2      NON-EMPLOYER STOCK FUND PROCEDURES

         (A)      APPLICATION OF PROCEDURES

         Whenever NSI or Spinco (the "Selling Party") desires to sell or
otherwise dispose of any or all of the shares of stock of the other party (the
"Notice Party") in their respective Non-Employer Stock Funds (other than sales
or dispositions required to satisfy the investment directions from participants,
for liquidity reasons or other general operational purposes), the Selling Party
shall follow the procedures for selling or otherwise disposing of such stock set
forth in this Section 4.2, and the Notice Party shall be entitled to advance
notice and a right of first

                                      -18-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

refusal to purchase such stock all as provided in this Section 4.2. The
provisions of this Section 4.2 shall be subject to the provisions of
Section 7.8.

         (B)      RIGHT OF FIRST REFUSAL AND NOTICE PROCEDURES

         When the Selling Party desires to sell or otherwise dispose of any or
all of the shares of stock in their Non-Employer Stock Fund (other than sales or
dispositions required to satisfy the investment directions from participants,
for liquidity reasons or other general operational purposes), the Selling Party
shall first offer such stock for sale to the Notice Party by delivering to the
Notice Party's Chief Financial Officer, or his or her designee, a written offer
of such shares of stock for sale to the Notice Party. The offer for sale to the
Notice Party shall designate the total number of shares of stock desired to be
sold (the "Offered Shares") and any special terms of sale, if the Offered Shares
will not be sold on the market.

         (C)      PROCEDURES AFTER NOTICE IS GIVEN

         The Notice Party shall within 30 days after receipt of notice advise
the Selling Party in writing whether it desires to purchase the Offered Shares
(which notice must confirm that it agrees to purchase all of the Offered
Shares), and the terms upon which such purchase would be consummated. Failure to
so notify the Selling Party shall be deemed a rejection of the offer, and the
Selling Party after the close of the 30-day period may sell or otherwise dispose
of the Offered Shares in its sole discretion. In the event that the Notice Party
advises the Selling Party of its acceptance of the offer for sale, such
acceptance shall specify a purchase date (the "Purchase Date") that is not less
than ten nor more than 30 days after the date of such acceptance, and on which
the New York Stock Exchange is scheduled to be open for trading. The purchase
price paid for the Offered Shares and the terms and conditions of the payment
shall be negotiated and agreed upon between the Selling Party and the Notice
Party before the Purchase Date. If the Selling Party and the Notice Party have
not agreed upon the price and the terms and conditions for payment by the
Purchase Date, the Notice Party shall have the right to purchase all of the
Offered Shares for cash immediately following the close of the New York Stock
Exchange on the Purchase Date, at a price per Offered Share equal to its closing
price on the New York Stock Exchange (but with any adjustment for the size of
the block that is necessary, in the judgment of the valuation expert designated
by NSI and Spinco for this purpose, to accomplish the sale at fair market
value). If the Notice Party does not purchase and pay for all of the Offered
Shares on the Purchase Date, it shall be deemed to have completely rejected the
offer and all of the Offered Shares may be sold or otherwise disposed of by the
Selling Party in its sole discretion.

                                      -19-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

                       ARTICLE V HEALTH AND WELFARE PLANS

5.1      ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES

         (A)      ASSUMPTION BY SPINCO

         Effective no later than the Close of the Distribution Date, Spinco
shall establish or cause to be established, the Spinco Health and Welfare Plans.
Immediately after the Distribution Date, all Liabilities for or relating to
Transferred Individuals under the NSI Health and Welfare Plans, shall cease to
be Liabilities of NSI or the NSI Health and Welfare Plans and shall be assumed
by Spinco and the corresponding Spinco Health and Welfare Plans. Thus, Spinco
and the Spinco Health and Welfare Plans shall be responsible for all Liabilities
that pertain to Transferred Individuals regardless of when incurred, including
all reported claims that are unpaid, all incurred but not reported claims as of
the Close of the Distribution Date, and all claims incurred after the Close of
the Distribution Date that pertain to Transferred Individuals under the NSI
Health and Welfare Plans and the Spinco Health and Welfare Plans. Spinco shall
be required to make all payments due or payable to Transferred Individuals under
the appropriate Spinco Health and Welfare Plans for the period beginning
Immediately after the Distribution Date, including all reported claims that are
unpaid and all incurred but not reported claims as of the Close of the
Distribution Date. All treatments which have been pre-certified for or are being
provided on an on-going basis to a Transferred Individual under the NSI Health
and Welfare Plans as of the Close of the Distribution Date shall continue to be
provided without interruption under the appropriate Spinco Health and Welfare
Plan until such treatment is concluded or discontinued pursuant to applicable
plan rules and limitations, and Spinco and the Spinco Health and Welfare Plans
shall be responsible for all Liabilities relating to, arising out of, or
resulting from such pre-certified or on-going treatments as of the Close of the
Distribution Date. Notwithstanding the preceding provisions of this Section 5.1,
neither Spinco nor a Spinco Health and Welfare Plan shall assume any Liability
with respect to: (i) a claim incurred on or prior to the Close of the
Distribution Date for which NSI or an NSI Health and Welfare Plan has insurance
coverage, and (ii) any benefit claim for which NSI is responsible under Section
5.4. Furthermore, NSI shall pay to Spinco a portion of any prescription drug
rebates received by NSI under the NSI Major Medical Plan which relate to periods
prior to the Distribution Date, which portion shall be determined by the number
of Transferred Individuals compared to the total number of participants in the
NSI Major Medical Plan as of the Distribution Date.

         (B)      CERTAIN AUDIT PROCEDURES WITH RESPECT TO HEALTH AND
                  WELFARE PLANS

         At periodic intervals beginning Immediately after the Distribution
Date, NSI and Spinco shall examine their respective payments and receipts for
health and welfare coverages to ascertain whether NSI has mistakenly made or
received payments for coverages with respect to Transferred Individuals and
whether Spinco has mistakenly made or received payments for coverages with
respect to participants and beneficiaries in the NSI Health and Welfare Plans
(other than Transferred Individuals). If any such mistaken payments have been
made or received by NSI or Spinco, such mistaken payments and receipts shall
first be netted against each other by NSI and Spinco and thereafter such net
payments or net receipts shall be further netted against

                                      -20-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

the other party's net payments or net receipts. The party with the remaining
amount of mistaken payments shall transfer such amount in cash to the other
party at such time or times as agreed upon by NSI and Spinco, but not less than
semi-annually. Furthermore, at periodic intervals beginning Immediately after
the Distribution Date, NSI and Spinco shall examine the payment of benefits and
claims, and reimbursements for expenses, by their respective Health and Welfare
Plans to ascertain whether any NSI Health and Welfare Plan has mistakenly paid
claims or benefits, or reimbursed expenses, with respect to Transferred
Individuals and whether any Spinco Health and Welfare Plan has mistakenly paid
claims or benefits, or reimbursed expenses, with respect to participants and
beneficiaries in the NSI Health and Welfare Plans (other than Transferred
Individuals). If any such mistaken payments or reimbursements have been made by
any NSI or Spinco Health and Welfare Plan, such mistaken payments and
reimbursements shall be netted against the other corresponding Health and
Welfare Plan's mistaken payments and reimbursements. The Health and Welfare Plan
with the remaining amount of mistaken payments and reimbursements shall transfer
such amount in cash to the other party's corresponding Health and Welfare Plan
at such time or times as agreed upon by NSI and Spinco, but not less than
semi-annually.

5.2      VENDOR CONTRACTS

         (A)      ASO CONTRACTS, GROUP INSURANCE POLICIES, HMO AGREEMENTS, AND
                  LETTERS OF UNDERSTANDING

                  (1)      Before the Distribution Date, NSI shall, in its sole
discretion, take such steps as are necessary under each ASO Contract, Group
Insurance Policy, HMO Agreement, letter of understanding, and arrangement in
existence as of the date of this Agreement to permit Spinco to participate in
the terms and conditions of such ASO Contract, Group Insurance Policy, HMO
Agreement, letter of understanding, or arrangement from Immediately after the
Distribution Date through December 31, 2002. Alternatively, NSI shall take such
steps as are necessary to arrange for an ASO Contract, Group Insurance Policy,
HMO Agreement, letter of understanding, or arrangement covering Spinco that
mirrors substantively that covering NSI. This mirror arrangement shall apply for
all or a portion of such period, as necessary under the circumstances. NSI, in
its sole discretion, may cause one or more of its ASO Contracts, Group Insurance
Policies, HMO Agreements, letters of understanding, and arrangements into which
NSI enters after the date of this Agreement to allow Spinco to participate in
the terms and conditions thereof. Nothing contained in this Section 5.2(a) shall
preclude NSI from choosing to enter into ASO Contracts, Group Insurance
Policies, HMO Agreements, letters of understanding, or other arrangements with
new or different vendors; provided, until December 31, 2002, NSI shall give
Spinco advance notice of any decision to change or add vendors. Furthermore,
nothing contained in this paragraph (1) shall require NSI to use more than its
reasonable best efforts in complying with the provisions of the first and second
sentence of this paragraph (1).

                  (2)      NSI shall have the right to determine, and shall
promptly notify Spinco of, the manner in which Spinco's participation in the
terms and conditions of ASO Contracts, Group Insurance Policies, HMO Agreements,
letters of understanding and arrangements as set forth above shall be
effectuated; provided, however, NSI shall use its best efforts to accommodate
any

                                      -21-

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                           EMPLOYEE BENEFITS AGREEMENT

reasonable needs communicated to NSI by Spinco that relate thereto. Such terms
and conditions shall include the financial and termination provisions,
performance standards, methodologies, auditing policies, quality measures,
reporting requirements, and target claims. Spinco hereby authorizes NSI to act
on its behalf to extend to Spinco the terms and conditions of the ASO Contracts,
Group Insurance Policies, HMO Agreements, and letters of understanding and
arrangements. Spinco shall fully cooperate with NSI in such efforts, and, for
periods through December 31, 2002, Spinco shall not perform any act or fail to
take any action that would prejudice NSI's efforts and financial arrangements
under the Health and Welfare Plans (other than taking reasonable steps to enter
into replacement ASO Contracts, Group Insurance Policies, HMO Agreements, and
letters of understanding and arrangements for periods after December 31, 2002,
which steps shall not, unless the parties otherwise agree, commence publicly
prior to January 1, 2002).

         (B)      PAYMENT AND EFFECT OF CHANGE IN RATES

         NSI and Spinco shall use their reasonable best efforts to cause each of
the insurance companies, HMOs, paid provider organizations and third-party
administrators providing services and benefits under the NSI Health and Welfare
Plans and the Spinco Health and Welfare Plans to maintain the premium and/or
administrative rates based on the aggregate number of participants in the NSI
Health and Welfare Plans and the Spinco Health and Welfare Plans, from the Close
of the Distribution Date through December 31, 2001, separately rated or adjusted
for the demographics, experience or other relevant factors related to the
covered participants of NSI and Spinco, respectively. To the extent they are not
successful in such efforts, NSI and Spinco shall each bear the revised premium
or administrative rates for health and welfare benefits attributable to the
individuals covered by their respective Health and Welfare Plans. The assistance
that NSI shall provide Spinco pursuant to this subsection (b) shall be provided
subject to the terms and conditions of the Transition Services Agreement.

5.3      NSI SHORT-TERM DISABILITY ARRANGEMENTS

         Any final determinations made by NSI with respect to short-term
disability claims by Transferred Individuals prior to the Distribution Date
shall be final and binding. NSI shall transfer to Spinco, effective Immediately
after the Distribution Date, and Spinco shall assume responsibility for (i)
administering all short-term disability claims incurred by Transferred
Individuals before the Close of the Distribution Date that are administered by
NSI as of the Close of the Distribution Date, and (ii) all Liabilities under any
NSI short-term disability arrangements to Transferred Individuals as of the
Close of the Distribution Date, in the same manner, and using the same methods
and procedures, as NSI used in determining and paying such claims. Effective
Immediately after the Distribution Date, Spinco shall have sole discretionary
authority to make any necessary determinations with respect to such claims,
including entering into settlements with respect to such claims, and shall be
solely responsible for any costs, Liabilities or related expenses of any nature
whatsoever related to such claims, payments or obligations.

                                      -22-

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                           EMPLOYEE BENEFITS AGREEMENT

5.4      RETIREE HEALTH AND LIFE INSURANCE BENEFITS

         Effective immediately after the Distribution Date, Spinco shall adopt a
Spinco Plan or Plans to provide any retiree medical or life insurance benefits
that are required to be provided to Transferred Individuals. Any retiree medical
or life insurance benefits provided shall be substantially identical to the
retiree medical or life insurance benefits that would have been provided under
an NSI Plan for such individuals, subject to the right of Spinco to amend or
terminate any such retiree benefits. In the case of any individual who is not a
Transferred Individual, NSI will retain the liability for providing any retiree
medical or life insurance benefits required to be provided to such individual,
subject to the right of NSI to amend or terminate any such retiree benefits.

5.5      COBRA AND HIPAA

         Effectively Immediately after the Distribution Date, Spinco or a member
of the Spinco Group shall be responsible for administering compliance and
providing coverage in accordance with the health care continuation coverage
requirements for "group health plans" under Title X of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"), and the portability
requirements (including the requirements for issuance of certificates of
creditable coverage) under the Health Insurance Portability and Accountability
Act of 1996 with respect to all Transferred Individuals and other employees and
former employees of Spinco or a member of the Spinco Group and any beneficiaries
and dependents thereof who experience a COBRA qualifying event or loss of
coverage under the Spinco Health and Welfare Plans after the Close of the
Distribution Date. Effective Immediately after the Distribution Date, Spinco or
a member of the Spinco Group shall be responsible for filing all necessary
employee change notices with respect to these persons identified in the previous
sentence in accordance with applicable law.

5.6      LEAVE OF ABSENCE PROGRAMS

         Effective Immediately after the Distribution Date, Spinco or a member
of the Spinco Group shall assume sole responsibility for the administration and
compliance of all leaves of absences and related programs (including compliance
with the Family and Medical Leave Act of 1993, as amended) affecting Transferred
Individuals.

5.7      POST-DISTRIBUTION  TRANSITIONAL ARRANGEMENTS

         (A)      CONTINUANCE OF ELECTIONS, CO-PAYMENTS, AND MAXIMUM BENEFITS

                  (1)      Spinco shall cause the Spinco Health and Welfare
Plans to recognize and maintain all coverage and contribution elections made by
Transferred Individuals under the NSI Health and Welfare Plans, as such
elections were last in effect during the period immediately prior to the
Distribution Date, and shall apply such elections under the Spinco Health and
Welfare Plans for the remainder of the period or periods for which such
elections are by their terms applicable (subject to applicable election change
rights). NSI shall cause the claims administrator for the NSI Health and Welfare
Plans to transfer to the claims administrator for the Spinco Health and Welfare
Plan all data necessary to maintain such coverage and elections.

                                      -23-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

                  (2)      Spinco shall cause the Spinco Health and Welfare
Plans to recognize and give credit for (A) all amounts applied to deductibles,
out-of-pocket maximums, and other applicable benefit coverage limits with
respect to such expenses which have been incurred by Transferred Individuals
under the NSI Health and Welfare Plans for the remainder of the benefit limit
year in which the Distribution occurs, and (B) all benefits paid to Transferred
Individuals under the NSI Health and Welfare Plans, during and prior to the
benefit limit year in which the Distribution occurs, for purposes of determining
when such persons have reached their maximum benefits under the Spinco Health
and Welfare Plans.

                  (3)      Spinco shall recognize and cover under the Spinco
Health and Welfare Plans all eligible employee groups covered by the NSI Health
and Welfare Plans (pertaining to Transferred Individuals) as of the Close of the
Distribution Date (determined under the applicable Plan documents).

                  (4)      Spinco shall (A) provide coverage to Transferred
Individuals under the Spinco Health and Welfare Plans without the need to
undergo a physical examination or otherwise provide evidence of insurability,
and (B) recognize and maintain all irrevocable assignments, elections and
beneficiary designations made by Transferred Individuals in connection with
their life insurance coverage under the NSI Health and Welfare Plans and any
predecessor plans.

