**Exhibit 10.1**

 

**EMPLOYMENT AGREEMENT**

 

This Employment Agreement (this “Agreement”)is effective August 3, 2003, and is between The Neiman Marcus Group, Inc., aDelaware corporation (“NMG”), and Burton M. Tansky (the “Executive”).

 

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

 

(a)                                  “Affiliate” means,with respect to any entity, any other corporation, organization, association,partnership, sole proprietorship or other type of entity, whether incorporatedor unincorporated, directly or indirectly controlling or controlled by or underdirect or indirect common control with such entity.

 

(b)                                 “Annual Period” meansNMG’s fiscal year.

 

(c)                                  “Board” means theBoard of Directors of NMG.

 

(d)                                 “Cause” means afinding by the Board of one or more of the following: (i) a breach of duty bythe Executive in the course of his employment involving fraud, acts ofdishonesty (other than inadvertent acts or omissions), disloyalty, or moralturpitude; (ii) conduct by the Executive that is materially detrimental to NMG,monetarily or otherwise, or reflects unfavorably on NMG or the Executive tosuch an extent that NMG’s best interests reasonably require the termination ofthe Executive’s employment; (iii) material acts or omissions of the Executivein violation of his obligations under this Agreement; (iv) the Executive’smaterial failure to comply with or unreasonable failure to enforce NMG’spolicies concerning equal employment opportunity, including engaging insexually or otherwise harassing conduct; (v) the Executive’s repeatedinsubordination; or (vi) the Executive’s conviction of or entry of a pleaagreement or consent decree or similar arrangement with respect to a felony orany violation of federal or state securities laws.

 

(e)                                  “Change of Control”means, and shall be deemed to have occurred, on or after the effective date ofthis Agreement:

 

(i)                                     uponthe consummation of any transaction or series of transactions under which NMGis merged or consolidated with any other company, other than a merger orconsolidation that would result in the stockholders of NMG immediately priorthereto owning voting securities immediately thereafter (either by thesecurities such stockholders owned immediately prior thereto remainingoutstanding or by the securities such stockholders owned immediately priorthereto being converted into voting securities of the surviving entity)representing more than 50% of the combined voting power of the votingsecurities of NMG, the acquiring entity or such surviving entity, as the casemay be, outstanding immediately after such merger or consolidation;

 

(ii)                                  ifany person or group (as used in Section 13(d) of the Securities Exchange Act of1934, as amended (the “Exchange Act”)) (other than NMG, any trustee or otherfiduciary holding securities under an employee benefit plan of NMG, or anycompany owned, directly or indirectly, by the stockholders of NMG insubstantially the same proportions as their ownership of

 

----

 

stock of NMG) becomes the“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) ofsecurities of NMG representing more than 40% of (A) the shares of NMG’s Class BCommon Stock then outstanding or (B) the combined voting power (other than inthe election of directors) of all voting securities of NMG then outstanding;

 

(iii)                               if,during any period of 24 consecutive months, individuals who at the beginning ofsuch period constituted the Board, and any director whose election ornomination for election by NMG’s stockholders was approved by a vote of atleast two-thirds (2/3) of the directors then still in office who either weredirectors at the beginning of the period or whose election or nomination forelection was previously so approved, cease for any reason (other than death ordisability) to constitute at least a majority thereof; or

 

(iv)                              uponthe complete liquidation of NMG or the sale or disposition by NMG of all orsubstantially all of NMG’s assets, other than a liquidation of NMG into awholly-owned subsidiary.

 

(f)                                    “Competitor” means(i) any person or entity (other than NMG or an Affiliate of NMG) that owns oroperates a luxury specialty retail store; (ii) Saks Incorporated, Nordstrom,Inc., Barneys New York, Inc., or, if those corporate names are not correct, thebusinesses commonly referred to as “Saks,” “Nordstrom’s,” and “Barneys”; and(iii) the successors to and assigns of the persons or entities described in(ii).

 

(g)                                 “ConfidentialInformation” means, without limitation, all documents or information, inwhatever 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, plansand opportunities; and customer, vendor, and supplier information; butexcluding any such information that is or becomes generally available to thepublic other than as a result of any breach of this Agreement or otherunauthorized disclosure by the Executive.

 

(h)                                 “Eligible Retirement,”for purposes of the special vesting rules of Paragraph 5(c)(iii), means thetermination of the Executive’s employment with NMG or any Affiliate of NMG onor after the date as of which the Executive is eligible for a normal retirementbenefit on account of reaching normal retirement age under the terms of TheNeiman Marcus Group, Inc. Retirement Plan (or any successor plan); provided,however, that the Executive’s termination of employment shall not be an“Eligible Retirement” if the Executive was terminated by NMG for Cause.

 

(i)                                     “EmploymentTermination Date” means the effective date of termination of the Executive’semployment as established under Paragraph 6(g).

 

(j)                                     “Equity IncentiveAward” means a stock option, restricted stock grant, restricted stock unit, orother equity-based incentive award granted pursuant to The Neiman Marcus Group,Inc. 1997 Incentive Plan (or any successor plan) or any other equity incentiveplan, program or arrangement of NMG or its Affiliates.

 

2

----

 

(k)                                  “Good Reason” meansany of the following actions if taken without the Executive’s prior consent:(i) any material failure by NMG to comply with its obligations under Paragraph5 (Compensation and Related Matters); (ii) any material failure by NMG tocomply with its obligations under Paragraph 20 (Assumption by Successor); (iii)a material reduction in the Executive’s responsibilities or duties except inaccordance with the terms of this Agreement; (iv) any material failure by NMGto comply with its obligations under Paragraph 4(b) (Executive’sresponsibilities during the Senior Executive Term); (v) any permanentrelocation of the Executive’s place of business to a location 50 miles or morefrom the current location; (vi) the reduction in title of the Executive asChief Executive Officer except in accordance with the terms of this Agreement;(vii) following a Change of Control, the failure of the parties to reach anagreement regarding the Executive’s responsibilities during the SeniorExecutive Term after a reasonable period of negotiation in accordance withParagraph 4(b) unless NMG offers to retain the Executive in the position ofChief Executive Officer of NMG; or (viii) a material breach of this Agreementby NMG; provided that (iii) and (vi) shall not apply after the end of the CEOTerm.

