**Exhibit 10.43**

 

**TIER I**

 

**CHANGE OF CONTROL TERMINATION PROTECTIONAGREEMENT**

 

**(BURTON M. TANSKY)**

 

**AGREEMENT** effectiveApril 1, 2005 between The Neiman Marcus Group, Inc. and Burton M. Tansky (the “Executive”).

 

Executive is a skilled and dedicated employee who has importantmanagement responsibilities and talents which benefit the Company.  The Company believes that its best interestswill be served if Executive is encouraged to remain with the Company or itsSubsidiaries.  The Company has determinedthat Executive’s ability to perform Executive’s responsibilities and utilizeExecutive’s talents for the benefit of the Company, and the Company’s abilityto retain Executive as an employee, will be significantly enhanced if Executiveis provided with fair and reasonable protection from the risks of a change incontrol of the Company.  Accordingly, theCompany and Executive agree as follows:

 

1.             Defined Terms.

 

Unless otherwise indicated, capitalized terms used in this Agreementwhich are defined in Schedule A shall have the meanings set forth inSchedule A.

 

2.             Effective Date;Term.

 

This Agreement shall be effective as of April 1, 2005 (the “EffectiveDate”) and shall remain in effect until April 1, 2007 (the “Term”); provided,however, that commencing with April 1, 2006 and on each anniversarythereof (each an “Extension Date”), the Term shall be automaticallyextended for an additional one-year period, unless the Company or Executiveprovides the other party hereto at least 60 days’ prior written noticebefore the applicable Extension Date that the Term shall not be soextended.  Notwithstanding the foregoing,this Agreement and the Term shall, if in effect on the date of a Change ofControl, remain in effect for two years following the Change of Control.

 

3.             Change of ControlBenefits.

 

Upon the occurrence of a Change of Control during the Term, any timeperiods, conditions or contingencies relating to the exercise or realizationof, or lapse of restrictions under, any outstanding equity incentive award thenheld by 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

 

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expressly provided for inconnection with such replacement or under the terms of the applicable awardagreement.

 

If Executive’s employment with the Company and its Subsidiaries isterminated at any time within two years following a Change of Control by theCompany and any of its Subsidiaries without Cause or by Executive for GoodReason (the effective date of either such termination hereafter referred to asthe “Termination Date”), Executive shall be entitled to, and the Companyshall be required to provide, subject to Executive’s execution of a generalrelease in favor of the Company substantially in the form attached hereto asExhibit A (the “Release”) (which Release is not revoked byExecutive), the payments and benefits provided hereafter in this Section 3and as set forth in this Agreement.  If Executive’semployment by the Company and any of its Subsidiaries is terminated prior to aChange of Control by the Company and any of its Subsidiaries without Cause inconnection with or in anticipation of such Change of Control at the request of,or upon the initiative of, the buyer in the Change of Control transaction (an “AnticipatoryTermination”), Executive shall be entitled to, and the Company shall berequired to provide, subject to Executive’s execution of the Release (whichRelease is not revoked by Executive), the benefits provided hereafter inSection 3 and as otherwise set forth in this Agreement (but only if ananticipated Change of Control actually occurs during the Term) and Executive’sTermination Date shall be deemed to have occurred immediately following theChange of Control.

 

Notice of termination without Cause or for Good Reason shall be givenin accordance with Section 13, and shall indicate the specific terminationprovision hereunder relied upon, the relevant facts and circumstances and theTermination Date.

 

a.             Severance Payments.  Within the later of (i) fifteen businessdays after the Termination Date or (ii) the expiration of the revocationperiod, if applicable, under the Release (the “Payment Period”), exceptwith respect to any additional bonus amount payable after the Payment Period tothe extent required pursuant to clause (3) below, the Company shall payExecutive a cash lump sum equal to:

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#### (1)           the Severance Multiple timesthe greater of Executive’s Base Salary in effect (i) immediately prior tothe date of the Change of Control or (ii) immediately prior to the eventset forth in the notice of termination giving rise to the Termination Date; and

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#### (2)           the Severance Multiple timesthe Target Bonus; and

