Exhibit 10.3

 

EXECUTION VERSION

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”), effective as of the Effective
Date, is by and among Karen Katz (the “Executive”), The Neiman Marcus
Group, Inc., a Delaware corporation (“NMG”) and, solely for purposes of
Paragraphs 2 and 23, Neiman Marcus Group LTD Inc. (formerly known as Neiman
Marcus, Inc., and referred to as “NMI”), a Delaware corporation.

 

1.                                      Definitions.  As used in this Agreement,
the following terms have the following meanings:

 

(a)           “Affiliate” means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
such Person.  As of the Effective Date, NMG and Parent are “Affiliates” of one
another.

 

(b)           “Cause” means one or more of the following: (i) the Executive’s
willful and material failure to substantially perform her duties (other than as
a result of physical or mental illness or injury), or other material breach of
this Agreement by the Executive; (ii) the Executive’s (A) willful misconduct or
(B) gross negligence, in each case which is materially injurious to NMG or any
of its Affiliates; (iii) the Executive’s willful breach of her fiduciary duty or
duty of loyalty to NMG or any of its Affiliates; or (iv) the commission by the
Executive of any felony or other serious crime involving moral turpitude.  For
purposes of the foregoing, no act or failure to act shall be treated as
“willful” unless done, or omitted to be done, by the Executive not in good faith
and without the reasonable belief that the Executive’s action or omission was in
the best interest of NMG.

 

(c)           “Code” means the Internal Revenue Code of 1986, as amended.

 

(d)           “Competitor” means (i) any Person (other than NMG or an Affiliate
of NMG) that owns or operates a luxury specialty retail store; (ii) Saks
Incorporated, Nordstrom, Inc., Barneys New York, Inc., Macy’s, Inc., Hudson’s
Bay Company, Amazon.com, Inc., Net-a-Porter LLC, Gilt Groupe, Inc. or, if those
corporate names are not correct, the businesses commonly referred to as “Saks,”
“Nordstrom’s,” “Barneys,” “Bloomingdales,” “Lord and Taylor,” “Amazon,”
“Net-a-Porter,” and “Gilt” or any of their respective parent companies, as
applicable; and (iii) the successors to and assigns of the Persons described in
(ii).

 

(e)           “Confidential Information” means all confidential or proprietary
information of NMG, Parent and their respective Affiliates, including (without
limitation) all documents or information, in whatever form or medium, concerning
or evidencing sales; costs; pricing; strategies; forecasts and long range plans;
financial and tax information; personnel information; business, marketing and
operational projections, plans and opportunities; and customer, vendor, and
supplier information; but excluding any such information that is or becomes
generally available to the public other than as a result of any breach of this
Agreement or other unauthorized disclosure by the Executive.

 

(f)            “Disability” means, and shall be deemed to have occurred if, the
Executive has been determined under NMG’s long-term disability plan to be
eligible for long-term disability benefits.  In the absence of the Executive’s
participation in such plan, “Disability” means that, in the NMG Board’s sole
judgment, the Executive is unable to perform any of the material duties of

 

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her regular position because of an illness or injury for (i) 80% or more of the
normal working days during six consecutive calendar months or (ii) 50% or more
of the normal working days during twelve consecutive calendar months.

 

(g)           “Effective Date” means the Closing Date (as defined in the Merger
Agreement).

 

(h)           “Employment Termination Date” means the effective date of
termination of the Executive’s employment as established under Paragraph 6(j).

 

(i)            “Good Reason” means any of the following actions if taken without
the Executive’s prior consent: (i) any material failure by NMG to comply with
its obligations under Paragraph 5 (Compensation and Related Matters); (ii) any
material failure by NMG to comply with its obligations under Paragraph 19
(Assumption by Successor); (iii) a material reduction in the Executive’s
responsibilities or duties as in effect on the Effective Date; (iv) any
relocation of the Executive’s place of business to a location 50 miles or more
from the current location; (v) the reduction in title of the Executive or
reporting relationships as Chief Executive Officer of NMG; (vi) so long as no
shares of NMG’s or Parent’s capital stock (or the capital stock of any Person or
Persons that are successors to the business of NMG or Parent) are listed on a
national securities exchange, any action or inaction by NMG or Parent or their
shareholders that prevents the Executive from serving on the NMG Board, other
than an action or inaction that (A) is required by law, (B) occurs because of a
reorganization where the Executive will serve on the board or boards of the
Person or Persons that are successors to the business of NMG or Parent, or
(C) occurs in connection with the termination of the Executive’s employment due
to death, by NMG for Cause or Disability or by Executive without Good Reason or
for Retirement; or (vii) a material breach of this Agreement by NMG.

 

(j)            “Management Equity Incentive Plan” means the NM Mariposa
Holdings, Inc. Management Equity Incentive Plan, relating to 10% of Parent
common stock, on a fully diluted basis, to be adopted on or as soon as
reasonably practicable after the Effective Date.

 

(k)           “Merger Agreement” means the Agreement and Plan of Merger by and
among Parent, Mariposa Merger Sub LLC and Neiman Marcus Group LTD Inc., dated as
of September 9, 2013.

 

(l)            “NMG Board” means the Board of Directors of NMG, or any successor
governing body of NMG or its successors.

 

(m)          “Parent” means NM Mariposa Holdings, Inc.

 

(n)           “Parent Board” means the Board of Directors of Parent, or any
successor governing body of Parent or its successors.

 

(o)           “Person” means any individual, corporation, partnership, sole
proprietorship, joint venture, association, joint-stock company, trust,
unincorporated organization, limited liability company, government or other
entity.

 

(p)           “Retirement” means the Executive’s “separation from service” under
Section 409A of the Code solely due to the Executive’s retirement upon or
following the second

 

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anniversary of the Effective Date, provided that Executive has delivered written
notice to the NMG Board at least 12 months’ prior to such separation from
service indicating her intent to retire from NMG.

 

(q)           “Target Bonus” means the target bonus under NMG’s annual incentive
bonus program(s).

 

(r)            “Work Product” means all ideas, works of authorship, inventions
and other creations, whether or not patentable, copyrightable, or subject to
other intellectual-property protection, that are made, conceived, developed or
worked on in whole or in part by the Executive while employed by NMG or any of
its Affiliates, that relate in any manner whatsoever to the business, existing,
proposed or advisable, of NMG or any of its Affiliates, or any other business or
research or development effort in which NMG or any of its Affiliates engages
during the Executive’s employment.  Work Product includes any material
previously conceived, made, developed or worked on during the Executive’s
employment with NMG or any of its Affiliates prior to the Effective Date.

 

2.                                      Employment; Prior Agreements.  NMG
agrees to continue to employ the Executive, and the Executive agrees to continue
to be employed, for the period set forth in Paragraph 3, in the position and
with the duties and responsibilities set forth in Paragraph 4, and upon the
other terms and conditions set out in this Agreement.  The employment agreement
entered into by and among the Executive, NMG and NMI, effective October 6, 2010,
as amended on December 31, 2010 (the “Prior Agreement”), is hereby superseded
effective as of the Effective Date and replaced in its entirety by this
Agreement without further right or obligation thereunder on the part of either
party thereto.  The replacement of the Prior Agreement with this Agreement does
not cause any right or obligation under the Prior Agreement to arise.  Prior to
the Effective Date, the Prior Agreement shall remain in full force and effect. 
Notwithstanding anything to the contrary, this Agreement shall only become
effective on the Effective Date and if (a) the Merger Agreement is terminated in
accordance with its terms or otherwise, or (b) the Executive’s employment or
service with NMG or its Affiliates terminates before the Effective Date under
any circumstances, this Agreement will thereupon automatically be null and void
and without effect, and neither the Executive nor NMG will have any rights or
obligations hereunder.

 

3.                                      Term.  Unless sooner terminated as
provided in this Agreement, the term of the Agreement shall commence on the
Effective Date and extend until the fourth anniversary thereof (the “Employment
Term”), provided that the Employment Term shall automatically be extended for
successive one year periods thereafter, unless at least three months prior to
the commencement of any such one year period, either party provides written
notice to the other (a “Notice of Non-Renewal”) that the Employment Term shall
not be so extended.  The Executive’s employment will end upon the expiration of
the Employment Term.

