**Exhibit 10.45**

 

**TIER III**

 

**THE NEIMAN MARCUS GROUP, INC.EXECUTIVECHANGE OF CONTROL SEVERANCE PLAN**

 

THIS EXECUTIVE CHANGE OF CONTROL SEVERANCE PLAN, made and executed atDallas, Texas, by THE NEIMAN MARCUS GROUP, INC., a Delaware corporation, isbeing established to provide for the payment of severance benefits to certainof its eligible employees.

 

# Section 1.               Definitions.  Unless the context clearly indicatesotherwise, when used in this Plan:

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## (a)           “Affiliate” means, with respect to any entity, anyother corporation, organization, association, partnership, sole proprietorshipor other type of entity, whether incorporated or unincorporated, directly orindirectly controlling or controlled by or under direct or indirect commoncontrol with such entity.

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## (b)           “Base Salary” means Executive’s annual rate of basesalary in effect on the date in question, determined prior to reduction for anyemployee-elected salary reduction contributions made to an Employer-sponsorednon-qualified deferred compensation plan or an Employer-sponsored plan pursuantto Section 401(k) or 125 of the Internal Revenue Code, and excludingbonuses, overtime, allowances, commissions, deferred compensation payments andany other extraordinary remuneration.

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## (c)           “Board” means the board of directors of the Company.

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## (d)           “Bonus” means the amount payable to Executive underthe Company’s applicable annual incentive bonus plan with respect to a fiscalyear of the Company.

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## (e)           “Cause” means

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### (1)           the willful and continued failure by Executive to substantiallyperform duties consistent with Executive’s position with the Company (otherthan any such failure resulting from incapacity due to physical or mentalillness or termination by Executive for Good Reason), after a demand forsubstantial performance is delivered to Executive by the Board, together with acopy of the resolution of the Board that specifically identifies the manner inwhich the Board believes that Executive has not substantially performedExecutive’s duties, which resolution must be passed by at least 2/3of the entire Board at a meeting called for the purpose and after anopportunity for Executive and Executive’s counsel to be heard by the Board, andExecutive has failed to resume substantial performance of Executive’s duties ona continuous basis within 14 days of receiving such demand;

 

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### (2)           the willful engaging by Executive in conduct that isdemonstrably and materially injurious to the Company, monetarily or otherwise,as set forth in a resolution of the Board, which resolution must be passed byat least 2/3 of the entire Board at a meeting called forthe purpose and after an opportunity for Executive and Executive’s counsel tobe heard by the Board; or

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### (3)           Executive’s conviction of a felony, or conviction of amisdemeanor involving assets of the Company.

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### For purposes of thisdefinition, no act, or failure to act, on Executive’s part shall be deemed “willful”unless done, or omitted to be done, by Executive not in good faith and withoutreasonable belief that Executive’s action or omission was in the best interestof the Company.

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## (f)            “Change of Control”means, and shall be deemed to have occurred:

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### (1)           upon the consummation of any transaction or series oftransactions under which the Company is merged or consolidated with any other company,other than a merger or consolidation that would result in the stockholders ofthe Company immediately prior thereto owning voting securities immediatelythereafter (either by the securities such stockholders owned immediately priorthereto remaining outstanding or by the securities such stockholders ownedimmediately prior thereto being converted into voting securities of thesurviving entity) representing more than 50% of the combined voting power ofthe voting securities of the Company, the acquiring entity or such survivingentity, as the case may be, outstanding immediately after such merger orconsolidation;

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### (2)           if any person or group (as used in Section 13(d) of theExchange Act) (other than the Company, any trustee or other fiduciary holdingsecurities under an employee benefit plan of the Company, or any company owned,directly or indirectly, by the stockholders of the Company in substantially thesame proportions as their ownership of stock of the Company) becomes the “beneficialowner” (as defined in Rule 13d-3 under the Exchange Act) of securities ofthe Company representing more than 40% of (a) the shares of the Company’sClass B Common Stock then outstanding or (b) the combined votingpower (other than in the election of directors) of all voting securities of theCompany then outstanding;

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### (3)           if, during any period of 24 consecutive months,individuals who at the beginning of such period constituted the Board, and anydirector whose election or nomination for election by the Company’s stockholderswas approved by a vote of at least two-thirds (2/3)of the directors then still in office who either were directors at thebeginning of the period or whose election or nomination for election waspreviously so approved, cease for any reason (other than death or disability)to constitute at least a majority thereof; or

 

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### (4)           upon the complete liquidation of the Company or the sale ordisposition by the Company of all or substantially all of the Company’s assets,other than a liquidation of the Company into a wholly-owned subsidiary.

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## (g)           “COBRA” means the Consolidated Omnibus BudgetReconciliation Act of 1985, as amended.

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## (h)           “Code” means the Internal Revenue Code of 1986, asamended.

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## (i)            “Committee” means thecommittee designated pursuant to Section 7 to administer this Plan.

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## (j)            “Company” means TheNeiman Marcus Group, Inc., a Delaware corporation and, after a Change ofControl, any successor or successors thereto.

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## (k)           “Eligible Executive” means an Executive whoseemployment with Executive’s Employer (i) is involuntarily terminated bythe Employer for any reason other than Cause (A) in connection with or inanticipation of a Change of Control at the request of, or upon the initiativeof, the buyer in the Change of Control transaction (an “AnticipatoryTermination”),****butonly if an anticipated Change of Control actually occurs during the period inwhich this Plan is effective (in which case Executive’s date of terminationshall be deemed to have occurred immediately following the Change of Control)or (B) during the two-year period beginning on the effective date of aChange of Control, or (ii) terminates during the two-year period beginningon the effective date of a Change of Control on account of such Executive’sresignation for Good Reason within six months from the date the Executive firstbecomes aware of the existence of Good Reason; provided, however,that the employment of an Executive shall not be considered to have been “involuntarilyterminated” in any of the following circumstances:

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### (1)           if an Executive’s employment with an Employer is terminatedby reason of a transfer to the employ of another Employer or an Affiliate,