         (B)      ADMINISTRATION

                  (1)      Coordination of Benefits for Spouses and Dependents

         Effective as of the earlier of the first January 1 or the first
applicable change in status (as defined under the Spinco Health and Welfare
Plans) that occurs after the Distribution Date, Spinco shall cause the Spinco
Health and Welfare Plans to permit eligible Transferred Individuals to cover
their lawful spouses as dependents if such lawful spouses are active or retired
NSI employees (but were not otherwise covered as a dependent under the NSI
Health and Welfare Plans or other NSI Plans due to their previous status as both
employee and dependent of an NSI employee). As of the earlier of the first
January 1 or the first applicable status change (as defined under the Spinco
Health and Welfare Plans) that occurs Immediately after the Distribution Date,
NSI shall cause the NSI Health and Welfare Plans to permit eligible NSI
employees to cover their lawful spouses as dependents if such lawful spouses are
active or retired Spinco employees. All benefits provided under any such Health
and Welfare Plans to a lawful spouse or dependent of the other company's
employees shall be coordinated pursuant to the terms and conditions of the
applicable NSI and Spinco Plans.

                  (2)      Health Care Financing Administration Data Match

         Effective Immediately after the Distribution Date, Spinco shall assume
all Liabilities relating to, arising out of or resulting from claims verified by
NSI or Spinco under the Health Care Financing Administration data match reports
that relate to Transferred Individuals. Spinco and NSI shall share all
information necessary to verify Health Care Financing Administration data match
reports regarding Transferred Individuals. Spinco shall not change any employee

                                      -24-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

identification numbers assigned by NSI without notifying NSI of the change and
the new employee identification number.

         (C)      NSI REIMBURSEMENT PLANS

         To the extent any Transferred Individual contributed to an account
under the NSI Reimbursement Plans during the calendar year that includes the
Distribution Date, effective Immediately after the Distribution Date, Spinco
shall recognize any such Transferred Individual's account balance, determined as
of the Close of the Distribution Date, and Spinco shall thereafter be solely
responsible for making any and all payments relative to such account balance of
the Transferred Individual for all claims during such calendar year under the
applicable Spinco Reimbursement Plan. As provided in Section 5.7(a), all
elections by Transferred Individuals in effect immediately prior to the
Distribution Date shall continue and be recognized by Spinco, and the
Distribution alone shall not be considered an event that gives any participant
the right to change any prior election. As soon as practicable after the
Distribution Date, NSI shall calculate as of the Close of the Distribution Date
the aggregate net balance in the accounts of Transferred Individuals under the
NSI Reimbursement Plans, expressed relative to the contributions received from
such Transferred Individuals. If the contributions received from a Transferred
Individual exceed the reimbursements made to or on behalf of such Transferred
Individual, the Transferred Individual shall be deemed to have a positive
account balance. In turn, if the contributions received from a Transferred
Individual are less than the reimbursements made to or on behalf of such
Transferred Individual, the Transferred Individual shall be deemed to have a
negative account balance. If the aggregate net balance in the accounts of all
such Transferred Participants is a positive number, then NSI shall pay this
amount in cash to Spinco as soon as practicable after the Distribution Date, and
if the aggregate net balance in the accounts of all such Transferred
Participants is a negative number, then Spinco shall pay this amount in cash to
NSI as soon as practicable after the Distribution Date.

5.8      APPLICATION OF ARTICLE V TO THE SPINCO GROUP

         Any reference in this Article V to "Spinco" shall include a reference
to another member of the Spinco Group when and to the extent Spinco has caused
the other member of the Spinco Group to (a) become a party to an ASO Contract,
Group Insurance Policy, HMO Agreement, letter of understanding or arrangement
associated with a Spinco Health and Welfare Plan, (b) become a self-insured
entity for the purposes of one or more Spinco Health and Welfare Plans, (c)
assume all or a portion of the Liabilities or the administrative
responsibilities with respect to benefits which arose before the Close of the
Distribution Date under any NSI Health and Welfare Plan and which were expressly
assumed by Spinco pursuant to this Agreement, or (d) take any other action,
extend any coverage, assume any other Liability or fulfill any other
responsibility that Spinco would otherwise be required to take under the terms
of this Article V, unless it is clear from the context that the particular
reference is not intended to include another member of the Spinco Group. In all
such instances in which a reference in this Article V to "Spinco" includes a
reference to another member of the Spinco Group, Spinco shall be responsible to
NSI for ensuring that the other member of the Spinco Group complies with the
applicable terms of this Agreement and that the Transferred Individuals employed
by such member of the Spinco

                                      -25-

<PAGE>
                          EMPLOYEE BENEFITS AGREEMENT

Group shall have the same rights and entitlements to benefits under the
applicable Spinco Health and Welfare Plans that the Transferred Individual would
have had, if he or she had instead been employed by Spinco.

                                      -26-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

                          ARTICLE VI EXECUTIVE PROGRAMS

6.1      ASSUMPTION OF OBLIGATIONS

         Consistent with the principles set forth in Article II and except as
otherwise specifically provided herein, effective no later than the Close of the
Distribution Date, Spinco or a member of the Spinco Group shall become plan
sponsor of and assume all Liabilities with respect to any Executive Program that
is a Spinco Stand-Alone Plan and shall assume and be solely responsible for all
Liabilities to or relating to Transferred Individuals under all NSI Executive
Programs. Spinco shall be solely responsible for all such Liabilities,
notwithstanding any failure by Spinco to complete its obligations under this
Article.

6.2      ANNUAL INCENTIVE AWARDS

         Prior to the Distribution Date, NSI shall pay to participants
(including Transferred Individuals) any amounts earned under the Annual
Incentive Plan for the performance period ending August 31, 2001 at the time and
in the manner provided under the terms of such plan. For periods after the
Distribution Date, Spinco shall establish the Spinco Annual Incentive Plan
covering such of its active employees as it in its sole discretion deems
appropriate.

6.3      LONG-TERM INCENTIVE PLAN

         (A)      AWARD 4 (FOR THE PERFORMANCE PERIOD 9/1/99-8/31/02)

         With respect to Awards under "Award 4" of the National Service
Industries, Inc. Long-Term Achievement Incentive Plan to Transferred Individuals
who are Corporate Office employees for the performance period ending August 31,
2002, effective as of August 31, 2001, a determination shall be made by NSI of
the extent to which the Awards have been earned for the performance period as of
such date and no further amounts shall be earned by such Transferred Individuals
after that date. The amounts earned (if any) under the Awards as of August 31,
2001 shall be payable by NSI as promptly as practicable after the amounts are
determined.

         With respect to Awards under Award 4 for Transferred Individuals other
than Corporate Office employees, such Awards shall be assumed by Spinco and
shall be paid, to the extent earned, after the close of the performance period
ending on August 31, 2002, under and in accordance with the terms of the Spinco
Long-Term Incentive Plan; provided, however, that Spinco will make such
adjustments to the financial goals, targets, payments and forms of payments as
Spinco in its sole discretion deems appropriate to reflect the Distribution.

         (B)      STOCK OPTIONS

         The treatment of outstanding Awards described in this Section 6.3 shall
apply to Transferred Individuals, including Transferred Individuals who have
terminated employment or who are compensated under a payroll which is
administered outside the 50 United States, its territories and possessions, and
the District of Columbia; provided, however, if such treatment is

                                      -27-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

not legally permitted, or results in adverse consequences for NSI, any of its
affiliates or the Transferred Individual, as determined by NSI in its sole
discretion, NSI may determine, in its sole discretion, to provide for a
different treatment.

         Effective Immediately after the Distribution Date, each Award or grant
consisting of an option, regardless of the date of the grant, under an NSI Stock
Incentive Plan that is outstanding as of the Close of the Distribution Date for
all Transferred Individuals and all Spinco non-employee directors who were
previously non-employee directors of NSI shall be converted to options for
Spinco Common Stock with the same material terms and conditions under the Spinco
Stock Incentive Plan, and shall be transferred to the recordkeeper of the Spinco
Stock Incentive Plan. As soon as practicable after the Distribution Date, the
number of options and the exercise price for such options converted to options
for Spinco Common Stock shall be determined in accordance with the Conversion
Formula. Such converted Spinco stock option grants shall continue to vest and
become exercisable under the Spinco Stock Incentive Plan in accordance with the
terms of the original grant under the NSI Stock Incentive Plan. Spinco shall be
the obligor with respect to such options and shall be solely responsible for all
stock option grants and payments under the Spinco Stock Incentive Plan, with
respect to, but not limited to, recordkeeping, administrative costs and fees,
payroll taxes, plan maintenance, option exercise and related tax filings. Spinco
shall, as soon as practicable after the Distribution Date provide each
Transferred Individual with an agreement or notice relating to the Transferred
Individual's options under the Spinco Stock Incentive Plan.

         (C)      RESTRICTED STOCK AWARDS

                  (1)      Determination of Status of Restricted Stock

         Effective as of the record date for the Distribution, NSI shall
determine the extent to which shares of restricted stock awarded under an NSI
Stock Incentive Plan pursuant to a restricted stock award agreement (A) have
begun to vest as a result of an applicable stock price target having been
achieved and have been registered in the name of the holder of such restricted
stock on the books of NSI's transfer agent, but remain unvested and subject to a
substantial risk of forfeiture (the "Granted Restricted Stock"), and (B) have
not begun to vest and are not registered in the name of the holder of such
restricted stock on the books of NSI's transfer agent, because the applicable
stock price targets in the restricted stock award agreement have not been
reached (the "Ungranted Restricted Stock").

                  (2)      Treatment of Granted Restricted Stock

         All executives (including Transferred Individuals) who hold shares of
Granted Restricted Stock shall receive the distribution of shares of Spinco
Common Stock on such shares of Granted Restricted Stock. All shares of Spinco
Common Stock received with respect to such Granted Restricted Stock shall be
subject to the same restrictions, terms and conditions as apply to the Granted
Restricted Stock pursuant to the restricted stock award agreement; provided,
however, that continued employment with Spinco or a member of the Spinco Group
or NSI or a member of the NSI Group shall be considered continued employment
under the restricted stock award agreement. NSI and Spinco agree to notify the
other party when a holder of such restricted stock

                                      -28-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

terminates employment prior to the date such restricted stock is fully vested
and no longer subject to a substantial risk of forfeiture.

                  (3)      Treatment of Ungranted Restricted Stock

         All executives (including Transferred Individuals) holding shares of
Ungranted Restricted Stock shall not receive the distribution of Spinco Common
Stock on such shares of Ungranted Restricted Stock. Effective Immediately after
the Distribution Date, all Ungranted Restricted Stock for all Transferred
Individuals shall be equitably converted to restricted stock Awards for Spinco
Common Stock under the Spinco Stock Incentive Plan, subject to the same
restrictions and the same material terms and conditions as under the restricted
stock award agreement; provided, that the number of shares and the stock price
targets under the converted restricted stock award agreements shall be equitably
revised to reflect the Distribution and the conversion of the Award to Spinco
Common Stock and Spinco Common Stock price targets.

                  (4)      Issuance of New Agreements

         As soon as practicable after the Distribution Date, NSI and Spinco
shall cooperate to replace each existing restricted stock award agreement held
by a Transferred Individual with two restricted stock award agreements: one
agreement with respect to the Granted Restricted Stock that becomes restricted
stock in both NSI and Spinco and the other agreement with respect to the
Ungranted Restricted Stock that is converted to a restricted stock Award of
Spinco Common Stock under the Spinco Stock Incentive Plan.

6.4      EMPLOYEE STOCK PURCHASE PLAN

         It is intended that Spinco will establish an employee stock purchase
plan that is substantially similar to the National Service Industries, Inc.
Employee Stock Purchase Plan and that the NSI Common Stock, and Spinco Common
Stock distributed with respect to such stock, held for Transferred Individuals
will be transferred to a recordkeeper for the Spinco Plan, provided, however,
Spinco, in its sole discretion, shall determine when such Plan shall become
effective and may change the terms of such Plan as it deems appropriate.

6.5      DEFERRED COMPENSATION PLANS

         (A)      ASSUMPTION OR ESTABLISHMENT OF SPINCO DEFERRED COMPENSATION
                  PLANS

         Effective no later than the Close of the Distribution Date, Spinco
shall take all necessary actions to assume, become plan sponsor of, and be
solely responsible for all Liabilities with respect to, the Deferred
Compensation Plans that are Spinco Stand-Alone Plans. Effective no later than
the Close of the Distribution Date, Spinco shall also establish the Spinco
Deferred Compensation Plans that are Spinco Mirror Plans, and the amounts
credited to the accounts of Transferred Individuals under the NSI Deferred
Compensation Plans shall be transferred to the applicable Spinco Deferred
Compensation Plans.

         The Transferred Individuals' termination of employment with the NSI
Group as a result of the Distribution shall not constitute a termination of
employment for purposes of the NSI or

                                      -29-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

Spinco Deferred Compensation Plans. All elections by the Transferred Individuals
that were controlling under the terms of the applicable NSI Deferred
Compensation Plan prior to the Distribution shall continue under the applicable
Spinco Plan until changed under the terms of such Plan. All investment choices
of Transferred Individuals under the NSI or Spinco Deferred Compensation Plans
shall also be continued in effect; provided, however, that any account balance
that is deemed to be invested in whole or in part in phantom shares of NSI
Common Stock shall be converted into deemed investments in phantom shares of
Spinco Common Stock in an equitable manner determined by Spinco. Nothing herein
shall restrict NSI's or Spinco's rights to amend or terminate their respective
Plans in the future.

         (B)      TRANSFER OF CORPORATE-OWNED LIFE INSURANCE

         No later than the Close of the Distribution Date, NSI shall transfer
and assign to Spinco all of the corporate-owned life insurance policies owned by
NSI or an affiliate of NSI that have been held by NSI to help fund its
obligations under the Deferred Compensation Plans that are being assumed or
adopted by Spinco; provided, however, that such transfer shall not occur (or
shall be modified in an appropriate manner) unless NSI has received a
satisfactory opinion of legal counsel that such transfer of corporate-owned life
insurance will not jeopardize the current tax treatment of such policies.

6.6      SUPPLEMENTAL RETIREMENT BENEFIT PLANS

         Effective no later than the Close of the Distribution Date, NSI and
Spinco shall take all necessary actions (a) to allow Spinco to adopt and assume,
become the plan sponsor of, and be solely responsible for all Liabilities with
respect to the supplemental retirement plans previously maintained by the
Holophane Corporation; and (b) to allow Spinco to establish the Spinco
Supplemental Pension Plan and the Spinco Supplemental Retirement Plan for
Executives and to assume all Liabilities with respect to Transferred Individuals
under the Supplemental Pension Plan of National Service Industries, Inc. and the
Supplemental Retirement Plan for Executives of National Service Industries, Inc.

6.7      BENEFITS PROTECTION TRUST AND EXECUTIVE BENEFITS TRUST

         Effective no later than the Close of the Distribution Date, NSI and
Spinco shall take all actions necessary to allow Spinco or a member of the
Spinco Group to adopt and assume, amend as appropriate, and replace NSI as a
party to and grantor under, the National Service Industries, Inc. Benefits
Protection Trust and the National Service Industries, Inc. Executive Benefits
Trust ("Trusts").

6.8      SEVERANCE PROTECTION AGREEMENTS

         Effective Immediately after the Distribution Date, Spinco shall enter
into severance protection agreements with the Transferred Individuals listed in
Appendix E which are substantially identical in all Material Features to the
form of NSI severance protection agreement covering such Transferred Individual
as of the Distribution Date. Spinco shall be solely

                                      -30-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

responsible for all Liabilities related to the Spinco severance protection
agreements with the Transferred Individuals.

6.9      EMPLOYMENT AGREEMENTS

         Effective Immediately after the Distribution Date, Spinco shall enter
into employment agreements with the Transferred Individuals listed in Appendix E
which are substantially identical in all Material Features to the corresponding
NSI employment agreements or shall assume the existing agreements. Spinco shall
be solely responsibly for all Liabilities related to the Spinco employment
agreements with the Transferred Individuals.