 

4.                                      Position and Duties.

 

(a)           The Executive shall serve as the President and Chief Executive
Officer of NMG and Parent.  In such capacities, the Executive, subject to the
ultimate control and direction of the

 

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Parent Board, shall have and exercise direct charge of and general supervision
over the business and affairs of NMG and Parent.  In addition, the Executive
shall have such other duties, functions, responsibilities, and authority as are
from time to time delegated to the Executive by the Parent Board; provided,
however, that such duties, functions, responsibilities, and authority are
reasonable and customary for a person serving in the same or similar capacity of
an enterprise comparable to NMG, Parent and their Affiliates.  The Executive
shall report and be accountable to the Parent Board.  During the portion of the
Employment Term during which no shares of NMG’s or Parent’s capital stock (or
the capital stock of any Person or Persons that are successors to the business
of NMG or Parent) are listed on a national securities exchange, the Executive
shall serve as a member of the NMG Board and the Parent Board, and during the
portion of the Employment Term during which any shares of NMG’s or Parent’s
capital stock (or the capital stock of any intermediary corporation or any
Person or Persons that are successors to the business of NMG or Parent) are
listed on a national securities exchange, NMG and Parent shall use commercially
reasonable efforts to nominate the Executive for election as a member of the
Board of Directors of the entity whose shares are so listed at each meeting of
such entity’s shareholders at which the election of the Executive is subject to
a vote by shareholders and recommend that the shareholders vote to elect
Executive as a member of such Board of Directors.  Notwithstanding anything
herein to the contrary, the Executive agrees that any action that may be taken
by the NMG Board may be taken by the Parent Board and be deemed to action by the
NMG Board.

 

(b)           During the Employment Term, the Executive shall devote her full
time, skill, and attention and her best efforts to the business and affairs of
NMG and Parent to the extent necessary to discharge fully, faithfully, and
efficiently the duties and responsibilities delegated and assigned to the
Executive in or pursuant to this Agreement, except for usual, ordinary, and
customary periods of vacation and absence due to illness or other disability.
 Notwithstanding the foregoing, the Executive may (i) subject to the prior
written approval of the Parent Board, serve as a director or as a member of an
advisory board of a noncompeting company, (ii) serve as an officer or director
or otherwise participate in non-profit educational, welfare, social, religious,
professional, and civic organizations, including, without limitation, all such
positions and participation in effect as of the Effective Date, and (iii) manage
personal and family investments; provided, however, that any such activities as
described in (i), (ii) or (iii) of the preceding provisions of this Paragraph
4(b) do not materially interfere with the performance and fulfillment of the
Executive’s duties and responsibilities as an executive of NMG and Parent in
accordance with this Agreement.

 

(c)           In connection with the Executive’s employment by NMG under this
Agreement, the Executive shall be based at the principal executive offices of
NMG in Dallas, Texas, except for such reasonable travel as the performance of
the Executive’s duties in the business of NMG and its Affiliates may require.

 

(d)           All services that the Executive may render to NMG or any of its
Affiliates in any capacity during the Employment Term shall be deemed to be
services required by this Agreement and the consideration for such services is
that provided for in this Agreement.

 

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5.                                      Compensation and Related Matters.

 

(a)           Base Salary.  During the Employment Term, NMG shall pay to the
Executive for her services under this Agreement an annual base salary.  The
Executive’s annual base salary, as in effect from time to time, is hereinafter
referred to as the “Base Salary.” The Base Salary on the Effective Date shall be
$1,070,000.  The Base Salary will be reviewed annually and is subject to
increase at the discretion of the NMG Board.  The Base Salary may not be
reduced, provided, however, that the Base Salary may be reduced, without such
reduction constituting either a violation of this Agreement or Good Reason, if
the reduction is pursuant to action of NMG or its Affiliates reducing the annual
salaries of all NMG senior executives by substantially equal amounts or
substantially equal percentages of such executives’ annual salaries.  The Base
Salary shall be payable in installments in accordance with the general payroll
practices of NMG, or as otherwise mutually agreed upon.

 

(b)           Annual Incentives.  The Executive will participate in NMG’s annual
incentive bonus program(s) applicable to the Executive’s position, in accordance
with the terms of such program(s), and shall have the opportunity to earn an
annual bonus thereunder based on the achievement of performance objectives
determined by the NMG Board after consultation with the Executive.  During each
fiscal year, the minimum bonus payable to the Executive if the threshold bonus
targets for such year are achieved will be 50% of the Executive’s Base Salary
for such fiscal year, the Target Bonus will be 125% of Base Salary, and the
maximum bonus payable to the Executive will be 250% of Base Salary.  The actual
amount of any annual incentive bonus paid to the Executive will be determined
according to the terms of the annual incentive bonus program(s), including any
such terms that place the amount of any annual incentive bonus within the
discretion of the NMG Board.  No annual incentive bonus will be paid pursuant to
this Paragraph 5(b) unless the Executive has remained continuously employed with
NMG through the applicable payment date, except as otherwise expressly provided
for in Paragraph 7 hereof.

 

(c)           Long-term Incentives.  The Executive will participate in such
long-term incentive programs as the NMG Board may determine.  On, or as soon as
reasonably practicable after, the Effective Date, the Executive shall roll over
stock options for NMI stock on substantially the terms set forth in the
Co-Invest Option Agreement as set forth on Exhibit A.  On, or as soon as
reasonably practicable after, the Effective Date, Parent will grant to the
Executive a time-vested stock option to purchase [25,116](1) shares of each of
Class A and Class B common stock of Parent on terms as set forth in the
Time-Vested Option Agreement as set forth in Exhibit B, and a performance-vested
stock option to purchase [25,116](2) shares of each of Class A and Class B
Common Stock of Parent on terms as set forth in the Performance-Vested Option
Agreement as set forth in Exhibit C.  The Executive acknowledges and agrees that
the terms of the grant of an award pursuant to the Management Equity Incentive
Plan shall be governed exclusively by the terms of such plan and award
agreement, including, without limitation, the vesting provisions thereof.
Accordingly, except as otherwise provided pursuant to such plan or award
agreement,

 

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(1)  Final option numbers subject to final equity accounting at Closing.

(2)  Final option numbers subject to final equity accounting at Closing.

 

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there shall be no acceleration of vesting as a result of a termination of
employment for any reason.

 

(d)           SERP Participation.  If (i) during the Employment Term, the
Executive’s employment is terminated by NMG for any reason other than death,
Disability, or Cause, (ii) during the Employment Term, the Executive’s
employment is terminated by the Executive for Good Reason or Retirement, or
(iii) the Executive’s employment terminates upon expiration of the Employment
Term following the provision by NMG of a Notice of Non-Renewal, and, in any such
case, on the date of such termination the Executive has not yet reached age 65,
the Executive’s benefit under The Neiman Marcus Group, Inc. Supplemental
Executive Retirement Plan (the “SERP”) shall not be reduced according to the
terms of the SERP solely by reason of the Executive’s failure to reach age 65 as
of the Employment Termination Date.  During the Employment Term, the Executive
shall participate in and accrue benefits under The Neiman Marcus Group, Inc.
Defined Contribution Supplemental Executive Retirement Plan (the “DC SERP”),
provided that the amount credited to the account(s) maintained for the Executive
under the DC SERP as of the last day of her Employment Term shall not be less
than the present value (determined on the basis of the 1984 Unisex Pension
Mortality Table and an interest rate of 6%) of the additional benefits the
Executive would have accrued under the SERP after December 31, 2010 had the SERP
remained in effect through the end of the Employment Term.