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### (2)           if an Executive’s employment with an Employer is terminatedby reason of a transfer to the employ of another entity into which the Employeris merged or otherwise consolidated; provided such entity adopts thisPlan,

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### (3)           if an Executive’s employment with an Employer is terminatedupon the expiration of a leave of absence by reason of his or her failure toreturn to work at such time or the absence at such time of an availableposition for which the Executive is qualified,

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### (4)           if an Executive’s employment with an Employer is terminatedin connection with the sale of stock or the sale or lease by such Employer ofall or part of its assets if (i) such Employer determines in its solediscretion that either (A) in connection with such sale or lease suchExecutive was offered employment for a comparable position at a comparablesalary, annual bonus opportunity and employee benefits with the purchaser orlessee, as the case may be, of the Employer’s stock or assets or (B) suchExecutive voluntarily elected not to

 

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### participate in theselection process for such employment and (ii) the purchaser or lesseeadopts this Plan,

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### (5)           if an Executive resigns from employment with an Employerunder circumstances that do not constitute Good Reason, and

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### (6)           if Executive’s employment is terminated due to a death orTotal Disability.

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## (l)            “Employer” means theCompany and any other Affiliate of the Company which adopts this Plan with theconsent of the Board.

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## (m)          “Exchange Act” means the Securities Exchange Act of1934, as amended.

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## (n)           “Executive” means an employee of an Employer as ofthe date of a Change of Control who is listed on Schedule Aattached hereto.

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## (o)           “Good Reason” means any of the following actions onor after a Change of Control, without Executive’s express prior written approval,other than due to Executive’s Total Disability or death:

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### (1)           any decrease in, or any failure to increase in accordancewith an agreement between Executive and the Company or any of its Subsidiaries,Base Salary or Target Bonus;

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### (2)           any material diminution in the aggregate employee benefitsafforded to the Executive immediately prior to the Change of Control; for thispurpose employee benefits shall include, but not be limited to pensionbenefits, life insurance and medical and disability benefits (excluding, forthe avoidance of doubt, the Company’s termination of the Plan in accordancewith, and subject to, the provisions of Section 9 of the Plan);

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### (3)           any diminution in Executive’s title or primary reportingrelationship, or substantial diminution in duties or responsibilities; provided,however, that no such diminution or substantial diminution, asapplicable, shall be deemed to occur (a) solely as a result of(x) the Company ceasing to be a publicly held corporation or (y) theCompany becoming a subsidiary or division of another entity, providedthat (A) such subsidiary or division continues to represent substantiallyall of the business operations of the Company as in effect immediately prior tothe Change of Control and (B) the Executive does not suffer a diminutionin title or primary reporting relationship or substantial diminution in dutiesor responsibilities with respect to such subsidiary or division relative to hisor her title, primary reporting relationship or duties or responsibilities withthe Company immediately prior to such Change of Control or (b) as a resultof a diminution in connection with a corporate or management reorganization orrestructuring which similarly affects a substantial percentage of other Companyexecutives with similar responsibility levels at the Company;

 

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### (4)           any relocation of Executive’s principal place of business of50 miles or more, other than normal travel consistent with past practice,or any requirement that Executive engage in excessive business-related travelin a manner inconsistent with past practice in any material respect; or

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### (5)           the failure of any successor or assignee (whether direct orindirect, by purchase, merger, consolidation, or otherwise) to all orsubstantially all of the business and/or assets of the Company in connectionwith any Change of Control, by agreement in writing in form and substancereasonably satisfactory to Executive, expressly, absolutely and unconditionallyto assume and agree to perform this Plan, or the Confidentiality,Non-Competition and Termination Benefits Agreement or any other employmentagreement to which the Company and Executive are party, in each case, whichremains in effect as of immediately prior to such Change of Control, in thesame manner and to the same extent that the Company would be required toperform any such agreement if no such succession or assignment had taken place.

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### Executive shall have six months from the timeExecutive first becomes aware of the existence of Good Reason to resign forGood Reason.

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## (p)           “Plan” means THE NEIMAN MARCUS GROUP, INC. EXECUTIVECHANGE OF CONTROL SEVERANCE PLAN as in effect from time to time.

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## (q)           “Plan Year” means the calendar year.

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## (r)            “Release” means a releaseto be signed by an Eligible Executive in such form as the Company shalldetermine, which shall, to the extent permitted by law, waive all claims andactions against the Employers and Affiliates and such other related parties andentities as the Company chooses to include in the release except for claims andactions for benefits provided under the terms of this Plan (which Release isnot revoked by the Eligible Executive).

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## (s)           “Target Bonus” means the greater of(1) Executive’s target Bonus in effect on the date of the Change ofControl or (2) Executive’s target Bonus in effect immediately prior to theevent set forth in the notice of termination given in accordance withSection 13.

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## (t)            “Total Disability” “means that, in the Company’s reasonable judgment, either (1) Executive hasbeen unable to perform Executive’s duties because of a physical or mentalimpairment for 80% or more of the normal working days during six consecutivecalendar months or 50% or more of the normal working days during12 consecutive calendar months, or (2) Executive has become totallyand permanently incapable of performing the usual duties of his employment withthe Company on account of a physical or mental impairment.