 

(l)                                     “Inability toPerform” means and shall be deemed to have occurred if the Executive has beendetermined under NMG’s long-term disability plan to be eligible for long-termdisability benefits.  In the absence ofthe Executive’s participation in such plan, “Inability to Perform” means that,in the Board’s sole judgment, the Executive is unable to perform any of thematerial duties of his regular position because of an illness or injury for (i)80% or more of the normal working days during six consecutive calendar monthsor (ii) 50% or more of the normal working days during twelve consecutivecalendar months.

 

(m)                               “Target Bonus” means thetarget bonus under NMG’s annual incentive bonus program(s).

 

(n)                                 “Work Product” meansall ideas, works of authorship, inventions and other creations, whether or notpatentable, copyrightable, or subject to other intellectual-propertyprotection, that are made, conceived, developed or worked on in whole or inpart by the Executive while employed by NMG and/or any of its Affiliates, thatrelate in any manner whatsoever to the business, existing or proposed, of NMGand/or any of its Affiliates, or any other business or research or developmenteffort in which NMG and/or any of its Affiliates engages during the Executive’semployment.   Work Product includes anymaterial previously conceived, made, developed or worked on during theExecutive’s employment with NMG prior to the effective date of this Agreement.

 

2.                                       Employment.  NMG agrees to continue to employ theExecutive (who previously was employed at-will), and the Executive agrees tocontinue to be employed, for the period set forth in Paragraph 3, in theposition and with the duties and responsibilities set forth in Paragraph 4, andupon the other terms and conditions set out in this Agreement.

 

3.                                       Term.  The employment of the Executive as providedin Paragraph 2 shall be for five consecutive Annual Periods, commencing onAugust 3, 2003 (the “Employment Term”), unless

 

3

----

 

sooner terminated as provided in thisAgreement.  The Employment Term isdivided into two periods, the “CEO Term” and the “Senior Executive Term,” asdefined in Paragraph 4.  The Executive’semployment will end upon the expiration of the Employment Term, but the end ofthe Executive’s employment in that circumstance shall not constitute atermination of employment by either party under this Agreement or give rise toany of the obligations of NMG that arise under this Agreement as a result of atermination of employment.

 

4.                                       Positionand Duties.

 

(a)                                  During the firstthree Annual Periods of the Employment Term (the “CEO Term”), the Executiveshall serve as the Chief Executive Officer of NMG.  In such capacity, the Executive, subject to the ultimate controland direction of the Board, shall have and exercise direct charge of andgeneral supervision over the business and affairs of NMG.  In addition, the Executive shall have suchother duties, functions, responsibilities, and authority as are from time totime delegated to the Executive by the Board; provided, however, that suchduties, functions, responsibilities, and authority are reasonable and customaryfor a person serving in the same or similar capacity of an enterprisecomparable to NMG.  The Executive shallreport and be accountable to the Board. The Executive and NMG acknowledge that one purpose of this Agreement isto provide for a smooth and orderly transition to a new chief executive officerin the future.  Accordingly, during theCEO Term the Executive agrees to work with reasonable diligence to identify asuccessor to the position of Chief Executive Officer of NMG.  Nothing in this Agreement, however,prohibits the Board from undertaking its own search for a successor to the position.

 

(b)                                 During the last twoAnnual Periods of the Employment Term (the “Senior Executive Term”), theExecutive shall be employed in a meaningful executive or consulting role asdetermined by the Board; provided, however, that in the event that a Change ofControl occurs prior to or during the Senior Executive Term, then during theperiod of the Senior Executive Term following the Change of Control, theExecutive shall be employed in such senior executive, advisory, or consultingcapacity or capacities as may be mutually agreed on in good faith from time totime by the Executive and the Board.

 

(c)                                  During the EmploymentTerm, the Executive shall devote his full time, skill, and attention and hisbest efforts to the business and affairs of NMG to the extent necessary todischarge fully, faithfully, and efficiently the duties and responsibilitiesdelegated and assigned to the Executive in or pursuant to this Agreement,except for usual, ordinary, and customary periods of vacation and absence dueto illness or other disability. Notwithstanding the foregoing, the Executive may (i) subject to theapproval of the Board, serve as a director or as a member of an advisory boardof a noncompeting company, (ii) serve as an officer or director or otherwiseparticipate in non-profit educational, welfare, social, religious and civilorganizations, including, without limitation, all such positions andparticipation in effect as of the effective date of this Agreement, and (iii)manage personal and family investments; provided, however, that any suchactivities as described in (i), (ii) or (iii) of the preceding provisions ofthis paragraph do not significantly interfere with the

 

4

----

 

performance and fulfillment ofthe Executive’s duties and responsibilities as an executive of NMG inaccordance with this Agreement.

 

(d)                                 In connection with theExecutive’s employment by NMG under this Agreement, the Executive shall bebased at the principal executive offices of NMG in Dallas, Texas, except forsuch reasonable travel as the performance of the Executive’s duties in thebusiness of NMG may require.

 

(e)                                  All services that theExecutive may render to NMG or any of its Affiliates in any capacity during theEmployment Term shall be deemed to be services required by this Agreement andthe consideration for such services is that provided for in this Agreement.

 

5.                                       Compensationand Related Matters.

 

(a)                                  Base Salary.  During each Annual Period of the EmploymentTerm, NMG shall pay to the Executive for his services under this Agreement anannual base salary (“Base Salary”).  TheBase Salary on the effective date of this Agreement shall be at least$1,200,000.00.  The Base Salary will bereviewed annually and is subject to adjustment at the discretion of the Board,but in no event shall NMG pay the Executive a Base Salary less than that setforth above.  The Base Salary shall bepayable in installments in accordance with the general payroll practices of NMG,or as otherwise mutually agreed upon.