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#### (3)           Executive’s Target Bonusmultiplied by a fraction, the numerator ofwhich shall equal the number of days Executive was employed by the Company orany of its Subsidiaries in the Company fiscal year in which the Executive’stermination occurs and the denominator of which shall equal 365 (the “BonusFraction”); provided that if the Termination Date occurs after morethan 75% of the Company’s fiscal year has elapsed, then, if it is ultimately

 

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#### determinedthat the Bonus Executive would have been entitled to receive for the fiscalyear in which such Termination Date occurs, determined based solely upon actualCompany performance for such fiscal year and excluding any qualitativeperformance criteria 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 Company), the Company shall also pay Executive anamount in cash equal to the excess of the Year-End Bonus over the Target Bonusmultiplied by the Bonus Fraction; and

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#### (4)           in the event of anAnticipatory Termination, an amount equal to Executive’s Base Salary from thedate of Executive’s termination through the Termination Date and any Bonus forthe previously completed fiscal year, if not previously paid due to Executive’searlier termination of employment.

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b.             Continuation ofActive Employee Benefits. For a period of years following the TerminationDate equal to the Severance Multiple (the “Welfare Continuation Period”),the Company shall provide Executive and Executive’s spouse and dependents (eachas defined under the applicable program) with the following benefits:  (i) medical and dental insurancecoverages at the same benefit level as provided to Executive immediately priorto the Change of Control, for which the Company will (A) reimburseExecutive during the first 18 months of the Welfare Continuation Periodor, if shorter, the period of actual COBRA continuation coverage received byExecutive during the Welfare Continuation Period, for the total amount of themonthly COBRA medical and dental insurance premiums payable by Executive forsuch continued benefits (by reducing such premium obligations to zero) and(B) provide such coverage for the remainder of the Welfare ContinuationPeriod at the same cost to Executive as is generally provided to similarlysituated active employees of the Company (provided, however, thatif, during the Welfare Continuation Period, 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 Executivebecomes enrolled); and (ii) life insurance coverage at the same benefitlevel as provided to Executive immediately prior to the Change of Control andat the same cost to Executive as is generally provided to similarly situatedactive employees of the Company (or if such coverage is no longer provided bythe Company, then at the Executive’s cost immediately prior to the Change ofControl).

 

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c.             Payment of EarnedBut Unpaid Amounts.  Within thePayment Period, the Company shall pay Executive any unpaid Base Salary throughthe Termination Date, any Bonus earned but unpaid as of the Termination Datefor any previously completed fiscal year of the Company, and all compensationpreviously deferred by Executive but not yet paid as well as the Company’smatching contribution with respect to such deferred compensation with respectto the year in which such Termination Date occurs and all accrued interestthereon.  In addition, Executive shall beentitled to prompt reimbursement of any unreimbursed expenses properly incurredby Executive in accordance with Company policies prior to the Termination Date.  Executive shall also receive such otherbenefits, if any, to which 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 14 of this Agreement (paymentsand benefits in this subsection (c), the “Accrued Benefits”).

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### d.             Retirement Benefits.  As of the Termination Date, (i) Executive, tothe extent not then a participant in, shall be deemed a participant in, and tothe extent not then vested, shall become fully vested in Executive’s benefitsunder, The Neiman Marcus Group, Inc. Supplemental Executive Retirement Plan asin effect immediately prior to the Change of Control (the “SERP”) and(ii) Executive shall become entitled to, and the Company shall pay, within thePayment Period, Executive a cash lump sum equal to the excess of:

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#### (1)           the ActuarialEquivalent of the single life annuity that would be payable to Executive underthe terms of the SERP based on the accrued benefit as of the Termination Date,after (A) giving effect to the provisions of paragraph 5(c)(iv) of theEmployment Agreement and (B) crediting Executive with an additional number ofyears of service and age equal to the Severance Multiple beyond that accrued asof the Termination Date (subject, in each case, to the 25 maximum years ofservice limitation set forth in the SERP, as applicable) for purposes ofeligibility for participation, eligibility for retirement, for earlycommencement of actuarial subsidies and for purposes of benefit accrual; over

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#### (2)           the ActuarialEquivalent of the single life annuity that would be payable to Executive underthe terms of SERP (assuming Executive was fully vested therein) in accordancewith its terms as in effect immediately prior to the Change of Control, aftergiving effect to the provisions of paragraph 5(c)(iv) of the EmploymentAgreement, based on the accrued benefit as of the Termination Date.