 

(e)           Employee Benefits.  During the Employment Term, the Executive
shall be entitled to participate in all employee benefit plans, programs, and
arrangements that are generally made available by NMG to its senior executives,
including without limitation NMG’s life insurance, long-term disability, and
health plans.  NMG agrees that the employee benefit plans, programs and
arrangements that are made available to the Executive during the Employment Term
will not be materially diminished in the aggregate from those benefit plans,
programs and arrangements made available immediately prior to the Effective
Date, provided, however, that the employee benefit plans, programs and
arrangements that are made available to the Executive may be reduced, without
such reduction constituting either a violation of this Agreement or Good Reason,
if the reduction is pursuant to an action of NMG or its Affiliates reducing
employee benefit plans, programs and arrangements either for employees generally
or for all NMG senior executives in a substantially similar manner.  The
Executive agrees to cooperate and participate in any medical or physical
examinations as may be required by any insurance company in connection with the
applications for such life and/or disability insurance policies.

 

(f)            Fringe Benefits.  During the Employment Term, the Executive will
be entitled to the perquisites and other fringe benefits that are made available
by NMG to its senior executives generally and to such perquisites and fringe
benefits that are made available by NMG to the Executive in particular, subject
to any applicable terms and conditions of any specific perquisite or other
fringe benefit.  NMG agrees that the perquisites and other fringe benefits that
are made available to the Executive during the Employment Term will not be
materially diminished in the aggregate from those perquisites and fringe
benefits made available immediately prior to the Effective Date, provided,
however, that the perquisites and fringe benefits made available to the
Executive may be reduced, without such reduction constituting either a violation
of this Agreement or Good Reason, if the reduction is pursuant to an action of
NMG or its Affiliates

 

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reducing the perquisites or other fringe benefits of all of NMG’s senior
executives in a substantially similar manner.

 

(g)           Financial Planning and Advice.  The Executive shall be entitled to
receive reimbursement for up to $5,000 per each calendar year during the
Employment Term for fees and expenses incurred by her for personal financial and
tax advice and planning, including without limitation fees and expenses covering
services relating to personal financial and tax advice and planning arising from
the Executive’s compensation and benefits provided pursuant to this Agreement
and otherwise by NMG.  The Executive shall provide to NMG a request for
reimbursement along with a reasonably detailed receipt indicating the nature of
the services provided for any such fees and expenses within 30 days of the
occurrence of such fees and expenses.  Any such reimbursement shall be made as
soon as administratively possible, but in any event no later than the maximum
time permitted by Treasury Regulation Section 1.409A-3(i)(1)(iv).  The amount of
expenses incurred that are eligible for reimbursement pursuant to this Paragraph
5(g) with respect to any calendar year shall not affect the amount eligible for
reimbursement in any other calendar year.

 

(h)           Expenses.  The Executive shall be entitled to receive
reimbursement for all reasonable expenses incurred by the Executive in
performing her duties and responsibilities under this Agreement, consistent with
NMG’s policies or practices for reimbursement of expenses incurred by other NMG
senior executives.  In addition, and in lieu of any reimbursement to the
Executive of hotel or other lodging expenses incurred by the Executive in
connection with trips to New York for the business of NMG or its Affiliates, NMG
shall pay the Executive a lump sum cash payment during each year of the
Employment Term in the amount of $15,000 plus an amount necessary to gross-up
such payment for income taxes to be incurred by the Executive on such payment
such that the net amount of each such payment after income taxes shall total
$15,000.  Such payments shall be made on the first regularly scheduled pay date
in January of each calendar year during the Employment Term, or, in the event of
the Executive’s separation from service during the Employment Term and prior to
the payment of such amount for such year, the date of the Executive’s separation
from service.  The Executive shall also participate in any NMG policy providing
for the reimbursement to employees of liability for any New York state and city
taxes, on an after-tax basis, incurred by NMG employees who work principally in
states other than New York, subject to the terms and conditions of such policy
so long as it is in effect and as it may be amended from time to time; provided
that the Executive’s participation in such policy shall not result in the
Executive being reimbursed for income taxes which are grossed up in connection
with the New York lodging payment provided for above.

 

(i)            Vacations.  During the Employment Term, the Executive shall be
eligible for vacation, sick pay, and other paid and unpaid time off in
accordance with the policies and practices of NMG.  The Executive agrees to use
her vacation and other paid time off at such times that are (i) consistent with
the proper performance of her duties and responsibilities and (ii) mutually
convenient for NMG and the Executive.

 

(j)            Indemnification.  The Executive will be entitled to
indemnification on the same terms as indemnification is made available by NMG to
its other senior executives and directors (in each case, in their capacities as
such), whether through NMG’s bylaws or otherwise.

 

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6.             Termination of Employment.

 

(a)           Death.  The Executive’s employment shall terminate automatically
upon her death.

 

(b)           Disability.  In the event of the Executive’s Disability during the
Employment Term, NMG may notify the Executive of NMG’s termination of the
Executive’s employment.

 

(c)           Termination by NMG for Cause.  NMG may terminate the Executive’s
employment for Cause.  To exercise its right to terminate the Executive’s
employment pursuant to clause (i), (ii) or (iii) of the definition of Cause,
however, solely to the extent such event may reasonably be corrected, NMG must
first provide the Executive with a reasonable period of time to correct the
circumstances or events (but not more than 30 days) that NMG contends give rise
to the existence of Cause under such provision.  Prior to terminating the
Executive’s employment for Cause under this Paragraph 6(c), NMG must provide the
Executive with a written notice of its intent to terminate her employment for
Cause.  Such written notice must specify the particular act or acts or
failure(s) to act that form(s) the basis for the decision to so terminate the
Executive’s employment for Cause.  The Executive will be given the opportunity
within 30 calendar days of her receipt of such notice to meet with the NMG Board
to defend herself with regard to the alleged act or acts or failure(s) to act. 
If at the conclusion of or following such a meeting, the NMG Board decides to
proceed with the termination of the Executive’s employment for Cause, such a
termination will be effected by providing the Executive with a Notice of
Termination under Paragraph 6(h).  Upon or after NMG’s issuance of the notice of
intent to terminate the Executive’s employment for Cause, NMG may suspend the
Executive with pay pending the NMG Board’s decision whether to proceed with the
termination.

 

(d)           Termination by the Executive for Good Reason.  The Executive may
terminate her employment for Good Reason.  To exercise her right to terminate
for Good Reason, the Executive must provide written notice to NMG of her belief
that Good Reason exists, and that notice shall describe the circumstance
believed by her to constitute Good Reason.  Prior to the Executive terminating
her employment for Good Reason under this Paragraph 6(d), the Executive must
provide NMG with a written notice of her intent to terminate her employment for
Good Reason.  If that circumstance may reasonably be remedied, NMG shall have 30
days to effect that remedy.  If not remedied within that 30-day period, the
Executive may submit a Notice of Termination; provided, however, that the Notice
of Termination invoking the Executive’s right to terminate her employment for
Good Reason must be given, and such termination must be effective, no later than
(i) 60 days after the later of the first date the Executive knew or should have
known that Good Reason existed, and (ii) the end of NMG’s 30-day cure period, if
applicable; otherwise, the Executive is deemed to have accepted the
circumstance(s) that may have given rise to the existence of Good Reason;
provided, further, that notwithstanding anything to the contrary, NMG shall have
the right to accelerate the Employment Termination Date to an earlier date than
that specified in the Executive’s notice so long as NMG pays her all
compensation to which she would have been entitled had the Employment
Termination Date not been so accelerated.

 

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(e)           Termination by the Executive for Retirement.  On or after the
second anniversary of the Effective Date, the Executive may terminate her
employment for Retirement, provided that the Executive has provided at least 12
months’ prior written notice to the NMG Board indicating her intent to so
retire. Notwithstanding anything to the contrary, NMG shall have the right to
accelerate the Employment Termination Date to an earlier date than that
specified in the Executive’s notice so long as NMG pays her all compensation to
which she would have been entitled had the Employment Termination Date not been
so accelerated.

 

(f)            Termination by the Executive without Good Reason and not for
Retirement.  The Executive may voluntarily terminate the Executive’s employment
without Good Reason and not for Retirement upon at least three months’ prior
written notice to NMG; provided that, notwithstanding anything to the contrary,
NMG shall have the right to accelerate the Employment Termination Date to an
earlier date than that specified in the Executive’s written notice so long as
NMG pays her all compensation to which she would have been entitled had the
Employment Termination Date not been so accelerated.