 

(b)                                 Annual Incentives.  The Executive will participate in NMG’sannual incentive bonus program(s) applicable to the Executive’s position, inaccordance with the terms of such program(s). The Executive’s Target Bonus on the effective date of this Agreement is65% of his Base Salary.  The TargetBonus percentage may be adjusted but may not be reduced below 65% of theExecutive’s Base Salary.  The actualamount of any annual incentive bonus paid to the Executive will be determinedaccording to the terms of the annual incentive bonus program(s), including anysuch terms that place the amount of any annual incentive bonus within thediscretion of the Board.

 

(c)                                  Long-termIncentives and SERP Enhancement.

 

(i)                                     CEOTerm.  With respect to the CEO Term,the Executive shall participate in The Neiman Marcus Group, Inc. 1997 IncentivePlan (or any successor plan) in a manner that is consistent with theparticipation of other senior executives of NMG.

 

(ii)                                SeniorExecutive Term.  With respect to theSenior Executive Term, any participation of the Executive in The Neiman MarcusGroup, Inc. 1997 Incentive Plan (or any successor plan) will be at the solediscretion of the Board.

 

(iii)                               SpecialVesting.  The provisions of anyEquity Incentive Award to the contrary notwithstanding, in the event theExecutive’s employment with NMG or any of its Affiliates is terminated by NMGfor reasons other than Cause, is terminated because of the Executive’s death,or terminates on account of the Executive’s Eligible Retirement, then:

 

5

----

 

(A)                              withrespect to any stock option granted to the Executive by NMG or any of itsAffiliates that is outstanding as of the effective date of this Agreement orgranted to the Executive by NMG or any of its Affiliates on or after sucheffective date, such stock options will not terminate on account of suchtermination of employment and will remain outstanding and will continue to vestand/or become exercisable in accordance with the schedule set forth in the optionagreement or other instrument governing the option as if the Executive’semployment had not terminated, until the earlier of ten years after the datethe option was granted or five years after the date of such termination ofemployment;

 

(B)                                withrespect to any restricted stock issued to the Executive by NMG or any of itsAffiliates as of the effective date of this Agreement or issued to theExecutive by NMG or any of its Affiliates on or after such effective date thathas not yet vested as of the date of such termination of employment, suchrestricted stock will not be forfeited on account of such termination ofemployment and will continue to vest so that the restrictions imposed on suchrestricted stock shall continue to lapse in accordance with the vestingschedule set forth in the restricted stock agreement or other governinginstrument as if the Executive’s employment had not terminated, until fiveyears after the date of such termination of employment; and

 

(C)                                withrespect to any restricted stock units granted to the Executive by NMG or any ofits Affiliates on or after the effective date of this Agreement that have notyet vested as of the date of such termination of employment, such restrictedstock units will not be forfeited on account of such termination of employmentand will continue to vest in accordance with the vesting schedule set forth inthe restricted stock unit agreement or other governing instrument as if theExecutive’s employment had not terminated, until five years after the date ofsuch termination of employment.

 

The provisions of thisParagraph 5(c)(iii) are not intended to supersede or override anynoncompetition, confidentiality, nondisparagement, nonsolicitation or similarobligations set forth in any Equity Incentive Award.

 

(iv)                              SERPEnhancement.  At the time of theExecutive’s termination of employment with NMG and all of its Affiliates, theExecutive’s years of service for purposes of calculating his benefit under TheNeiman Marcus Group, Inc. Supplemental Executive Retirement Plan (or anysuccessor plan) (the “SERP”) shall be determined by multiplying his actualservice for purposes of the SERP by 2, subject to the 25-year maximum set forthin the SERP.

 

(d)                                 Employee Benefits.  During the Employment Term, the Executive shallbe entitled to participate in all employee benefit plans, programs, andarrangements that are generally made available by NMG to its senior executives,including without limitation NMG’s life insurance, long-term disability, andhealth plans.  The Executive agrees tocooperate and participate in any medical or physical examinations as may berequired by any insurance company in connection with the

 

6

----

 

applications for such lifeand/or disability insurance policies.

 

(e)                                  Fringe Benefits.  The Executive will be entitled to theperquisites and other fringe benefits that are made available by NMG to itssenior executives generally and to such perquisites and fringe benefits thatare made available by NMG to the Executive in particular, subject to anyapplicable terms and conditions of any specific perquisite or other fringebenefit.

 

(f)                                    Expenses.  The Executive shall be entitled to receivereimbursement for all reasonable expenses incurred by the Executive inperforming his duties and responsibilities under this Agreement, consistentwith NMG’s policies or practices for reimbursement of expenses incurred byother NMG senior executives.

 

(g)                                 Vacations.  During the Employment Term, the Executiveshall be eligible for vacation, sick pay, and other paid and unpaid time off inaccordance with the policies and practices of NMG.  The Executive agrees to use his vacation and other paid time offat such times that are (i) consistent with the proper performance of his dutiesand responsibilities and (ii) mutually convenient for NMG and the Executive.

 

(h)                                 Indemnification.  The Executive will be entitled toindemnification on the same terms as indemnification is made available by NMGto its other senior executives, whether through NMG’s bylaws or otherwise.

 

6.                                       Terminationof Employment.

 

(a)                                  Death.  The Executive’s employment shall terminateautomatically upon his death.

 

(b)                                 Inability toPerform.  In the event of theExecutive’s Inability to Perform during the Employment Term, NMG may notify theExecutive of NMG’s termination of the Executive’s employment.