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# Section 2.               Severance Benefits.  Each Eligible Executive who executes aRelease at the time and in the manner prescribed by the Company (and who doesnot revoke such Release)

 

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and who agrees to be subject tothe restrictive covenants set forth on Exhibit A shall be entitled to thefollowing:

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## (a)           Severance Pay.  Such an Eligible Executive shall be entitledto receive severance pay from his or her Employer in a lump sum amount equal to(i) 1.5 multiplied by the greater of the Eligible Executive’s BaseSalary in effect (A) immediately prior to the date of the Change ofControl or (B) immediately prior to the event set forth in the notice oftermination given in accordance with Section 13, (ii) 1.5 multipliedby the Target Bonus and (iii) the Target Bonus multipliedby a fraction, the numerator of which shallequal the number of days the Eligible Executive was employed by the EligibleExecutive’s Employer in the Employer fiscal year in which the EligibleExecutive’s termination occurs and the denominator of which shall equal 365 (the“Bonus Fraction”); provided that if the effective date of theEligible Executive’s termination occurs after more than 75% of the Company’sfiscal year has elapsed, then, if it is ultimately determined that the Bonusthe Eligible Executive would have been entitled to receive for the fiscal yearin which such termination occurs, determined based solely upon actual Employerperformance for such fiscal year and excluding any qualitative performancecriteria that would otherwise apply to such determination (i.e.,assuming any qualitative or subjective performance requirements were satisfiedin full) (the “Year-End Bonus”), is greater than the Target Bonus,within 15 business days following such determination (and in any event, nolater than the date annual bonuses for such fiscal year are otherwise paid toactive employees of the Employer), the Employer shall also pay the EligibleExecutive an amount in cash equal to the excess of the Year-End Bonus over theTarget Bonus multiplied by the Bonus Fraction. In the event of an Anticipatory Termination, such Eligible Executiveshall also be entitled to receive an amount equal to Executive’s Base Salaryfrom the date of Executive’s termination through the date immediately followingthe Change of Control and any Bonus for the previously completed fiscal year,if not previously paid due to Executive’s earlier termination of employment.

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## (b)           Medical, Dental and LifeInsurance Benefit Continuation.  For 18 monthsfollowing the Eligible Executive’s termination of employment (the “WelfareContinuation Period”), the Eligible Executive and such Eligible Executive’sspouse and dependents (each as defined under the applicable program) shallreceive the following benefits: (i) medical and dental insurance coveragesat the same benefit level as provided to the Eligible Executive immediatelyprior to the Change of Control, for which the Company will (A) reimbursethe Eligible Executive during the first 18 months of the WelfareContinuation Period or, if shorter, the period of actual COBRA continuationcoverage received by the Eligible Executive during the Welfare ContinuationPeriod, for the total amount of the monthly COBRA medical and dental insurancepremiums payable by the Eligible Executive for such continued benefits (by reducingsuch premium obligations to zero) and (B) provide such coverage for anyremaining portion of the Welfare Continuation Period at the same cost to theEligible Executive as is generally provided to similarly situated activeemployees of the Company (provided, however, that if, during theWelfare Continuation Period, the Eligible Executive becomes employed by a newemployer, continuing medical and dental coverage from the Company will becomesecondary to any coverage afforded by the new employer in which the EligibleExecutive becomes enrolled); and (ii) life insurance coverage at the samebenefit level as provided

 

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## to the EligibleExecutive immediately prior to the Change of Control and at the same cost tothe Eligible Executive as is generally provided to similarly situated activeemployees of the Company (or if such coverage is no longer provided by theCompany, then at the Executive’s cost immediately prior to the Change ofControl).

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## (c)           Accrued Benefits.  Such Eligible Executive shall be entitled toreceive any unpaid Base Salary through the date of such Eligible Executive’stermination, any Bonus earned but unpaid as of the date of such EligibleExecutive’s termination for any previously completed fiscal year of theCompany, and all compensation previously deferred by such Eligible Executivebut not yet paid as well as the Company’s matching contribution with respect tosuch deferred compensation with respect to the year in which such terminationof employment occurs and all accrued interest thereon.  In addition, such Eligible Executive shall beentitled to prompt reimbursement of any unreimbursed expenses properly incurredby such Eligible Executive in accordance with Company policies prior to the dateof such Eligible Executive’s termination. Such Eligible Executive shall also receive such other benefits, if any,to which such Eligible Executive may be entitled pursuant to the terms andconditions of the employee compensation, incentive, equity, benefit or fringebenefit plans, policies or programs of the Company, other than any Companyseverance policy and as provided in Section 11.

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## (d)           Retirement Benefits.  As of the Termination Date, (i) such EligibleExecutive, to the extent not then a participant in, shall be deemed aparticipant in, and to the extent not then vested, shall become fully vested insuch Eligible Executive’s benefits under, The Neiman Marcus Group, Inc.Supplemental Executive Retirement Plan as in effect immediately prior to theChange of Control (the “SERP”) and (ii) such Eligible Executive shallbecome entitled to, and the Company shall pay such Eligible Executive a cashlump sum equal to the excess of:

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##### (1) the Actuarial Equivalent of the single life annuity that wouldbe payable to such Eligible Executive under the terms of the SERP based on theaccrued benefit as of the Termination Date, after crediting such EligibleExecutive with an additional number of years of service and age equal to theSeverance Multiple beyond that accrued as of the Termination Date (subject, ineach case, to the 25 maximum years of service limitation set forth in the SERP,as applicable) for purposes of eligibility for participation, eligibility forretirement, for early commencement of actuarial subsidies and for purposes ofbenefit accrual; over

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##### (2) the Actuarial Equivalent of the single life annuity that wouldbe payable to such Eligible Executive under the terms of SERP (assuming theEligible Executive was fully vested therein) in accordance with its terms as ineffect immediately prior to the Change of Control, based on the accrued benefitas of the Termination Date.

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The Actuarial Equivalent shall be determinedbased upon the assumptions set forth in the NMG Retirement Plan (Basic Plan)and the benefit under this Section 3(d) shall be calculated in a mannerconsistent with the methodology and assumptions set forth in the illustrativeexample attached as Exhibit B.

 

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## (e)           Retiree Medical.  Following such Eligible Executive’sentitlement to continued active employee benefits pursuant toSection 2(b), if Executive was eligible for retiree medical benefits as ofthe Termination Date, using the eligibility criteria in effect immediatelyprior to the Change of Control, Executive shall be entitled to, and Companyshall be required to provide, retiree medical coverage at the same benefitlevel and at the same cost to Executive as specified by the retiree medicalplan in effect immediately prior to the Change of Control.

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## (f)            Outplacement.  For 18 months following such EligibleExecutive’s termination of employment, the Company shall promptly pay (or, inthe discretion of the Eligible Executive, reimburse the Eligible Executive forall reasonable expenses incurred) for professional outplacement services byDrake Beam Morin, Inc. or another comparable qualified consultant selected bythe Company, but for no longer than the date the Eligible Executive firstobtains full-time employment after the date of termination of employment.

