Exhibit 10.25


 


CONFIDENTIALITY,
NON-COMPETITION AND TERMINATION BENEFITS


AGREEMENT


 


This
Confidentiality, Non-Competition and Termination Benefits Agreement
(“Agreement”) is entered into effective as of January 28, 2003 between Brendan
L. Hoffman (“Executive”) and The Neiman Marcus Group, Inc., a Delaware
corporation, (“NMG”). All capitalized terms used but not defined herein shall
have the meanings assigned to them in Appendix A, which is attached hereto and
incorporated fully herein by reference.


 


WHEREAS, Executive
has been employed by NMG in a non-executive capacity and is being promoted to
an executive position as President and Chief Executive Officer of Neiman Marcus
Direct, a division of NMG;


 


WHEREAS either
Executive or NMG may terminate Executive’s employment at any time, with or
without notice, and for any reason;


 


WHEREAS, the Board
of Directors of NMG has determined that stock option and restricted stock
awards provided to senior executives of NMG, including Executive, should be
combined with appropriate post-employment and other restrictions designed to
protect the legitimate business interests of NMG and its Affiliates;


 


WHEREAS, NMG and
Executive will be entering into separate stock option and restricted stock
agreements (the “Incentive Agreements”) that will set forth the rights and
obligations of NMG and Executive with respect to such awards;


 


WHEREAS, by virtue
of his new position and responsibilities, Executive will have unique access to
and knowledge of NMG’s trade secrets and other confidential and proprietary
business information;


 


WHEREAS,
Executive’s association with NMG to the exclusion of its competitors is
anticipated to enhance NMG’s goodwill and Executive’s earning capacity; and


 


WHEREAS, NMG and
Executive mutually desire to protect NMG’s goodwill created by Executive’s
association with NMG and NMG’s trade secrets and other confidential and
proprietary business information and in recognition of the possible
interruption of Executive’s earnings after the end of his NMG employment;


 


NOW, THEREFORE, in
consideration of the Incentive Agreements and the promises and undertakings of
the parties set out herein, and intending to be legally bound, Executive and
NMG agree as follows:


 


1. (a) While
Executive is employed at-will by NMG, if NMG terminates Executive’s employment
for any reason other than for “Cause,” his “Total Disability,” or his death,
subject to paragraphs 1(c) and 1(d) below, NMG shall provide Executive with
benefits (“Termination Benefits”) consisting of:


 


(1)   an amount equivalent to 1.5
times his then-current annual base salary, less required withholding, which
amount would be paid over an 18-month period (hereinafter, the “Salary
Continuance Period”) in regular, bi-weekly installments following such
termination; and


 


(2)   if, at the time of his
termination, Executive participates in a group medical insurance plan offered
by NMG and Executive is eligible for and elects to receive continued coverage
under such plan in accordance with the Consolidated Omnibus Budget
Reconciliation Act of 1985 (“COBRA”) or any successor law, NMG will reimburse
Executive during the Salary Continuance Period or, if shorter, the period of
such actual COBRA continuation coverage, for the total 


 

















 


amount of the
monthly COBRA medical insurance premiums actually paid by Executive for such
continued medical insurance benefits.


 


For the purposes of
determining whether or not NMG has terminated Executive’s employment under this
paragraph I(a), any material, adverse change in the terms and conditions of his
employment, including but not limited to a relocation of Executive’s place of
business 50 miles or more from the current location, which change causes
Executive to resign his employment with NMG, will be deemed a termination by
NMG. A transfer of employment between NMG and its Affiliates shall not be
considered as a termination of employment for purposes of this Agreement.


 


(b)   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 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 a material,
adverse change in the terms and conditions of Executive’s employment and will
be deemed a termination by NMG for purposes of paragraph 1(a) of this Agreement
if such failure causes Executive to resign his employment with NMG; provided
that the Termination Benefits to which Executive would be entitled after such
resignation pursuant to paragraph 1(a) of this Agreement shall be the sole
remedy of 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 1(b) or that otherwise becomes obligated
under this Agreement by operation of law.


 


(c)   If, in the reasonable
judgment of NMG, Executive engages in any of the Restricted Activities
described in paragraph 3 of this Agreement, NMG’s obligation to provide the
Termination Benefits shall end as of the date NMG so notifies Executive in
writing.