6.10     AUTOMOBILE PROGRAM

         As of the Close of the Distribution Date, Spinco shall assume all of
NSI's Liabilities and obligations with respect to the motor vehicles leased by
NSI for Transferred Individuals pursuant to lease agreements under any NSI
Executive automobile program.

6.11     OTHER EXECUTIVE BENEFITS/PROGRAMS

         Effective no later than the Close of the Distribution Date, Spinco
shall establish Plans that are substantially similar to the following NSI Plans
and other executive benefits: Executive physical program, corporate matching
gift program, automobile allowance policy. Spinco shall assume all Liabilities
for Transferred Individuals under or relating to these Plans, and any elections,
benefits, balances, or limits in effect immediately prior to the Distribution
shall remain in effect under the Spinco Plans.

6.12     NON-EMPLOYEE DIRECTOR BENEFITS

         (A)      NON-EMPLOYEE DIRECTOR DEFERRED STOCK UNIT PLAN

         Effective not later than the Close of the Distribution Date, Spinco
shall establish a Spinco non-employee director deferred stock unit plan that is
substantially identical in all Material Respects to the National Service
Industries, Inc. Non-Employee Director Deferred Stock Unit Plan, and Spinco
shall assume and be solely responsible for all Liabilities under the NSI
Non-Employee Director Deferred Stock Unit Plan relating to individuals who
become non-employee directors of Spinco (and certain former non-employee
directors of NSI). The deferred stock units of NSI Common Stock relating to
non-employee directors of Spinco shall be converted into deferred stock units of
Spinco Common Stock in an equitable manner as determined by Spinco.

         (B)      NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

         Effective not later than the Close of the Distribution Date, Spinco
shall establish the Spinco, Inc. Non-Employee Directors' Stock Option Plan that
is substantially identical in all Material Respects to the National Service
Industries, Inc. Non-Employee Directors' Stock Option Plan. All outstanding
options held by non-employee directors of Spinco who were

                                      -31-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

previously non-employee directors of NSI (and certain former non-employee
directors of NSI) shall be treated as provided in Section 6.3(b).

                                      -32-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

                               ARTICLE VII GENERAL

7.1      PAYMENT OF AND ACCOUNTING TREATMENT FOR EXPENSES AND BALANCE SHEET
         AMOUNTS

         (A)      EXPENSES

         All expenses (and the accounting treatment related thereto) through the
Close of the Distribution Date regarding matters addressed herein shall be
handled and administered by NSI and Spinco in accordance with past NSI
accounting and financial practices and procedures pertaining to such matters. To
the extent expenses that pertain to Transferred Individuals are unpaid as of the
Close of the Distribution Date, Spinco or any member of the Spinco Group shall
be solely responsible for such payment, without regard to any accounting
treatment to be accorded such expense by NSI or Spinco on their respective books
and records. The accounting treatment to be accorded all expenses incurred prior
to the Distribution Date, whether such expenses are paid by NSI or Spinco, shall
be determined by NSI in its sole discretion.

         (B)      BALANCE SHEET AMOUNTS

         Spinco shall assume any and all balance sheet liability that relates to
any Liability assumed by it under this Agreement as of the Close of the
Distribution Date or thereafter. The balance sheet liabilities to be assumed
pursuant to this Section shall be determined by NSI in its sole discretion
consistent with past accounting practices, consistently applied.

7.2      SHARING OF PARTICIPANT INFORMATION

         Subject to applicable laws on confidentiality, NSI and Spinco shall
share, NSI shall cause each applicable member of the NSI Group to share, and
Spinco shall cause each applicable member of the Spinco Group to share, with
each other and their respective agents and vendors (without obtaining releases)
all participant information necessary for the efficient and accurate
administration of each of the NSI Plans and the Spinco Plans during the period
NSI and Spinco are coordinating with respect to vendor contracts under Section
5.2. NSI and Spinco and their respective authorized agents shall, subject to
applicable laws on confidentiality, be given reasonable and timely access to,
and may make copies of, all information relating to the subjects of this
Agreement in the custody of the other party, to the extent necessary for such
administration. Until the Close of the Distribution Date, all participant
information shall be provided in the manner and medium applicable to
Participating Companies in the NSI Plans generally, and thereafter until
December 31, 2002, all participant information shall be provided in a manner and
medium that is compatible with the data processing systems of NSI as in effect
on the Close of the Distribution Date, unless otherwise agreed to by NSI and
Spinco.

7.3      RESTRICTIONS ON EXTENSION OF OPTION EXERCISE PERIODS, AMENDMENT OR
         MODIFICATION OF OPTION TERMS AND CONDITIONS

         Spinco agrees that, without the prior written consent of NSI, neither
Spinco nor any of its affiliates or Subsidiaries shall take any action to extend
the exercise period of or to provide for

                                      -33-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

additional vesting with respect to any Spinco options, which were received
pursuant to Section 6.3(b) in replacement of NSI options, for Transferred
Individuals, including providing such Transferred Individuals with leaves of
absences or special termination or severance arrangements.

7.4      REPORTING AND DISCLOSURE AND COMMUNICATIONS TO PARTICIPANTS

         While Spinco is a Participating Company in the NSI Plans, Spinco shall
take, and shall cause each other applicable member of the Spinco Group to take,
all actions necessary or appropriate to facilitate the distribution of all NSI
Plan-related communications and materials to employees, participants and
beneficiaries, including summary plan descriptions and related summaries of
material modification, summary annual reports, investment information,
prospectuses, notices and enrollment materials for the Spinco Plans. Spinco
shall assist, and Spinco shall cause each other applicable member of the Spinco
Group to assist, NSI in complying with all reporting and disclosure requirements
of ERISA for plan years ending on or before December 31, 2002, including the
preparation of Form 5500 annual reports for the NSI Plans, where applicable.

7.5      PLAN AUDITS

         (A)      AUDIT RIGHTS WITH RESPECT TO THE ALLOCATION OR TRANSFER OF
                  PLAN ASSETS

         The allocation of Pension Plan assets and liabilities pursuant to
Section 3.3 shall, at the election of Spinco, be audited on behalf of both NSI
and Spinco by an actuarial and benefit consulting firm mutually selected by the
parties; provided, however, that no audit shall be permitted after the date of
the pension plan asset transfer, in the case of the Pension Plans. The scope of
such audit shall be limited to the accuracy of the data and the accuracy of the
computation and adherence to the methodology specified in this Agreement and,
except as set forth in the penultimate sentence of this Section 7.5(a), such
audit shall not be binding on the parties. The actuarial and benefit consulting
firm shall provide its report to both NSI and Spinco. No other audit shall be
conducted with respect to the allocation of Plan assets and no issue of any
nature whatsoever may be raised by Spinco once the transfer of assets has been
completed. Subject to the following two sentences, no transfer of assets shall
occur unless and until Spinco agrees to the allocation of assets. To the extent
such audit recommends a change to the value of assets allocated to a Spinco Plan
of less than 5%, the original determination shall be binding on the parties and
shall not be subject to the dispute resolution process provided in Section 7.16.
To the extent such audit recommends such a change of 5% or more (a "Significant
Allocation Change"), any unresolved dispute between the parties as to whether
and how to make any change in response to such recommendation shall be subject
to the dispute resolution process provided in Section 7.16. Spinco shall pay or
shall be responsible for the payment of the full costs of such audit; provided,
however, that in the event such audit recommends a Significant Allocation Change
and such recommendation is attributable to variances in actuarial assumptions or
simplification or modification of the allocation calculated by NSI, NSI shall be
responsible for the full costs of such audit.

                                      -34-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

         (B)      AUDIT RIGHTS WITH RESPECT TO INFORMATION PROVIDED

                  (1)      Subject to Section 7.5(b)(2), each of NSI and Spinco,
and their duly authorized representatives, shall have the right to conduct
audits at any time upon reasonable prior notice, at their own expense, with
respect to all information provided to it or to any Plan recordkeeper or
third-party administrator by the other party. Subject to Sections 7.5(a) and
7.5(b)(2), the party conducting the audit shall have the sole discretion to
determine the procedures and guidelines for conducting audits and the selection
of audit representatives. The auditing party shall have the right to make copies
of any records at its expense, subject to the confidentiality provisions set
forth in the Distribution Agreement, which are incorporated by reference herein.
The party being audited shall provide the auditing party's representatives with
reasonable access during normal business hours to its operations, computer
systems and paper and electronic files, and provide workspace to its
representatives. After any audit is completed, the party being audited shall
have the right to review a draft of the audit findings and to comment on those
findings in writing within five business days after receiving such draft.

                  (2)      The auditing party's audit rights under this
Section 7.5(b) shall include the right to audit, or participate in an audit
facilitated by the party being audited, of any Subsidiaries and affiliates of
the party being audited and of any benefit providers and third parties with whom
the party being audited has a relationship, or agents of such party, to the
extent any such persons are affected by or addressed in this Agreement
(collectively, the "Non-parties"). The party being audited shall, upon written
request from the auditing party, provide an individual (at the auditing party's
expense) to supervise any audit of any Non-party. The auditing party shall be
responsible for supplying, at its expense, additional personnel sufficient to
complete the audit in a reasonably timely manner.

         (C)      AUDITS REGARDING VENDOR CONTRACTS

         From Immediately after the Distribution Date through December 31, 2002,
NSI and Spinco and their duly authorized representatives shall have the right to
conduct joint audits with respect to any vendor contracts that relate to both
the NSI Health and Welfare Plans and the Spinco Health and Welfare Plans. The
scope of such audits shall encompass the review of all correspondence, account
records, claim forms, canceled drafts (unless retained by the bank), provider
bills, medical records submitted with claims, billing corrections, vendor's
internal corrections of previous errors and any other documents or instruments
relating to the services performed by the vendor under the applicable vendor
contracts. NSI and Spinco shall agree on the performance standards, audit
methodology, auditing policy and quality measures and reporting requirements
relating to the audits described in this Section 7.5(c) and the manner in which
costs incurred in connection with such audits will be shared.

         (D)      AUDIT ASSISTANCE

         To the extent that either NSI or Spinco is required to respond to any
Governmental Authority, vendor or recordkeeper audit, or otherwise conducts an
audit with respect to any provision or obligation of the other party under this
Agreement, NSI or Spinco, whichever is applicable, shall be required to fully
cooperate with the audit, including providing such records

                                      -35-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

and data as may be necessary to respond to any document or data request that may
arise by reason of such audit. The party being audited shall provide the
auditing party's representatives with reasonable access during normal business
hours to its operations, computer systems and paper and electronic files, and
provide workspace to its representatives. To the extent the results of an audit
result in any correction to the Liabilities involving any Transferred
Individuals, Spinco shall be solely responsible for all such costs and expenses
associated with such Liabilities and any related corrections.

7.6      BENEFICIARY DESIGNATIONS/RELEASE OF INFORMATION/RIGHT TO REIMBURSEMENT

         All beneficiary designations, authorizations for the release of
information and rights to reimbursement made by or relating to Transferred
Individuals under NSI Plans shall be transferred to and be in full force and
effect under the corresponding Spinco Plans until such beneficiary designations,
authorizations or rights are replaced or revoked by, or no longer apply, to the
relevant Transferred Individual.

7.7      REQUESTS FOR INTERNAL REVENUE SERVICE RULINGS AND UNITED STATES
         DEPARTMENT OF LABOR OPINIONS

         Spinco shall cooperate fully with NSI on any issue relating to the
transactions contemplated by this Agreement for which NSI elects to seek a
determination letter or private letter ruling from the Internal Revenue Service
or an advisory opinion from the United States Department of Labor. NSI shall
cooperate fully with Spinco with respect to any request for a determination
letter or private letter ruling from the Internal Revenue Service or advisory
opinion from the United States Department of Labor with respect to any of the
Spinco Plans relating to the transactions contemplated by this Agreement.

7.8      FIDUCIARY AND RELATED MATTERS

         The parties acknowledge that NSI will not be a fiduciary with respect
to the Spinco Plans and that Spinco will not be a fiduciary with respect to the
NSI Plans. The parties also acknowledge that neither party shall be deemed to be
in violation of this Agreement if it fails to comply with any provisions hereof
based upon its good faith determination that to do so would violate any
applicable fiduciary duties or standards of conduct under ERISA or other
applicable law. Notwithstanding any other provision in this Agreement, the
parties may take such actions as necessary or appropriate to effectuate the
terms and provisions of this Agreement.

7.9      NO THIRD-PARTY BENEFICIARIES; NON-TERMINATION OF EMPLOYMENT

         This Agreement is not intended and shall not be construed as to confer
upon any Person other than the parties hereto any rights or remedies hereunder.
No provision of this Agreement or the Distribution Agreement shall be construed
to create any right, or accelerate entitlement, to any compensation or benefit
whatsoever on the part of any Transferred Individual or other future, present,
or former employee of the NSI Group or the Spinco Group under any NSI Plan or
Spinco Plan or otherwise. Without limiting the generality of the foregoing,
except as expressly provided in this Agreement: (i) neither the Distribution nor
the termination of the Participating

                                      -36-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

Company status of a member of the Spinco Group shall cause any employee to be
deemed to have incurred a termination of employment which entitles such
individual to the commencement of benefits under any of the NSI Plans, any of
the Spinco Plans, or any of the Individual Agreements; and (ii) nothing in this
Agreement other than those provisions specifically set forth herein to the
contrary shall preclude Spinco, at any time after the Close of the Distribution
Date, from amending, merging, modifying, terminating, eliminating, reducing, or
otherwise altering in any respect any Spinco Plan, any benefit under any Plan or
any trust, insurance policy or funding vehicle related to any Spinco Plan.

7.10     COLLECTIVE BARGAINING

         To the extent any provision of this Agreement is contrary to and
violates the provisions of any applicable collective bargaining agreement to
which NSI or any affiliate of NSI is a party, the terms of such collective
bargaining agreement shall continue to apply to the affected employees. Should
any provision of this Agreement be deemed to relate to a topic determined by an
appropriate authority to be a mandatory subject of collective bargaining, NSI or
Spinco may be obligated to bargain with the union representing affected
employees concerning those subjects.

7.11     CONSENT OF THIRD PARTIES

         If any provision of this Agreement is dependent on the consent of any
third party (such as a vendor) and such consent is withheld, NSI and Spinco
shall use their reasonable best efforts to implement the applicable provisions
of this Agreement to the full extent practicable. If any provision of this
Agreement cannot be implemented due to the failure of such third party to
consent, NSI and Spinco shall negotiate in good faith to implement the provision
in a mutually satisfactory manner. The phrase "reasonable best efforts" as used
in this Agreement shall not be construed to require the incurrence of any
non-routine or unreasonable expense or liability or the waiver of any right.

7.12     FOREIGN PLANS

         The treatment of Foreign Plans by NSI and Spinco shall be as set forth
in Appendix D.

7.13     EFFECT IF DISTRIBUTION DOES NOT OCCUR

         If the Distribution does not occur, then all actions and events that
are, under this Agreement, to be taken or occur before or effective as of the
Close of the Distribution Date, Immediately after the Distribution Date, or
otherwise in connection with the Distribution, shall not be taken or occur
except to the extent specifically agreed by Spinco and NSI.

7.14     RELATIONSHIP OF PARTIES

         Nothing in this Agreement shall be deemed or construed by the parties
or any third party as creating the relationship of principal and agent,
partnership or joint venture between the parties, it being understood and agreed
that no provision contained herein, and no act of the

                                      -37-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

parties, shall be deemed to create any relationship between the parties other
than the relationship set forth herein.

7.15     AFFILIATES

         Each of NSI and Spinco shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set forth
in this Agreement to be performed by members of the NSI Group or members of the
Spinco Group, respectively, where relevant.

7.16     DISPUTE RESOLUTION

         Any controversy or claim arising out of or relating to this Agreement,
or the breach hereof, shall be settled pursuant to the dispute resolution
provisions described in the Distribution Agreement.