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## (g)           Discount.  At all times from and following such EligibleExecutive’s termination of employment, the Company shall provide to theEligible Executive and the Eligible Executive’s spouse and dependents (each asdefined under the Company’s applicable policies) all merchandise discountsavailable to the Company’s employees immediately prior to the Change ofControl.

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## (h)           Equity Incentive Awards.  Any time periods, conditions or contingenciesrelating to the exercise or realization of, or lapse of restrictions under, anyoutstanding equity incentive award then held by such Eligible Executive shall,if not previously accelerated or waived pursuant to Section 3, beautomatically accelerated or waived effective as of the effective date of suchEligible Executive’s termination of employment.

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## (i)            Restrictive Covenants.  In consideration of the provision of theforegoing benefits provided in this Section 2 and as otherwise set forthin the Plan, Executive hereby agrees to be bound by the restrictive covenantsset forth in Exhibit A attached hereto.

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# Section 3.               Treatment of Equity IncentiveAwards.  Upon the occurrence of a Change of Controlduring the period in which this Plan is effective, any time periods, conditionsor contingencies relating to the exercise or realization of, or lapse ofrestrictions under, any outstanding equity incentive award then held by theEligible Executive shall be automatically accelerated or waived effective as ofthe date of the Change of Control; provided, however, that in theevent any such outstanding equity incentive award is replaced as of theoccurrence of the Change of Control by comparable types of awards of greater orat least substantially equivalent value, as determined in the sole discretionof the administrator of the equity incentive award plan under which theoutstanding award was granted, no such automatic acceleration or waiver shalloccur, except to the extent the administrator of the applicable equityincentive award plan, in its sole discretion, provides for such acceleration orwaiver, or unless such acceleration or waiver is expressly provided for inconnection with such replacement or under the terms of the applicable awardagreement.

 

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# Section 4.               Form and Time of Payment.  The cash severance pay benefits payable to anEligible Executive by his or her Employer under Section 2 shall be paid tosuch Eligible Executive in a single lump sum less applicable withholdingswithin the later of (i) 15 business days after the Eligible Executive’sdate of termination or (ii) the expiration of the revocation period, ifapplicable, under the Release, except with respect to any additional bonusamount payable after such time period to the extent required pursuant to Section 2(a)(iii)above and except as provided pursuant to Section 5.

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# Section 5.               Tax Withholding and Deferral.  Each Employer shall withhold from any amountpayable to an Eligible Executive pursuant to this Plan, and shall remit to theappropriate governmental authority, any income, employment or other tax theEmployer is required by applicable law to so withhold from and remit on behalfof such Eligible Executive. Notwithstanding any other provision of this Plan or certain compensationand benefit plans of the Employer, any payments or benefits due under this Planor such Employer compensation and benefit plans upon or in connection with atermination of Executive’s employment shall be deferred and paid no earlierthan six months following such termination of Executive’s employment, if, andonly to the extent, required to comply with Section 409A of the Code.

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# Section 6.               Limitation of Certain Payments.

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## (a)           In the event the Employer determines, based upon the adviceof the independent public accountants for the Employer, that part or all of theconsideration, compensation or benefits to be paid to Executive under this Planconstitute “parachute payments” under Section 280G(b)(2) of the Code, asamended, then, if the aggregate present value of such parachute payments,singularly or together with the aggregate present value of any consideration,compensation or benefits to be paid to Executive under any other plan,arrangement or agreement which constitute “parachute payments” (collectively,the “Parachute Amount”) exceeds 2.99 times the Executive’s “baseamount”, as defined in Section 280G(b)(3) of the Code (the “ExecutiveBase Amount”), the amounts constituting “parachute payments” which wouldotherwise be payable to or for the benefit of Executive shall be reduced to theextent necessary so that the Parachute Amount is equal to 2.99 times theExecutive Base Amount (the “Reduced Amount”); provided that suchamounts shall not be so reduced if the Executive determines, based upon theadvice of an independent nationally recognized public accounting firm (whichmay, but need not be the independent public accountants of the Employer), thatwithout such reduction Executive would be entitled to receive and retain, on anet after tax basis (including, without limitation, any excise taxes payableunder Section 4999 of the Code), an amount which is greater than theamount, on a net after tax basis, that the Executive would be entitled toretain upon his receipt of the Reduced Amount.

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## (b)           If the determination made pursuant to clause (a) ofthis Section 6 results in a reduction of the payments that would otherwisebe paid to Executive except for the application of clause (a) of thisSection 6, Executive may then elect, in his sole discretion, which and howmuch of any particular entitlement shall be eliminated or reduced and shalladvise the Employer in writing of his election within ten days of thedetermination of the reduction in payments. If no such election is made by Executive within such ten-day period, theEmployer may elect which and how much of any entitlement shall be

 

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## eliminated orreduced and shall notify Executive promptly of such election.  Within ten days following such determinationand the elections hereunder, the Employer shall pay to or distribute to or forthe benefit of Executive such amounts as are then due to Executive under thisPlan and shall promptly pay to or distribute to or for the benefit of Executivein the future such amounts as become due to Executive pursuant to this Plan.

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## (c)           As a result of the uncertainty in the application ofSection 280G of the Code at the time of a determination hereunder, it ispossible that payments will be made by the Employer which should not have beenmade under clause (a) of this Section 6 (“Overpayment”) orthat additional payments which are not made by the Employer pursuant toclause (a) of this Section 6 should have been made (“Underpayment”).  In the event that there is a finaldetermination by the Internal Revenue Service, or a final determination by acourt of competent jurisdiction, that an Overpayment has been made, any suchOverpayment shall be repaid by Executive to the Employer together with interestat the applicable Federal rate provided for in Section 7872(f)(2) of theCode.  In the event that there is a finaldetermination by the Internal Revenue Service, a final determination by a courtof competent jurisdiction or a change in the provisions of the Code or regulationspursuant to which an Underpayment arises under this Plan, any such Underpaymentshall be promptly paid by the Employer to or for the benefit of Executive,together with interest at the applicable Federal rate provided for inSection 7872(f)(2) of the Code.

