**Exhibit 10.40**

 

**THE NEIMAN MARCUS GROUP, INC.**

 

**Matching Restricted Stock Unit Agreement**

**Issued Pursuant to 1997 Incentive Plan**

 

 

THIS AGREEMENT is made as of the         day of               ,20     , by and between THE NEIMAN MARCUS GROUP, INC., aDelaware corporation (the “Corporation”), and                                        ,an employee of the Corporation or one of its affiliates (the “Employee”).

 

**Recitals:**

 

1.             On January 17,1997, the Corporation adopted for the benefit of key employees The NeimanMarcus Group, Inc. 1997 Incentive Plan (the “Plan”), and the Plan was approvedby its stockholders on that date.

 

2.             The Plan isadministered by the Compensation Committee (the “Committee”) of theCorporation’s Board of Directors (the “Board”).

 

3.             The Committee hasselected the Employee to participate in the Plan by the grant of MatchingRestricted Stock Units, each of which represents a fictional interest in ashare of Class A Common Stock of the Corporation, par value $.01 per share(“Common Stock”), that shall be subject to the vesting, distribution and otherprovisions specified herein.  TheEmployee was required to purchase at fair market value one share of CommonStock (the “Matched Common Stock”) for each Matching Restricted Stock Unit.

 

**Agreement:**

 

For and in consideration of the mutual covenants hereinafter set forthand for other good and valuable consideration, it is agreed as follows:

 

1.             **Grant of Matching Restricted Stock Units.**  The Corporation hereby grants to the Employee             MatchingRestricted Stock Units (the “Award”), subject to the vesting schedule describedin Section 4 and the requirement that the Matching Restricted Stock Units maybe forfeited to the Corporation under the circumstances set forth in thatSection.

 

2.             **No Rights as Equity Owner. **ThisAward shall not entitle the Employee to any voting rights, rights uponliquidation or other rights of owners of the Corporation with respect to anyMatching Restricted Stock Units or Dividend Units unless and until shares of CommonStock are issued to the Employee in respect of such Units as provided herein.

 

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3.             **Dividend Units. **Inthe event a cash dividend is paid on the Common Stock while the Employee holdsundistributed Matching Restricted Stock Units pursuant to this Award that havenot been forfeited, whether or not then vested, the Corporation shall credit tothe account of the Employee an additional fractional unit representing afictional interest in a share of Common Stock (a “Dividend Unit”) with respectto each such Matching Restricted Stock Unit, with a numerator equal to theamount of the per share cash dividend declared on the Common Stock and adenominator equal to the closing price of a share of Common Stock on the NewYork Stock Exchange on the date the cash dividend is paid. Dividend Units shallbe subject to all other terms and conditions of this Agreement, provided thatno additional Dividend Units shall be credited with respect to outstandingDividend Units.

 

4.             **Vesting of Matching Restricted Stock Units and Dividend Units andDistribution of Common Stock; Separation from Service; Death; Disability; orRetirement.**

 

(a)           TheMatching Restricted Stock Units granted hereunder and all Dividend Units withrespect thereto shall vest on the third anniversary of the date of thisAgreement (the “Vesting Date”) if and only if the Employee remains an employeeof the Corporation or one of its affiliates through the Vesting Date, and onlyto the extent that the Matching Restricted Stock Units and Dividend Units havenot been forfeited pursuant to Section 4(b). On the Vesting Date, the Corporation shall issue to the Employee acertificate representing a number of shares of Common Stock equal to the numberof Matching Restricted Stock Units and Dividend Units then subject to thisAward; provided, however, that pursuant to the irrevocable election made by theEmployee prior to the execution of this Agreement, distribution of              % of the shares of Common Stock otherwise issuable to the Employee on theVesting Date (rounded down to the nearest whole share) shall be deferred beyondthe Vesting Date for distribution on                    ,20       (the“Deferred Distribution Date”) or, if earlier, as soon as practicable followingthe date of the Employee’s death after the Vesting Date, or six monthsfollowing the Employee’s separation from service with the Corporation and allof its affiliates for any reason after the Vesting Date, at which time theCorporation shall issue a certificate representing the number of shares ofCommon Stock subject to such deferral election. The certificate representing the shares of Matched Common Stock held bythe Corporation pursuant to Section 4(b) shall be delivered to the Employee assoon as practicable following the Vesting Date.