 

(c)                                  Termination by NMGfor Cause.  NMG may terminate theExecutive’s employment for Cause.  Toexercise its right to terminate the Executive pursuant to provision (iii) orprovision (v) of the definition of Cause, however, NMG must first provide theExecutive with a reasonable period of time to correct the circumstances orevents, to the extent that they may reasonably be corrected, that NMG contendsgive rise to the existence of Cause under such provision.  Prior to terminating the Executive’semployment for Cause under this Paragraph 6(c), NMG must provide the Executivewith a written notice of its intent to terminate his employment for Cause.  Such written notice must specify theparticular act or acts or failure(s) to act that form(s) the basis for thedecision to so terminate the Executive’s employment for Cause.  The Executive will be given the opportunitywithin 30 calendar days of his receipt of such notice to meet with the Board todefend himself with regard to the alleged act or acts or failure(s) toact.  If at the conclusion of orfollowing such a meeting, the Board decides to proceed with the termination ofthe Executive’s employment for Cause, such a termination will be effected byproviding the Executive with a Notice of Termination

 

7

----

 

under Paragraph 6(f).  Upon or after NMG’s issuance of the noticeof intent to terminate the Executive’s employment for Cause, NMG may suspendthe Executive with pay pending the Board’s decision whether to proceed with thetermination.

 

(d)                                 Termination by theExecutive for Good Reason.  TheExecutive may terminate his employment for Good Reason.  To exercise his right to terminate for GoodReason, the Executive must provide written notice to NMG of his belief thatGood Reason exists, and that notice shall describe the circumstance believed toconstitute Good Reason.  If thatcircumstance may reasonably be remedied, NMG shall have 30 days to effect thatremedy.  If not remedied within that30-day period, the Executive may submit a Notice of Termination; provided,however, that the Notice of Termination invoking the Executive’s right toterminate his employment for Good Reason must be given no later than 60 daysafter the later of (i) the first date the Executive knew or should have knownthat Good Reason existed, and (ii) the end of NMG’s 30-day cure period, ifapplicable; otherwise, the Executive is deemed to have accepted the circumstance(s)that may have given rise to the existence of Good Reason.

 

(e)                                Termination by EitherParty Without Cause or Without Good Reason.  Either NMG or the Executive may terminate the Executive’semployment without Cause or Good Reason upon at least six months’ prior writtennotice to the other party.

 

(f)                                    Notice ofTermination.  Any termination of theExecutive’s employment by NMG or by the Executive (other than a terminationpursuant to Paragraph 6(a)) shall be communicated by a Notice of Termination.  A “Notice of Termination” is a written noticethat must (i) indicate the specific termination provision in this Agreementrelied upon; (ii) in the case of a termination for Inability to Perform, Cause,or Good Reason, set forth in reasonable detail the facts and circumstancesclaimed to provide a basis for termination of the Executive’s employment underthe provision invoked, including the particular act or acts or failure(s) toact that is or are the basis of any termination for Cause or Good Reason; and (iii)if the termination is by the Executive under Paragraph 6(e), or by NMG for anyreason, specify the Employment Termination Date.  The failure by NMG to set forth in the Notice of Termination anyfact or circumstance that contributes to a showing of Cause shall not waive anyright of NMG or preclude NMG from asserting such fact or circumstance inenforcing NMG’s rights.

 

(g)                                 EmploymentTermination Date.  The EmploymentTermination Date shall be as follows: (i) if the Executive’s employment isterminated by his death, the date of his death; (ii) if the Executive’semployment is terminated by NMG because of his Inability to Perform or forCause, the date specified in the Notice of Termination, which date shall be noearlier than the date such notice is given; (iii) if the Executive’s employmentis terminated by the Executive for Good Reason, the date on which the Notice ofTermination is given; or (iv) if the termination is under Paragraph 6(e), thedate specified in the Notice of Termination, which date shall be no earlierthan six months after the date such notice is given.

 

(h)                                 Resignation.  In the event of termination of theExecutive’s employment (for any

 

8

----

 

reason other than the death ofthe Executive), the Executive agrees that if at such time he is a member of theBoard or is an officer of NMG or a director or officer of any of itsAffiliates, he shall be deemed to have resigned from such position(s) effectiveon the Employment Termination Date.

 

7.                                       CompensationUpon Termination of Employment.

 

(a)                                  Death.  If the Executive’s employment is terminatedby reason of the Executive’s death, NMG shall pay to the Executive’s estate (i)any unpaid portion of the Executive’s Base Salary through the Employment TerminationDate (the “Compensation Payment”), (ii) any accrued but unused vacation days(the “Vacation Payment”), (iii) any reimbursement for business travel and otherexpenses to which the Executive is entitled (the “Reimbursement”), and (iv) anamount of annual incentive pay, as described in Paragraph 5(b), equal to aprorated portion of the Target Bonus amount for the Annual Period in which theEmployment Termination Date occurs (the “Prorated Bonus”).  This Paragraph 7(a) does not limit theentitlement of the Executive’s estate or beneficiaries to any death or otherbenefits to which the Executive may be entitled under any life insurance, stockownership, stock options, or other benefit plan or policy that is maintained byNMG for the Executive’s benefit.

 

(b)                                 Inability toPerform.  If the Executive’semployment is terminated by reason of the Executive’s Inability to Perform, NMGshall pay to the Executive (i) the Compensation Payment, (ii) the VacationPayment, (iii) the Reimbursement, and (iv) the Prorated Bonus.  This Paragraph 7(b) does not limit theentitlement of the Executive to any amounts payable pursuant to the terms ofany applicable disability insurance plan, policy, or similar arrangement thatis maintained by NMG for the Executive’s benefit.

 

(c)                                  Termination by theExecutive Without Good Reason.  Ifthe Executive’s employment is terminated by the Executive pursuant to and incompliance with Paragraph 6(e), NMG shall pay to the Executive (i) theCompensation Payment, (ii) the Vacation Payment, (iii) the Reimbursement, and(iv) the Prorated Bonus.

 

(d)                                 Termination forCause.  If the Executive’semployment is terminated by NMG for Cause, NMG shall pay to the Executive (i)the Compensation Payment, (ii) the Vacation Payment, and (iii) the Reimbursement.