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# Section 7.               Plan Administration.  This Plan shall be administered by theCompensation Committee of the Board.  TheCommittee shall have discretionary and final authority to interpret andimplement the provisions of this Plan and to determine eligibility for benefitsunder the Plan.  The Committee shallperform all of the duties and exercise all of the powers and discretion thatthe Committee deems necessary or appropriate for the proper administration ofthis Plan.  Every interpretation, choice,determination or other exercise by the Committee of any power or discretiongiven either expressly or by implication to it shall be conclusive and bindingupon all parties having or claiming to have an interest under this Plan orotherwise directly or indirectly affected by such action, without restriction,however, upon the right of the Committee to reconsider or redetermine suchaction.  The Committee may adopt suchrules and regulations for the administration of this Plan as are consistentwith the terms hereof, and shall keep adequate records of its proceedings andacts.  The Committee may employ suchagents, accountants and legal counsel (who may be agents, accountants and legalcounsel for an Employer) as may be appropriate for the administration of the Plan.  All reasonable administration expensesincurred by the Committee in connection with the administration of the Planshall be paid by the Employer.

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# Section 8.               Claims Procedure.  If any person (hereinafter called the “Claimant”)feels he or she is being denied a benefit to which he or she is entitled underthis Plan, such Claimant may file a written claim for said benefit with theChairman of the Committee.  Within60 days of the receipt of such claim the Committee shall determine andnotify the Claimant as to whether he or she is entitled to such benefit.  Such notification shall be in writing and, ifdenying the claim for benefit, shall set forth the specific reason or reasonsfor the denial, make specific reference to the pertinent Plan provisions, andadvise the Claimant that he or she may, within 60 days of the receipt ofsuch notice, request in writing to appear before the Committee or itsdesignated

 

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# representative for a hearing to review suchdenial.  Any such hearing shall bescheduled at the mutual convenience of the Committee or its designatedrepresentative and the Claimant, and at such hearing the Claimant and/or his orher duly authorized representative may examine any relevant documents andpresent evidence and arguments to support the granting of the benefit beingclaimed.  The final decision of theCommittee with respect to the claim being reviewed shall be made within60 days following the hearing thereon, and the Committee shall in writingnotify the Claimant of its final decision, again specifying the reasonstherefor and the pertinent Plan provisions upon which such decision isbased.  The final decision of theCommittee shall be conclusive and binding upon all parties having or claimingto have an interest in the matter being reviewed.

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# Section 9.               Plan Amendment and Termination.  The Company shall have the right and power atany time and from time to time to amend this Plan, in whole or in part, bywritten document executed by its duly authorized representative and at any timeto terminate this Plan; provided, however, that no such amendmentor termination shall reduce the amount of severance pay payable under this Planto a former Executive whose employment with an Employer terminated prior to thedate of such amendment or termination, or defer the date for the payment ofsuch former Executive’s benefit hereunder except as provided pursuant toSection 5, without the consent of such former Executive.  Any provision of this Plan to the contrarynotwithstanding, any action to amend or terminate this Plan on or after thedate on which a Change of Control occurs shall not be effective prior to theend of the two-year period beginning on the effective date of the Change ofControl.

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# Section 10.             Nature of Plan and Rights.  This Plan is an unfunded employee welfarebenefit plan and no provision of this Plan shall be deemed or construed tocreate a trust fund of any kind or to grant a property interest of any kind toany Executive or former Executive.  Anypayment which becomes due under this Plan to an Eligible Executive shall bemade by his or her Employer out of its general assets, and the right of anyEligible Executive to receive a payment hereunder from his or her Employershall be no greater than the right of any unsecured general creditor of suchEmployer.

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# Section 11.             Entire Agreement; Offset;Modification.

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## (a)           This Plan constitutes the entire agreement between theparties and, except as expressly provided herein, supersedes the provisions ofall other prior agreements expressly concerning the payment of severancebenefits upon a termination of employment in connection with or following aChange of Control.  Without limiting thegenerality of the preceding sentence, the payment of any amounts and provisionof any benefits pursuant to Section 2 of this Plan shall be in lieu of andshall supersede Executive’s entitlement to payments or benefits pursuant toparagraph 1(a) of the Confidentiality, Non-Competition and TerminationBenefits Agreement between Executive and the Company (to the extent suchagreement is currently in effect).  Inall other respects, any such Confidentiality, Non-Competition and TerminationBenefits Agreement shall remain in full force and effect, including withrespect to any amounts payable or benefits to be provided prior to andotherwise not in connection with a Change of Control; provided, that inno event shall payments or benefits provided pursuant to the Confidentiality,Non-Competition and Termination Benefits Agreement or any other

 

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## severance agreementor policy entitle Executive to a duplication of payments and benefits pursuantto this Plan and, in the event of an Anticipatory Termination, any amountpayable hereunder shall be offset and reduced by the amount of any terminationpayments or benefits previously provided to Executive under theConfidentiality, Non-Competition and Termination Benefits Agreement or anyother severance arrangement with the Company.

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## (b)           Except as expressly provided herein, this Plan shall notinterfere in any way with the right of the Company to reduce Executive’scompensation or other benefits or terminate Executive’s employment, with orwithout Cause.  Any rights that Executiveshall have in that regard shall be as set forth in any applicable employmentagreement between Executive and the Company.

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# Section 12.             Spendthrift Provision.  No right or interest of an Eligible Executiveunder this Plan may be assigned, transferred or alienated, in whole or in part,either directly or by operation of law, and no such right or interest shall beliable for or subject to any debt, obligation or liability of such EligibleExecutive.