7.17     INDEMNIFICATION

         Effective on the Distribution Date, Spinco and each member of the
Spinco Group agrees to jointly and severally indemnify and hold harmless NSI and
each member of the NSI Group and each of their respective officers, directors,
employees and agents and the NSI Plans and any related trusts, including the NSI
Pension Trust and the trustees thereof, from and against any and all losses,
Liabilities, claims, suits, damages, costs and expenses (including without
limitation, reasonable attorneys' fees and any and all expenses reasonably
incurred in investigating, preparing or defending against any pending or
seriously threatened litigation or claim) (collectively, "Indemnifiable
Expenses") arising out of or related in any manner to Transferred Individuals,
except for Indemnifiable Expenses arising solely out of a claim which is made by
any Person (other than a Person who is a member of the Spinco or NSI Group) and
which is related solely to NSI's exercise of its fiduciary responsibility for
the investment of the assets of the NSI Plans prior to the Distribution Date (or
prior to the Pension Plan Spinoff Date for purposes of the NSI Pension Plans and
prior to the Savings Plan Transfer Date for purposes of the NSI Savings Plans).
In addition, effective on the Distribution Date, NSI agrees to indemnify and
hold harmless each member of the Spinco Group and each of their respective
officers, directors, employees and agents and the Spinco Plans and any related
trusts, including the Spinco Pension Trust and the trustees thereof, from and
against any and all Indemnifiable Expenses arising solely out of a claim which
is made by any Person (other than a Person who is a member of the Spinco or NSI
Groups) and which is related solely to NSI's exercise of its fiduciary
responsibility for the investment of the assets of the NSI Plans prior to the
Distribution Date (or prior to the Pension Plan Spinoff Date for purposes of the
NSI Pension Plans and prior to the Savings Plan Transfer Date for purposes of
the NSI Savings Plans).

         If any action is brought or any claim is made against a party or person
in respect of which indemnity may be sought pursuant to this Section 7.17 (the
"Indemnitee"), the Indemnitee shall, within twenty (20) days after the receipt
of information indicating that an action or claim is likely, notify in writing
the party from whom indemnification is sought (the "Indemnitor") of the
institution of the action or the making of the claim, and the Indemnitor shall
have the right, and

                                      -38-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

at the request of the Indemnitee, shall have the obligation, to assume the
defense of the action or claim, including the employment of counsel. If the
Indemnitor assumes the defense of the action or claim, the Indemnitor shall be
entitled to settle the action or claim on behalf of the Indemnitee without the
prior written consent of the Indemnitee, unless such settlement would, in
addition to the payment of money, materially affect the ongoing business or
employment of the Indemnitee.

         The Indemnitee shall have the right to interpret the provisions of its
own Plans and to employ its own counsel, but the fees and expenses of that
counsel shall be the responsibility of the Indemnitee unless: (i) the employment
of that counsel shall have been authorized in writing by the Indemnitor in
connection with the defense of the action or claim; (ii) the Indemnitor shall
not have employed counsel to have charge of the defense of such action or claim;
or (iii) such Indemnitee shall have reasonably concluded that there may be
defenses available to it which are different from or additional to those
available to the Indemnitor (in which case the Indemnitor shall not have the
right to direct any different defense of the action or claim on behalf of the
Indemnitee). The Indemnitee shall, in any event, be kept fully informed of the
defense of any such action or claim. Except as expressly provided above, in the
event that the Indemnitor shall not previously have assumed the defense of an
action or claim, at such time as the Indemnitor does assume the defense of the
action or claim, the Indemnitor shall not thereafter be liable to any Indemnitee
for legal or other expenses subsequently incurred by the Indemnitee in
investigating, preparing or defending against such action or claim.

         Anything in this Section 7.17 to the contrary notwithstanding, the
Indemnitor shall not be liable for any settlement of any claim or action
effected without its written consent; provided, however, that if after due
notice the Indemnitor refuses to defend a claim or action, the Indemnitee shall
have the right to defend and/or settle such action, and the Indemnitee shall not
be precluded from making a claim against the Indemnitor for reasonable expenses
and liabilities resulting from such defense and/or settlement in accordance with
this Section 7.17.

         Notwithstanding the foregoing provisions of this Section 7.17, there
may be particular actions or claims which reasonably could result in both
parties being liable to the other under the indemnification provisions of this
Agreement. In such events, the Parties shall endeavor, acting reasonably and in
good faith, to agree upon a manner of conducting the defense and settlement of
the action or claim with a view to minimizing the legal expenses and associated
costs that might otherwise be incurred by the parties, such as, by way of
illustration only, agreeing to use the same legal counsel.

         The indemnification provisions of this Section 7.17 shall not inure to
the benefit of any third party. By way of illustration only, an insurer who
would otherwise be obligated to pay any claim shall not be relieved of the
responsibility with respect thereto, or, solely by virtue of the indemnification
provisions, hereof, have any subrogation rights with respect thereto, it being
expressly understood and agreed that no insurer or any other third party shall
be entitled to a "windfall" (i.e., a benefit they would not be entitled to
receive in the absence of the indemnification provisions) by virtue of these
indemnification provisions.

                                      -39-

<PAGE>

                          EMPLOYEE BENEFITS AGREEMENT

7.18     W-2 MATTERS

         Pursuant to the alternative procedure set forth in Internal Revenue
Service Rev. Proc. 96-60, Spinco will assume NSI's obligations to furnish Forms
W-2 to all Transferred Individuals for the year in which the Distribution Date
occurs. NSI will provide to Spinco the information not available to Spinco
relating to periods ending on the Distribution Date necessary for Spinco to
prepare and distribute Forms W-2 to Transferred Individuals for the year in
which the Distribution Date occurs, which will include all remuneration earned
by Transferred Individuals before the Distribution Date and Forms W-4 provided
to NSI by Transferred Individuals to the extent that Spinco is not already in
possession of such information. Spinco shall prepare and distribute such forms.
To the extent permitted by applicable law, in particular Code Sections
3121(a)(1) and 3306(b)(1), Spinco shall be deemed a successor employer to NSI
with respect to Transferred Individuals for purposes of calculating the annual
wage limitation to which state and federal payroll taxes apply.

7.19     CONFIDENTIALITY

         Except as required by applicable law, for the purpose of satisfying any
obligation under this Agreement or with the consent of the other party, neither
NSI nor Spinco shall disclose to any Person (other than members of the NSI Group
or the Spinco Group) any information (including, but not limited to, information
regarding fees, expenses, assets, Liabilities and Plan terms) relating to the
NSI Plans, Spinco Plans or Transferred Individuals. Each of NSI and Spinco shall
be permitted to disclose such information within the NSI Group and Spinco Group
only to the extent reasonably necessary in the ordinary course of business.

7.20     NOTICES

         Any notice, demand, claim, or other communication under this Agreement
shall be in writing and shall be given in accordance with the provisions for
giving notice under the Distribution Agreement.

7.21     INTERPRETATION

         Words in the singular shall be held to include the plural and vice
versa and words of one gender shall be held to include the other genders as the
context requires. The terms "hereof," "herein," and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including all Appendices hereto) and not to any particular
provision of this Agreement. The word "including" and words of similar import
when used in this Agreement shall mean "including, without limitation," unless
the context otherwise requires or unless otherwise specified. The word "or"
shall not be exclusive.

7.22     SEVERABILITY

         The provisions of this Agreement are severable and should any provision
hereof be void, voidable or unenforceable under any applicable law, such
provision shall not affect or invalidate any other provision of this Agreement,
which shall continue to govern the relative rights and

                                      -40-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

duties of the parties as though such void, voidable or unenforceable provision
were not a part hereof.

7.23     GOVERNING LAW/EXECUTION

         This Agreement shall be construed in accordance with, and governed by,
the laws of the State of Delaware without regard to the conflicts of law rules
of such state, may not be assigned by either party without the prior written
consent of the other, and shall bind and inure to the benefit of the parties
hereto and their respective successors and permitted assignees. This Agreement
may not be amended or supplemented except by an agreement in writing signed by
NSI and Spinco. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original instrument, but all of which together shall
constitute one and the same Agreement.

                            [SIGNATURE PAGE FOLLOWS]

                                      -41-
<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

         IN WITNESS WHEREOF, the parties have caused this Employee Benefits
Agreement to be duly executed as of the day and year first above written.

NATIONAL SERVICE INDUSTRIES, INC.

By:      /s/ Brock A. Hattox
         -------------------------------
         Brock A. Hattox
         Executive Vice President and
             Chief Financial Officer

ACUITY BRANDS, INC.

By:      /s/ James S. Balloun
         -------------------------------
         James S. Balloun
         Chairman, President and
             Chief Executive Officer

                                      -42-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

                    APPENDIX A -- QUALIFIED RETIREMENT PLANS

SPINCO PENSION PLANS (all are Stand-Alone Plans)

National Service Industries Pension Plan C

Pension Plan for Hourly Employees of the Emergency Lighting Division of
          Lithonia Lighting Company

Major Reflector Products Co. Employees' Pension Plan

Pension Plan of Lithonia Lighting Company -- Members of Bargaining Unit
         Represented by International Brotherhood of Electrical
         Workers Local Union #613

Pension Plan of Lithonia Lighting Company -- Members of Bargaining Unit
         Represented by Truck Drivers  and Helpers Local Union #728
         International Brotherhood of Teamsters, Chauffeurs, Warehousemen,
         and Helpers of America

Pension Plan of Lithonia Lighting Company -- Members of Bargaining Unit
         Represented by International Brotherhood of Electrical
         Workers Local Union #1132

Pension Plan of Lithonia Lighting Company -- for Members of Bargaining Unit
         Represented by International Brotherhood of Electrical Workers
         Local Union #1048 (Amended and Restated Effective February 2, 1989)

Lithonia Lighting Division Hourly Employees' Retirement Plan

SPINCO SAVINGS PLANS (all are Stand-Alone Plans)

Lithonia Lighting Profit Sharing Retirement Plan for Salaried Employees

Zep Manufacturing Company Profit Sharing/401(k) Retirement Plan

Selig Chemical Industries Retirement Plan

National Service Industries Retirement and 401(k) Plan

Lithonia Lighting 401(k) Plan for Hourly Employees

Enforcer Products 401(k) Plan

Holophane Division of Lithonia Lighting Group Retirement and 401(k) Plan for
         Hourly Employees

Holophane Division of Lithonia Lighting Group Retirement and 401(k) Plan for
         Hourly Employees Covered by a Collective Bargaining Agreement

Hydrel/Lithonia Operations 401(k) Retirement Plan

                                      -43-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

                      APPENDIX B SPINCO EXECUTIVE PROGRAMS

STAND-ALONE PLANS/AGREEMENTS TO BE ASSUMED BY SPINCO (WITH APPROPRIATE NAME
CHANGES)

National Service Industries, Inc. Executive Savings Plan

Supplemental retirement plans previously maintained by Holophane Corporation

National Service Industries, Inc. Executive Benefits Trust

National Service Industries, Inc. Benefits Protection Trust

Individual Agreements

         Including employment, severance protection, and consulting agreements.

NSI PLANS FOR WHICH SPINCO MIRROR PLANS WILL BE ESTABLISHED

Supplemental Retirement Plan for Executives of National Service Industries, Inc.

National Service Industries, Inc. Long-Term Achievement Incentive Plan

National Service Industries, Inc. Supplemental Deferred Savings Plan

National Service Industries, Inc. Executives' Deferred Compensation Plan

National Service Industries, Inc. Senior Management Benefit Plan

National Service Industries, Inc. Management Compensation and Incentive Plan

National Service Industries, Inc. Non-Employee Directors' Deferred Stock
         Unit Plan

National Service Industries, Inc. Non-Employee Director Stock Option Plan

National Service Industries, Inc. Employee Stock Purchase Plan

Supplemental Pension Plan of National Service Industries, Inc.

NSI EXECUTIVE PROGRAMS THAT WILL REMAIN AT NSI AND NOT BE MIRRORED AT SPINCO

Supplemental Retirement Plan for Eligible Employees of AECO Products Division of
         National Service Industries, Inc.

Deferred Compensation Plan for National Linen Service Officers

                                      -44-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

                   APPENDIX C SPINCO HEALTH AND WELFARE PLANS

Health Plans (ERISA):
         Spinco Major Medical Plan (which includes medical, dental, prescription
              drug, various HMOs, vision, wellness programs, and employee
              assistance benefits).

Group Insurance Plans (ERISA):
         Spinco Group Basic Life and Supplemental Life Insurance Plan
         Spinco Accidental Death and Dismemberment Insurance Plan
         Spinco Group 24-Hour Business Travel Accident Plan
         Spinco Personal Accident Plan

Disability Plans (ERISA):
         Spinco Short-Term Disability Programs
         Spinco Long Term Disability Plan

Cafeteria Plan (ERISA):
         Spinco Before Tax Premium Plan
         Spinco Health Care Flexible Spending Account Plan
         Spinco Dependent Care Flexible Spending Account Plan (non-ERISA)

Miscellaneous Plans (non-ERISA):
         Spinco Educational Assistance Program
         Spinco Vacation Program
         Spinco Executive Financial Planning Program

* Spinco shall have the right to rename, combine or disaggregate any of the
above Plans for any purpose, including the satisfaction of any disclosure or
reporting requirements under ERISA.

                                      -45-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

                            APPENDIX D FOREIGN PLANS

         This Appendix D describes the principles under which Foreign Plans
shall be treated. For purposes of this Appendix, outside the U.S. means outside
the 50 United States, its territories and possessions, and the District of
Columbia, and employed outside the U.S. means compensated under a payroll which
is administered outside the United States.

D.1      PLANS COVERING ONLY EMPLOYEES OF NSI OR SPINCO

         Effective as of the Close of the Distribution Date or such later date
as may be required by applicable law, union, or works council agreement, any
Foreign Plan that covers only individuals employed outside the U.S. by the NSI
Group shall be the sole responsibility of the NSI Group and no member of the
Spinco Group shall have any Liability with respect to such a Plan; and any
Foreign Plan that covers only individuals employed outside the U.S. by the
Spinco Group shall be the sole responsibility of the Spinco Group and no member
of the NSI Group shall have any Liability with respect to such a Plan.

D.2      PLANS COVERING EMPLOYEES OF BOTH NSI AND SPINCO

         (A)      TERMINATION OF PARTICIPATION

         To the extent legally permitted and except as otherwise provided
herein, effective as of the Close of the Distribution Date, or as soon as
practicable thereafter, Spinco and each other applicable member of the Spinco
Group shall cease to be a Participating Company in each Foreign Plan maintained
by NSI or the NSI Group and each other applicable member of the NSI Group shall
cease to be a Participating Company in each Foreign Plan maintained by the
Spinco Group. NSI and Spinco recognize that because of the requirements of local
law or administrative considerations, a transition period extending beyond the
Close of the Distribution Date may be required during which NSI or Spinco may
continue to participate in each other's Foreign Plans. During such transition
period, NSI and Spinco agree to cooperate in handling any and all matters with
respect to the Foreign Plans.

         (B)      MIRROR PLANS

                  (1)      Effective Immediately after the Distribution Date,
Spinco shall adopt, or cause to be adopted, Foreign Plans for the benefit of
employees of the Spinco Group employed outside the United States who are
eligible to participate in NSI Foreign Plans and shall cause such Spinco Foreign
Plans to be substantially identical in all Material Features to the
corresponding NSI Foreign Plans as in effect on the Distribution Date.
Notwithstanding the preceding sentence - (i) Spinco may satisfy this requirement
by extending coverage to such individuals under a Foreign Plan of the Spinco
Group which was in effect before the Distribution Date and which is, with
respect to all Material Features, at least equal to the corresponding NSI
Foreign Plan, and (ii) Spinco is not required to adopt a defined benefit pension
plan for the benefit of its Canadian employees (but instead shall make an
equitable adjustment to the defined contribution plan covering these employees).

                                      -46-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

                  (2)      Effective Immediately after the Distribution Date,
NSI shall adopt, or cause to be adopted, Plans for the benefit of any employees
of the NSI Group employed outside the United States who are eligible to
participate in Spinco Plans and shall cause such Plans to be substantially
identical in all Material Features to the corresponding Spinco Foreign Plans as
in effect on the Distribution Date; provided, however, that NSI may satisfy this
requirement by extending or continuing coverage to such individuals under an NSI
Foreign Plan of the NSI Group which was in effect before the Distribution Date.