 


(d)   If 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 him by any regulatory agency, for actions or omissions related to his
employment with NMG, or if NMG reasonably believes in its sole judgment that
Executive has committed any act or omission that would have entitled NMG to
terminate his employment for Cause, whether such act or omission was committed
during his employment with NMG or during the Salary Continuance Period, NMG may
suspend any payments remaining pursuant to paragraph l(a) of this Agreement
until the [mal resolution of such criminal or civil proceedings or until NMG
has made a final determination in its sole judgment as to whether Executive
committed such an act or omission. If 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 if NMG determines in its sole judgment
that Executive has committed such an act or omission, (1) NMG’s obligation to
provide the Termination Benefits shall immediately end, and (2) Executive shall
repay to NMG any amounts paid to him pursuant to paragraph 1(a) of this
Agreement within 30 days after a written request to do so by NMG. 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, or NMG determines
in its sole judgment that Executive has not committed such an act or omission,
NMG shall pay to Executive any payments pursuant to paragraph 1(a) of this
Agreement that it has suspended, with interest on such suspended payments at its
cost of funds, and shall make any remaining payments due thereunder.


 


2.     Executive acknowledges and
agrees that (a) NMG is engaged in a highly competitive business; (b) NMG has
expended considerable time and resources to develop goodwill with its customers,
vendors, and others, and to create, protect, and exploit Confidential
Information; (c) 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; (d) in the specialty
retail business, his participation in or direction of NMG’s day-to-day
operations and strategic planning as 


 


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a result of his promotion will be an integral part of NMG’s continued
success and goodwill; (e) given his new position and responsibilities, he
necessarily will be creating Confidential Information that belongs to NMG and
enhances NMG’s goodwill, and in carrying out his new responsibilities he in turn
will be relying on NMG’s goodwill and the disclosure by NMG to him of
Confidential Information; (f) he 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
(g) he necessarily would use or disclose Confidential Information if he were to
engage in competition with NMG. NMG acknowledges and agrees that Executive must
have and continue to have throughout his employment the benefits and use of its
goodwill and Confidential Information in order to properly carry out his new
responsibilities. NMG accordingly promises upon execution and delivery of this
Agreement and in connection with Executive’s promotion to provide Executive
immediate access to new and additional Confidential Information and authorize
him to engage in activities that will create new and additional Confidential
Information. NMG and Executive thus acknowledge and agree that upon execution
and delivery of this Agreement and in connection with the promotion of
Executive and during his employment in his new position, Executive (a) will
receive Confidential Information that is unique, proprietary, and valuable to
NMG, (b) will create Confidential Information that is unique, proprietary, and
valuable to NMG, and (c) will benefit, including without limitation by way of
increased earnings and earning capacity, from the goodwill NMG has generated
and from the Confidential Information. Accordingly, Executive acknowledges and
agrees that at all times during his employment by NMG and thereafter:


 


(a) all
Confidential Information shall remain and be the sole and exclusive property of
NMG;


 


(b) he will
protect and safeguard all Confidential Information;


 


(c) he will hold
all Confidential Information in strictest confidence and not, directly or
indirectly, disclose or divulge any Confidential Information to any person
other than an officer, director, or employee of NMG to the extent necessary for the proper performance of his
responsibilities unless authorized to do so by NMG or compelled to do so by law
or valid legal process;


 


(d) if he believes
he is compelled by law or valid legal process to disclose or divulge any
Confidential Information, he will notify NMG in writing sufficiently in advance
of any such disclosure to allow NMG the opportunity to defend, limit, or
otherwise protect its interests against such disclosure;


 


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


 


(f) absent the
promises and representations of Executive in this paragraph and paragraph 3
below, NMG would not promote Executive, would require him immediately to return
any tangible Confidential Information in his possession, would not provide
Executive with new and additional Confidential Information, would not authorize
Executive to engage in activities that will create new and additional
Confidential Information, and would not enter into this Agreement or the
Incentive Agreements.