 

(b)           Inconnection with the Employee’s purchase of the shares of Matched Common Stock,the Corporation will direct its registrar and transfer agent, Mellon InvestorServices LLC, to issue in the Employee’s name a certificate representing theshares of Matched Common Stock.  Theretention by the Employee of the Matched Common Stock throughout the periodending on the Vesting Date is a requirement for vesting in the MatchingRestricted Stock Units and Dividend Units and, to satisfy such requirement, theEmployee may not sell, convey, pledge, assign or otherwise transfer anyinterest in the Matched Common Stock prior to the Vesting Date.  In order to enforce this requirement, thecertificate representing the Matched Common Stock shall be held by theCorporation on behalf of the Employee until the Vesting Date or the Employee’searlier death or separation 

 

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from service with the Corporation and all of its affiliates, unlessprior to such time the Employee requests delivery of any or all of the MatchedCommon Stock, which the Employee shall be entitled to do for any reason.  Even though the certificate is held by theCorporation, the Employee is and shall be for all purposes the record andbeneficial owner of the shares of Matched Common Stock and shall be entitled tovote the shares of Matched Common Stock and to receive and retain all dividendsthat may be paid with respect thereto; provided, however, that in the event ofany reorganization, recapitalization, stock split, stock dividend, merger,consolidation, combination of shares or other change affecting the CommonStock, the Corporation shall hold the certificates representing any and allshares resulting from such event that arise from the Matched Common Stock andsuch shares shall be subject to the provisions hereof relating to the retentionof Matched Common Stock.  If the Employeerequests and receives delivery from the Corporation (either in the form of acertificate or in book-entry form) of any or all of the shares of MatchedCommon Stock prior to the Vesting Date, the Employee shall immediately forfeita fraction of the number of Matching Restricted Stock Units and a fraction ofthe number of Dividend Units then subject to this Agreement, which fraction willhave a numerator equal to the number of shares of Matched Common Stockdelivered to the Employee and a denominator equal to the total number of sharesof Matched Common Stock held by the Corporation prior to such delivery, withthe result that such forfeited Units shall no longer be outstanding and nolonger be subject to this Agreement, and neither the Employee nor any of theEmployee’s heirs, beneficiaries, executors, administrators or other personalrepresentatives shall have any rights with respect thereto.  The provisions of this Agreement shallcontinue to apply to all Matching Restricted Stock Units and Dividend Unitsthat have not been so forfeited.

 

(c)           Subjectto the provisions of Sections 4(d), 4(e) and 4(f), upon the Employee’sseparation from service with the Corporation and all of its affiliates at atime when the Matching Restricted Stock Units and Dividend Units have notvested, (i) the Employee shall have no rights whatsoever in and to any ofthe Matching Restricted Stock Units or Dividend Units; (ii) all theMatching Restricted Stock Units and Dividend Units shall be forfeited to theCorporation and shall no longer be outstanding as of the date of suchseparation from service; and (iii) neither the Employee nor any of his orher heirs, beneficiaries, executors, administrators or other personalrepresentatives shall have any rights with respect thereto.  The certificate representing the shares ofMatched Common Stock held by the Corporation pursuant to Section 4(b) shall bedelivered to the Employee as soon as practicable following such separation fromservice.

 

(d)           Ifthe Employee dies while in the employ of the Corporation or any of itsaffiliates, the Matching Restricted Stock Units and Dividend Units then subjectto this Award shall vest if not yet vested and the retention requirementsapplicable to shares of Matched Common Stock in Section 4(b) shall cease toapply. The person or persons to whom the Employee’s rights under this Agreementare transferred by will or the laws of descent and distribution (collectively,the “Transferee”) shall be entitled to receive, within 30 days afterpresentation to the Secretary of the Corporation of documentation acceptable tothe Secretary establishing the Transferee’s legal rights, a certificate representinga number of shares of

 

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Common Stock equal to the number of Matching Restricted Stock Units andDividend Units then subject to this Award. The certificate representing the shares of Matched Common Stock held bythe Corporation pursuant to Section 4(b) shall be delivered to the Employee’sestate as soon as practicable following the Employee’s death.