 

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The Actuarial Equivalent shall be determined based upon the assumptionsset forth in the NMG Retirement Plan (Basic Plan) and the benefit under thisSection 3(d) shall be calculated in a manner consistent with the methodologyand assumptions set forth in the illustrative example attached as Exhibit B.

 

### e.             Retiree Medical.  Following Executive’s entitlement tocontinued active employee benefits pursuant to Section 3(b), if Executivewas eligible for retiree medical benefits as of the Termination Date, using theeligibility criteria in effect immediately prior to the Change of Control,Executive shall be entitled to, and Company shall be required to provide,retiree medical coverage at the same benefit level and at the same cost toExecutive as specified by the retiree medical plan in effect immediately priorto the Change of Control.

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### f.              Other Benefits.  For a period of years following theTermination Date equal to the Severance Multiple, the Company shall promptlypay (or, in the discretion of Executive, reimburse Executive for all reasonableexpenses incurred) for professional outplacement services by Drake Beam Morin,Inc. or another comparable qualified consultant selected by the Company, butfor no longer than the date Executive first obtains full-time employment afterthe Termination Date (not to exceed $75,000). At all times from and following the Termination Date, the Company shallprovide to Executive and Executive’s spouse and dependents (each as definedunder the Company’s applicable policies) all merchandise discounts available tothe Company’s employees immediately prior to the Change of Control.

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### g.             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 Executive, if not previouslyaccelerated or waived pursuant to the first paragraph of this Section 3,shall be automatically accelerated or waived effective as of the TerminationDate.

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In consideration of the provision of the foregoing benefits provided inthis Section 3 and as otherwise set forth in this Agreement, Executivehereby agrees to be bound by the restrictive covenants of paragraphs 8, 9and 10 of the Employment Agreement.

 

4.             Mitigation.

 

Executive shall not be required to mitigate damages or the amount ofany payment provided for under this Agreement by seeking other employment orotherwise, and, subject to Section 3(b), compensation earned from suchemployment or otherwise shall not reduce the amounts otherwise payable underthis Agreement.  No amounts payable underthis

 

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Agreement shall be subject to reduction or offset in respect of anyclaims which the Company or any of its Subsidiaries (or any other person orentity) may have against Executive.

 

5.             Gross-Up. 

 

### a.             In the event it shall bedetermined that any payment, benefit or distribution (or combination thereof)by the Company, any of its Affiliates, or one or more trusts established by theCompany for the benefit of its employees, to or for the benefit of Executive(whether paid or payable or distributed or distributable pursuant to the termsof this Agreement, or otherwise) (a “Payment”) is subject to the excisetax imposed by Section 4999 of the Code or any interest or penalties areincurred by Executive with respect to such excise tax (such excise tax,together with any such interest and penalties, hereinafter collectivelyreferred to as the “Excise Tax”), Executive shall be entitled to receivean additional payment (a “Gross-Up Payment”) in an amount such thatafter payment by Executive of all taxes (including any interest or penaltiesimposed with respect to such taxes), including, without limitation, any incometaxes (and any interest and penalties imposed with respect thereto) and theExcise Tax imposed upon the Gross-Up Payment, Executive retains an amount ofthe Gross-Up Payment equal to the Excise Tax imposed upon the Payments.  Notwithstanding the foregoing provisions ofthis Section 5(a), if it shall be determined that Executive is entitled toa Gross-Up Payment, but that the Payment does not exceed 110% of the greatestamount that could be paid to Executive without giving rise to any Excise Tax(the “Safe Harbor Amount”), then no Gross-Up Payment shall be made toExecutive and the amounts payable under this Agreement shall be reduced so thatthe Payment, in the aggregate, is reduced to the Safe Harbor Amount.  The reduction of the amounts payable hereunder,if applicable, shall be made by first reducing the payments underSection 3(a), unless an alternative method of reduction is elected byExecutive.

