Exhibit
10.11


 


CONFIDENTIALITY,
NON-COMPETITION AND TERMINATION BENEFITS AGREEMENT


 


This Confidentiality, Non-Competition and Termination Benefits
Agreement (“Agreement”) is entered into effective as of November 20, 2002
between Karen W. Katz (“Executive”) and The Neiman Marcus Group, Inc., a
Delaware corporation, (“NMG”), and replaces and supersedes in its entirety that
certain Termination and Change of Control Agreement between Executive and NMG
dated May 22, 2000 (the “2000 Agreement”). 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 is employed “at will” as President and Chief
Executive Officer of Neiman Marcus Stores and either Executive or NMG may
terminate Executive’s employment at any time, with or without notice, and for
any reason;


 


WHEREAS, in connection with the restructuring of the compensation and
benefits provided to senior executives of NMG, including Executive, the Board
of Directors of NMG has determined that stock option and restricted stock
awards 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 have entered into separate stock option and
restricted stock agreements (the “Incentive Agreements”), effective November
20, 2002 that set forth the rights and obligations of NMG and Executive with
respect to such awards;


 


WHEREAS, NMG has granted to Executive an ownership interest in NMG in
the form of NMG stock;


 


WHEREAS, by virtue of her new position and responsibilities, Executive
has 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 her NMG
employment;


 


WHEREAS, NMG and Executive accordingly desire to make certain
modifications to the provisions of the 2000 Agreement, necessitating its
replacement with this Agreement;


 


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,” her “Total
Disability,” or her 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 her 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 her 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 1(a), any material, adverse change in the terms
and conditions of her 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 her 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 her 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 her 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 her employment for Cause, whether
such act or omission was committed during her employment with NMG or during the
Salary Continuance Period, NMG may suspend any


 


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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, her participation in or
direction of NMG’s day-to-day operations and strategic planning as a result of
her promotion will be an integral part of NMG’s continued success and goodwill;
(e) given her new position and responsibilities, she necessarily will be
creating Confidential Information that belongs to NMG and enhances NMG’s
goodwill, and in carrying out her new responsibilities she in turn will be
relying on NMG’s goodwill and the disclosure by NMG to her of Confidential
Information; (f) 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 (g) she
necessarily would use or disclose Confidential Information if she were to
engage in competition with NMG. NMG acknowledges and agrees that Executive must
have and continue to have throughout her employment the benefits and use of its
goodwill and Confidential Information in order to properly carry out her 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
her 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 her employment in her 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 her employment by NMG and thereafter:


 


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


 


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


 


(c) she 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


 


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officer,
director, or employee of NMG 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;


 


(d) 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 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 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


 


(f) absent the promises and representations of Executive in this
paragraph and paragraph 3 below, NMG would not promote Executive, would require
her immediately to return any tangible Confidential Information in her
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 her 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 and
the Incentive Agreements, Executive agrees that, while she is employed by NMG
and for a period of 18 months 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 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;


 


(b) She will not, whether on her 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) She will not, whether on her 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) She 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) she
has advised NMG in writing in advance of her 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


 


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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 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 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 her 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 she will immediately notify NMG in writing
should she believe or be advised that the restrictions are not valid or
enforceable under Texas law or the law of any other state that she 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 her to return any Confidential
Information in her 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.


 


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 her 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


 


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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 she 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 her 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/  Karen W. Katz

  	
   

  	
   

  	
  By:

  	
  /s/  Marita O’Dea

  	
   

  
	
  Karen
  W. Katz

  	
   

  	
   

  	
  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 her
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
her 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 her full
working time and best efforts to the performance of her 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) and (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 her 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 her employment with NMG on account of a physical or mental
impairment.


 


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