#  

# Section 13.             Notice.  Notice of termination without Cause or forGood Reason shall be given in accordance with this Section, and shall indicatethe specific termination provision under the Plan relied upon, the relevantfacts and circumstances and the effective date of termination.  For the purpose of this Plan, any notice andall other communication provided for in this Plan shall be in writing and shallbe deemed to have been duly given when received at the respective addresses setforth below, or to such other address as the Company or the Eligible Executivemay have furnished to the other in writing in accordance herewith.

#  

If to the Company:

 

The Neiman Marcus Group, Inc.

1618 Main Street

Dallas, TX 75201

Attention:  General Counsel

 

If to Executive:

 

To the most recent address of Executive set forth in the personnelrecords of the Company.

 

# Section 14.             Applicable Law.  This Plan shall be governed and construed inaccordance with applicable federal law.

 

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# Section 15.             Effectiveness.  This Plan shall be effective as of the dateof adoption by the Board and shall remain in effect until terminated pursuantto Section 9 of this Plan.

#  

IN WITNESS WHEREOF, this Plan has been executed this 1st dayof April, 2005, to be effective as of April 1, 2005.

 
|   |   | THE NEIMAN MARCUS GROUP, IN.C               |
|--------|--------|---------------------------------------------|
|   |   |                                        |
|   | By:    | /s/ Nelson a. Bangs                         |
|   |   | Nelson A. Bangs                             |
|   |   | Senior Vice President & General Counsel |

 

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**TIER III**

**SCHEDULE A**

 

 

Barnes

Galvin

Goddard

Hershey

Hussey

Joselove

Kaner

Kazor

Kornajcik

Lind

Paolini

Patrick

Shields

Shirley

Spaniolo

Stangle

Stapleton

Yee

 

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**Exhibit A**

 

**CONFIDENTIALITY AND NON-COMPETITIONRESTRICTIVE COVENANTS**

 

**I.**              Executiveacknowledges and agrees that (a) the Company is engaged in a highlycompetitive business; (b) the Company has expended considerable time andresources to develop goodwill with its customers, vendors, and others, and tocreate, protect, and exploit Confidential Information (as defined in Section Vbelow); (c) the Company must continue to prevent the dilution of itsgoodwill and unauthorized use or disclosure of its Confidential Information toavoid irreparable harm to its legitimate business interests; (d) in thespecialty retail business, Executive’s participation in or direction of theCompany’s day-to-day operations and strategic planning are and will be anintegral part of the Company’s continued success and goodwill; (e) givenExecutive’s position and responsibilities, Executive necessarily will becreating Confidential Information that belongs to the Company and enhances theCompany’s goodwill, and in carrying out Executive’s responsibilities Executivein turn will be relying on the Company’s goodwill and the disclosure by theCompany to him of Confidential Information; (f) Executive will have accessto Confidential Information that could be used by any competitor of the Companyin a manner that would irreparably harm the Company’s competitive position inthe marketplace and dilute its goodwill; and (g) Executive necessarilywould use or disclose Confidential Information if Executive were to engage in competitionwith the Company.  The Companyacknowledges and agrees that Executive must have and continue to havethroughout Executive’s employment the benefits and use of its goodwill andConfidential Information in order to properly carry out Executive’s responsibilities.  The Company accordingly promises uponexecution and delivery of the Plan to provide Executive immediate access to newand additional Confidential Information and authorize him to engage in activitiesthat will create new and additional Confidential Information.  The Company and Executive thus acknowledgeand agree that upon execution and delivery of the Plan Executive (x) hasreceived, will receive, and will continue to receive, Confidential Informationthat is unique, proprietary, and valuable to the Company, (y) has created,will create, and will continue to create, Confidential Information that isunique, proprietary, and valuable to the Company, and (z) has benefited,will benefit, and will continue to benefit, including without limitation by wayof increased earnings and earning capacity, from the goodwill the Company hasgenerated and from the Confidential Information.  Accordingly, Executive acknowledges andagrees that at all times during Executive’s employment by the Company and thereafter:

 

(i)            all ConfidentialInformation shall remain and be the sole and exclusive property of the Company;

 

(ii)           Executive will protectand safeguard all Confidential Information;

 

(iii)          Executive will hold allConfidential Information in strictest confidence and not, directly orindirectly, disclose or divulge any Confidential Information to any personother than an officer, director, or employee of the Company to the extentnecessary for the proper performance of Executive’s responsibilities unless authorizedto do so by the Company or compelled to do so by law or valid legal process;

 

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(iv)          if Executive believesExecutive is compelled by law or valid legal process to disclose or divulge anyConfidential Information, Executive will notify the Company in writingsufficiently in advance of any such disclosure to allow the Company theopportunity to defend, limit, or otherwise protect its interests against suchdisclosure;

 

(v)           at the end of Executive’semployment with the Company for any reason or at the request of the Company atany time, Executive will return to the Company all Confidential Information andall copies thereof, in whatever tangible form or medium (including electronic);and

 

(vi)          absent the promises andrepresentations of Executive in this Section I and in Section II below,the Company would require him immediately to return any tangible ConfidentialInformation in Executive’s possession, would not provide Executive with new andadditional Confidential Information, would not authorize Executive to engage inactivities that will create new and additional Confidential Information, andwould not enter or have entered into the Plan.

 

**II.**            Inconsideration of the Company’s promises to provide Executive with new andadditional Confidential Information and to authorize him to engage inactivities that will create new and additional Confidential Information uponexecution and delivery of the Plan, and the other promises and undertakings ofthe Company in the Plan, Executive agrees that, while Executive is employed bythe Company and for a period of 12 months following the end of thatemployment for any reason, Executive shall not engage in any of the followingactivities (the “Restricted Activities”):

 

(a)           Executive will notdirectly or indirectly disparage the Company or its Affiliates, any products,services, or operations of the Company or its Affiliates, or any of the former,current, or future officers, directors, or employees of the Company or itsAffiliates;

 

(b)           Executive will not,whether on Executive’s own behalf or on behalf of any other individual,partnership, firm, corporation or business organization, either directly orindirectly solicit, induce, persuade, or entice, or endeavor to solicit,induce, persuade, or entice, any person who is then employed by or otherwiseengaged to perform services for the Company or its Affiliates to leave thatemployment or cease performing those services;