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### b.             All determinations required tobe made under this Section 5, including whether and when a Gross-UpPayment is required and the amount of such Gross-Up Payment and the assumptionsto be utilized in arriving at such determination, shall be made by a nationallyrecognized accounting firm selected by the Company (the “Accounting Firm”)which shall provide detailed supporting calculations both to the Company andExecutive within ten business days of the receipt of notice from Executive thatthere has been a Payment, or such earlier time as is requested by the Company; providedthat for purposes of determining the amount of any Gross-Up Payment, Executiveshall be deemed to pay federal income tax at the highest marginal ratesapplicable to individuals in the calendar year in which any such Gross-UpPayment is to be made and deemed to pay state and local income taxes at thehighest effective rates applicable to individuals in the state or locality ofExecutive’s residence or place of

 

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### employment in the calendar year in which anysuch Gross-Up Payment is to be made, net of the maximum reduction in federalincome taxes that can be obtained from deduction of such state and local taxes,taking into account limitations applicable to individuals subject to federalincome tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne solely bythe Company.  Any Gross-Up Payment, asdetermined pursuant to this Section 5, shall be paid by the Company toExecutive (or to the appropriate taxing authority on Executive’s behalf) whenthe applicable tax is due.  If theAccounting Firm determines that no Excise Tax is payable by Executive, it shallso indicate to Executive in writing.  Anydetermination by the Accounting Firm shall be binding upon the Company andExecutive.  As a result of theuncertainty in the application of Section 4999 of the Code, it is possiblethat the amount of the Gross-Up Payment determined by the Accounting Firm to bedue to (or on behalf of) Executive was lower than the amount actually due (“Underpayment”).  In the event that the Company exhausts itsremedies pursuant to Section 5(c) and Executive thereafter is required tomake a payment of any Excise Tax, the Accounting Firm shall determine theamount of the Underpayment that has occurred and any such Underpayment shall bepromptly paid by the Company to or for the benefit of Executive.

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### c.             Executive shall notify theCompany in writing of any claim by the Internal Revenue Service that, ifsuccessful, would require the payment by the Company of any Gross-UpPayment.  Such notification shall begiven as soon as practicable but no later than ten business days afterExecutive is informed in writing of such claim and shall apprise the Company ofthe nature of such claim and the date on which such claim is requested to bepaid.  Executive shall not pay such claimprior to the expiration of the thirty day period following the date on which itgives such notice to the Company (or such shorter period ending on the datethat any payment of taxes with respect to such claim is due).  If the Company notifies Executive in writingprior to the expiration of such period that it desires to contest such claim,Executive shall (i) give the Company any information reasonably requestedby the Company relating to such claim, (ii) take such action in connectionwith contesting such claim as the Company shall reasonably request in writingfrom time to time, including, without limitation, accepting legalrepresentation with respect to such claim by an attorney reasonably selected bythe Company, (iii) cooperate with the Company in good faith in order toeffectively contest such claim and (iv) permit the Company to participatein any proceedings relating to such claim; provided, however,that the Company shall bear and pay directly all costs and expenses (includingadditional interest and penalties) incurred in connection with such contest andshall indemnify and hold Executive harmless, on an after-tax basis, for anyExcise Tax or income tax

 

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### (including interest and penalties withrespect thereto) imposed as a result of such representation and payment ofcosts and expenses.  Without limitationon the foregoing provisions of this Section 5(c), the Company shallcontrol all proceedings taken in connection with such contest and, at its soleoption, may pursue or forego any and all administrative appeals, proceedings,hearings and conferences with the taxing authority in respect of such claim andmay, at its sole option, either direct Executive to pay the tax claimed and suefor a refund or contest the claim in any permissible manner, and Executiveagrees to prosecute such contest to a determination before any administrativetribunal, in a court of initial jurisdiction and in one or more appellatecourts, as the Company shall determine; provided, further, thatif the Company directs Executive to pay such claim and sue for a refund, theCompany shall advance the amount of such payment to Executive, on aninterest-free basis, and shall indemnify and hold Executive harmless, on anafter-tax basis, from any Excise Tax or income tax (including interest orpenalties with respect thereto) imposed with respect to such advance or withrespect to any imputed income with respect to such advance; provided, further,that if Executive is required to extend the statute of limitations to enablethe Company to contest such claim, Executive may limit this extension solely tosuch contested amount.  The Company’scontrol of the contest shall be limited to issues with respect to which aGross-Up Payment would be payable hereunder and Executive shall be entitled tosettle or contest, as the case may be, any other issue raised by the InternalRevenue Service or any other taxing authority.