 

(e)           Ifwhile in the employ of the Corporation or any of its affiliates the Employeeshall become permanently disabled such that the Employee will be unable toreturn to his or her employment with the Corporation or its affiliates (asshall be conclusively determined by the Employee Benefits Committee of theCorporation), the Matching Restricted Stock Units and Dividend Units thensubject to this Award shall vest if not yet vested and the retentionrequirements applicable to shares of Matched Common Stock in Section 4(b) shallcease to apply.  The Corporation shallissue to the Employee a certificate representing a number of shares of CommonStock equal to the number of Matching Restricted Stock Units and Dividend Unitsthen subject to this Award six months following the Employee’s separation fromservice with the Corporation and all of its affiliates on account of disabilityor, if earlier, the Vesting Date or the Deferred Distribution Date, whicheveris applicable.  The certificaterepresenting the shares of Matched Common Stock held by the Corporationpursuant to Section 4(b) shall be delivered to the Employee as soon aspracticable following such determination of permanent disability.

 

(f)            Inthe event of the Employee’s separation from service with the Corporation andall of its affiliates prior to the Vesting Date on account of his or herEligible Retirement, then a portion of the Matching Restricted Stock Units andDividend Units then subject to this Award shall vest, with the number to bedetermined by multiplying the number of Matching Restricted Stock Units andDividend Units then subject to this Award by a fraction, the numerator of whichis the number of completed months from the date of this Agreement through thedate of Eligible Retirement and the denominator of which is 36, and theretention requirements applicable to shares of Matched Common Stock in Section4(b) shall cease to apply.  Six monthsfollowing the date of such separation from service, the Corporation shall issueto the Employee a certificate representing a number of shares of Common Stockequal to such number of vested Matching Restricted Stock Units and vestedDividend Units.  The remaining MatchingRestricted Stock Units and Dividend Units subject to this Agreement shall betreated in the same manner as unvested Matching Restricted Stock Units andunvested Dividend Units subject to the provisions of Section 4(c).  The certificate representing the shares ofMatched Common Stock held by the Corporation pursuant to Section 4(b) shall bedelivered to the Employee as soon as practicable following such EligibleRetirement.  For purposes of thisAgreement, “Eligible Retirement” shall mean the Employee’s separation fromservice with the Corporation and all of its affiliates on or after the date asof which the Employee (i) is eligible for a normal retirement benefit onaccount of reaching normal retirement age under the terms of The Neiman MarcusGroup, Inc. Retirement Plan (or a successor plan); or (ii) is not less than age55 and has not less than 20 years of vesting or credited service under theterms of The Neiman Marcus Group, Inc. Retirement Plan (or a successor plan);provided, however, that the Employee’s separation from service shall not be an“Eligible Retirement” if the Committee shall find that the

 

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Employee was terminated on account of “Cause.”  For purposes of this Agreement, “Cause” shallmean, in the Committee’s reasonable judgment, (i) a breach of duty by theEmployee in the course of his or her employment involving fraud, acts ofdishonesty (other than inadvertent acts or omissions), disloyalty, or moralturpitude; (ii) conduct that is materially detrimental to the Corporation orany of its affiliates, monetarily or otherwise, or reflects unfavorably on theCorporation or any of its affiliates or the Employee; (iii) the Employee’s failureto comply with or enforce the Corporation’s or any of its affiliates’ policiesconcerning equal employment opportunity, including engaging in sexually orotherwise harassing conduct; (iv) the Employee’s repeated insubordination orfailure to comply with or enforce other personnel policies of the Corporationor any of its affiliates; (v) the Employee’s failure to devote his or her fullworking time and best efforts to the performance of his or her responsibilitiesto the Corporation or its affiliates; or (vi) the Employee’s conviction of orentry of a plea agreement or consent decree or similar arrangement with respectto, a felony, other serious criminal offense, or any violation of federal orstate securities laws; provided, however, that with respect to items (iv) and(v), the Employee has been provided prior written notice of the failure andafforded a reasonable opportunity to correct.