 


3.             In consideration of NMG’s promises
to promote Executive, provide him with new and additional Confidential
Information, and to authorize him 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 and
the Incentive Agreements, Executive agrees that, while he is employed by NMG
and for a period of 18 months following the end of that employment for any
reason, he shall not engage in any of the following activities (the “Restricted
Activities”):


 


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


 


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(b) He will not,
whether on his own behalf or on behalf of any other individual, partnership,
firm, corporation or business organization, either directly or indirectly
solicit, induce, persuade, or entice, or endeavor to solicit, induce, persuade,
or entice, any person who is then employed by or otherwise engaged to perform
services for NMG or its Affiliates to leave that employment or cease performing
those services;


 


( c) He will not,
whether on his own behalf or on behalf of any other individual, partnership,
firm, corporation or business organization, either directly or indirectly
solicit, induce, persuade, or entice, or endeavor to solicit, induce, persuade,
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 or entity’s business from NMG or any of
its Affiliates; and


 


(d) He will not
associate directly or indirectly, as an employee, officer, director, agent,
partner, stockholder, owner, representative, or consultant, with any Competitor
of NMG or any of its Affiliates, unless (1) he has advised NMG in writing in
advance of his desire to undertake such activities and the specific nature of
such activities; (2) NMG has received written assurances (that will be
designed, among other things, to protect NMG’s and its Affiliates’ goodwill,
Confidential Information, and other important commercial interests) from the
Competitor and Executive that are, in NMG’s sole discretion, adequate to
protect its interests; (3) NMG, in its sole discretion, has approved in writing
such association; and (4) Executive and the Competitor adhere to such
assurances. This restriction (1) extends to the performance by Executive,
directly or indirectly, of the same or similar activities 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 (2) 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. Executive shall not be in violation of this paragraph 3(d) solely as
a result of his 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 he and the members of his immediate family
do not, directly or indirectly, hold more than a total of one (1) percent of
all such shares of stock or other securities issued and outstanding. Executive
acknowledges and agrees that engaging in the activities restricted by this
subparagraph would result in the inevitable disclosure or use of Confidential
Information for the Competitor’s benefit or to the detriment of NMG.


 


Executive acknowledges and agrees that the restrictions contained in
this paragraph 3 are ancillary to an otherwise enforceable agreement, including
without limitation the mutual promises and undertakings set forth in paragraph
2 of this Agreement and in the Incentive Agreements; that NMG’s promises and
undertakings set forth in paragraph 2 of this Agreement and in the Incentive
Agreements, Executive’s new position and responsibilities with NMG, and NMG
granting to Executive ownership in NMG in the form of NMG stock, give rise to
NMG’s interest in restricting Executive’s post-employment activities; that such
restrictions are designed to enforce Executive’s promises and undertakings set
forth in this paragraph 3 and his common- law obligations and duties owed to
NMG; 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 goodwill, Confidential Information, and other legitimate
business interests; that he will immediately notify NMG in writing should he
believe or be advised that the restrictions are not valid or enforceable under
Texas law or the law of any other state that he contends or is advised is
applicable; that the mutual promises and undertakings of NMG and Executive
under paragraphs 2 and 3 of this Agreement are not contingent on the duration
of Executive’s employment with NMG; and that absent the promises and
representations made by Executive in this paragraph 3 and paragraph 2 above,
NMG would not promote Executive, would require him to return any Confidential
Information in his possession, would not provide Executive with new and
additional Confidential Information, would not authorize Executive to engage in
activities that will create new and additional Confidential Information, and
would not enter into this Agreement or the Incentive Agreements.


 


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4.             The Termination Benefits constitute
all of NMG’s obligations to Executive with respect to the end of Executive’s
employment with NMG. However, nothing in this Agreement is intended to limit
any earned, vested benefits (other than any entitlement to severance or
separation pay, if any) that Executive may have under the applicable provisions
of any benefit plan of NMG in which Executive is participating at the time of
his termination of employment or resignation.


 


5.             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 2 or 3 of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, Executive agrees that NMG shall be entitled to
equitable relief, including preliminary and permanent injunctions and specific
performance, in the event 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 Executive, but shall be in addition to all other remedies available
to NMG at law or equity. Executive acknowledges and agrees that NMG shall be
entitled to recover its attorneys’ fees, expenses, and court costs, in addition
to any other remedies to which it may be entitled, in the event he breaches
this Agreement. Executive acknowledges and agrees that no breach by NMG of this
Agreement or failure to enforce or insist on its rights under this Agreement
shall constitute a waiver or abandonment of any such rights or defense to
enforcement of such rights.


 


6.             If the provisions of paragraphs 2
or 3 of this Agreement are ever deemed by a court to exceed the limitations
permitted by applicable law, Executive and NMG agree that such provisions shall
be, and are, automatically reformed to the maximum limitations permitted by
such law.