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### d.             If, after the receipt byExecutive of an amount paid or advanced by the Company pursuant to thisSection 5, Executive becomes entitled to receive any refund with respectto a Gross-Up Payment, Executive shall (subject to the Company’s complying withthe requirements of Section 5(c)) promptly pay to the Company the amountof such refund received (together with any interest paid or credited thereonafter taxes applicable thereto).  If,after the receipt by Executive of an amount advanced by the Company pursuant toSection 5(c), a determination is made that Executive shall not be entitledto any refund with respect to such claim and the Company does not notifyExecutive in writing of its intent to contest such denial of refund prior tothe expiration of thirty days after such determination, then such advance shallbe forgiven and shall not be required to be repaid and the amount of suchadvance shall offset, to the extent thereof, the amount of the Gross-Up Paymentrequired to be paid.

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6.             ExcludedTermination Events.

 

Nothing in this Agreement shall be construed to prevent the Company or anyof its Subsidiaries from terminating Executive’s employment for Cause or due toExecutive’s Total Disability.  IfExecutive is terminated (i) during the Term by the Company for Cause orTotal

 

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Disability or due to Executive’s death or resignation without GoodReason or (ii) for any reason following the expiration of the Term, theCompany shall have no obligation to make any payments under this Agreement.

 

7.             Indemnification;Director’s and Officer’s Liability Insurance.

 

(a) Executive shall retain all rights to indemnification under theCompany’s Certificate of Incorporation or By-Laws, and (b) the Companyshall maintain Director’s and Officer’s liability insurance on behalf ofExecutive, in both cases at the level in effect immediately prior to theTermination Date or immediately prior to the Change in Control, whichever isgreater, for a number of years equal to the Severance Multiple following theTermination Date, and throughout the period of any applicable statute oflimitations.

 

8.             Arbitration.

 

All disputes and controversies arising under or in connection with thisAgreement shall be settled by arbitration conducted before one arbitratorsitting in Dallas, Texas, or such other location agreed by the parties hereto,in accordance with the rules for expedited resolution of employment disputes ofthe American Arbitration Association then in effect.  The determination of the arbitrator shall bemade within thirty days following the close of the hearing on any dispute orcontroversy and shall be final and binding on the parties.  Judgment may be entered on the award of thearbitrator in any court having proper jurisdiction.

 

9.             Costs ofProceedings.

 

The Company shall pay all costs and expenses of the Company and, atleast monthly, Executive in connection with any arbitration relating to theinterpretation or enforcement of any provision of this Agreement; providedthat if Executive instituted the proceeding and the arbitrator or otherindividual presiding over the proceeding affirmatively finds that Executiveinstituted the proceeding in bad faith, Executive shall reimburse the Companyfor all costs and expenses of Executive previously paid by the Company pursuantto this Section 9.

 

10.           Assignment.

 

Except as otherwise provided herein, this Agreement shall be bindingupon, inure to the benefit of and be enforceable by the Company and Executiveand their respective heirs, legal representatives, successors and assigns.  If the Company shall be merged into orconsolidated with another entity, the provisions of this Agreement shall bebinding upon and inure to the benefit of the entity surviving such merger orresulting from such consolidation.  TheCompany shall require any successor (whether direct or indirect, by purchase,merger, consolidation or otherwise) to all or substantially all of the businessor assets of the Company, by agreement, expressly to assume and agree toperform this Agreement in the same manner and to the same extent that theCompany would be required to perform it if no such succession had takenplace.  The provisions of thisSection 10 shall continue to apply to each subsequent

 

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employer of Executive hereunder in the event of any subsequent merger,consolidation or transfer of assets of such subsequent employer.

 

11.           Withholding andDeferral.

 

Notwithstanding any other provision of this Agreement, the Company may,to the extent required by law, withhold applicable federal, state and local incomeand other taxes from any payments due to Executive hereunder.  Notwithstanding any other provision of thisAgreement or certain compensation and benefit plans of the Company or itsSubsidiaries, any payments or benefits due under this Agreement or such plansupon or in connection with a termination of Executive’s employment shall bedeferred and paid no earlier than 6 months following such termination ofExecutive’s employment, if, and only to the extent, required to comply withSection 409A of the Code.

 

12.           Applicable Law.

 

This Agreement shall be governed by and construed in accordance withthe laws of the State of Texas, without regard to conflicts of laws principlesthereof.