 

(g)           Termination by the Company without Cause.  NMG may terminate the
Executive’s employment without Cause immediately upon written notice to the
Executive.

 

(h)           Termination by Reason of Non-Renewal.  The Executive’s employment
will terminate upon the expiration of the Employment Term if either party
provides a Notice of Non-Renewal pursuant to Paragraph 3.  Such a termination of
employment shall not be considered to be a termination under Paragraph 6(f) or
6(g).

 

(i)            Notice of Termination.  Any termination of the Executive’s
employment by NMG or by the Executive (other than a termination pursuant to
Paragraph 6(a) or Paragraph 6(h)) shall be communicated by a Notice of
Termination.  A “Notice of Termination” is a written notice that must (i)
indicate the specific termination provision in this Agreement relied upon; (ii)
in the case of a termination for Disability, Cause, or Good Reason, set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision invoked, including
the particular act or acts or failure(s) to act that is or are the basis of any
termination for Cause or Good Reason; and (iii) if the termination is by the
Executive under Paragraph 6(e) or Paragraph 6(f), or by NMG for any reason,
specify the Employment Termination Date.  The failure by NMG to set forth in the
Notice of Termination any fact or circumstance that contributes to a showing of
Cause shall not waive any right of NMG or preclude NMG from asserting such fact
or circumstance in enforcing NMG’s rights.  The failure of the Executive to set
forth in the Notice of Termination any fact or circumstances that contributes to
a showing of Good Reason shall not waive any right of the Executive or preclude
the Executive from asserting such fact or circumstance in enforcing her rights.

 

(j)            Employment Termination Date.  The Employment Termination Date
shall be as follows: (i) if the Executive’s employment is terminated by her
death, the date of her death; (ii) if the Executive’s employment is terminated
by NMG because of her Disability or for Cause, the date specified in the Notice
of Termination, which date shall be no earlier than the date such notice is
given; (iii) if the Executive’s employment is terminated by the Executive for
Good Reason, the date on which the Notice of Termination is given; (iv) if the
termination is under Paragraph 6(e), the date specified in the Notice of
Termination, which date shall be no earlier

 

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than twelve months after the date such notice is given (subject to the
provisions therein); (v) if the termination is under Paragraph 6(f), the date
specified in the Notice of Termination, which date shall be no earlier than
three months after the date such notice is given (subject to the provisions
therein); (vi) if the termination is under Paragraph 6(g), the date specified in
the Notice of Termination or (vii) if a Notice of Non-Renewal is provided by
either party pursuant to Paragraph 3, upon expiration of the Employment Term.

 

(k)           Resignation.  In the event of termination of the Executive’s
employment (for any reason other than the death of the Executive), the Executive
agrees that if at such time she is a member of the NMG Board or is an officer of
NMG or a director or officer of any of its Affiliates, she shall be deemed to
have resigned from such position(s) effective on the Employment Termination Date
unless the parties otherwise agree.

 

7.             Compensation Upon Termination of Employment.

 

(a)           Death.  If the Executive’s employment is terminated by reason of
the Executive’s death, NMG shall pay to the Executive’s estate within 60 days of
the Employment Termination Date (i) any unpaid portion of the Executive’s Base
Salary accrued through the Employment Termination Date and any earned or accrued
bonus payable for the preceding fiscal year that has otherwise not already been
paid (together, the “Compensation Payment”), provided that the payment of any
such bonus may not be delayed past the date the bonus is payable under the terms
of any bonus plan, (ii) any accrued but unused vacation days (the “Vacation
Payment”), (iii) any reimbursement for business travel and other expenses to
which the Executive is entitled pursuant to Paragraph 5(h) (the
“Reimbursement”), and (iv) an amount of annual incentive pay, as described in
Paragraph 5(b), equal to a prorated portion of the Target Bonus amount for the
year in which the Employment Termination Date occurs, determined by multiplying
such Target Bonus amount by a fraction, the numerator of which is the number of
days the Executive was employed during the year in which the Employment
Termination Date occurs and the denominator of which is 365 (the “Prorated
Bonus”).  This Paragraph 7(a) does not limit the entitlement of the Executive’s
estate or beneficiaries to any death or other vested benefits to which the
Executive may be entitled under any life insurance, stock ownership, stock
options, or other benefit plan that is maintained by NMG for the Executive’s
benefit.

 

(b)           Disability. If the Executive’s employment is terminated by reason
of the Executive’s Disability, NMG shall pay to the Executive within 60 days of
the Employment Termination Date (i) the Compensation Payment, provided that the
payment of the bonus portion of the Compensation Payment may not be delayed past
the date the bonus is payable under the terms of any bonus plan, (ii) the
Vacation Payment, (iii) the Reimbursement, and (iv) the Prorated Bonus.  This
Paragraph 7(b) does not limit the entitlement of the Executive to any amounts
payable pursuant to the terms and conditions of any applicable disability
insurance plan or similar arrangement that is maintained by NMG for the
Executive’s benefit, or other vested benefits under any stock ownership, stock
option, or other benefit plan that is maintained by NMG for the Executive’s
benefit, pursuant to the terms and conditions of any such plan.

 

(c)           Termination by the Executive Without Good Reason or by Reason of
Executive Non-Renewal.  If the Executive’s employment is terminated by the
Executive pursuant to and in compliance with Paragraph 6(f) or by reason of the
provision of a Notice of Non-Renewal by the

 

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Executive, NMG shall pay to the Executive within 60 days of the Employment
Termination Date (i) any unpaid portion of the Executive’s Base Salary accrued
through the Employment Termination Date, (ii) the Vacation Payment, and
(iii) the Reimbursement.  This Paragraph 7(c) does not limit the entitlement of
the Executive to any vested benefits under any stock ownership, stock option, or
other benefit plan that is maintained by NMG for the Executive’s benefit,
pursuant to the terms and conditions of any such plan.

 

(d)           Termination by the Executive for Retirement.  If the Executive’s
employment is terminated by the Executive for Retirement pursuant to Paragraph
6(e), NMG shall pay to the Executive within 60 days of the Employment
Termination Date (i) the Compensation Payment, provided that the payment of the
bonus portion of the Compensation Payment may not be delayed past the date the
bonus is payable under the terms of any bonus plan (ii) the Vacation Payment,
and (iii) the Reimbursement. In addition, if within 60 days of the Employment
Termination Date, the Executives executes a release and waiver of claims against
NMG and its Affiliates (in such form as NMG reasonably requires and delivers to
the Executive within 7 days of the Employment Termination Date), and provided
that such release and waiver of claims becomes non-revocable under applicable
law during such 60-day period, NMG will pay to the Executive a lump-sum payment
equal to one times the sum of the Base Salary provided for in Paragraph 5(a) and
the Target Bonus described in Paragraph 5(b), at the level in effect as of the
Employment Termination Date (such payment, the “Retirement Severance Payment”)
on the first business day after the 65th day following the Employment
Termination Date.  This Paragraph 7(d) does not limit the entitlement of the
Executive to any vested benefits under any stock ownership, stock option, or
other benefit plan that is maintained by NMG for the Executive’s benefit,
pursuant to the terms and conditions of any such plan.

 

(e)           Termination by NMG for Cause.  If the Executive’s employment is
terminated by NMG for Cause, NMG shall pay to the Executive within 60 days of
the Employment Termination Date (i) any unpaid portion of the Executive’s Base
Salary accrued through the Employment Termination Date, (ii) the Vacation
Payment, and (iii) the Reimbursement.  This Paragraph 7(e) does not limit the
entitlement of the Executive to any vested benefits under any stock ownership,
stock option, or other benefit plan that is maintained by NMG for the
Executive’s benefit, pursuant to the terms and conditions of any such plan.

 

(f)            Termination Without Cause or With Good Reason or by Reason of NMG
Non-Renewal.