 

(e)                                  TerminationWithout Cause or With Good Reason. If the Executive’s employment is terminated by NMG for any reason otherthan death, Inability to Perform, or Cause, or is terminated by the Executivefor Good Reason, NMG shall pay to the Executive (i) the Compensation Payment,(ii) the Vacation Payment, and (iii) the Reimbursement.  In addition, NMG will continue to pay to theExecutive the Base Salary provided for in Paragraph 5(a) and the Target Bonusunder Paragraph 5(b), at the level in effect as of the Employment TerminationDate and at the time and in the manner such compensation would have been paidhad the Executive’s employment not been terminated, for the greater of (A) theperiod of time remaining after the Employment Termination Date and before theexpiration of the Employment Term, but not to exceed three years, or (B) oneyear (collectively,

 

9

----

 

the “Continuing Payments”);provided, however, that NMG’s obligation to make the Continuing Payments islimited as follows:

 

(i)                                     if,in the reasonable judgment of NMG, the Executive engages in any conduct thatviolates Paragraph 8 or engages in any of the Restricted Activities describedin Paragraph 9, NMG’s obligation to provide the Continuing Payments, if anysuch obligation remains, shall end as of the date NMG so notifies the Executivein writing; provided, however, that NMG shall reinstate such payments if within30 days of the date NMG so notifies the Executive in writing, the Executiveprovides information to NMG that NMG determines is sufficient to establish thatthe Executive did not engage in any conduct that violated Paragraph 8 or engagein any of the Restricted Activities described in Paragraph 9;

 

(ii)                                  ifthe Executive is arrested or indicted for any felony, other serious criminaloffense, or any violation of federal or state securities laws, or has any civilenforcement action brought against him by any regulatory agency, for actions oromissions related to his employment with NMG or any of its Affiliates, or ifNMG reasonably believes that the Executive has committed any act or omission,either during his employment under this Agreement or if related to suchemployment thereafter, that during his employment would have entitled NMG to terminatehis employment for Cause under provisions (i), (ii), (iv), or (vi) of thedefinition of Cause, then NMG may suspend any remaining Continuing Paymentsunder this Paragraph 7(e) until the final resolution of such criminal or civilproceedings or until the Board has made a final determination as to whether theExecutive committed such an act or omission. If the Executive is found guilty or enters into a plea agreement,consent decree or similar arrangement with respect to any such criminal orcivil proceedings, or if the Board makes a finding that the Executive hascommitted such an act or omission, (1) NMG’s obligation to provide theContinuing Payments shall immediately end, and (2) the Executive shall repay toNMG, within 30 days after a written request by NMG, any Continuing Paymentspaid to him.  If any such criminal orcivil proceedings do not result in a finding of guilt or the entry of a pleaagreement or consent decree or similar arrangement, or if the Board makes afinding that the Executive has not committed such an act or omission, NMG shallpay to the Executive any Continuing Payments that it has suspended, withinterest on such suspended Continuing Payments at its cost of funds, and shallmake any remaining Continuing Payments due under this Paragraph 7(e).

 

(f)                                    TerminationFollowing Change of Control.  If,within the two-year period following a Change of Control, the Executive’semployment with NMG or an Affiliate or successor of NMG is terminated for anyreason other than death, Inability to Perform, or Cause, or is terminated bythe Executive for Good Reason, NMG shall pay to the Executive, in lieu of anypayments under Paragraph 7(e), the following: (i) the Compensation Payment;(ii) the Vacation Payment; (iii) the Reimbursement; (iv) a lump-sum amountequivalent to two times the Executive’s then-current Base Salary; and (v) alump-sum amount equivalent to two times the Executive’s then-current TargetBonus.  The amounts specified in (iv)and (v) of this Paragraph 7(f) shall be paid to the Executive within fivebusiness days after the Employment Termination Date.

 

10

----

 

(g)                                 Medical and DentalInsurance.  If the Executive’semployment with NMG or any Affiliate of NMG ends on account of (i) a terminationby NMG for any reason other than for death or Cause, or (ii) a termination bythe Executive for Good Reason, the Executive will receive, in addition to anyother payments due under this Agreement, the following benefit: if, at the timehis employment ends, the Executive participates in one or more health plansoffered by NMG and the Executive is eligible for and elects to receivecontinued coverage under such plans in accordance with the Consolidated OmnibusBudget Reconciliation Act of 1985 (“COBRA”) or any successor law, NMG willreimburse the Executive during the 18-month period following the EmploymentTermination Date or, if shorter, the period of such actual COBRA continuationcoverage, for the total amount of the monthly COBRA premiums actually paid bythe Executive for such continued health plan benefits.

 

(h)                                 No Mitigation.  The Executive will not be required tomitigate the amount of any payment provided for in this Agreement by seekingother employment or otherwise, nor will the amount of any payment provided forunder this Agreement be reduced by any profits, income, earnings, or otherbenefits received by the Executive from any source other than NMG or itssuccessor.

 

(i)                                     Offset.  The Executive agrees that NMG may set offagainst, and he authorizes NMG to deduct from, any payments due to theExecutive, or to his heirs, legal representatives, or successors, as a resultof the termination of the Executive’s employment any amounts which may be dueand owing to NMG by the Executive, whether arising under this Agreement orotherwise.

 

8.                                       ConfidentialInformation.

 

(a)                                  The Executiveacknowledges and agrees that (i) NMG is engaged in a highly competitivebusiness; (ii) NMG has expended considerable time and resources to developgoodwill with its customers, vendors, and others, and to create, protect, andexploit Confidential Information; (iii) NMG must continue to prevent thedilution of its goodwill and unauthorized use or disclosure of its ConfidentialInformation to avoid irreparable harm to its legitimate business interests;(iv) in the luxury specialty retail business, his participation in or directionof NMG’s day-to-day operations and strategic planning are an integral part ofNMG’s continued success and goodwill; (v) given his position and responsibilities,he necessarily will be creating Confidential Information that belongs to NMGand enhances NMG’s goodwill, and in carrying out his responsibilities he inturn will be relying on NMG’s goodwill and the disclosure by NMG to him ofConfidential Information; (vi) he will have access to Confidential Informationthat could be used by any Competitor of NMG in a manner that would irreparablyharm NMG’s competitive position in the marketplace and dilute its goodwill; and(vii) he necessarily would use or disclose Confidential Information if he wereto engage in competition with NMG.