                  (3)      The continuation by NSI or Spinco of separate
employment terms and conditions for employees previously covered by the other
entity's Plans shall not continue beyond the time legally required.

         (C)      TRANSFER OF ASSETS

         As of the Close of the Distribution Date, NSI and Spinco will use their
reasonable best efforts to ensure that, to the extent legally permitted: (i)
Liabilities of the Foreign Plans of NSI relating to Transferred Individuals
shall be assumed by the appropriate Foreign Plans of Spinco; and (ii) an
appropriate portion of any assets of the Foreign Plans of NSI shall be
transferred to the appropriate Foreign Plans of Spinco, and vice versa.

D.3      SEVERANCE ISSUES

         If under applicable law, any Transferred Individual employed outside
the U.S. is deemed to have incurred a termination of employment as a result of
the Distribution or any other transaction contemplated by the Distribution
Agreement or this Agreement, which entitles such individual to receive any
payment or benefit under any Foreign Plan, governmental plan or arrangement or
pursuant to any law or regulation, including severance benefits, notwithstanding
such individual's continued employment by the Spinco Group, then Spinco shall be
liable for any such payment or benefit and, notwithstanding any other provision
hereof, to the extent legally permitted, appropriate adjustments shall be made
to the treatment of such individual during such continued employment, including
not giving such individual credit for prior service and/or treating such
individual as having been newly hired immediately after such deemed termination,
for purposes of all applicable Foreign Plans. Liability with respect to such
payments shall be the responsibility of Spinco.

D.4      LEGALLY PERMITTED

         For purposes of this Appendix D, "legally permitted" means permitted
under the laws of the country, the labor union, works council, or collective
agreement without adverse consequences to NSI, Spinco or Transferred
Individuals, as determined by NSI, in its sole discretion, including mandated
waiting periods before which working conditions (including benefits) cannot be
changed, and upon receiving required agreement from individual employees and/or
Plan trustees, foundation boards and members, and any other organizations having
a recognized right to determine or affect benefits and/or funding of the Plan.

                                      -47-

<PAGE>

                           EMPLOYEE BENEFITS AGREEMENT

                                   APPENDIX E

Severance Protection Agreements

Mark Bachmann
Jim Balloun
Bob Burchfield
Sam Daniels
Charles Darnell
Kevin Davidson
John Ehrie
Helen Haines
Jim Heagle
Ken Honeycutt
Jeff Kernan
Richard Manning
Dave McCormish
Bob Mello
Larry Miller
John Morgan
Ken Morgan
Ken Murphy
Tom Naramore
Vern Nagel
Joe Parham
Wes Wittich
Allan Zeitlin

Employment Letters

Jim Balloun
Jim Heagle
Vern Nagel
Joe Parham

                                      -48-<PAGE>

                                                                    EXHIBIT 10.5
                               ACUITY BRANDS, INC.

                            LONG-TERM INCENTIVE PLAN

                       (Effective as of November 30, 2001)

         1.       PURPOSE. The purposes of the Acuity Brands, Inc. Long-Term
Incentive Plan (the "Plan") are to provide additional incentives to those
officers and key executives of Acuity Brands, Inc. (the "Company") and its
Subsidiaries (as hereinafter defined) whose substantial contributions are
essential to the continued growth and profitability of the Company's businesses,
to strengthen their commitment to the Company and its Subsidiaries, to further
motivate those officers and other executives to perform their assigned
responsibilities diligently and skillfully, and to attract and retain competent
and dedicated individuals whose efforts will result in the long term growth and
profitability of the Company and, over time, appreciation in the market value of
its stock. To accomplish these purposes, the Plan provides that the Company may
grant Incentive Stock Options, Nonqualified Stock Options, Aspiration
Achievement Incentive Awards, Restricted Stock, Performance Units and
Performance Shares (as each term is hereinafter defined).

      In connection with the spin-off of the Company by National Service
Industries, Inc. ("NSI"), effective November 30, 2001, Options and Awards will
be granted under this Plan as Replacement Awards to former employees of NSI and
its Subsidiaries who become employees of the Company and its Subsidiaries.

         2.       DEFINITIONS. For purposes of the Plan:

                  (a)      "ADJUSTED FAIR MARKET VALUE" means in the event of a
         Change in Control, the greater of (i) the highest price per share paid
         to holders of the Shares in any transaction (or series of transactions)
         constituting or resulting in a Change in Control or (ii) the highest
         Fair Market Value of a Share during the ninety (90) day period ending
         on the date of a Change in Control.

                  (b)      "AGREEMENT" means the written agreement between the
         Company and an Optionee or Grantee evidencing the grant of an Option or
         Award and setting forth the terms and conditions thereof.

                  (c)      "ASPIRATION ACHIEVEMENT INCENTIVE AWARD" or
         "ASPIRATION AWARD" means an Award granted to an Eligible Employee, as
         described in Section 7 of the Plan.

                  (d)      "AWARD" means a grant of an Aspiration Award,
         Restricted Stock, Performance Awards, or any or all of them.

                  (e)      "BOARD" means the Board of Directors of the Company.

                  (f)      "BUSINESS UNIT" means any of the operating units or
         divisions of the Company, or its Subsidiaries, designated as a Business
         Unit by the Committee.

                  (g)      "CHANGE IN CAPITALIZATION" means any increase or
         reduction in the number of Shares, or any change (including, but not
         limited to, a change in value) or exchange of Shares for a different
         number or kind of shares or other securities of the Company, by reason
         of a reclassification, recapitalization, merger, consolidation,
         reorganization, spin-off, split-up, issuance of warrants or rights or
         debentures, stock dividend, stock split or reverse stock split, cash
         dividend, property dividend, combination or exchange of shares,
         repurchase of shares, public offering, private placement, change in
         corporate structure or otherwise, which in the judgment of the
         Committee is material or significant.

                  (h)      "CHANGE IN CONTROL" means any of the following
         events:

                           (i)      The acquisition (other than from the
                  Company) by any "Person" (as the term is used for purposes of
                  Sections 13(d) or 14(d) of the Exchange Act) of beneficial
                  ownership (within the meaning of Rule 13d-3 promulgated under
                  the Exchange Act) of twenty percent (20%) or more of the
                  combined voting power of the Company's then outstanding voting
                  securities; or

<PAGE>

                           (ii)     The individuals who, as of December 1, 2001,
                  are members of the Board (the "Incumbent Board"), cease for
                  any reason to constitute at least two-thirds of the Board;
                  provided, however, that if the election, or nomination for
                  election by the Company's stockholders, of any new director
                  was approved by a vote of at least two-thirds of the Incumbent
                  Board, such new director shall, for purposes of this
                  Agreement, be considered as a member of the Incumbent Board;
                  or

                           (iii)    A merger or consolidation involving the
                  Company if the stockholders of the Company, immediately before
                  such merger or consolidation do not, as a result of such
                  merger or consolidation, own, directly or indirectly, more
                  than seventy percent (70%) of the combined voting power of the
                  then outstanding voting securities of the corporation
                  resulting from such merger or consolidation in substantially
                  the same proportion as their ownership of the combined voting
                  power of the voting securities of the Company outstanding
                  immediately before such merger or consolidation; or

                           (iv)     A complete liquidation or dissolution of the
                  Company or an agreement for the sale or other disposition of
                  all or substantially all of the assets of the Company.

                  Notwithstanding the foregoing, a Change in Control shall not
         be deemed to occur pursuant to Section 2(g)(i), solely because twenty
         percent (20%) or more of the combined voting power of the Company's
         then outstanding securities is acquired by (i) a trustee or other
         fiduciary holding securities, under one or more employee benefit plans
         maintained by the Company or any of its subsidiaries or (ii) any
         corporation which, immediately prior to such acquisition, is owned
         directly or indirectly by the stockholders of the Company in the same
         proportion as their ownership of stock in the Company immediately prior
         to such acquisition.

                  (i)      "CODE" means the Internal Revenue Code of 1986, as
         amended.

                  (j)      "COMMITTEE" means a committee consisting of two or
         more non-employee members of the Board who are appointed by the Board
         to administer the Plan and to perform the functions set forth herein.

                  (k)      "COMPANY" means Acuity Brands, Inc., a Delaware
         corporation, or any successor corporation.

                  (l)      "DISABILITY" means a physical or mental incapacity
         which impairs the Optionee's or Grantee's ability to substantially
         perform his duties for a period of one hundred eighty (180) consecutive
         days, as determined by the Committee.

                  (m)      "ELIGIBLE EMPLOYEE" means any officer or other
         designated employee of the Company or a Subsidiary designated by the
         Committee as eligible to receive Options or Awards, subject to the
         conditions set forth herein.

                  (n)      "EMPLOYEE BENEFITS AGREEMENT" means the Employee
         Benefits Agreement between NSI and the Company dated as of November 30,
         2001, which provides for the treatment of the employee plans in
         connection with the spin-off of the Company from NSI.

                  (o)      "EXCHANGE ACT" means the Securities Exchange Act of
         1934, as amended.

                  (p)      "FAIR MARKET VALUE" means the fair market value of
         the Shares as determined in good faith by the Committee; provided,
         however, that (A) if the Shares are admitted to trading on a national
         securities exchange, Fair Market Value on any date shall be the last
         sale price reported for the Shares on such exchange on such date or, if
         no sale was reported on such date, on the last date preceding such date
         on which a sale was reported, (B) if the Shares are admitted to
         quotation on the National Association of Securities Dealers Automated
         Quotation System ("NASDAQ") or other comparable quotation system and
         have been designated as a National Market System ("NMS") security, Fair
         Market Value on any date shall be the last sale price reported for the
         Shares on such system on such date or on the last day preceding such
         date on which a sale was reported, or (C) if the Shares are admitted to
         Quotation on NASDAQ and have not been designated a NMS Security, Fair
         Market Value on any date shall be the average of the highest bid and
         lowest asked prices of the Shares on such system on such date.

                  (q)      "GRANTEE" means a person to whom an Award has been
         granted under the Plan.

                  (r)      "INCENTIVE STOCK OPTION" means an Option within the
         meaning of Section 422 of the Code.

                                       2

<PAGE>

                  (s)      "NAMED EXECUTIVE OFFICER" means an Eligible Employee
         who as of the date of grant, vesting and/or payout of an Award or
         Option is deemed by the Committee to be a "covered employee" as defined
         in Code Section 162(m) and the regulations thereunder.

                  (t)      "NONQUALIFIED STOCK OPTION" means an Option which is
         not an Incentive Stock Option.

                  (u)      "NSI LONG-TERM INCENTIVE PLANS" means the long-term
         incentive plans sponsored by NSI, including the National Service
         Industries, Inc. Long-Term Achievement Incentive Plan, and the National
         Service Industries, Inc. Long-Term Incentive Plan.

                  (v)      "OPTION" means an Incentive Stock Option, a
         Nonqualified Stock Option, or either or both of them.

                  (w)      "OPTIONEE" means a person to whom an Option has been
         granted under the Plan.

                  (x)      "PARTICIPANT" means an Eligible Employee who has an
         outstanding Award or Option under the Plan.

                  (y)      "PERFORMANCE AWARDS" means Performance Units,
         Performance Shares or either or both of them.

                  (aa)     "PERFORMANCE CYCLE" means the time period specified
         by the Committee at the time an Aspiration Award or a Performance Award
         is granted during which the performance of the Company, a Subsidiary or
         a Business Unit will be measured.

                  (bb)     "PERFORMANCE SHARES" means Restricted Stock granted
         under Section 9 of the Plan.

                  (cc)     "PERFORMANCE UNIT" means Performance Units granted
         under Section 9 of the Plan.

                  (dd)     "REPLACEMENT AWARDS" means Options or Awards that are
         issued in substitution of options or grants of restricted stock that
         were granted under the NSI Long-Term Incentive Plans to employees of
         NSI and its Subsidiaries who become employees of the Company and its
         Subsidiaries (or who are otherwise considered Transferred Employees
         under the Employee Benefits Agreement) as of the date of the spin-off
         of the Company to the stockholders of NSI. As provided in Sections 6(j)
         and 8(g), the Replacement Awards shall have the same material terms and
         conditions under the Plan as such awards had under the respective NSI
         Long-Term Incentive Plans.

                  (ee)     "RESTRICTED STOCK" means Shares issued or transferred
         to an Eligible Employee which are subject to restrictions. Restricted
         Stock may be subject to restrictions which lapse over time without
         regard to the performance of the Company, a Subsidiary or a Business
         Unit, pursuant to Section 8 hereof, or may be awarded as Performance
         Shares pursuant to Section 9 hereof.

                  (ff)     "RETIREMENT" means the voluntary termination of
         employment by the Grantee or Optionee at any time on or after the
         Grantee or Optionee attains age 65.

                  (gg)     "SHARES" means the common stock, par value $.01 per
         share, of the Company (including any new, additional or different stock
         or securities resulting from a Change in Capitalization).

                  (hh)     "SUBSIDIARY" means any corporation in an unbroken
         chain of corporations, beginning with the Company (or NSI), if each of
         the corporations other than the last corporation in the unbroken chain
         owns stock possessing 50% or more of the total combined voting power of
         all classes of stock in one of the other corporations in such chain.
         The term "Subsidiary" shall also include a partnership in which the
         Company or a Subsidiary owns 50% or more of the profits interest or
         capital interest in the partnership.

                  (ii)     "SUCCESSOR CORPORATION" means a corporation, or a
         parent or subsidiary thereof within the meaning of Section 424(a) of
         the Code, which issues or assumes an Option in a transaction to which
         Section 424(a) of the Code applies.

                  (jj)     "TEN-PERCENT STOCKHOLDER" means an Eligible Employee
         who, at the time an Incentive Stock Option is to be granted to him,
         owns (within the meaning of Section 422(b)(6) of the Code) stock
         possessing more than ten percent (10%) of the total combined voting
         power of all classes of stock of the Company.

                                       3

<PAGE>

         (kk) "TERMINATION FOR CAUSE" means the Optionee or Grantee has
terminated employment and has been found by the Committee to be guilty of
theft, embezzlement, fraud or misappropriation of the Company's property
or any action which, if the individual were an officer of the Company,
would constitute a breach of fiduciary duty.

3.       ADMINISTRATION.

         (a)      The Plan shall be administered by the Committee which
shall hold such meetings as may be necessary for the proper administration of
the Plan. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan, or
any Agreements, Options or Awards under the Plan, and all members of the
Committee shall be fully indemnified by the Company with respect to any such
action, determination or interpretation.

         (b)      Subject to the express terms and conditions set forth
herein, the Committee shall have the power from time to time:

                  (i)      to determine those Eligible Employees to
         whom Options shall be granted under the Plan and the number of
         Incentive Stock Options and/or Nonqualified Stock Options to
         be granted to each Eligible Employee and to prescribe the
         terms and conditions (which need not be identical) of each
         Option, including the purchase price per Share subject to each
         Option, and to make any amendment or modification to any
         Agreement consistent with the terms of the Plan;

                  (ii)     to select those Eligible Employees to whom
         Awards shall be granted under the Plan and to determine the
         amount of Aspiration Award and Shares payable, the number of
         Performance Units, Performance Shares, and/or shares of
         Restricted Stock, to be granted pursuant to each Award, the
         terms and conditions of each Award, including the restrictions
         or performance criteria relating to such Award, the maximum
         value of each Award, and to make any amendment or modification
         to any Agreement consistent with the terms of the Plan;
         provided, however, that the Board can exercise any of the
         powers set forth in this Section 3(b), subject to any
         limitations imposed by Code Section 162(m) or Rule 16b-3 under
         the Exchange Act.