 

(i)            If the Executive’s employment is terminated (x) prior to the
expiration of the Employment Term by NMG for any reason other than death,
Disability, Cause or Retirement, or (y) prior to the expiration of the
Employment Term by the Executive for Good Reason, or (z) upon expiration of the
Employment Term following the provision of a Notice of Non-Renewal by NMG to the
Executive (an “NMG Non-Renewal”), then NMG shall pay to the Executive within 60
days of the Employment Termination Date (i) the Compensation Payment, provided
that the payment of the bonus portion of the Compensation Payment may not be
delayed past the date the bonus is payable under the terms of any bonus plan,
(ii) the Vacation Payment, and (iii) the Reimbursement.  This

 

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Paragraph 7(f) does not limit the entitlement of the Executive to any vested
benefits under any stock ownership, stock option, or other benefit plan that is
maintained by NMG for the Executive’s benefit, pursuant to the terms and
conditions of any such plan.

 

(ii)           In addition, subject to (x) the occurrence of the conditions in
Paragraph 7(f)(i) above and (y) the Executive’s execution, within 60 days of the
Employment Termination Date, of a release and waiver of claims against NMG and
its Affiliates (in such form as NMG reasonably requires and delivers to the
Executive within 7 days of the Employment Termination Date), and provided that
such release and waiver of claims becomes non-revocable under applicable law
during such 60-day period, NMG will:

 

(A)          pay to the Executive a “Severance Payment” in a lump-sum payment
equal to:  the sum of (I) the Prorated Bonus, (II) the monthly COBRA premium
applicable to the Executive at her Employment Termination Date under the NMG
group medical plan if she timely elected COBRA continuation coverage under such
plan based upon the coverage in effect for the Executive under NMG’s group
medical plan immediately prior to her Employment Termination Date multiplied by
eighteen (18) (or twelve (12) in the case of an NMG Non-Renewal), (III) the
monthly premium that would be applicable to the Executive at her Employment
Termination Date if she elected coverage as a retiree under NMG’s group medical
plan for retired employees based on the coverage in effect for the Executive
under NMG’s group medical plan immediately prior to her Employment Termination
Date multiplied by six (6) (or zero (0) in the case of an NMG Non-Renewal), as a
supplement for the cost of post-employment welfare benefits, and (IV) two (2)
times (or one (1) times in the case of an NMG Non-Renewal) the sum of the Base
Salary provided for in Paragraph 5(a) and the Target Bonus described in
Paragraph 5(b), at the level in effect as of the Employment Termination Date;
and

 

(B)          for a period of two (2) years (or one (1) year in the case of an
NMG Non-Renewal) following the Employment Termination Date, provide the
Executive and the Executive’s spouse and dependents life insurance coverage at
the same benefit level as provided to Executive immediately prior to the
Employment Termination Date and at the same cost to the Executive as is
generally provided to similarly situated active employees of NMG.  The amount
expended for the provision of life insurance during a taxable year of the
Executive shall not affect the amount expended for the provision of life
insurance in any other taxable year.

 

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(iii)          Any Severance Payment to which the Executive becomes entitled
pursuant to Paragraph 7(f)(ii) shall be paid on the first business day after the
65th day following the Employment Termination Date.

 

(iv)          The Executive shall be required to repay the Severance Payment and
the Retirement Severance Payment, and the benefits described in Paragraph
7(f)(ii)(B) shall cease, if:

 

(A)          the Executive receives written notice from NMG that, in the
reasonable judgment of NMG, the Executive engaged or is engaging in any conduct
that violates Paragraph 8 or engaged or is engaging in any of the Restricted
Activities described in Paragraph 9, unless within 30 days of the date NMG so
notifies the Executive in writing, the Executive provides information to NMG
that NMG determines is sufficient to establish that the Executive did not engage
in any conduct that violated Paragraph 8 or engage in any of the Restricted
Activities described in Paragraph 9; or

 

(B)          the Executive is arrested or indicted for any felony, other serious
criminal offense, or any violation of federal or state securities laws, or has
any civil enforcement action brought against her by any regulatory agency, for
actions or omissions related to her employment with NMG or any of its
Affiliates; or if NMG reasonably believes that the Executive has committed any
act or omission, either during her employment under this Agreement or if related
to such employment thereafter, that during her employment would have entitled
NMG to terminate her employment for Cause under provisions (i), (ii), (iii), or
(iv) of the definition of Cause, and either (x) the Executive is found guilty or
enters into a plea agreement, consent decree or similar arrangement with respect
to any such criminal or civil proceedings, or (y) the NMG Board makes a finding
that the Executive has committed such an act or omission.  If any such criminal
or civil proceedings do not result in a finding of guilt or the entry of a plea
agreement or consent decree or similar arrangement, and the NMG Board makes a
finding that the Executive has not committed such an act or omission, the
Executive shall not be required to repay any amounts hereunder.

 

(g)           No Mitigation.  The Executive will not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, nor will the amount of any payment provided for under this
Agreement be reduced by any profits, income, earnings, or other benefits
received by the Executive from any source other than NMG or its successor.

 

(h)           Offset.  The Executive agrees that NMG may set off against, and
she authorizes NMG to deduct from, any payments due to the Executive, or to her
heirs, legal representatives, or successors, as a result of the termination of
the Executive’s employment any specified

 

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amounts which may be due and owing to NMG by the Executive, whether arising
under this Agreement or otherwise; provided, however, that no offset is allowed
against payments to the Executive which are subject to Section 409A of the Code
if such offset cannot be made in a manner that complies with Code Section 409A.

 

8.             Confidential Information.

 

(a)           The Executive acknowledges and agrees that (i) NMG is engaged in a
highly competitive business; (ii) NMG has expended considerable time and
resources to develop goodwill with its customers, vendors, and others, and to
create, protect, and exploit Confidential Information; (iii) NMG must continue
to prevent the dilution of its goodwill and unauthorized use or disclosure of
its Confidential Information to avoid irreparable harm to its legitimate
business interests; (iv) in the luxury specialty retail business, her
participation in or direction of NMG’s day-to-day operations and strategic
planning are an integral part of NMG’s continued success and goodwill; (v) given
her position and responsibilities, she necessarily will be creating Confidential
Information that belongs to NMG and enhances NMG’s goodwill, and in carrying out
her responsibilities she in turn will be relying on NMG’s goodwill and the
disclosure by NMG to her of Confidential Information; (vi) she will have access
to Confidential Information that could be used by any Competitor of NMG in a
manner that would irreparably harm NMG’s competitive position in the marketplace
and dilute its goodwill; and (vii) she necessarily would use or disclose
Confidential Information if she were to engage in competition with NMG.

 

(b)           NMG acknowledges and agrees that the Executive must have and
continue to have throughout her employment the benefits and use of its and its
Affiliates’ goodwill and Confidential Information in order to properly carry out
her responsibilities.  NMG accordingly promises upon execution and delivery of
this Agreement to provide the Executive immediate access to new and additional
Confidential Information and authorize her to engage in activities that will
create new and additional Confidential Information.

 

(c)           NMG and the Executive thus acknowledge and agree that during the
Executive’s employment with NMG and upon execution and delivery of this
Agreement she (i) has received, will receive, and will continue to receive,
Confidential Information that is unique, proprietary, and valuable to NMG or its
Affiliates; (ii) has created, will create, and will continue to create,
Confidential Information that is unique, proprietary, and valuable to NMG or its
Affiliates; and (iii) has benefited, will benefit, and will continue to benefit,
including without limitation by way of increased earnings and earning capacity,
from the goodwill NMG and its Affiliates have generated and from the
Confidential Information.