 

(b)                                 NMG acknowledges andagrees that the Executive must have and continue to have throughout hisemployment the benefits and use of its and its Affiliates’ goodwill and ConfidentialInformation in order to properly carry out his responsibilities.  NMG accordingly promises upon

 

11

----

 

execution and delivery of thisAgreement to provide the Executive immediate access to new and additionalConfidential Information and authorize him to engage in activities that willcreate new and additional Confidential Information.

 

(c)                                  NMG and the Executivethus acknowledge and agree that during the Executive’s employment with NMG andupon execution and delivery of this Agreement he (i) has received, willreceive, and will continue to receive, Confidential Information that is unique,proprietary, and valuable to NMG and/or its Affiliates; (ii) has created, willcreate, and will continue to create, Confidential Information that is unique,proprietary, and valuable to NMG and/or its Affiliates; and (iii) hasbenefited, will benefit, and will continue to benefit, including withoutlimitation by way of increased earnings and earning capacity, from the goodwillNMG and its Affiliates have generated and from the Confidential Information.

 

(d)                                 Accordingly, theExecutive acknowledges and agrees that at all times during his employment byNMG and/or any of its Affiliates and thereafter:

 

(i)                                     allConfidential Information shall remain and be the sole and exclusive property ofNMG and/or its Affiliates;

 

(ii)                                  hewill protect and safeguard all Confidential Information;

 

(iii)                               hewill hold all Confidential Information in strictest confidence and not,directly or indirectly, disclose or divulge any Confidential Information to anyperson other than an officer, director, or employee of, or legal counsel for,NMG or its Affiliates, to the extent necessary for the proper performance ofhis responsibilities unless authorized to do so by NMG or compelled to do so bylaw or valid legal process;

 

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

 

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

 

(vi)                              absentthe promises and representations of the Executive in this Paragraph 8 and inParagraph 9, NMG would require him immediately to return any tangibleConfidential Information in his possession, would not provide the Executivewith new and additional Confidential Information, would not authorize theExecutive to engage in activities that will create new and additionalConfidential Information, and would not enter or have entered into thisAgreement.

 

12

----

 

9.                                       Noncompetitionand Nondisparagement Obligations. In consideration of NMG’s promises to provide the 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 this Agreement, and the other promises andundertakings of NMG in this Agreement, the Executive agrees that, while he isemployed by NMG and/or any of its Affiliates and for a three-year periodfollowing the end of that employment for any reason, he shall not engage in anyof the following activities (the “Restricted Activities”):

 

(a)                                  He will not directlyor indirectly disparage NMG or its Affiliates, any products, services, oroperations of NMG or its Affiliates, or any of the former, current, or futureofficers, directors, or employees of NMG or its Affiliates;

 

(b)                                 He will not, whetheron 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, orentice, any person who is then employed by or otherwise engaged to performservices for NMG or its Affiliates to leave that employment or cease performingthose services;

 

(c)                                  He will not, whetheron 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, orentice, any person who is then a customer, supplier, or vendor of NMG or any ofits Affiliates to cease being a customer, supplier, or vendor of NMG or any ofits Affiliates or to divert all or any part of such person’s or entity’sbusiness from NMG or any of its Affiliates; and

 

(d)                                 He will not associatedirectly or indirectly, as an employee, officer, director, agent, partner,stockholder, owner, member, representative, or consultant, with any Competitorof NMG or any of its Affiliates, unless (i) he has advised NMG in writing inadvance of his desire to undertake such activities and the specific nature ofsuch activities; (ii) NMG has received written assurances (that will bedesigned, among other things, to protect NMG’s and its Affiliates’ goodwill,Confidential Information, and other important commercial interests) from theCompetitor and the Executive that are, in NMG’s sole discretion, adequate toprotect its interests; (iii) NMG, in its sole discretion, has approved inwriting such association; and (iv) the Executive and the Competitor adhere tosuch assurances.  This restriction (i)extends to the performance by the Executive, directly or indirectly, of thesame or similar activities the Executive has performed for NMG or any of itsAffiliates or such other activities that by their nature are likely to lead tothe disclosure of Confidential Information, and (ii) with respect to thepost-employment restriction, applies to any Competitor that has a retail storewithin 50 miles of, or in the same Metropolitan Statistical Area as, any retailstore of NMG or any of its Affiliates. The Executive shall not be in violation of this Paragraph 9(d) solely asa result of his investment in stock or other securities of a Competitor or anyof its Affiliates listed on a national securities exchange or actively tradedin the over-the-counter market if he and the members of his immediate family donot, directly or indirectly, hold more than a total of one percent of all suchshares of stock or other securities issued and outstanding.  The

 

13

----

 

Executive acknowledges andagrees that engaging in the activities restricted by this Paragraph 9(d) wouldresult in the inevitable disclosure or use of Confidential Information for theCompetitor’s benefit or to the detriment of NMG or its Affiliates.