         (c)      Subject to the express terms and conditions set forth
         herein, the Committee shall have the power from time to time:

                  (i)      to construe and interpret the Plan and the
                  Options and Awards granted thereunder and to establish, amend
                  and revoke rules and regulations for the administration of the
                  Plan, including, but not limited to, correcting any defect or
                  supplying any omission, or reconciling any inconsistency in
                  the Plan or in any Agreement, in the manner and to the extent
                  it shall deem necessary or advisable to make the Plan fully
                  effective, and all decisions and determinations by the
                  Committee in the exercise of this power shall be final,
                  binding and conclusive upon the Company, a Subsidiary, and the
                  Optionees and Grantees, as the case may be;

                  (ii)     to determine the duration and purposes for
                  leaves of absence which may be granted to an Optionee or
                  Grantee on an individual basis without constituting a
                  termination of employment or service for purposes of the Plan;

                  (iii)    to exercise its discretion with respect to
                  the powers and rights granted to it as set forth in the Plan;

                  (iv)     generally, to exercise such powers and to
                  perform such acts as are deemed necessary or advisable to
                  promote the best interests of the Company with respect to the
                  Plan.

4.       SHARES SUBJECT TO PROGRAM.

         (a)      The maximum number of Shares that may be issued or
transferred pursuant to Options and Awards under the Plan is 8,100,000 Shares
(or the number and kind of shares of stock or other securities to which such
Shares are adjusted upon a Change in Capitalization pursuant to Section 11) The
Shares may, in the discretion of the Company, be authorized but unissued Shares
or Shares held as treasury shares, including Shares purchased by the Company,
whether on the market or otherwise, or a combination of each.

         (b)      Not more than an aggregate of thirty percent (30%) of the
Shares referred to in Section 4(a) may be issued or transferred in connection
with Aspiration Achievement Incentive Awards made pursuant to Section 7, Awards
of Restricted Stock made pursuant to Section 8, and Awards of Performance Shares
and Performance Units pursuant to Section 9.

                                       4

<PAGE>

                  (c)      Whenever any outstanding Option or Award or portion
         thereof expires, is canceled or is otherwise terminated for any reason
         (other than by exercise of the Option), the Shares allocable to the
         canceled or otherwise terminated portion of such Option or Award may
         again be the subject of Options and Awards hereunder.

                  (d)      Whenever any Shares subject to an Award or Option are
         forfeited for any reason pursuant to the terms of the Plan, such shares
         may again be the subject of Options and Awards hereunder.

                  (e)      With respect to Shares used to exercise an Option or
         for tax withholding, the Committee shall, in its discretion and in
         accordance with applicable law, determine whether to include such
         shares in determining the maximum number of Shares that may be issued
         under the Plan.

         5.       ELIGIBILITY. Subject to the provisions of the Plan, the
Committee shall have full and final authority to select those Eligible Employees
who will receive Options and/or Awards; provided, however, that no Eligible
Employee shall receive any Incentive Stock Options unless he is an employee of
the Company or a Subsidiary (other than a Subsidiary that is a partnership) at
the time the Incentive Stock Option is granted.

         6.       OPTIONS. The Committee may grant Options in accordance with
the Plan and the terms and conditions of the Option shall be set forth in an
Agreement. The Committee shall have sole discretion in determining the number of
Shares underlying each Option to grant a Participant; provided, however, that in
the case of any Incentive Stock Option granted under the Plan, the aggregate
Fair Market Value (determined at the time such Option is granted) of the Shares
to which Incentive Stock Options are exercisable for the first time by the
Participant during any calendar year (under the Plan and all other incentive
stock option plans of the Company and any Subsidiary) shall not exceed $100,000.
Excluding any Replacement Award, the maximum number of Shares subject to Options
which can be granted under the Plan during a fiscal year of the Company to any
Participant, including a Named Executive Officer, is 500,000 Shares. Each Option
and Agreement shall be subject to the following conditions:

                  (a)      PURCHASE PRICE. The purchase price or the manner in
         which the purchase price is to be determined for Shares under each
         Option shall be set forth in the Agreement, provided, that the purchase
         price per Share under each Option (other than Replacement Awards) shall
         not be less than 100% of the Fair Market Value of a Share on the date
         the Option is granted (110% in the case of an Incentive Stock Option
         granted to a Ten-Percent Stockholder).

                  (b)      DURATION. Options granted hereunder shall be for such
         term as the Committee shall determine, provided that no Option shall be
         exercisable after the expiration of ten (10) years from the date it is
         granted (five (5) years in the case of an Incentive Stock Option
         granted to a Ten-Percent Stockholder). The Committee may, subsequent to
         the granting of any Option, extend the term thereof, but in no event
         shall the term as so extended exceed the maximum term provided for in
         the preceding sentence.

                  (c)      NON-TRANSFERABILITY. Unless the Committee otherwise
         provides in the Agreement, no Option granted hereunder shall be
         transferable by the Optionee, otherwise than by will or the laws of
         descent and distribution, and an Option may be exercised during the
         lifetime of such Optionee only by the Optionee or his guardian or legal
         representative. The terms of such Option shall be final, binding and
         conclusive upon the beneficiaries, executors, administrators, heirs and
         successors of the Optionee.

                  (d)      VESTING. Subject to Section 6(h) hereof, each Option
         shall be exercisable in such installments (which need not be equal or
         the same for each Optionee) and at such times as may be designated by
         the Committee and set forth in the Agreement. To the extent not
         exercised, installments shall accumulate and be exercisable, in whole
         or in part, at any time after becoming exercisable, but not later than
         the date the Option expires. The Committee may accelerate the
         exercisability of any Option or portion thereof at any time.

                  (e)      METHOD OF EXERCISE. The exercise of an Option shall
         be made only by a written notice delivered in person or by mail to the
         Secretary of the Company at the Company's principal executive office
         (or to such other person or address as may be designated by the
         Committee), specifying the number of Shares to be purchased and
         accompanied by payment therefor and otherwise in accordance with the
         Agreement pursuant to which the Option was granted. The purchase price
         for any Shares purchased pursuant to the exercise of an Option shall be
         paid in full upon such exercise, as determined by the Committee in its
         discretion or as provided in the Agreement, in cash, by check, or by
         transferring Shares to the Company or by attesting to the ownership of
         Shares upon such terms and conditions as determined by the Committee.
         The written notice pursuant to this

                                       5
<PAGE>

         Section 6(e) may also provide instructions from the Optionee to the
         Company that upon receipt of the purchase price in cash from the
         Optionee's broker or dealer, designated as such on the written notice,
         in payment for any Shares purchased pursuant to the exercise of an
         Option, the Company shall issue such Shares directly to the designated
         broker or dealer. Any Shares the Optionee transfers to the Company or
         attests to owning as payment of the purchase price under an Option
         shall be valued at their Fair Market Value on the day preceding the
         date of exercise of such Option. If requested by the Committee, the
         Optionee shall deliver the Agreement evidencing the Option to the
         Secretary of the Company who shall endorse thereon a notation of such
         exercise and return such Agreement to the Optionee. No fractional
         Shares shall be issued upon exercise of an Option and the number of
         Shares that may be purchased upon exercise shall be rounded to the
         nearest number of whole Shares.

                  (f)      RIGHTS OF OPTIONEES. No Optionee shall be deemed for
         any purpose to be the owner of any Shares subject to any Option unless
         and until (i) the Option shall have been exercised pursuant to the
         terms thereof, (ii) the Company shall have issued and delivered the
         Shares to the Optionee and (iii) the Optionee's name shall have been
         entered as a stockholder of record on the books of the Company.
         Thereupon, the Optionee shall have full voting, dividend and other
         ownership rights with respect to such Shares.

                  (g)      TERMINATION OF EMPLOYMENT. The Agreement shall set
         forth the terms and conditions of the Option upon the termination of
         the Optionee's employment with the Company, a Subsidiary or a Business
         Unit (including an Optionee's ceasing to be employed by a Subsidiary or
         Business Unit as a result of the sale of such Subsidiary or Business
         Unit or an interest in such Subsidiary or Business Unit), as the
         Committee may, in its discretion, determine at the time the Option is
         granted or thereafter, provided, however no Option shall be exercisable
         beyond its maximum term as described in Section 6(b) hereof.

                  (h)      EFFECT OF CHANGE IN CONTROL. Unless otherwise
         provided in the Agreement, in the event of a Change in Control, (i) all
         Options outstanding on the date of such Change in Control shall become
         immediately and fully exercisable and (ii) an Optionee will be
         permitted to surrender for cancellation within sixty (60) days after
         such Change in Control, any Option or portion of an Option to the
         extent not yet exercised and the Optionee will be entitled to receive a
         cash payment in the amount equal to the excess, if any, of (x) (A) in
         the case of a Nonqualified Stock Option, the greater of (1) the Fair
         Market Value, on the date preceding the date of surrender, of the
         Shares subject to the Option or portion thereof surrendered or (2) the
         Adjusted Fair Market Value of the Shares subject to the option or
         portion thereof surrendered or (B) in the case of an Incentive Stock
         Option, the Fair Market Value, at the time of surrender, of the Shares
         subject to the Option or portion thereof surrendered, over (y) the
         aggregate purchase price for such Shares under the Option.

                  (i)      MODIFICATION. Subject to the terms of the Plan, the
         Committee may, in its discretion, modify outstanding Options.
         Notwithstanding the foregoing, (a) no modification of an Option shall
         adversely alter or impair any rights or obligations under the Agreement
         without the Optionee's consent, and (b) the Committee shall not have
         authority to materially modify outstanding options or accept the
         surrender of outstanding options and grant new options in substitution
         for them or to change the exercise price of any outstanding Option.

                  (j)      REPLACEMENT AWARDS. Each Replacement Award for an
         option granted under the NSI Long-Term Incentive Plans shall reflect
         the adjustments provided for in the Employee Benefits Agreements and
         shall have the same material terms and conditions as the award it
         replaces under the NSI Long-Term Incentive Plans, as determined by the
         Committee. Notwithstanding any other provision in this Plan to the
         contrary, no Replacement Award in substitution of an award that
         qualified as an Incentive Stock Option immediately before the grant of
         the Replacement Award shall contain any term that is materially more
         favorable than the terms of the substituted award which makes the award
         no longer qualify as an Incentive Stock Option.

         7.       ASPIRATION ACHIEVEMENT INCENTIVE AWARDS.

                  (a)      GRANT OF ASPIRATION AWARDS. Subject to the terms of
         the Plan, the Committee may grant Aspiration Awards to Eligible
         Employees. The Committee shall have the discretion to determine the
         amount of each Aspiration Award and the other terms and conditions
         relating to the grant of such awards.

                  (b)      TERMS OF ASPIRATION AWARDS. The following rules shall
         apply to the Aspiration Awards:

                           (i)      Prior to or at the beginning of the
                  Performance Cycle (or within such time period as is permitted
                  by Code Section 162(m) and the regulations thereunder), the
                  Committee shall determine, based upon the Participant's salary
                  and level of responsibility, the Aspiration Award applicable
                  to the Participant. The Award will contain performance levels

                                       6

<PAGE>

                  related to the Performance Measure(s) that will determine the
                  actual award the Participant will receive at the end of the
                  Performance Cycle. The Committee will select one or more of
                  the Performance Measures listed on Appendix A (which
                  objectives may be different for different Participants or
                  Performance Cycles) for purposes of the Aspiration Awards
                  under the Plan. Performance Measures may be in respect of the
                  performance of the Company and its Subsidiaries on a
                  consolidated basis, or a Subsidiary or a Business Unit, or
                  some combination of the foregoing. Performance levels with
                  respect to a Performance Measure may be absolute or relative
                  and may be expressed in terms of a progression within a
                  specified range. The agreement for an Aspiration Award may
                  provide for such adjustments to the financial performance of
                  the Company (or a Business Unit or Subsidiary) for the
                  Performance Cycle as the Committee deems appropriate and are
                  not inconsistent with Code Section 162(m). Aspiration Awards
                  may also include performance levels that relate to individual
                  achievements or goals. Except with respect to Named Executive
                  Officers, the Committee may establish additional Performance
                  Measures for purposes of Aspiration Awards under the Plan.
                  Further, in the event that applicable tax and/or securities
                  laws (including, but not limited to, Code Section 162(m) and
                  Section 16 of the Exchange Act) change to permit Committee
                  discretion to alter the governing Performance Measures for
                  Named Executive Officers without obtaining stockholder
                  approval of such changes, the Committee shall have sole
                  discretion to make such changes without obtaining stockholder
                  approval.

                           (ii)     No Participant may receive an Aspiration
                  Award in excess of $4 million with respect to a single
                  Performance Cycle.

                  (c)      EARNING OF ASPIRATION AWARDS. After the applicable
         Performance Cycle has ended, the Committee shall certify the extent to
         which the performance levels for the Performance Measure(s) have been
         achieved. In addition to any adjustments provided for by the Agreement,
         the Committee may, in determining whether the performance levels have
         been met, adjust the financial results for a Performance Cycle to
         exclude the effect of unusual charges or income items, or other events
         (such as acquisitions or divestitures and equity and other
         restructurings), which are distortive of financial results for the
         Performance Cycle; provided, that, with respect to Named Executive
         Officers, in determining financial results, items whose exclusion from
         consideration will increase the Award shall only have their effects
         excluded if they constitute "extraordinary" or "unusual" events or
         items under generally accepted accounting principles and all such
         events and items shall be excluded. The Committee shall also adjust the
         performance calculations to exclude the unanticipated effect on
         financial results of changes in the Code, or other tax laws, and the
         regulations thereunder. The Committee may decrease the amount of an
         Award otherwise payable if, in the Committee's view, the financial
         performance during the Performance Cycle justifies such adjustment,
         regardless of the extent to which the Performance Measure was achieved.

                  The Agreement may provide the Committee with the right, during
         a Performance Cycle or after it has ended, to revise the performance
         levels for the Performance Measure and the Award amounts, if unforeseen
         events (including, without limitation, a Change in Capitalization, an
         equity restructuring, an acquisition or a divestiture) occur which have
         a substantial effect on the financial results and which in the judgment
         of the Committee make the application of the performance levels unfair
         unless a revision is made. For Named Executive Officers, such changes
         shall be made in a manner that is not inconsistent with Code Section
         162(m).

                  (d)      FORM AND TIMING OF PAYMENT OF ASPIRATION AWARDS. The
         Agreement shall set forth the manner in which payment of earned
         Aspiration Awards will be made. Payment will be made in cash or in
         Shares, or in a combination of cash and Shares, as determined by the
         Committee in the Agreement. Payment will be made as soon as practical
         after the end of the Performance Cycle to which the Award relates.
         Unless the Committee provides otherwise in the Agreement, for purposes
         of the portion of the Award paid in Shares, the Shares shall be valued
         as the average of their Fair Market Value for the last 10 trading days
         of the Performance Cycle. Notwithstanding the foregoing, the Committee
         may permit a Participant to elect to surrender all or a portion of an
         earned Aspiration Award in exchange for Options upon such terms and
         conditions as may be established by the Committee. The Committee may,
         in its sole discretion, defer payment of an Award or a portion thereof
         and provide for payment at a later date, if the Committee believes such
         payment if not deferred would violate Section 162(m).

                  (e)      TERMINATION OF EMPLOYMENT. The Agreement shall set
         forth the terms and conditions of the Aspiration Award upon the
         termination of the Participant's employment with the Company,
         Subsidiary or a Business Unit (including a Participant's ceasing to be
         employed by a Subsidiary or Business Unit as a result of the sale of
         such Subsidiary or Business Unit or an interest in such Subsidiary or
         Business Unit), as the Committee may, in its discretion, determine at
         the time the Aspiration Award is granted or thereafter.

                                       7

<PAGE>

                  (f)      NONTRANSFERABILITY. Unless the Agreement provides
         otherwise, Aspiration Awards may not be sold, transferred, pledged,
         assigned or otherwise alienated or hypothecated, other than, if amounts
         are payable after the Participant's death, by will or by the laws of
         descent and distribution.

                  (g)      EFFECT OF CHANGE IN CONTROL. In the event of a Change
         in Control, the Participant shall earn and become entitled to payment
         of such portion of the Aspiration Award as set forth in the Agreement.
         The time of payment of the Aspiration Award and the form of such
         payment shall also be as set forth in the Agreement.