 

(d)           Accordingly, the Executive acknowledges and agrees that at all
times during her employment by NMG or any of its Affiliates and thereafter:

 

(i)            all Confidential Information shall remain and be the sole and
exclusive property of NMG or its Affiliates;

 

(ii)           she will protect and safeguard all Confidential Information;

 

(iii)          she will hold all Confidential Information in the strictest
confidence and not, directly or indirectly, disclose or divulge any Confidential

 

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Information to any Person other than an officer, director, or employee of, or
legal counsel for, NMG or its Affiliates, to the extent necessary for the proper
performance of her responsibilities unless authorized to do so by NMG or
compelled to do so by law or valid legal process;

 

(iv)          if she believes she is compelled by law or valid legal process to
disclose or divulge any Confidential Information, she will notify NMG in writing
within 24 hours after receipt of legal process or other writing that causes her
to form such a belief, or as soon as practicable if she receives less than 24
hours’ notice, so that NMG may defend, limit, or otherwise protect its interests
against such disclosure;

 

(v)           at the end of her employment with NMG for any reason or at the
request of NMG at any time, she will return to NMG all Confidential Information
and all copies thereof, in whatever tangible form or medium, including
electronic; and

 

(vi)          absent the promises and representations of the Executive in this
Paragraph 8 and in Paragraph 9, NMG would require her immediately to return any
tangible Confidential Information in her possession, would not provide the
Executive with new and additional Confidential Information, would not authorize
the Executive to engage in activities that will create new and additional
Confidential Information, and would not enter or have entered into this
Agreement.

 

9.             Noncompetition and Nondisparagement Obligations.  In
consideration of NMG’s promises to provide the Executive with new and additional
Confidential Information and to authorize her to engage in activities that will
create new and additional Confidential Information upon execution and delivery
of this Agreement, and the other promises and undertakings of NMG in this
Agreement (including without limitation Section 7), the Executive agrees that,
while she is employed by NMG and/or any of its Affiliates and for a two-year
period following the end of that employment for any reason, she shall not engage
in any of the following activities (the “Restricted Activities”):

 

(a)           She will not directly or indirectly disparage NMG or any of its
Affiliates, any products, services, or operations of NMG or any of its
Affiliates, or any of the former, current, or future, shareholders, partners,
directors, officers, employees, agents or representatives of NMG or any of its
Affiliates;

 

(b)           She will not, whether on her own behalf or on behalf of any other
Person, either directly or indirectly solicit, induce, persuade, entice or hire,
or endeavor to solicit, induce, persuade, entice or hire, any person who is then
employed by or otherwise engaged to perform services for NMG or any of its
Affiliates to leave that employment or cease performing those services;

 

(c)           She will not, whether on her own behalf or on behalf of any other
Person, either directly or indirectly solicit, induce, persuade, or entice, or
endeavor to solicit, induce, persuade,

 

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or entice, any Person who is then a customer, supplier, or vendor of NMG or any
of its Affiliates to cease being a customer, supplier, or vendor of NMG or any
of its Affiliates or to divert all or any part of such Person’s business from
NMG or any of its Affiliates; and

 

(d)           She will not directly or indirectly, as an employee, officer,
director, agent, partner, stockholder, owner, member, representative,
consultant, or otherwise, associate with, or provide services to any Competitor
of NMG or any of its Affiliates.  This restriction (i) extends to the
performance by the Executive, directly or indirectly, of the same or similar
activities the Executive has performed for NMG or any of its Affiliates or such
other activities that by their nature are likely to lead to the disclosure of
Confidential Information, and (ii) with respect to the post-employment
restriction, applies to any Competitor that has a retail store within 50 miles
of, or in the same Metropolitan Statistical Area as, any retail store of NMG or
any of its Affiliates.  The Executive shall not be in violation of this
Paragraph 9(d) solely as a result of her investment in stock or other securities
of a Competitor or any of its Affiliates listed on a national securities
exchange or actively traded in the over-the-counter market if she and the
members of her immediate family do not, directly or indirectly, hold in the
aggregate more than a total of one percent of all such shares of stock or other
securities issued and outstanding.  The Executive acknowledges and agrees that
engaging in the activities restricted by this Paragraph 9(d) would result in the
inevitable disclosure or use of Confidential Information for the Competitor’s
benefit or to the detriment of NMG or its Affiliates.

 

The Executive acknowledges and agrees that the restrictions contained in this
Paragraph 9 are ancillary to an otherwise enforceable agreement, including
without limitation the mutual promises and undertakings set forth in Paragraph
8; that NMG’s promises and undertakings set forth in Paragraph 8, the
Executive’s position and responsibilities with NMG, and NMG granting to the
Executive ownership in NMG in the form of NMG stock, give rise to NMG’s interest
in restricting the Executive’s post-employment activities; that such
restrictions are designed to enforce the Executive’s promises and undertakings
set forth in this Paragraph 9 and her common-law obligations and duties owed to
NMG and its Affiliates; that the restrictions are reasonable and necessary, are
valid and enforceable under Texas law, and do not impose a greater restraint
than necessary to protect NMG’s and its Affiliates’ goodwill, Confidential
Information, and other legitimate business interests; that she will immediately
notify NMG in writing should she believe or be advised that the restrictions are
not, or likely are not, valid or enforceable under Texas law or the law of any
other state that she contends or is advised is applicable (the “Enforceability
Notification”); and that absent the promises and representations made by the
Executive in this Paragraph 9 and in Paragraph 8, NMG would require her to
return any Confidential Information in her possession, would not provide the
Executive with new and additional Confidential Information, would not authorize
the Executive to engage in activities that will create new and additional
Confidential Information, and would not enter or have entered into this
Agreement.  Notwithstanding the foregoing, NMG agrees that the Executive’s
conduct in providing the Enforceability Notification under this Paragraph 9(d)
shall not constitute a waiver of any attorney-client privilege between the
Executive and her attorney(s).

 

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10.                               Intellectual Property.

 

(a)           In consideration of NMG’s promises and undertakings in this
Agreement, the Executive agrees that all Work Product will be disclosed promptly
by the Executive to NMG, shall be the sole and exclusive property of NMG, and is
hereby assigned to NMG, regardless of whether (i) such Work Product was
conceived, made, developed or worked on during regular hours of her employment
or her time away from her employment, (ii) the Work Product was made at the
suggestion of NMG; or (iii) the Work Product was reduced to drawing, written
description, documentation, models or other tangible form.  Without limiting the
foregoing, the Executive acknowledges that all original works of authorship that
are made by the Executive, solely or jointly with others, within the scope of
her employment and that are protectable by copyright are “works made for hire,”
as that term is defined in the United States Copyright Act (17 U.S.C.,
Section 101), and are therefore owned by NMG from the time of creation.

 

(b)           The Executive agrees to assign, transfer, and set over, and the
Executive does hereby assign, transfer, and set over to NMG, all of her right,
title and interest in and to all Work Product, without the necessity of any
further compensation, and agrees that NMG is entitled to obtain and hold in its
own name all patents, copyrights, and other rights in respect of all Work
Product.  The Executive agrees to (i) cooperate with NMG during and after her
employment with NMG in obtaining patents or copyrights or other
intellectual-property protection for all Work Product; (ii) execute,
acknowledge, seal and deliver all documents tendered by NMG to evidence its
ownership thereof throughout the world; and (iii) cooperate with NMG in
obtaining, defending and enforcing its rights therein.

 

(c)           The Executive represents that there are no other contracts to
assign inventions or other intellectual property that are now in existence
between the Executive and any other Person.  The Executive further represents
that she has no other employment or undertakings that might restrict or impair
her performance of this Agreement.  The Executive will not in connection with
her employment by NMG, use or disclose to NMG any confidential, trade secret, or
other proprietary information of any previous employer or other Person that the
Executive is not lawfully entitled to disclose.

 

11.                               Reformation.  If the provisions of Paragraph
8, 9, or 10 are ever deemed by a court to exceed the limitations permitted by
applicable law, the Executive and NMG agree that such provisions shall be, and
are, automatically reformed to the maximum limitations permitted by such law.