 

13.           Notice.

 

For the purpose of this Agreement, any notice and all othercommunication provided for in this Agreement shall be in writing and shall bedeemed to have been duly given when received at the respective addresses setforth below, or to such other address as either party may have furnished to theother 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.

 

14.           Entire Agreement;Offset; Modification.

 

### a.             This Agreement constitutes theentire agreement between the parties and, except as expressly provided herein,supersedes the provisions of all other prior agreements expressly concerningthe payment of severance benefits upon a termination of employment inconnection with or following a Change of Control during the Term.  Without limiting the generality of thepreceding sentence, the payment of any amounts and provision of any benefitspursuant to Section 3 of this Agreement shall be in lieu of and

 

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### shall supersede Executive’s entitlement topayments or benefits pursuant to paragraphs 7(e), 7(f) and 7(g) of theEmployment Agreement.  In all otherrespects, the Employment Agreement shall remain in full force and effect,including with respect to any amounts payable or benefits to be provided priorto and otherwise not in connection with a Change of Control; provided,that in no event shall payments or benefits provided pursuant to the EmploymentAgreement or any other severance agreement or policy entitle Executive to aduplication of payments and benefits pursuant to this Agreement and, in theevent of an Anticipatory Termination, any amount payable hereunder shall be offsetand reduced by the amount of any termination payments or benefits previouslyprovided to Executive under the Employment Agreement or any other severancearrangement with the Company.

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### b.             Except as expressly providedherein, this Agreement shall not interfere in any way with the right of theCompany to reduce Executive’s compensation or other benefits or terminateExecutive’s employment, with or without Cause. Any rights that Executive shall have in that regard shall be as setforth in any applicable employment agreement between Executive and theCompany.  This Agreement may be changedonly by a written agreement executed by the Company and Executive.

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15.           Counterparts.

 

This Agreement may be signed in counterparts, each of which shall be anoriginal, with the same effect as if the signatures thereto and hereto wereupon the same instrument.

 

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**IN WITNESS WHEREOF**,the parties have executed this Agreement on the 1st day of April, 2005.

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

 

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**Schedule A**

 

**CERTAIN DEFINITIONS**

 

As used in this Agreement, and unless the context requires a differentmeaning, the following terms, when capitalized, have the meaning indicated:

 

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

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##### II.            “BaseSalary” means Executive’s annual rate of base salary in effect on the datein question.

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##### III.           “Board”means the board of directors of the Company.

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##### IV.           “Bonus”means the amount payable to Executive under the Company’s applicable annualincentive bonus plan with respect to a fiscal year of the Company.

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##### V.            “Cause”means

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###### (1)           the willful andcontinued failure by Executive to substantially perform duties consistent withExecutive’s position with the Company (other than any such failure resultingfrom incapacity due to physical or mental illness or termination by Executivefor Good Reason), after a demand for substantial performance is delivered toExecutive by the Board, together with a copy of the resolution of the Boardthat specifically identifies the manner in which the Board believes thatExecutive has not substantially performed Executive’s duties, which resolutionmust be passed by at least 2/3 of the entire Board at ameeting called for the purpose and after an opportunity for Executive andExecutive’s counsel to be heard by the Board, and Executive has failed toresume substantial performance of Executive’s duties on a continuous basiswithin 14 days of receiving such demand;

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###### (2)           the willful engaging byExecutive in conduct that is demonstrably and materially injurious to theCompany, monetarily or otherwise, as set forth in a resolution of the Board,which resolution must be passed by at least 2/3 of theentire Board at a meeting called for the purpose and after an opportunity forExecutive and Executive’s counsel to be heard by the Board; or

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

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For purposes of this definition, no act, or failure to act, onExecutive’s part shall be deemed “willful” unless done, or omitted to be done,by Executive not in good faith and without reasonable belief that Executive’saction or omission was in the best interest of the Company.