         8.       RESTRICTED STOCK. The Committee may grant Awards of Restricted
Stock, and may issue Shares of Restricted Stock in payment in respect of
Aspiration Awards or vested Performance Units (as hereinafter provided in
Section 9(b)), which shall be evidenced by an Agreement between the Company and
the Grantee. Shares of Restricted Stock may be granted or awarded based upon the
achievement of such Performance Measures (as listed on Appendix A) as the
Committee may determine and subject to such other terms and conditions as the
Committee may specify. Each Agreement shall contain such restrictions, terms and
conditions as the Committee may, in its discretion, determine and (without
limiting the generality of the foregoing) such Agreements may require that an
appropriate legend be placed on Share certificates. Subject to the terms of the
Plan, the Committee may modify outstanding Awards of Restricted Stock.
Notwithstanding the foregoing, no modification of an award shall adversely alter
or impair any rights or obligations under the Agreement without the Grantee's
consent. The aggregate maximum number of Shares that may be awarded under a
Restricted Stock Award and an Award of Performance Shares and Performance Units
to a Participant during any fiscal year of the Company is 100,000 Shares and
Units. Awards of Restricted Stock shall be subject to the following terms and
provisions:

                  (a)      RIGHTS OF GRANTEE. Shares of Restricted Stock granted
         pursuant to an Award hereunder shall be recorded in the name of the
         Grantee as soon as reasonably practicable after the Award is granted,
         provided that the Grantee has executed an Agreement evidencing the
         Award, the appropriate blank stock powers and, in the discretion of the
         Committee, an escrow agreement and any other documents which the
         Committee may require as a condition to the issuance of such Shares. If
         a Grantee shall fail to execute the documents which the Committee may
         require within the time period prescribed by the Committee at the time
         the Award is granted, the Award shall be null and void. At the
         discretion of the Committee, Shares issued in connection with a
         Restricted Stock Award shall be deposited together with the stock
         powers with an escrow agent designated by the Committee. Unless the
         Committee determines otherwise and as set forth in the Agreement, upon
         delivery of the Shares to the escrow agent, the Grantee shall have all
         of the rights of a stockholder with respect to such Shares, including
         the right to vote the Shares and to receive all dividends or other
         distributions paid or made with respect to the Shares.

                  (b)      NONTRANSFERABILITY. Unless the Agreement provides
         otherwise, until any restrictions upon the Shares of Restricted Stock
         awarded to a Grantee shall have lapsed in the manner set forth in
         Section 8(c), such Shares shall not be sold, transferred or otherwise
         disposed of and shall not be pledged or otherwise hypothecated, nor
         shall they be delivered to the Grantee.

                  (c)      LAPSE OF RESTRICTIONS.

                           (i)      GENERALLY. Restrictions upon Shares of
                  Restricted Stock awarded hereunder shall lapse at such time or
                  times and on such terms and conditions as the Committee may
                  provide in the Agreement.

                           (ii)     EFFECT OF CHANGE IN CONTROL. Unless the
                  Agreement provides otherwise, in the event of a Change in
                  Control, all restrictions upon any Shares of Restricted Stock
                  (other than Performance Shares) shall lapse immediately and
                  all such Shares shall become fully vested in the Grantee.

                  (d)      TERMINATION OF EMPLOYMENT. The Agreement shall set
         forth the terms and conditions that shall apply upon the termination of
         the Grantee's employment with the Company, a Subsidiary or a Business
         Unit (including a forfeiture of Shares for which the restrictions have
         not lapsed upon Grantee's ceasing to be employed) as the Committee may,
         in its discretion, determine at the time the Award is granted or
         thereafter.

                  (e)      TREATMENT OF DIVIDENDS. At the time the Award of
         Shares of Restricted Stock is granted, the Committee may, in its
         discretion, determine that the payment to the Grantee of dividends, or
         a specified portion thereof, declared or paid on such Shares by the
         Company shall be (i) deferred until the lapsing of the restrictions
         imposed upon such Shares and (ii) held by the Company for the account
         of the Grantee until such time. In the event of such deferral, there
         shall be credited at the end of each year (or portion thereof) interest
         on the amount of the account at the beginning of the year at a rate per
         annum as the

                                       8

<PAGE>

         Committee, in its discretion, may determine. Payment of deferred
         dividends, together with interest accrued thereon, shall be made upon
         the lapsing of restrictions imposed on such Shares, and any dividends
         deferred (together with any interest accrued thereon) in respect of any
         Shares of Restricted Stock shall be forfeited upon the forfeiture of
         such Shares pursuant to Section 8(d) or otherwise.

                  (f)      DELIVERY OF SHARES. Upon the lapse of the
         restrictions on Shares of Restricted Stock, the Committee shall cause a
         stock certificate to be delivered to the Grantee with respect to such
         Shares, free of all restrictions hereunder (except any restrictions
         under Section 17).

                  (g)      REPLACEMENT AWARDS. Each Replacement Award for
         restricted stock granted under the NSI Long-Term Incentive Plans shall
         reflect the adjustments provided for in the Employee Benefits
         Agreements and shall have the same material terms and conditions as the
         award it replaces under the NSI Long-Term Incentive Plans, as
         determined by the Committee.

         9.       PERFORMANCE AWARDS.

                  (a)      PERFORMANCE OBJECTIVES. The Committee will select one
         or more of the Performance Measures listed on Appendix A attached
         hereto for purposes of Performance Awards under the Plan. Performance
         Measures may be in respect of the performance of the Company and its
         Subsidiaries (which may be on a consolidated basis), a Subsidiary or a
         Business Unit, or any combination of the foregoing. Performance Awards
         may also include performance levels that relate to individual
         achievements or goals. Performance objectives may be absolute or
         relative and may be expressed in terms of a progression within a
         specified range, with the Grantee becoming vested in (i) a minimum
         percentage of such Performance Awards in the event the Minimum
         Acceptable Objective is met or, if surpassed, a greater percentage (ii)
         an intermediate percentage of such Performance Awards in the event the
         Good Objective is met or, if surpassed, a greater percentage and (iii)
         one hundred percent (100%) of such Performance Awards in the event the
         Maximum Realistic Objective is met or surpassed. In addition to
         adjustments provided for by the Agreement, the Committee may, in
         determining whether the performance levels have been met, adjust the
         financial results for a Performance Cycle to exclude the effect of
         unusual charges or income items, or other events (such as acquisition
         or divestitures and equity and other restructurings), which are
         distortive of financial results for the Performance Cycle; provided,
         that, with respect to Named Executive Officers, in determining
         financial results, items whose exclusion from consideration will
         increase the Award shall only have their effects excluded if they
         constitute "extraordinary" or "unusual" events or items under generally
         accepted accounting principles and all such events and items shall be
         excluded. The Committee shall also adjust the performance calculations
         to exclude the unanticipated effect on financial results of changes in
         the Code, or other tax laws, and the regulations thereunder. The
         Committee may decrease the amount of an Award otherwise payable if, in
         the Committee's view, the financial performance during the Performance
         Cycle justifies such adjustment, regardless of the extent to which the
         Performance Measure was achieved.

                  The Agreement may provide the Committee with the right, during
         a Performance Cycle or after it has ended, to revise the performance
         levels for the Performance Measure and the Award amounts, if unforeseen
         events (including, without limitation, a Change in Capitalization, an
         equity restructuring, an acquisition or a divestiture) occur which have
         a substantial effect on the financial results and which in the judgment
         of the Committee make the application of the performance levels unfair
         unless a revision is made. For Named Executive Officers, such changes
         shall be made in a manner that is not inconsistent with Code Section
         162(m).

                  Except with respect to Named Executive Officers, the Committee
         may establish additional Performance Measures for purposes of
         Performance Awards under the Plan. Further, in the event that
         applicable tax and/or securities laws (including, but not limited to,
         Code Section 162(m) and Section 16 of the Exchange Act) change to
         permit Committee discretion to alter the governing Performance Measures
         for Named Executive Officers without obtaining stockholder approval of
         such changes, the Committee shall have sole discretion to make such
         changes without obtaining stockholder approval.

                  The aggregate maximum number of Performance Units and
         Performance Shares and Shares of Restricted Stock a Participant may be
         awarded for any fiscal year of the Company shall be 100,000 Units and
         Shares.

                  (b)      PERFORMANCE UNITS. The Committee may grant
         Performance Units, the terms and conditions of which shall be set forth
         in an Agreement between the Company and the Grantee. Each Performance
         Unit shall, contingent upon the attainment of specified performance
         objectives within the Performance Cycle, represent one (1) Share. Each
         Agreement shall specify the number of the Performance Units to which it
         relates, the performance objectives which must be satisfied in order
         for the

                                       9

<PAGE>

         Performance Units to vest, the Performance Cycle within which such
         objectives must be satisfied, and the form of payment in respect of
         vested Performance Units.

                           (i)      VESTING AND FORFEITURE. A Grantee shall
                  become vested with respect to the Performance Units to the
                  extent that the performance objectives set forth in the
                  Agreement are satisfied for the Performance Cycle. Subject to
                  Section 9(d) hereof, if the Minimum Acceptable Objective
                  specified in the Agreement is not satisfied for the applicable
                  Performance Cycle, the Grantee's rights with respect to the
                  Performance Units shall be forfeited.

                           (ii)     PAYMENT OF AWARDS. Payment of Performance
                  Units to Grantees in respect of vested Performance Units shall
                  be made within sixty (60) days after the last day of the
                  Performance Cycle to which such Award relates. Subject to
                  Section 9(d), such payments may be made entirely in Shares,
                  entirely in cash, or in such combination of Shares and cash as
                  the Committee in its discretion, shall determine at any time
                  prior to such payment, provided, however, that if the
                  Committee in its discretion determines to make such payment
                  entirely or partially in Shares of Restricted Stock, the
                  Committee must determine the extent to which such payment will
                  be in Shares of Restricted Stock at the time the Award is
                  granted. Except as provided in Section 9(d), and except as the
                  Committee otherwise provides in the Agreement, if payment is
                  made in the form of cash, the amount payable in respect of any
                  Share shall be equal to the average of the Fair Market Value
                  of such Share for the last ten (10) trading days of the
                  Performance Cycle.

                           (iii)    TERMINATION OF EMPLOYMENT. The Agreement
                  shall set forth the terms and conditions of the Award of
                  Performance Units upon the termination of the Grantee's
                  employment with the Company, a Subsidiary, or a Business Unit
                  (including a Grantee's ceasing to be employed by a Subsidiary
                  or Business Unit as a result of the sale of such Subsidiary or
                  Business Unit or an interest in such Subsidiary or Business
                  Unit) as the Committee may, in its discretion, determine at
                  the time the Award is granted or thereafter.

                  (c)      PERFORMANCE SHARES. The Committee, in its discretion,
         may grant Awards of Performance Shares and shall be evidenced by an
         Agreement between the Company and the Grantee. Each Agreement shall
         contain such restrictions, if any, and the terms and conditions as the
         Committee may, in its discretion, require, and (without limiting the
         generality of the foregoing) such Agreements may require that an
         appropriate legend be placed on Share certificates. Awards of
         Performance Shares shall be subject to the following terms and
         provisions:

                           (i)      RIGHTS OF GRANTEE. The Committee shall
                  provide at the time an Award of Performance Shares is made,
                  the time or times at which the Performance Shares granted
                  pursuant to such Award hereunder shall be issued in the name
                  of the Grantee; provided, however, that no Performance Shares
                  shall be issued until the Grantee has executed an Agreement
                  evidencing the Award, the appropriate blank stock powers and,
                  in the discretion of the Committee, an escrow agreement and
                  any other documents which the Committee may require as a
                  condition to the issuance of such Performance Shares. If a
                  Grantee shall fail to execute the documents which the
                  Committee may require within the time period prescribed by the
                  Committee at the time the Award is granted, the Award shall be
                  null and void. At the discretion of the Committee, Shares
                  issued in connection with an Award of Performance Shares shall
                  be deposited together with the stock powers with an escrow
                  agent designated by the Committee. Except as restricted by the
                  terms of the Agreement, upon delivery of the Shares to the
                  escrow agent, the Grantee shall have, in the discretion of the
                  Committee, all of the rights of a stockholder with respect to
                  such Shares, including the right to vote the shares and to
                  receive all dividends or other distributions paid or made with
                  respect to the shares.

                           (ii)     NONTRANSFERABILITY. Unless the Agreement
                  provides otherwise, until any restrictions upon the
                  Performance Shares awarded to a Grantee shall have lapsed in
                  the manner set forth in Sections 9(c)(3) or 9(d), such
                  Performance Shares shall not be sold, transferred or otherwise
                  disposed of and shall not be pledged or otherwise
                  hypothecated, nor shall they be delivered to the Grantee. The
                  Committee may also impose such other restrictions and
                  conditions on the Performance Shares, if any, as it deems
                  appropriate.

                           (iii)    LAPSE OF RESTRICTIONS. Subject to Section
                  9(d), restrictions upon Performance Shares awarded hereunder
                  shall lapse and such Performance Shares shall become vested at
                  such time or times and on such terms, conditions and
                  satisfaction of performance and other objectives as the
                  Committee may, in its discretion, determine at the time an
                  Award is granted.

                           (iv)     TERMINATION OF EMPLOYMENT. The Agreement
                  shall set forth the terms and conditions of the Award of
                  Performance Shares upon the termination of the Grantee's
                  employment with the Company, a Subsidiary or a Division

                                       10

<PAGE>

                  (including a Grantee's ceasing to be employed by a Subsidiary
                  or Division as a result of the sale of such Subsidiary or
                  Division or an interest in such Subsidiary or Division) as the
                  Committee may, in its discretion, determine at the time the
                  Award is granted or thereafter.

                           (v)      TREATMENT OF DIVIDENDS. At the time the
                  Award of Performance Shares is granted, the Committee may, in
                  its discretion, determine that the payment to the Grantee of
                  dividends, or a specified portion thereof, declared or paid on
                  Performance Shares issued by the Company to the Grantee shall
                  be (i) deferred until the lapsing of the restrictions imposed
                  upon such Performance Shares and (ii) held by the Company for
                  the account of the Grantee until such time. In the event of
                  such deferral, there shall be credited at the end of each year
                  (or portion thereof) interest on the amount of the account at
                  the beginning of the year at a rate per annum as the
                  Committee, in its discretion, may determine. Payments of
                  deferred dividends, together with interest accrued thereon as
                  aforesaid, shall be made upon the lapsing of restrictions
                  imposed on such Performance Shares, except that any dividends
                  deferred (together with any interest accrued thereon) in
                  respect of any Performance Shares shall be forfeited upon the
                  forfeiture of such Performance Shares pursuant to Section
                  9(c)(iv) or otherwise.

                           (vi)     DELIVERY OF SHARES. Upon the lapse of the
                  restrictions on Performance Shares awarded hereunder, the
                  Committee shall cause a stock certificate to be delivered to
                  the Grantee with respect to such Shares, free of all
                  restrictions hereunder.

                  (d)      EFFECT OF CHANGE IN CONTROL. Unless the Agreement
         provides otherwise, in the event of a Change in Control:

                           (i)      With respect to the Performance Units, the
                  Grantee shall (i) become vested in a percentage of Performance
                  Unit as determined by the Committee at the time of the Award
                  of such Performance Units and as set forth in the Agreement
                  and (ii) be entitled to receive in respect of all Performance
                  Units which become vested as a result of a Change in Control,
                  a cash payment within ten (10) days after such Change in
                  Control equal to the product of the Adjusted Fair Market Value
                  of a Share multiplied by the number of Performance Units which
                  become vested in accordance with this Section 9(d); and

                           (ii)     With respect to the Performance Shares, all
                  restrictions shall lapse immediately on all or a portion of
                  the Performance Shares as determined by the Committee at the
                  time of the Award of such Performance Shares and as set forth
                  in the Agreement.

                  (e)      NONTRANSFERABILITY. Unless the Agreement provides
         otherwise, no Performance Awards shall be transferable by the Grantee
         otherwise than by will or the laws of descent and distribution.

                  (f)      DEFINITIONS. For purposes of Performance Awards, the
         following definitions shall apply:

                           (i)      "GOOD OBJECTIVE" means a challenging and
         above average level of performance of the Company, a Subsidiary or a
         Business Unit during a Performance Cycle for which a performance Award
         is granted, as determined by the Committee at the time such Performance
         Award is granted.