 

(g)           Notwithstanding the provisions ofSection 4(b), the Employee may pledge any or all of the Matched CommonStock at any time prior to the Vesting Date without forfeiting the relatedMatching Restricted Stock Units or Dividend Units so long as the pledge iseffected in accordance with the following provisions:  (i) the Employee shall provide to theCorporation (A) written instructions to deliver a certificate (the“Pledged Share Certificate”), representing a specified number of shares ofMatched Common Stock (the “Pledged Shares”), to the lender to which the PledgedShares have been pledged (the “Pledgee”), (B) copies of the related noteand pledge agreement, and (C) the Employee’s signed written direction tothe Pledgee, in a form satisfactory to the Corporation, that if prior to theVesting Date the Pledged Shares are sold or the Pledged Share Certificate is returnedto the Employee, the Pledgee shall promptly notify the Corporation in writing,which written direction to the Pledgee shall be sent by the Corporationdirectly to the Pledgee; (ii) if prior to the Vesting Date the Pledgeereturns the Pledged Share Certificate to the Employee, the Employee shallpromptly deliver the certificate to the Corporation, which shall hold itpursuant to the provisions of Section 4(b); and (iii) on or after theVesting Date, or on or after such earlier date as vesting of the MatchingRestricted Stock Units may occur pursuant to Section 4(d), 4(e) or 4(f), theEmployee shall demonstrate to the Corporation that he or she owned the PledgedShares on the Vesting Date or such earlier date by presenting to theCorporation (A) the Pledged Share Certificate (which must have the samecertificate number as the Pledged Share Certificate the Corporation sent to thePledgee), or (B) such other evidence of continued ownership of the MatchedCommon Stock as the Corporation may deem satisfactory.

 

5.             **No Guarantee of Employment.** Nothing in the Plan or in this Agreement shall (i) confer on theEmployee any right to continue in the employ of the Corporation or any of itsaffiliates; (ii) affect the right of the Employee or the Corporation orany of its affiliates to terminate the employment relationship at any time;(iii) be deemed a waiver or modification of any provision

 

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contained in any agreement between the Employee and the Corporation orany of its affiliates; (iv) be construed as part of the Employee’s entitlementto remuneration or benefit pursuant to a contract of employment or otherwise oras compensation for past services rendered; (v) afford the Employee any rightsor additional rights to compensation or damages as a consequence of the loss ortermination of his or her office; or (vi) entitle the Employee to anycompensation or damages for any loss or potential loss he or she may suffer byreason of being or becoming unable to vest in the Matching Restricted StockUnits and any Dividend Units attributable thereto as a consequence of the lossor termination of his or her office, employment, or service with theCorporation or any of its affiliates.  Acessation of the Employee’s employment by reason of a leave of absence of notmore than six months approved by the Corporation shall not be deemed aseparation from service.

 

6.             **Changes in Common Stock.** In the event of any reorganization, recapitalization, stock split, stockdividend, merger, consolidation, combination of shares or other changeaffecting the Common Stock, the Committee shall make such adjustments as it maydeem appropriate with respect to the Matching Restricted Stock Units andDividend Units.

 

7.             **Fractional Units; Optional Issuance in Book-Entry Form.** Notwithstanding the foregoing, (i) anyfractional Matching Restricted Stock Unit or Dividend Unit will be paid in cashin lieu of Common Stock, with the amount of such payment to be based on theclosing price of a share of Common Stock on the New York Stock Exchange on thelast trading day prior to the date the payment amount is calculated; and (ii)any shares of Common Stock that under the terms of this Agreement are issuablein the form of a stock certificate may instead be issued in book-entry form if(a) the Corporation elects to hold Matched Common Stock in that form instead ofholding a certificate as provided in Section 4(b); or (b) the person in whosename the certificate would otherwise be issued so requests in writing.