 

(c)           Executive will not,whether on Executive’s own behalf or on behalf of any other individual,partnership, firm, corporation or business organization, either directly orindirectly, solicit, induce, persuade, or entice, or endeavor to solicit,induce, persuade, or entice, any person who is then a customer, supplier, orvendor of the Company or any of its Affiliates to cease being a customer,supplier, or vendor of the Company or any of its Affiliates or to divert all orany part of such person’s or entity’s business from the Company or any of itsAffiliates; and

 

(d)           Executive will notassociate directly or indirectly, as an employee, officer, director, agent,partner, stockholder, owner, representative, or consultant, with any Competitor(as defined in Section V below), unless (i) Executive has advised theCompany in writing in advance of Executive’s desire to undertake suchactivities and the specific nature of such activities; (ii) the Companyhas received written assurances (that will be designed, among other

 

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things, to protect the Company’sand its Affiliates’ goodwill, Confidential Information, and other importantcommercial interests) from the Competitor and Executive that are, in theCompany’s sole discretion, adequate to protect its interests; (iii) theCompany, in its sole discretion, has approved in writing such association; and(iv) Executive and the Competitor adhere to such assurances.  After the end of Executive’s employment withthe Company and any Affiliate, the restriction immediately set forth above inthis Section II(d) applies only to conduct of Executive that takes placeanywhere in, or is directed at any part of, the Noncompetition Area (as definedin Section V below).  Executive shallnot be in violation of this Section II(d) solely as a result of Executive’sinvestment in stock or other securities of a Competitor or any of itsAffiliates listed on a national securities exchange or actively traded in theover-the-counter market if Executive and the members of Executive’s immediatefamily do not, directly or indirectly, hold more than a total of onepercent (1%) of all such shares of stock or other securities issued andoutstanding.  Executive acknowledges andagrees that engaging in the Restricted Activities described in this subparagraphwould result in the inevitable disclosure or use of Confidential Informationfor the Competitor’s benefit or to the detriment of the Company.

 

Executive acknowledges and agrees that the restrictions contained inthis Section II are ancillary to an otherwise enforceable agreement,including without limitation the mutual promises and undertakings set forth inSection II; that the Company’s promises and undertakings set forth inSection II, and Executive’s position and responsibilities with the Company,give rise to the Company’s interest in restricting Executive’s post-employmentactivities; that such restrictions are designed to enforce Executive’s promisesand undertakings set forth in this Section II and Executive’s common-lawobligations and duties owed to the Company; that the restrictions arereasonable and necessary, are valid and enforceable under Texas law, and do notimpose a greater restraint than necessary to protect the Company’s goodwill,Confidential Information, and other legitimate business interests; thatExecutive will immediately notify the Company in writing should Executivebelieve or be advised that the restrictions are not valid or enforceable underTexas law or the law of any other state that Executive contends or is advisedis applicable; that the mutual promises and undertakings of the Company andExecutive under Section I and Section II are not contingent on theduration of Executive’s employment with the Company; and that absent thepromises and representations made by Executive in Section I andSection II, the Company would require him to return any ConfidentialInformation in Executive’s possession, would not provide Executive with new andadditional Confidential Information, would not authorize Executive to engage inactivities that will create new and additional Confidential Information, andwould not enter or have entered into the Plan.

 

**III.****          **Executiveacknowledges and agrees that the Company would not have an adequate remedy atlaw and would be irreparably harmed in the event that any of the provisions ofSection I or Section II were not performed in accordance with theirspecific terms or were otherwise breached. Accordingly, Executive agrees that the Company shall be entitled toequitable relief, including preliminary and permanent injunctions and specificperformance, in the event Executive breaches or threatens to breach any of theprovisions of such Sections, without the necessity of posting any bond orproving special damages or irreparable injury. Such remedies shall not be deemed to be the exclusive remedies for abreach or threatened breach of the provisions of Section I orSection II by Executive, but shall be in addition to all other remediesavailable to the Company at law or equity. Executive acknowledges and agrees that the Company shall be entitled torecover its attorneys’ fees, expenses, and court costs, in addition to

 

A-3

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any other remedies to which it may be entitled, in the event Executivebreaches the provisions of Section I or Section II.  Executive acknowledges and agrees that nobreach by the Company of this Plan or failure to enforce or insist on itsrights under this Plan shall constitute a waiver or abandonment of any suchrights or defense to enforcement of such rights.

 

**IV.****          **Ifthe provisions of Section I or Section II are ever deemed by a courtto exceed the limitations permitted by applicable law, Executive and theCompany agree that such provisions shall be, and are, automatically reformed tothe maximum limitations permitted by such law.

 

**V.****            Definitions:**

 

“Competitor” means (a) each of Saks Incorporated,Nordstrom, Inc., Barneys New York, Inc., any Affiliate of any of them, and anyother person or entity that owns, operates or controls any of them or any oftheir Affiliates, directly or indirectly; (b) the successors to or assignsof the persons or entities identified in (a); and (c) the retailoperations of any person or entity, or successor or assign of such person orentity, who, at any time during Executive’s employment with the Company orwithin 12 months following the end of Executive’s employment with theCompany, was a vendor of the Company and had an annual gross revenue of$100 million or more, and the Affiliates of such vendors.  To the extent that any of the corporate namesused in (a) of this definition are not the legally correct corporate names ofthe entities commonly referred to by the corporate names used above absent thecorporate form designation, the definition shall be deemed to apply to theentities with the correct corporate names, along with the Affiliates,successors, and assigns of such correctly named entities.

 

“Confidential Information” shall mean, without limitation, alldocuments or information, in whatever form or medium, concerning or evidencingsales; costs; pricing; strategies; forecasts and long range plan; financial andtax information; personnel information; business, marketing and operationalprojections, plans and opportunities; and customer, vendor, and supplierinformation; **but excluding**any such information that is or becomes generally available to the public otherthan as a result of any breach of Section I or Section II above orother unauthorized disclosure by Executive.