                           (ii)     "MAXIMUM REALISTIC OBJECTIVE" means an
         excellent level of performance of the Company, a Subsidiary or a
         Business Unit during a Performance Cycle for which a Performance Award
         is granted, as determined by the Committee at the time such Performance
         Award is granted.

                           (iii)    "MINIMUM ACCEPTABLE OBJECTIVE" means a
         minimum level of performance of the Company, a Subsidiary or a Business
         Unit during a Performance Cycle for which a Performance Award is
         granted, as determined by the Committee at the time such Performance
         Award is granted.

         10.      LOANS.

                  (a)      The Company or any Subsidiary may make loans to a
         Grantee or Optionee in connection with the exercise of an Option,
         subject to the following terms and conditions and such other terms and
         conditions not inconsistent with the Plan including the rate of
         interest, if any, as the Committee shall impose from time to time.

                                       11

<PAGE>

                  (b)      No loan made under the Plan shall exceed the sum of
         (i) the aggregate purchase price payable pursuant to the Option with
         respect to which the loan is made, plus (ii) the amount of the
         reasonably estimated income taxes payable by the Optionee or Grantee
         with respect to the Option or Award. In no event may any such loan
         exceed the Fair Market Value, at the date of exercise, of any such
         Shares.

                  (c)      No loan shall have an initial term exceeding ten (10)
         years; provided, however, that loans under the Plan shall be renewable
         at the discretion of the Committee.

                  (d)      Loans under the Plan may be satisfied by an Optionee
         or Grantee, as determined by the Committee, in cash or, with the
         consent of the Committee, in whole or in part by the transfer to the
         Company of Shares whose Fair Market Value on the date preceding the
         date of such payment is equal to the cash amount for which such Shares
         are transferred.

                  (e)      A loan shall be secured by a pledge of Shares with a
         Fair Market Value of not less than the principal amount of the loan.
         After partial repayment of a loan, pledged Shares no longer required as
         security may be released into escrow or pursuant to the terms of the
         Option, Award or escrow agreement to the Optionee or Grantee.

         11.      ADJUSTMENT UPON CHANGES IN CAPITALIZATION.

                  (a)      In the event of a Change in Capitalization, the
         Committee shall determine in its discretion, exercised in good faith,
         the appropriate adjustments, if any, to the maximum number and class of
         Shares or other stock or securities with respect to which Options or
         Awards may be granted under the Plan (in the aggregate and to an
         individual Participant), the number and class of Shares or other stock
         or securities which are subject to outstanding Options or Awards
         granted under the Plan, and the purchase price therefor, if applicable.

                  (b)      Any such adjustment in the Shares or other stock or
         securities subject to outstanding Incentive Stock Options (including
         any adjustments in the purchase price) shall be made in such manner as
         not to constitute a modification as defined by Section 424(h)(3) of the
         Code and only to the extent otherwise permitted by Sections 422 and 424
         of the Code.

                  (c)      If, by reason of a Change in Capitalization, a
         Grantee of an Award shall be entitled to, or an Optionee shall be
         entitled to exercise an Option with respect to, new, additional or
         different shares of stock, securities, Aspiration Awards, Performance
         Units or Performance Shares (other than rights or warrants to purchase
         securities), such new, additional or different shares shall thereupon
         be subject to all of the conditions, restrictions and performance
         criteria which were applicable to the Aspiration Awards, Performance
         Units or Performance Shares pursuant to the Award or Shares subject to
         the Option, as the case may be, prior to such Change in Capitalization.

         12.      EFFECT OF CERTAIN TRANSACTIONS. Subject to Sections 6(h),
7(g), 8(c)(ii) and 9(d), in the event of (i) the liquidation or dissolution of
the Company or (ii) a merger or consolidation of the Company (a "Transaction"),
the Plan and the Options and Awards issued hereunder shall continue in effect in
accordance with their respective terms and each Optionee and Grantee shall be
entitled to receive in respect of each Share subject to any outstanding Options
or Awards, as the case may be, upon exercise of any Option or Award or payment
or transfer in respect of any Award, the same number and kind of stock,
securities, cash, property, or other consideration that each holder of a Share
was entitled to receive in the Transaction in respect of a Share.

         13.      RELEASE OF FINANCIAL INFORMATION. A copy of the Company's
annual report to stockholders shall be delivered to each Optionee and Grantee at
the time such report is distributed to the Company's stockholders. Upon
reasonable request the Company shall furnish as soon as reasonably practicable,
to each Optionee and Grantee a copy of its most recent annual report and each
quarterly report and current report filed under the Exchange Act since the end
of the Company's prior fiscal year.

         14.      FOREIGN EMPLOYEES. In order to facilitate the making of any
grant of Options or Awards under this Plan, the Committee may provide for such
special terms for Options or Awards to Participants who are foreign nationals or
who are employed by the Company or any Subsidiary outside of the United States
of America as the Committee may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom, which special terms may be
contained in an Appendix attached hereto. Moreover, the Committee may approve
such supplements to or amendments, restatements or alternative versions of this
Plan as it may consider necessary or appropriate for such purposes, without
thereby affecting the terms of this Plan as in effect for any other purpose, and
the Secretary or other appropriate officer of the Company may certify any such
document as having been approved and adopted in the same manner as this Plan. No
such special terms, supplements, amendments or restatements, however, shall
include any

                                       12
<PAGE>

provisions that are inconsistent with the terms of this Plan as then in effect
unless this Plan could have been amended to eliminate such inconsistency without
further approval by the shareholders of the Company.

         15.      TERMINATION AND AMENDMENT OF THE PLAN.

                  (a)      The Plan shall terminate on November 6, 2011, and no
         Option or Award may be granted thereafter. The Board may sooner
         terminate or amend the Plan (other than to reduce the rights of
         Optionees and Grantees, as the case may be, under Sections 6(h), 7(g),
         8(c)(ii) and 9(d)), at any time and from time to time; provided,
         however, that to the extent legally required, no amendment shall be
         effective unless approved by the stockholders of the Company in
         accordance with applicable law and regulations at an annual or special
         meeting.

                  (b)      Except as provided in Sections 11 and 12 hereof,
         rights and obligations under any Option or Award granted before any
         amendment of the Plan shall not be adversely altered or impaired by
         such amendment, except with the consent of the Optionee or Grantee, as
         the case may be.

         16.      NONEXCLUSIVITY OF THE PLAN. The adoption of the Plan by the
Board shall not be construed as amending, modifying or rescinding any previously
approved incentive arrangement or as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan, and such arrangements may be either applicable generally or only
in specific cases.

         17.      LIMITATION OF LIABILITY. As illustrative of the limitations of
liability of the Company, but not intended to be exhaustive thereof, nothing in
the Plan shall be construed to:

                  (a)      give any person any right to be granted an Option or
         Award other than at the sole discretion of the Committee;

                  (b)      give any person any rights whatsoever with respect to
         Shares except as specifically provided in the Plan;

                  (c)      limit in any way the right of the Company to
         terminate the employment of any person at any time (with or without
         Cause); or

                  (d)      be evidence of any agreement or understanding,
         expressed or implied, that the Company will employ any person in any
         particular position at any particular rate of compensation or for any
         particular period of time.

         18.      REGULATION AND OTHER APPROVALS; GOVERNING LAW.

                  (a)      This Plan and the rights of all persons claiming
         hereunder shall be construed and determined in accordance with the laws
         of the State of Delaware without giving effect to the conflicts of laws
         principles thereof, except to the extent that such law is preempted by
         federal law.

                  (b)      The obligation of the Company to sell or deliver
         Shares with respect to Options and Awards granted under the Plan shall
         be subject to all applicable laws, rules and regulations, including all
         applicable federal and state securities laws, and the obtaining of all
         such approvals by governmental agencies as may be deemed necessary or
         appropriate by the Committee.

                  (c)      The Plan is intended to comply with Rule 16b-3
         promulgated under the Exchange Act and the Committee shall interpret
         and administer the provisions of the Plan or any Agreement in a manner
         consistent therewith. Any provisions inconsistent with such Rule shall
         be inoperative and shall not affect the validity of the Plan.

                  (d)      The Board may make such changes as may be necessary
         or appropriate to comply with the rules and regulations of any
         government authority, or to obtain for Eligible Employees granted
         Incentive Stock Options the tax benefits under the applicable
         provisions of the code and regulations promulgated thereunder.

                  (e)      Each Option and Award is subject to the requirement
         that, if at any time the Committee determines, in its discretion, that
         the listing, registration or qualification of Shares issuable pursuant
         to the Plan is required by any securities exchange or under any state
         or federal law, or the consent or approval of any governmental
         regulatory body is necessary or desirable as a condition of, or in
         connection with, the grant of an Option or the issuance of Shares, no
         Options shall be granted or payment

                                       13

<PAGE>

         made or Shares issued, in whole or in part, unless such listing,
         registration, qualification, consent or approval has been effected or
         obtained free of any conditions as acceptable to the Committee.

                  (f)      Notwithstanding anything contained in the Plan to the
         contrary, in the event that the disposition of Shares acquired pursuant
         to the Plan is not covered by a then current registration statement
         under the Securities Act of 1933, as amended, and is not otherwise
         exempt from such registration, such Shares shall be restricted against
         transfer to the extent required by the Securities Act of 1933, as
         amended, and Rule 144 or other regulations thereunder. The Committee
         may require any individual receiving Shares pursuant to the Plan, as a
         condition precedent to receipt of such Shares (including upon exercise
         of an Option), to represent and warrant to the Company in writing that
         the Shares acquired by such individual are acquired without a view to
         any distribution thereof and will not be sold or transferred other than
         pursuant to an effective registration thereof under said Act or
         pursuant to an exemption applicable under the Securities Act of 1933,
         as amended, or the rules and regulations promulgated thereunder. The
         certificates evidencing any of such Shares shall be appropriately
         legended to reflect their status as restricted securities as aforesaid.

                  (g)      In the event that changes are made to Code Section
         162(m) to permit greater flexibility with respect to any Award or
         Option under the Plan, the Committee may, subject to this Section 18,
         make any adjustments it deems appropriate in such Award or Option.

         19.      MISCELLANEOUS.

                  (a)      MULTIPLE AGREEMENTS. The terms of each Option or
         Award may differ from other Options or Awards granted under the Plan at
         the same time, or at some other time. The Committee may also grant more
         than one Option or Award to a given Eligible Employee during the term
         of the Plan, either in addition to, or in substitution for, one or more
         Options or Awards previously granted to that Eligible Employee. The
         grant of multiple Options and/or Awards may be evidenced by a single
         Agreement or multiple Agreements, as determined by the Committee.

                  (b)      WITHHOLDING OF TAXES.

                           (i)      The Company shall have the right to deduct
                  from any distribution of cash to any Optionee or Grantee, an
                  amount equal to the federal, state and local income taxes and
                  other amounts as may be required by law to be withheld (the
                  "Withholding Taxes") with respect to any Option or Award. If
                  an Optionee or Grantee is entitled to receive Shares upon
                  exercise of an Option or pursuant to an Award, the Optionee or
                  Grantee shall pay the Withholding Taxes to the Company prior
                  to the issuance, or release from escrow, of such Shares. In
                  satisfaction of the Withholding Taxes to the Company, the
                  Optionee or Grantee may make an irrevocable written election
                  (the "Tax Election"), which may be accepted or rejected in the
                  discretion of the Committee, to have withheld a portion of the
                  Shares issuable to him or her upon exercise of the Option or
                  pursuant to an Award having an aggregate Fair Market Value
                  equal to the Withholding Taxes.

                           (ii)     If an Optionee makes a disposition, within
                  the meaning of Section 424(c) of the Code and regulations
                  promulgated thereunder, of any Share or Shares issued to him
                  pursuant to his exercise of an Incentive Stock Option within
                  the two-year period commencing on the day after the date of
                  the grant or within the one-year period commencing on the day
                  after the date of transfer of such Share or Shares to the
                  Optionee pursuant to such exercise, the Optionee shall, within
                  ten (10) days of such disposition, notify the Company thereof,
                  by delivery of written notice to the Company at its principal
                  executive office, and immediately deliver to the Company the
                  amount of Withholding Taxes.

                  (c)      DESIGNATION OF BENEFICIARY. To the extent applicable
         to the type of Award, each Grantee (other than an Optionee) may
         designate a person or persons to receive in the event of his or her
         death, any Award or any amount payable pursuant thereto, to which he or
         she would then be entitled under the terms of the Plan. Such
         designation will be made upon forms supplied by and delivered to the
         Company and may be revoked in writing.

                  (d)      DEFERRAL. The Committee may permit a Participant to
         defer to another plan or program such Participant's receipt of Shares
         or cash that would otherwise be due to such Participant by virtue of
         the exercise of an Option, earning of an Aspiration Award, the vesting
         of Restricted Stock or the earning of Performance Awards. If any such
         deferral election is required or permitted, the Committee shall, in its
         sole discretion, establish rules and procedures for such payment
         deferrals.

         20.      EFFECTIVE DATE. This Plan shall be effective November 30,
2001.

                                       14
<PAGE>

                  IN WITNESS WHEREOF, the Plan has been executed by the Company
      on this 28th day of November, 2001, to be effective on the Effective Date.

                                       ACUITY BRANDS, INC.

                                       By: /s/ James S. Balloun
                                          --------------------------------------
                                          James S. Balloun
                                          Chairman, President and
                                            Chief Executive Officer

                                       15

<PAGE>

                                   APPENDIX A
                                       TO
                               ACUITY BRANDS, INC.
                            LONG-TERM INCENTIVE PLAN

<TABLE>
<CAPTION>
PERFORMANCE MEASURE                                                     GENERAL DEFINITION
--------------------                                                    ------------------
<S>                                                                     <C>
AATP Margin ................................................            AATP divided by Sales

Adjusted After-Tax Profit (AATP) ...........................            APTP minus book income taxes (reported tax rate
                                                                        applied to APTP)

Adjusted Pre-Tax Profit (APTP) .............................            Income before provision for income taxes plus
                                                                        interest expense plus implied interest on
                                                                        capitalized operating leases. The measure may
                                                                        include or exclude income from discontinued
                                                                        operations, extraordinary items, changes in
                                                                        accounting principles, and restructuring expense.

Capitalized Economic Profit ................................            Economic Profit divided by a predetermined rate
                                                                        reflecting the cost of capital

Capitalized Entity Value ...................................            Sum of average invested capital in the
                                                                        business and the Capitalized Economic Profit

Capitalized Equity Value ...................................            Capitalized Entity Value minus total debt

Cashflow ...................................................            Net cash provided by operating activities
                                                                        less net cash used for investing activities

Cashflow Return on Capital .................................            Cashflow divided by average invested capital

Cashflow Return on Capitalized Entity/Equity Value .........            Cashflow divided by Capitalized Entity/Equity
                                                                        Value

Cashflow Return on Investment ..............................

Change in Price of Shares ..................................

Earnings Per Share .........................................            Primary or fully diluted earnings per share

Economic Profit ............................................            AATP minus a charge for capital

Net Income .................................................            Net income as reported in NSI's annual financial
                                                                        statements or the books and records of its
                                                                        segments. The measure may include or exclude
                                                                        income from discontinued operations,
                                                                        extraordinary items, changes in accounting
                                                                        principles, and restructuring expense.

Net Income Return on Capital ...............................            Net Income divided by average invested capital

Return on Assets (ROA) .....................................            Net Income divided by average total assets

Return on Equity (ROE) .....................................            Net Income divided by average stockholders'
                                                                        equity

Return on Gross Investment .................................            Sum of Net Income plus depreciation divided by
                                                                        sum of average invested capital plus accumulated
                                                                        depreciation

Return on Invested Capital .................................            Net Income or AATP divided by average
                                                                        invested capital

Return on Net Assets (RONA) ................................            Net Income, APTP, or income before taxes,
                                                                        divided by average net assets

Sales ......................................................            Net sales of products and service revenues

Sales Growth ...............................................            Percentage change in Sales from year to year

Total Return to Stockholders ...............................            Percentage change in stockholder value (stock
                                                                        price plus reinvested dividends)
</TABLE>

                                       16

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