 

8.             **Tax Withholding. **TheCorporation shall take any steps it deems necessary or desirable to satisfy anyobligations imposed by a Federal, state, local or other governmental entity towithhold taxes; provided, however, that in furtherance of satisfying such withholdingobligations, the Employee shall have the right (by delivering written notice tothe Secretary of the Corporation no less than 30 days nor more than 60 daysprior to the date of distribution) to have a number of whole shares of CommonStock withheld by the Corporation from the shares to be issued upondistribution, or to tender to the Corporation other whole shares of CommonStock, with a value not to exceed the statutory minimum tax withholdingobligation.  In addition, the Employeeand/or his or her beneficiary (including his or her estate) shall bear alltaxes on amounts paid under the Plan to the extent no taxes are withheld,irrespective of whether withholding is required.

 

9.             **Interpretation of Plan and this Agreement.**  This Agreement is being entered into pursuantto the Plan and shall be governed in all respects by the terms and provisionsof the Plan, which are incorporated herein by this reference.  In the case of any inconsistency between thePlan and this Agreement, the Plan provisions shall control.  Capitalized terms used and not defined inthis Agreement shall have the respective meanings given them in the Plan.  As used herein (i) the term “employee” shallmean an employee of the Corporation or of any affiliate of the Corporation;(ii) the term “affiliate” as used with respect to the Corporation shall meanany corporation or other entity in

 

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which the Corporation or any such other corporation or entity owns,directly or indirectly, 50% or more of the outstanding capital stock(determined by aggregate voting rights) or other voting interests, or that isconsidered to be under common control with the Corporation pursuant to Section414(b) or (c) of the Internal Revenue Code of 1986, as amended (the “Code”);and (iii) the phrase “separation from service” shall be interpreted in a mannerconsistent with the distribution requirements of Section 409A of the Code.  In all respects, questions of interpretation andapplication of the Plan and of this Agreement shall be determined by a majorityof the Committee, as it may from time to time be constituted, and thedeterminations of such majority shall be final and binding upon all persons.

 

10.           **Choice ofLaw; Exclusive Forum; Consent to Jurisdiction; Waiver of Right to ContestRemoval and to Jury Trial.** The validity, performance and enforceabilityof this Agreement shall be determined and governed by the laws of the State ofTexas, without regard to its conflict of laws principles. The exclusive forumfor any action concerning this Agreement or the transactions contemplatedhereby shall be in a court of competent jurisdiction in Dallas County, Texas,with respect to a state court, or the Dallas Division of the United StatesDistrict Court for the Northern District of Texas, with respect to a federalcourt.  THE EMPLOYEE HEREBY CONSENTS TOTHE EXERCISE OF JURISDICTION OF A COURT IN THE EXCLUSIVE FORUM AND WAIVES ANYRIGHT HE OR SHE MAY HAVE TO CHALLENGE OR CONTEST THE REMOVAL AT ANY TIME BY THECORPORATION OR ANY OF ITS AFFILIATES TO FEDERAL COURT OF ANY SUCH ACTION HE ORSHE MAY BRING AGAINST IT IN STATE COURT. THE EMPLOYEE AND THE CORPORATION FURTHER HEREBY MUTUALLY WAIVE THEIRRIGHT TO TRIAL BY JURY IN ANY ACTION CONCERNING THIS AGREEMENT OR THE TRANSACTIONCONTEMPLATED HEREBY.

 

EXECUTED at Dallas, Texas, as of the dateappearing in the first paragraph of this Agreement.

 
|   | THE NEIMAN MARCUS GROUP, INC. |
|--------|-------------------------------|
|   |                          |   |
|   |                          |   |
|   | By                            |   |   |
|   |                          |   Nelson A. Bangs, |
|   |                          |   Senior Vice President & General Counsel |
|   |                          |   |   |
|   |                          |   |   |
|   |                          |   |   |
|   |                          |   | , Employee |
|        |                               |  |  |  |

 

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