 

The Executive acknowledges and agrees thatthe restrictions contained in this Paragraph 9 are ancillary to an otherwiseenforceable agreement, including without limitation the mutual promises andundertakings set forth in Paragraph 8; that NMG’s promises and undertakings setforth in Paragraph 8, the Executive’s position and responsibilities with NMG,and NMG granting to the Executive ownership in NMG in the form of NMG stock,give rise to NMG’s interest in restricting the Executive’s post-employmentactivities; that such restrictions are designed to enforce the Executive’spromises and undertakings set forth in this Paragraph 9 and his common-lawobligations and duties owed to NMG and its Affiliates; that the restrictionsare reasonable and necessary, are valid and enforceable under Texas law, and donot impose a greater restraint than necessary to protect NMG’s goodwill,Confidential Information, and other legitimate business interests; that he willimmediately notify NMG in writing should he believe or be advised that therestrictions are not, or likely are not, valid or enforceable under Texas lawor the law of any other state that he contends or is advised is applicable (the“Enforceability Notification”); that the mutual promises and undertakings ofNMG and the Executive under Paragraphs 8 and 9 are not contingent on theduration of the Executive’s employment with NMG; and that absent the promisesand representations made by the Executive in this Paragraph 9 and Paragraph 8,NMG would require him to return any Confidential Information in his possession,would not provide the Executive with new and additional ConfidentialInformation, would not authorize the Executive to engage in activities thatwill create new and additional Confidential Information, and would not enter orhave entered into this Agreement. Notwithstanding the foregoing, NMG agrees that the Executive’s conductin providing the Enforceability Notification under this Paragraph 9(d) shallnot constitute a waiver of any attorney-client privilege between the Executiveand his attorney(s).

 

10.                                 IntellectualProperty.

 

(a)                                  In consideration ofNMG’s promises and undertakings in this Agreement, the Executive agrees thatall Work Product will be disclosed promptly by the Executive to NMG, shall bethe sole and exclusive property of NMG, and is hereby assigned to NMG,regardless of whether (i) such Work Product was conceived, made, developed orworked on during regular hours of his employment or his time away from hisemployment, (ii) the Work Product was made at the suggestion of NMG; or (iii)the Work Product was reduced to drawing, written description, documentation,models or other tangible form.  Withoutlimiting the foregoing, the Executive acknowledges that all original works ofauthorship that are made by the Executive, solely or jointly with others,within the scope of his employment and that are protectable by copyright are“works made for hire,” as that term is defined in the United States CopyrightAct (17 U.S.C., Section 101), and are therefore owned by NMG from the time ofcreation.

 

(b)                                 The Executive agreesto assign, transfer, and set over, and the Executive does hereby assign,transfer, and set over to NMG, all of his right, title and interest in and toall Work Product,

 

14

----

 

without the necessity of anyfurther compensation, and agrees that NMG is entitled to obtain and hold in itsown name all patents, copyrights, and other rights in respect of all Work Product.  The Executive agrees to (i) cooperate withNMG during and after his employment with NMG in obtaining patents or copyrightsor other intellectual-property protection for all Work Product; (ii) execute,acknowledge, seal and deliver all documents tendered by NMG to evidence itsownership thereof throughout the world; and (iii) cooperate with NMG inobtaining, defending and enforcing its rights therein.

 

(c)                                  The Executiverepresents that there are no other contracts to assign inventions or other intellectualproperty that are now in existence between the Executive and any other personor entity.  The Executive furtherrepresents that he has no other employment or undertakings that might restrictor impair his performance of this Agreement. The Executive will not in connection with his employment by NMG, use ordisclose to NMG any confidential, trade secret, or other proprietaryinformation of any previous employer or other person that the Executive is notlawfully entitled to disclose.

 

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

 

12.                                 Assistancein Litigation.  After the EmploymentTerm, the Executive shall, upon reasonable notice, furnish such information andassistance to NMG or any of its Affiliates as may reasonably be requested byNMG in connection with any litigation in which NMG or any of its Affiliates is,or may become, a party.  NMG shallreimburse the Executive for all reasonable out-of-pocket expenses, includingtravel expenses, incurred by the Executive in rendering such assistance, butshall have no obligation to compensate the Executive for his time in providinginformation and assistance in accordance with this Paragraph 12.

 

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

 

14.                                 LegalFees and Expenses.  NMG willreimburse the Executive for all reasonable legal fees and expenses incurred bythe Executive in connection with the preparation, review, and negotiation ofthis Agreement prior to its execution.

 

15.                                 Survival.  The expiration or termination of theEmployment Term will not impair the rights or obligations of any party heretothat accrue hereunder prior to such expiration or termination, except to theextent specifically stated herein.  Inaddition to the foregoing, NMG’s obligations under Paragraphs 5(h), 7, and 14,and the Executive’s obligations under Paragraphs 8, 9, 10 and 12, will survivethe expiration or termination of Executive’s employment.

 

15

----

 

16.                                 WithholdingTaxes.  NMG shall withhold from anypayments to be made to the Executive pursuant to this Agreement such amounts(including social security contributions and federal income taxes) as shall berequired by federal, state, and local withholding tax laws.

 

17.                                 Notices.  All notices, requests, demands, and othercommunications required or permitted to be given or made by either party shallbe in writing and shall be deemed to have been duly given or made (a) when deliveredpersonally, or (b) when deposited in the United States mail, first classregistered or certified mail, postage prepaid, return receipt requested, to theparty for which intended at the following addresses (or at such other addressesas shall be specified by the parties by like notice, except that notices ofchange of address shall be effective only upon receipt):

 
|   | (i)    | If to NMG, at:                                                                            |
|--------|--------|-------------------------------------------------------------------------------------------|
|   |   |                                                                                      |
|   |   | The Neiman Marcus Group, Inc.                                                             |
|   |   | Attn:  General Counsel                                                                    |
|   |   | 1618 Main  Street                                                                         |
|   |   | Dallas, TX  75201                                                                         |
|   |   |                                                                                      |
|   | (ii)   | If to the  Executive, at the Executive’s then-current home address on file with NMG. |

 

18.                                 InjunctiveRelief.  The Executive acknowledgesand agrees that NMG would not have an adequate remedy at law and would beirreparably harmed in the event that any of the provisions of Paragraphs 8, 9,and 10 were not performed in accordance with their specific terms or wereotherwise breached.  Accordingly, theExecutive agrees that NMG shall be entitled to equitable relief, including preliminaryand permanent injunctions and specific performance, in the event the Executivebreaches or threatens to breach any of the provisions of such Paragraphs,without the necessity of posting any bond or proving special damages orirreparable injury.  Such remedies shallnot be deemed to be the exclusive remedies for a breach or threatened breach ofthis Agreement by the Executive, but shall be in addition to all other remediesavailable to NMG at law or equity.