 

12.                               Assistance in Litigation.  After the
Employment Term and for the life of the Executive, the Executive shall, upon
reasonable notice, furnish such information and assistance to NMG or any of its
Affiliates as may reasonably be requested by NMG in connection with any
litigation in which NMG or any of its Affiliates is, or may become, a party. 
NMG shall reimburse the Executive for all reasonable out-of-pocket expenses,
including travel expenses, meals and lodging, incurred by the Executive in
rendering such assistance, but shall have no obligation to compensate the
Executive for her time in providing information and assistance in accordance
with this Paragraph 12.  The Executive shall provide to NMG a receipt or voucher
for any reimbursable expense within 30 days of the occurrence of such expense. 
Any such reimbursement shall be made as soon as

 

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administratively possible, but in any event no later than 30 days following
receipt of such receipt or voucher.  Further, the amount of expenses eligible
for reimbursement during the Executive’s taxable year shall not affect the
expenses eligible for reimbursement in any other taxable year, and the right to
reimbursement shall not be subject to liquidation or exchanged for another
benefit.

 

13.                               No Obligation to Pay; Section 409A of the
Code; Section 280G of the Code.

 

(a)           With regard to any payment due to the Executive under this
Agreement, it shall not be a breach of any provision of this Agreement for NMG
to fail to make such payment to the Executive if (i) NMG is legally prohibited
from making the payment; (ii) NMG would be legally obligated to recover the
payment if it was made; or (iii) the Executive would be legally obligated to
repay the payment if it was made.

 

(b)           Notwithstanding anything to the contrary contained herein, in the
event the Executive is a “specified employee” (as defined below) and is entitled
to receive a payment on separation from service that is subject to Code
Section 409A, the payment may not be made earlier than six months following the
date of the Executive’s separation from service if required by Code Section 409A
and the regulations thereunder, in which case, the accumulated postponed amount
shall be paid in a lump sum payment within ten (10) days after the end of the
six-month period.  If the Executive dies during the postponement period prior to
the payment of the postponed amount, the amounts withheld on account of Code
Section 409A shall be paid to the personal representative of the Executive’s
estate within 60 days after the date of the Executive’s death.  A “specified
employee” shall mean an employee who, at any time during the 12-month period
ending on the identification date, is a “specified employee” under Code
Section 409A, as determined by the NMG Board.  The determination of “specified
employees,” including the number and identity of persons considered “specified
employees” and the identification date, shall be made by the NMG Board in
accordance with the provisions of Code Section 409A and the regulations issued
thereunder.

 

(c)           Notwithstanding anything to the contrary contained herein, this
Agreement is intended to satisfy the requirements of Code Section 409A and all
provisions herein, or incorporated by reference, shall be construed and
interpreted to satisfy the requirements of Code Section 409A, and in the event
of future legislative or regulatory changes to, or official guidance regarding,
the requirements imposed by Code Section 409A, NMG and the Executive agree to
cooperate by negotiating in good faith regarding possible future revisions to
this Agreement (without obligation on the part of any party to agree to any such
revisions) that they may determine are necessary in order that this Agreement
will continue to satisfy the requirements of, and the compensation payable
hereunder will thereby not be subject to the taxes imposed by, Code
Section 409A; provided, however, that no Person connected with NMG in any
capacity, including but not limited to any Affiliate of NMG, and their
respective directors, officers, agents and employees, makes any representation,
commitment or guarantee that any particular tax treatment, including, but not
limited to, federal, state and local income, estate and gift tax treatment, will
be applicable with respect to any amounts payable under the Agreement or that
such tax treatment will apply to or be available to the Executive.  Further, for
purposes of Code Section 409A, Executive’s right to receive any installment
payment under this Agreement shall be treated as a right to receive a series of
separate and distinct payments.  Any reimbursements or

 

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in-kind benefits provided under this Agreement shall be made or provided in
accordance with the requirements of Code Section 409A, including, where
applicable, the requirement that (i) any reimbursement is for expenses incurred
during the period of time specified in this Agreement, (ii) the amount of
expenses eligible for reimbursement, or in kind benefits provided, during a
calendar year may not affect the expenses eligible for reimbursement, or in kind
benefits to be provided, in any other calendar year, (iii) the reimbursement of
an eligible expense will be made no later than the last day of the calendar year
following the year in which the expense is incurred, and (iv) the right to
reimbursement or in kind benefits is not subject to liquidation or exchange for
another benefit.  Notwithstanding anything to the contrary herein, a termination
of employment shall not be deemed to have occurred for purposes of any provision
of this Agreement providing for the payment of amounts or benefits upon or
following a termination of employment unless such termination is also a
“separation from service” (as determined in accordance with Treasury Regulation
Section 1.409A-1(h)) and, for purposes of any such provision of this Agreement,
references to a “resignation,” “termination,” “termination of employment” or
like terms shall mean separation from service. In no event whatsoever shall NMG
or any of its Affiliates be liable for any additional tax, interest or penalty
that may be imposed on the Executive by Code Section 409A or any damages for
failing to comply with Code Section 409A.

 

(d)           So long as NMG satisfies the description in
Section 280G(b)(5)(A)(ii)(I) of the Code, if any payment or benefit (within the
meaning of Section 280G(b)(2) of the Code), to the Executive or for the
Executive’s benefit paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise in connection with, or arising out of,
the Executive’s employment with NMG or a change in ownership or effective
control of NMG or of a substantial portion of its assets (the “Payments”), would
be subject to the excise tax imposed by Section 4999 of the Code, then, to the
extent, if any, the Executive elects to waive the right to receive such payments
or benefits unless shareholder approval is obtained in accordance with
Section 280G(b)(5)(B) of the Code, NMG shall use its commercially reasonable
efforts to prepare and deliver to its stockholders the disclosure required by
Section 280G(b)(5)(B) of the Code with respect to the Payments and to submit the
Payments to NMG’s stockholders for approval in accordance with
Section 280G(b)(5)(B) of the Code and the regulation codified at 26 C.F.R. §
1.280G-1.  The Executive understands that NMG does not guarantee that such
stockholder approval will be obtained.  The determinations to be made with
respect to this Paragraph 13(d) shall be made by a certified public accounting
firm designated by NMG and reasonably acceptable to the Executive. NMG shall be
responsible for all charges of the accountant.

 

14.                               Survival.  The expiration or termination of
the Employment Term will not impair the rights or obligations of any party
hereto that accrue hereunder prior to such expiration or termination, except to
the extent specifically stated herein.  In addition to the foregoing, NMG’s
obligations under Paragraphs 5(j), and 7, and the Executive’s obligations under
Paragraphs 8, 9, 10 and 12, will survive the expiration or termination of the
Executive’s employment.

 

15.                               Withholding Taxes.  NMG shall withhold from
any payments to be made to the Executive pursuant to this Agreement such amounts
(including social security contributions and federal income taxes) as shall be
required by federal, state, and local withholding tax laws.

 

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16.                               Notices.  All notices, requests, demands, and
other communications required or permitted to be given or made by either party
shall be in writing and shall be deemed to have been duly given or made (a) when
delivered personally, or (b) when deposited in the United States mail, first
class registered or certified mail, postage prepaid, return receipt requested,
to the party for which intended at the following addresses (or at such other
addresses as shall be specified by the parties by like notice, except that
notices of change of address shall be effective only upon receipt):

 

(i)                                     If to NMG, at:

 

The Neiman Marcus Group, Inc.
Attn: General Counsel
1618 Main Street
Dallas, TX 75201

 

With a copy (which shall not constitute notice) to:

 

NM Mariposa Holdings, Inc.
Attn: Adam Stein
2000 Avenue of the Stars, 12th Floor
Los Angeles, CA 90067

 

and

 

Proskauer Rose LLP
Attention:  Michael A. Woronoff

2049 Century Park East, Suite 3200
Los Angeles, CA  90067

 

(ii)                                  If to the Executive, at the Executive’s
then-current home address on file with NMG.

 

17.                               Injunctive Relief.  The Executive acknowledges
and agrees that NMG would not have an adequate remedy at law and would be
irreparably harmed in the event that any of the provisions of Paragraphs 8, 9,
10 and 12 were not performed in accordance with their specific terms or were
otherwise breached.  Accordingly, the Executive agrees that NMG shall be
entitled to equitable relief, including preliminary and permanent injunctions
and specific performance, in the event the Executive breaches or threatens to
breach any of the provisions of such Paragraphs, without the necessity of
posting any bond or proving special damages or irreparable injury.  Such
remedies shall not be deemed to be the exclusive remedies for a breach or
threatened breach of this Agreement by the Executive, but shall be in addition
to all other remedies available to NMG at law or equity.