 

“Noncompetition Area” means the following geographic areas:  (a) any foreign country where theCompany or its Affiliates engage in business of any kind, including selling,purchasing, or ordering goods, at any time during Executive’s employment withthe Company or its Affiliates; and (b) the United States of America.

 

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Exhibit B

 

**Methodology for Change of Control Lump SumCalculation****And Definition of Actuarial Equivalent**

 

**(Capitalized terms used herein withoutdefinition have the meanings specified in theAgreement or Plan to which this Exhibit B is attached)**

 

The methodology for the Change of Control Lump Sum Calculation followsthe steps below:

 

1.     Calculatethe participant’s total benefit under the SERP as of the date of theparticipant’s termination of employment (the “Termination Date”) after addingthe participant’s Severance Multiple to the number of years of age and service(the “Age and Service Enhancement”) for purposes of eligibility forparticipation, eligibility for retirement, for early commencement of actuarialsubsidies and for purposes of benefit accrual (the “Enhanced Change of ControlBenefit”).  Calculate the earlyretirement benefit payable at the Termination Date (if eligible) or the age 65accrued benefit amount (if not eligible for early retirement).  This calculation is without offset for thebenefit under the NMG Retirement Plan (Basic Plan) (the “Basic Plan”).

2.     Calculatethe Lump Sum of the benefit in step 1, based on the Actuarial Equivalentdescribed below.

3.     Calculatethe participant’s total benefit under the SERP as of the Termination Datewithout taking into account the Age and Service Enhancement (the “Normal SERPBenefit”).  Calculate the earlyretirement benefit payable at the Termination Date (if eligible) or the age 65accrued benefit amount (if not eligible for early retirement).  This calculation is also without offset forthe Basic Plan benefit.

4.     Calculatethe Lump Sum of the benefit in step 3, based on the Actuarial Equivalentdescribed below.

5.     Subtractthe Lump Sum in step 4 from the Lump Sum in step 2 to determine the Lump Sumamount of the incremental Change of Control benefit.

 

Note that these calculations are not offset by the Basic Plan benefitbecause the SERP provisions provide for a more generous early retirementsubsidy than the Basic Plan, and that subsidy is calculated on the full SERPbenefit (before the benefit under the Basic Plan is offset from it).  Therefore, in order to capture the full valueof the SERP benefit at early retirement (and, by extension, the full value ofthe incremental Change of Control benefit), the benefits prior to the BasicPlan offset must be used.

 

There are three different calculation scenarios, depending on theParticipant’s age and service as of the Termination Date:

 

(1) If the participant is eligible for an immediate SERP benefit(without taking into account the Age and Service Enhancement), then the LumpSum amounts for both the Normal SERP Benefit and the Enhanced Change of ControlBenefit are based on the immediately payable early retirement benefits.

 

B-1

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(2) If the participant is not eligible for an immediate SERPbenefit even with the Age and Service Enhancement, then the Lump Sum amountsfor both the Normal SERP Benefit and the Enhanced Change of Control Benefit arebased on the Age 65 accrued benefits.

 

(3) If the participant is eligible for an immediate SERP benefitonly because of the Age and Service Enhancement, then the Lump Sum for theNormal SERP Benefit is based on the Age 65 accrued benefit and the Lump Sum forthe Enhanced Change of Control Benefit is based on the immediately payableearly retirement benefit.

 

The following example illustrates this third scenario:

 
| Severance  Multiple:                   |   | 2.0 years  |
|----------------------------------------|--------|------------|
|                                   |   |       |
| Actual Age  at Termination Date        |   | 54.0 years |
| Enhanced Age  at Termination Date:     |   | 56.0 years |
|                                   |   |       |
| Service at  Termination Date:          |   | 20.0 years |
| Enhanced  Service at Termination Date: |   | 22.0 years |

 

This participant is not eligible for an immediate benefit under theregular SERP provisions.  With the Ageand Service Enhancement, he is eligible for an immediate benefit, so the fullearly retirement subsidy is provided by the Enhanced Change of Control benefit.

 

Total Enhanced Change of Control Benefit at Termination Date

(a) Total Enhanced Change of Control Benefit at Termination DatePayable at age 65 = $7,000

(b) Total Enhanced Change of Control Early Retirement BenefitPayable at age 54 = $5,320

(Early Retirement Factor of .76 based on enhanced age 56 * (a))

(c) Age 54 Immediate Lump Sum Factor = 15.2476

(d) Lump Sum Value of Total EnhancedChange of Control Benefit at Termination = (b) * (c) * 12 = $973,407

 

Total Normal SERP Benefit at Termination Date

(e) Total SERP accrued benefit at Termination Date Payable at age65 = $5,000

(f) Age 54 Deferred to Age 65 Lump Sum Factor = 6.7961

(g) Lump Sum Value of Normal SERP Benefit at Termination Date =(e) * (f) * 12 = $407,766

 

(h) Incremental Change of Control Benefit = $973,407 - $407,766 =$565,641

 

The lump sum factors are based on the Actuarial Equivalent definitionfrom the Basic Plan used for determining a lump sum value, i.e., the GATTspecified mortality and interest under IRC Section 417(e)(3).  The assumptions are (a) the 1994 GroupAnnuity Reserve mortality table, (b) the 30-Year Treasury Rate for the month ofMarch in the Plan Year prior to the Plan Year of distribution, and (c) theparticipant’s actual age at distribution date.

 

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The example shown above assumes that both the Termination Date anddistribution date are in the Plan Year Ending July 31, 2005, so the interestrate used is the March 2004 30-Year Treasury Rate of 4.74%.  The March 2005 30-Year Treasury Rate whichwould be used for distributions made in the Plan Year Ending July 31, 2006 isnot yet known.

 

A participant who is not vested in the SERP upon his actual terminationdate is automatically vested under the Change of Control contract language (butwith no Basic Plan benefit available to him). In addition, any employee who is not yet a participant in the Basic Planas of his actual Termination Tate but who would otherwise be eligible for theSERP, is automatically a participant under the SERP (again, with no Basic Planbenefit).

 

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