 

19.                                 Binding Effect; NoAssignment by the Executive; No Third Party Benefit.  This Agreement shall be binding upon andinure to the benefit of the parties and their respective heirs, legalrepresentatives, successors, and assigns; provided, however, that the Executiveshall not assign or otherwise transfer this Agreement or any of his rights orobligations herein.  NMG is authorizedto assign or otherwise transfer this Agreement or any of its rights orobligations herein to an Affiliate of NMG. The Executive shall not have any right to pledge, hypothecate,anticipate, or in any way create a lien upon any payments or other benefitsprovided under this Agreement; and no benefits payable under this Agreementshall be assignable in anticipation of payment either by voluntary orinvoluntary acts, or by operation of law, except by will or pursuant to thelaws of descent and distribution. Nothing in this Agreement, express or implied, is intended to or shallconfer upon any person other than the parties, and their respective heirs,legal representatives, successors, and

 

16

----

 

permitted assigns, any rights,benefits, or remedies of any nature whatsoever under or by reason of thisAgreement.

 

20.                                 Assumption bySuccessor.  NMG shall require anysuccessor or assignee (whether direct or indirect, by purchase, merger,consolidation, or otherwise) to all or substantially all the business and/orassets of NMG, by agreement in writing in form and substance reasonablysatisfactory to the Executive, expressly, absolutely, and unconditionally toassume and agree to perform this Agreement in the same manner and to the sameextent that NMG would be required to perform it if no such succession orassignment had taken place.  If NMGfails to obtain such agreement by the effective time of any such succession orassignment, such failure shall be considered Good Reason; provided, however,that the compensation to which the Executive would be entitled upon atermination for Good Reason pursuant to Paragraph 7(e) shall be the sole remedyof the Executive for any failure by NMG to obtain such agreement.  As used in this Agreement, “NMG” shallinclude any successor or assignee (whether direct or indirect, by purchase,merger, consolidation, or otherwise) to all or substantially all the businessand/or assets of NMG that executes and delivers the agreement provided for inthis Paragraph 20 or that otherwise becomes obligated under this Agreement byoperation of law.

 

21.                                 Governing Law;Venue.  This Agreement and theemployment of the Executive shall be governed by the laws of the State of Texasexcept for its laws with respect to conflict of laws.  The exclusive forum for any lawsuit arising from or related tothe Executive’s employment or this Agreement shall be a state or federal courtin Dallas County, Texas.  This provisiondoes not prevent NMG from removing to an appropriate federal court any actionbrought in state court.  **THEEXECUTIVE HEREBY CONSENTS TO, AND WAIVES ANY OBJECTIONS TO, REMOVAL TO FEDERALCOURT BY NMG OF ANY ACTION BROUGHT AGAINST IT BY THE EXECUTIVE.**

 

**22.****                               JURYTRIAL WAIVER.  IN THE EVENT THAT ANYDISPUTE ARISING FROM OR RELATED TO THIS AGREEMENT OR THE EXECUTIVE’S EMPLOYMENTWITH NMG RESULTS IN A LAWSUIT, BOTH NMG AND THE EXECUTIVE MUTUALLY WAIVE ANYRIGHT THEY MAY OTHERWISE HAVE FOR A JURY TO DECIDE THE ISSUES IN THE LAWSUIT,REGARDLESS OF THE PARTY OR PARTIES ASSERTING CLAIMS IN THE LAWSUIT OR THENATURE OF SUCH CLAIMS.  NMG AND THEEXECUTIVE IRREVOCABLY AGREE THAT ALL ISSUES IN SUCH A LAWSUIT SHALL BE DECIDEDBY A JUDGE RATHER THAN A JURY.**

 

23.                                 Entire Agreement.  This Agreement contains the entire agreementbetween the parties concerning the subject matter hereof and supersedes allprior agreements and understandings, written and oral, between the parties withrespect to the subject matter of this Agreement.  In particular, but without limitation, this Agreement supersedesand replaces in its entirety that certain Termination and Change of ControlAgreement between the Executive and NMG dated October 6, 1999, as well as thatcertain letter, dated November 11, 1999, from Gerald T. Hughes of NMG to theExecutive, both of which are hereby terminated.

 

17

----

 

24.                                 Modification;Waiver.  No person, other thanpursuant to a resolution duly adopted by the members of the Board, shall haveauthority on behalf of NMG to agree to modify, amend, or waive any provision ofthis Agreement.  Further, this Agreementmay not be changed orally, but only by a written agreement signed by the partyagainst whom any waiver, change, amendment, modification or discharge is soughtto be enforced.  Each party to thisAgreement acknowledges and agrees that no breach of this Agreement by the otherparty or failure to enforce or insist on its or his rights under this Agreementshall constitute a waiver or abandonment of any such rights or defense toenforcement of such rights.

 

25.                                 Construction.  This Agreement is to be construed as awhole, according to its fair meaning, and not strictly for or against any ofthe parties.

 

26.                                 Severability.  If any provision of this Agreement shall bedetermined by a court to be invalid or unenforceable, the remaining provisionsof this Agreement shall not be affected thereby, shall remain in full force andeffect, and shall be enforceable to the fullest extent permitted by applicablelaw.

 

27.                                 Counterparts.  This Agreement may be executed by theparties in any number of counterparts, each of which shall be deemed anoriginal, but all of which shall constitute one and the same agreement.

 

IN WITNESS WHEREOF, NMG has caused thisAgreement to be executed on its behalf by its duly authorized officer, and theExecutive has executed this Agreement, effective as of the date first set forthabove.

 

**THENEIMAN MARCUS GROUP, INC.**

 

 
| By:                                  |  /s/ NELSON A. BANGS |   |  /s/ BURTON M. TANSKY |   |
|--------------------------------------|---------------------------|--------|----------------------------|--------|
| Printed  Name:  Nelson A. Bangs | Burton M.  Tansky         |
| Title:  Senior Vice President   |                      |

 

18

----