 

18.                               Binding Effect; No Assignment by the
Executive; No Third Party Benefit.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective heirs, legal
representatives, successors, and assigns; provided, however, that the Executive
shall not assign or otherwise transfer this Agreement or any of her rights or

 

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obligations herein.  NMG is authorized to assign or otherwise transfer this
Agreement or any of its rights or obligations herein to an Affiliate of NMG. 
The Executive shall not have any right to pledge, hypothecate, anticipate, or in
any way create a lien upon any payments or other benefits provided under this
Agreement; and no benefits payable under this Agreement shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by operation
of law, except by will or pursuant to the laws of descent and distribution. 
Nothing in this Agreement, express or implied, is intended to or shall confer
upon any Person other than the parties, and their respective heirs, legal
representatives, successors, and permitted assigns, any rights, benefits, or
remedies of any nature whatsoever under or by reason of this Agreement.

 

19.                               Assumption by Successor.  NMG shall require
any successor or assignee (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all the business and/or
assets of NMG, by agreement in writing in form and substance reasonably
satisfactory to the Executive, expressly, absolutely, and unconditionally to
assume and agree to perform this Agreement in the same manner and to the same
extent that NMG would be required to perform it if no such succession or
assignment had taken place.  If NMG fails to obtain such agreement by the
effective time of any such succession or assignment, such failure shall be
considered Good Reason; provided, however, that the compensation to which the
Executive would be entitled upon a termination for Good Reason pursuant to
Paragraph 7(f) shall be the sole remedy of the Executive for any failure by NMG
to obtain such agreement.  As used in this Agreement, “NMG” shall include any
successor or assignee (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all the business and/or
assets of NMG that executes and delivers the agreement provided for in this
Paragraph 19 or that otherwise becomes obligated under this Agreement by
operation of law.

 

20.                               Governing Law.  This Agreement and the
employment of the Executive shall be governed by the laws of the State of Texas
except for its laws with respect to conflict of laws.

 

21.                               Dispute Resolution: Arbitration; Jury-Trial
Waiver.

 

(a)           All disputes arising under or in connection with this Agreement
shall be settled by binding arbitration conducted before one arbitrator sitting
in Dallas, Texas, or such other location agreed by the parties hereto, in
accordance with the rules for expedited resolution of employment disputes of the
American Arbitration Association then in effect.  The determination of the
arbitrator shall be made in writing within thirty days following the close of
the hearing on any dispute or controversy and shall be final and binding on the
parties.  Judgment may be entered on the award of the arbitrator in any court
having proper jurisdiction. The parties acknowledge that this agreement
evidences a transaction involving interstate commerce. The Federal Arbitration
Act shall govern the interpretation, enforcement, and proceedings pursuant to
the arbitration clause in this agreement.

 

(b)           Notwithstanding the foregoing, NMG and its Affiliates may seek
such injunctive or other legal or equitable relief to which they may be entitled
in any state or federal court of

 

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competent jurisdiction to enforce its rights under Paragraphs 7(f), 8, 9, 10 or
12 of this Agreement.

 

(c)           ALTERNATIVE WAIVER OF JURY TRIAL: THE PARTIES AGREE THAT IN THE
EVENT THE AGREEMENT TO ARBITRATE CONTAINED IN THIS PARAGRAPH 21 IS DETERMINED TO
BE UNENFORCEABLE, ANY DISPUTE BETWEEN THE PARTIES THAT OTHERWISE WOULD BE
SUBJECT TO ARBITRATION SHALL BE HEARD BY A COURT SITTING WITHOUT A JURY, AND THE
PARTIES MUTUALLY WAIVE ANY RIGHT THEY MAY HAVE TO A JURY DETERMINATION OF ANY
ISSUE IN SUCH DISPUTE.

 

22.                               Costs of Proceedings.  If the Executive is the
prevailing party in any arbitration proceeding, as determined by the arbitrator,
or in any enforcement or other court proceedings, she will be entitled, to the
extent permitted by law, to reimbursement from the Parent, NMG or their
Affiliates, as applicable, for all of the Executive’s costs (including the
arbitrator’s compensation), expenses and attorneys’ fees.  If Parent, NMG or
their Affiliates are prevailing party in any arbitration proceeding, as
determined by the arbitrator, or in any enforcement or other court proceedings,
each party shall be responsible for their own respective costs, expenses and
attorneys’ fees.

 

23.                               Entire Agreement.  This Agreement contains the
entire agreement between the parties concerning the subject matter hereof and as
of the Effective Date supersedes all other prior agreements and understandings,
written and oral, between the parties with respect to the subject matter of this
Agreement (including, without limitation, the Prior Agreement); provided that
nothing contained herein shall supersede any entitlements or other rights the
Executive may have pursuant to the Merger Agreement.

 

24.                               Modification; Waiver.  No Person, other than
pursuant to a resolution duly adopted by the members of the NMG Board, shall
have authority on behalf of NMG to agree to modify or amend any provision of
this Agreement, or waive any provision of this Agreement enforceable by it. 
Further, this Agreement may not be changed, amended or modified orally, but only
by a written agreement signed by the parties hereto and no provision thereof may
be waived or discharged except by a written agreement signed by the party
against whom any waiver or discharge is sought to be enforced.  Each party to
this Agreement acknowledges and agrees that no breach of this Agreement by the
other party or failure to enforce or insist on its or her rights under this
Agreement shall constitute a waiver or abandonment of any such rights or defense
to enforcement of such rights.

 

25.                               Construction.  The parties hereto have
participated jointly in the negotiation and drafting of this Agreement and, in
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as jointly drafted by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provision of this Agreement.

 

26.                               Severability.  If any provision of this
Agreement shall be determined by a court to be invalid or unenforceable, the
remaining provisions of this Agreement shall not be

 

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affected thereby, shall remain in full force and effect, and shall be
enforceable to the fullest extent permitted by applicable law.

 

27.                               Counterparts.  This Agreement may be executed
by the parties in any number of counterparts (including by facsimile or
electronic transmission), each of which shall be deemed an original, but all of
which shall constitute one and the same agreement.

 

28.                               Section 162(m).  The parties hereto recognize
that NMG is not currently subject to Section 162(m) of the Code but that it may
become subject to said section during the term of this Agreement.  In such
event, NMG retains the right to amend the provisions of this Agreement that
impact, relate to or reference NMG’s annual bonus program if NMG determines that
such an amendment would be necessary or appropriate to ensure that any
performance-based compensation payable under a new bonus plan satisfies the
requirements for exemption under Section 162(m) of the Code, provided, however,
that any such amendment provides the Executive at least the same economic
benefit under this Agreement as she had prior to the amendment.

 

Remainder of Page Intentionally Left Blank

 

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IN WITNESS WHEREOF, each of NMG and Neiman Marcus Group LTD Inc. has caused this
Agreement to be executed on its behalf by its duly authorized officer, and the
Executive has executed this Agreement, effective as of the Effective Date.

 

Karen Katz

 

 

 

/s/ Karen Katz

 

 

 

 

 

Dated: October 25, 2013

 

 

 

 

 

The Neiman Marcus Group, Inc.

 

 

 

/s/ James E. Skinner

 

By: James E. Skinner

 

Title:   Executive Vice President, Chief Operating Officer, and Chief Financial
Officer

Dated: October 25, 2013

 

 

 

 

 

Solely for purposes of Paragraphs 2
and 23 of the Agreement:

 

 

 

Neiman Marcus Group LTD Inc.

 

 

 

/s/ James E. Skinner

 

By: James E. Skinner

 

Title:   Executive Vice President, Chief Operating Officer, and Chief Financial
Officer

 

Dated: October 25, 2013

 

 

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