 

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##### VI.           “Changeof Control” means, and shall be deemed to have occurred:

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###### (1)           upon the consummationof any transaction or series of transactions under which the Company is mergedor consolidated with any other company, other than a merger or consolidationthat would result in the stockholders of the Company immediately prior theretoowning voting securities immediately thereafter (either by the securities suchstockholders owned immediately prior thereto remaining outstanding or by thesecurities such stockholders owned immediately prior thereto being convertedinto voting securities of the surviving entity) representing more than 50% ofthe combined voting power of the voting securities of the Company, theacquiring entity or such surviving entity, as the case may be, outstandingimmediately after such merger or consolidation;

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###### (2)           if any person or group(as used in Section 13(d) of the Exchange Act) (other than the Company,any trustee or other fiduciary holding securities under an employee benefitplan of the Company, or any company owned, directly or indirectly, by thestockholders of the Company in substantially the same proportions as theirownership of stock of the Company) becomes the “beneficial owner” (as definedin Rule 13d-3 under the Exchange Act) of securities of the Companyrepresenting more than 40% of (a) the shares of the Company’s Class BCommon Stock then outstanding or (b) the combined voting power (other thanin the election of directors) of all voting securities of the Company thenoutstanding;

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###### (3)           if, during any periodof 24 consecutive months, individuals who at the beginning of such periodconstituted the Board, and any director whose election or nomination forelection by the Company’s stockholders was approved by a vote of at leasttwo-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

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###### (4)           upon the completeliquidation of the Company or the sale or disposition by the Company of all orsubstantially all of the Company’s assets, other than a liquidation of theCompany into a wholly-owned subsidiary.

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##### VII.          “Class BCommon Stock” means Class B Common Stock, par value $.01 per share, ofthe Company.

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##### VIII.        “COBRA”means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

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##### IX.           “Code”means the Internal Revenue Code of 1986, as amended.

 

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##### X.            “Company”means The Neiman Marcus Group, Inc. and, after a Change of Control, anysuccessor or successors thereto.

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##### XI.           “EmploymentAgreement” means the Employment Agreement between Executive and the Companydated August 3, 2003.

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##### XII.         “ExchangeAct” means the Securities Exchange Act of 1934, as amended.

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##### XIII.        “GoodReason” means any of the following actions on or after a Change of Control,without Executive’s express prior written approval, other than due to Executive’sTotal Disability or death:

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###### (1)           any decrease in, or anyfailure to increase in accordance with an agreement between Executive and theCompany or any of its Subsidiaries, Base Salary or Target Bonus;

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###### (2)           any material diminutionin the aggregate employee benefits afforded to the Executive immediately priorto the Change of Control; for this purpose employee benefits shall include, butnot be limited to pension benefits, life insurance and medical and disabilitybenefits (excluding, for the avoidance of doubt, the Company’s election not toextend the Agreement in accordance with, and subject to, the provisions ofSection 2 of this Agreement);

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###### (3)           any diminution inExecutive’s title or primary reporting relationship, or substantial diminutionin duties or responsibilities (including, without limitation, the Companybecoming a subsidiary or division of a parent operating entity (unless Executiveretains or assumes the title and primary reporting relationship (withoutdiminution) and duties and responsibilities (without substantial diminution),as in effect with respect to the Company immediately prior to the Change ofControl, at, and with respect to, such parent operating entity)); provided,however, that no such diminution or substantial diminution, asapplicable, shall be deemed to occur solely as a result of the Company ceasingto be a publicly held corporation;

######  

###### (4)           any relocation ofExecutive’s principal place of business of 50 miles or more, other thannormal travel consistent with past practice, or any requirement that Executiveengage in excessive business-related travel in a manner inconsistent with pastpractice in any material respect**;**

######  

###### (5)           the failure of anysuccessor or assignee (whether direct or indirect, by purchase, merger,consolidation, or otherwise) to all or substantially all of the business and/orassets of the Company in connection with any Change of Control, by agreement inwriting in form and substance reasonably satisfactory to Executive, expressly,absolutely and unconditionally to assume and agree to perform this Agreement,the Employment Agreement or any other employment agreement to which the Companyand Executive are party, in each case, which remains in

 

A-4

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###### effect as ofimmediately prior to such Change of Control, in the same manner and to the sameextent that the Company would be required to perform any such agreement if nosuch succession or assignment had taken place; or

######  

###### (6)           any additional eventwhich would constitute Good Reason under the Employment Agreement or any otheremployment agreement to which the Company and Executive are party which remainsin effect as of the date of the event giving rise to Good Reason.