 


7.             This Agreement contains the entire
agreement between the parties and supersedes all prior agreements and
understandings, oral or written, with respect to the ending of Executive’s
at-will employment and the subject matter of this Agreement. This Agreement may
not be changed orally. It may be changed only by written agreement signed by
the party against whom any waiver, change, amendment, modification or discharge
is sought to be enforced. This Agreement is to be construed as a whole, according
to its fair meaning, and not strictly for or against any of the parties. 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 affected
thereby, shall remain in full force and effect, and shall be enforceable to the
fullest extent permitted by applicable law.


 


8.             The validity, performance and
enforceability of this Agreement shall be determined and governed by the laws
of the State of Texas, without regard to its conflict of laws principles. NMG
and Executive agree that the exclusive forum for any action concerning this
Agreement shall be in a court of competent jurisdiction in Dallas County,
Texas, with respect to a state court, or the Dallas Division of the United
States District Court for the Northern District of Texas, with respect to a
federal court. EXECUTIVE HEREBY CONSENTS TO THE EXERCISE OF JURISDICTION OF A
COURT IN THE EXCLUSIVE FORUM AND WAIVES ANY RIGHT HE MAY HAVE TO CHALLENGE OR
CONTEST THE REMOVAL AT ANY TIME BY NMG TO FEDERAL COURT OF ANY SUCH ACTION HE
MAY BRING AGAINST IT IN STATE COURT. EXECUTIVE AND NMG FURTHER HEREBY MUTUALLY
WAIVE THEIR RIGHT TO TRIAL BY JURY IN ANY ACTION CONCERNING THIS AGREEMENT.


 


9.             Executive’s promises and obligations
under this Agreement shall survive the end of his employment with NMG, and such
promises and obligations shall inure to the benefit of any Affiliates,
subsidiaries, divisions, successors, or assigns of NMG.


 


 


	
   

  	
  THE
  NEIMAN MARCUS GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/  Brendan L. Hoffman

  	
   

  	
  By:

  	
  /s/  Marita O’Dea

  	
   

  
	
  Brendan L. Hoffman

  	
   

  	
   

  	
  Marita O’Dea, Senior Vice President

  	
   

  



 


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APPENDIX
A


 


Definitions


 


1.             “Affiliate” means, with respect to
any entity, any other corporation, organization, association, partnership, sole
proprietorship or other type of entity, whether incorporated or unincorporated,
directly or indirectly controlling or controlled by or under direct or indirect
common control with such entity.


 


2.             “Cause” means, in NMG’s reasonable
judgment, (i) a breach of duty by Executive in the course of his employment
involving fraud, acts of dishonesty (other than inadvertent acts or omissions),
disloyalty, or moral turpitude; (ii) conduct that is materially detrimental to
NMG, monetarily or otherwise, or reflects unfavorably on NMG or Executive to
such an extent that NMG’s best interests reasonably require the termination of
Executive’s employment; (iii) acts of Executive in violation of his obligations
under this Agreement or at law; (iv) Executive’s failure to comply with or
enforce NMG’s policies concerning equal employment opportunity, including
engaging in sexually or otherwise harassing conduct; (v) Executive’s repeated
insubordination or failure to comply with or enforce other personnel policies
of NMG or its Affiliates; (vi) Executive’s failure to devote his full working
time and best efforts to the performance of his responsibilities to NMG or its
Affiliates; or (vii) Executive’s conviction of or entry of a plea agreement or
consent decree or similar arrangement with respect to, a felony, other serious
criminal offense, or any violation of federal or state securities laws;
provided, however, that with respect to items (v) ~d (vi), Executive has been
provided prior written notice of the failure and afforded a reasonable
opportunity to correct same.


 


3.             “Competitor” means (i) the person
or entity that owns or operates Saks Incorporated, Nordstrom, Inc., or Barneys
New York, Inc.; (ii) the successors to or assigns of the persons or entities
identified in (i); and (iii) any other person or entity that owns or operates a
luxury specialty retail store.


 


4.             “Confidential Information” shall
mean, 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
Executive.


 


5.             “Total Disability”
means that, in NMG’s reasonable judgment, either (i) Executive has been unable
to perform his duties because of a physical or mental impairment for 80% or
more of the normal working days during six consecutive calendar months or 50%
or more of the normal working days during twelve consecutive calendar months,
or (ii) Executive has become totally and permanently incapable of performing
the usual duties of his employment with NMG on account of a physical or mental
impairment.


 


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