######  

Executive shall have six months from the time Executive first becomesaware of the existence of Good Reason to resign for Good Reason.

 

##### XIV.        “SeveranceMultiple” means 3.

#####  

##### XV.         “Subsidiary”means a subsidiary corporation, as defined in Section 424(f) of the Code(or any successor Section thereto).

#####  

##### XVI.        “TargetBonus” means the greater of (i) Executive’s target Bonus in effect onthe date of the Change of Control or (ii) Executive’s target Bonus ineffect immediately prior to the event set forth in the notice of terminationgiving rise to the Termination Date.

#####  

##### XVII.       “TotalDisability” means that, in the Company’s reasonable judgment, either(1) Executive has been unable to perform Executive’s duties because of aphysical or mental impairment for 80% or more of the normal working days duringsix consecutive calendar months or 50% or more of the normal working daysduring 12 consecutive calendar months, or (2) Executive has becometotally and permanently incapable of performing the usual duties of hisemployment with the Company on account of a physical or mental impairment.

 

A-5

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**Exhibit A**

 

**WAIVER AND RELEASE OF CLAIMS**

 

In consideration of, and subject to, the payments to be made to me byThe Neiman Marcus Group, Inc., or any of its subsidiaries, or its or theirsuccessor(s) or assigns (the “Company”), pursuant to the attached Changeof Control Termination Protection Agreement (“TPA”) dated April 1, 2005,I agree to and do release and forever discharge the Company, and its respectivepast and present officers, directors, shareholders, employees and agents fromany and all claims and causes of action, known or unknown, arising out of orrelating to my employment with the Company or the termination thereof,including, but not limited to, wrongful discharge, breach of contract, tort,fraud, the Civil Rights Act, Age Discrimination in Employment Act, EmployeeRetirement Income Security Act, Americans with Disabilities Act, or any otherfederal, state or local legislation or common law relating to employment ordiscrimination in employment.

 

Notwithstanding the foregoing or any other provision hereof, nothing inthis Waiver and Release of Claims shall adversely affect (i) my rightsunder the TPA; (ii) my rights to benefits other than severance benefitsunder plans, programs and arrangements of the Company which are accrued butunpaid as of the date of my termination; or (iii) my rights to indemnificationunder any indemnification agreement, applicable law, and certificates ofincorporation and bylaws of the Company, and my rights under any directors’ andofficers’ liability insurance policy covering me.

 

I acknowledge that I have signed this Waiver and Release of Claimsvoluntarily, knowingly, of my own free will and without reservation or duress,and that no promises or representations have been made to me by any person toinduce me to do so other than the promise of payment set forth in the firstparagraph above and the Company’s acknowledgement of my rights reserved underthe second paragraph above.

 

I acknowledge that I have been given not less than[twenty-one (21)] [forty-five (45)] days to review and consider thisWaiver and Release of Claims, and that I have had the opportunity to consultwith an attorney or other advisors of my choice and have been advised by theCompany to do so if I choose.  I mayrevoke this Waiver and Release of Claims seven days or less after its executionby providing written notice to the Company.

 

Finally, I acknowledge that I have read this Waiver and Release ofClaims and understand all of its terms.

 
|   |                       |   |
|--------|----------------------------|--------|
|   | Employee’s  Signature |   |
|   |                       |   |
|   |                       |   |
|   | Print name                 |   |
|   |                       |   |
|   |                       |   |
|   | Date Signed                |   |

 

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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

 

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and the Enhanced Change of Control Benefit are based on the immediatelypayable early retirement benefits.

 

(2) If the participant is not eligible for an immediate SERP benefiteven with the Age and Service Enhancement, then the Lump Sum amounts for boththe Normal SERP Benefit and the Enhanced Change of Control Benefit are based onthe Age 65 accrued benefits.

 

(3) If the participant is eligible for an immediate SERP benefit onlybecause of the Age and Service Enhancement, then the Lump Sum for the NormalSERP Benefit is based on the Age 65 accrued benefit and the Lump Sum for theEnhanced Change of Control Benefit is based on the immediately payable earlyretirement 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 Benefit Payableat 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 Enhanced Changeof 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 age 65 =$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)

 

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the 30-Year Treasury Rate for the month of March in the Plan Year priorto the Plan Year of distribution, and (c) the participant’s actual age atdistribution date.

 

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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