**EXHIBIT10.35**

**THE NEIMANMARCUS GROUP, INC.**

**KEY EMPLOYEEDEFERRED COMPENSATION PLAN**

**(EffectiveJanuary 1, 2006)**

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**TABL**E OF CONTENTS

 
| ARTICLE 1. INTRODUCTION          |                                      | 1      |
|----------------------------------|-------------------------------------------|--------|
|                             |                                      |   |
| 1.1                              | Purpose of Plan                           |   | 1 |
| 1.2                              | Status of Plan                            |   | 1 |
|                             |                                      |   |   |
| ARTICLE 2.  DEFINITIONS          |                                      | 1      |
|                             |                                      |   |
| 2.1                              | “Account”                       |   | 1 |
| 2.2                              | “Affiliate”                     |   | 1 |
| 2.3                              | “Base Pay”                      |   | 1 |
| 2.4                              | “Bonus”                         |   | 2 |
| 2.5                              | “Change in Control”             |   | 2 |
| 2.6                              | “Code”                          |   | 4 |
| 2.7                              | “Committee”                     |   | 4 |
| 2.8                              | “Company”                       |   | 4 |
| 2.9                              | “Compensation”                  |   | 4 |
| 2.10                             | “Discretionary Credit”          |   | 4 |
| 2.11                             | “Effective Date”                |   | 4 |
| 2.12                             | “Elective Deferral”             |   | 4 |
| 2.13                             | “Eligible Employee”             |   | 5 |
| 2.14                             | “Employer”                      |   | 5 |
| 2.15                             | “ERISA”                         |   | 5 |
| 2.16                             | “Matching Deferral”             |   | 5 |
| 2.17                             | “Maximum Savings Plan Deferral” |   | 6 |
| 2.18                             | “Maximum Savings Plan Match”    |   | 6 |
| 2.19                             | “Participant”                   |   | 6 |
| 2.20                             | “Plan”                          |   | 6 |
| 2.21                             | “Plan Year”                     |   | 6 |
| 2.22                             | “Retirement”                    |   | 6 |
| 2.23                             | “Savings Plan”                  |   | 6 |
| 2.24                             | “Year of Service”               |   | 6 |
|                             |                                      |   |   |
| ARTICLE 3. PARTICIPATION         |                                      | 7      |
|                             |                                      |   |
| 3.1                              | Commencement of Participation             |   | 7 |
| 3.2                              | Continued Participation                   |   | 7 |
|                             |                                      |   |   |
| ARTICLE 4. DEFERRALS AND CREDITS |                                      | 7      |
|                             |                                      |   |
| 4.1                              | Elective Deferrals.                       |   | 7 |
| 4.2                              | Matching Deferrals                        |   | 9 |
| 4.3                              | Discretionary Credits                     |   | 10 |
|                             |                                      |   |   |
| ARTICLE 5. ACCOUNTS; INTEREST    |                                      | 10     |
|                             |                                      |   |
| 5.1                              | Accounts                                  |   | 10 |
| 5.2                              | Interest                                  |   | 11 |
| 5.3                              | Payments                                  |   | 11 |

 

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| ARTICLE 6. PAYMENTS                  |                                           | 11     |
|--------------------------------------|------------------------------------------------|--------|
|                                 |                                           |   |
| 6.1                                  | Election of Time and Form of Payment           |   | 11 |
| 6.2                                  | Retirement and Other Termination of Employment |   | 13 |
| 6.3                                  | Death                                          |   | 14 |
| 6.4                                  | Change in Control                              |   | 14 |
| 6.5                                  | Hardship Distributions                         |   | 15 |
| 6.6                                  | Changes in Time and Form of Payment            |   | 16 |
| 6.7                                  | Withholding                                    |   | 16 |
| 6.8                                  | Specified Employees                            |   | 17 |
| 6.9                                  | 409A Income Inclusion                          |   | 17 |
|                                 |                                           |   |   |
| ARTICLE 7. COMMITTEE                 |                                           | 17     |
|                                 |                                           |   |
| 7.1                                  | Plan Administration and Interpretation         |   | 17 |
| 7.2                                  | Powers, Duties, Procedures, Etc.               |   | 18 |
| 7.3                                  | Information                                    |   | 19 |
| 7.4                                  | Indemnification of Committee                   |   | 19 |
| 7.5                                  | Claims Procedure                               |   | 19 |
|                                 |                                           |   |   |
| ARTICLE 8. AMENDMENT AND TERMINATION |                                           | 20     |
|                                 |                                           |   |
| 8.1                                  | Amendments                                     |   | 20 |
| 8.2                                  | Termination of Plan                            |   | 20 |
| 8.3                                  | Existing Rights                                |   | 21 |
|                                 |                                           |   |   |
| ARTICLE 9. MISCELLANEOUS             |                                           | 21     |
|                                 |                                           |   |
| 9.1                                  | No Funding; Source of Payments                 |   | 21 |
| 9.2                                  | Nonassignability; Domestic Relations Order     |   | 21 |
| 9.3                                  | Limitation of Participants’ Rights        |   | 22 |
| 9.4                                  | Participants Bound                             |   | 22 |
| 9.5                                  | Receipt and Release                            |   | 22 |
| 9.6                                  | Governing Law                                  |   | 23 |
| 9.7                                  | No Guarantee of Tax Consequences               |   | 23 |
| 9.8                                  | Adoption by Other Employers                    |   | 23 |
| 9.9                                  | Headings and Subheadings                       |   | 24 |

 

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**THENEIMAN MARCUS GROUP, INC.KEY EMPLOYEE DEFERRED COMPENSATION PLAN**

**(EffectiveJanuary 1, 2006)**

# ARTICLE 1.  INTRODUCTION

## 1.1           Purposeof Plan.  The Employers haveadopted this Key Employee Deferred Compensation Plan as a nonqualified deferredcompensation arrangement to provide a means by which certain eligible employeesmay defer Compensation.

## 1.2           Statusof Plan.  The Plan is intended tobe “a plan which is unfunded and is maintained by an employer primarily for thepurpose of providing deferred compensation for a select group of management orhighly compensated employees” within the meaning of Sections 201(2) and301(a)(3) of ERISA and is intended to comply with the requirements of Codesection 409A, and shall be interpreted and administered in a manner consistentwith those intentions.

# ARTICLE 2.  DEFINITIONS

Whereverused herein, the following terms have the meanings set forth below, unless adifferent meaning is clearly required by the context:

## 2.1           “Account”means, for each Participant, the account established for his or her benefitunder Section 5.1. 

## 2.2           “Affiliate”means any corporation or organization that together with an Employer is treatedas a single employer under Section 414(b) or (c) of the Code.

## 2.3           “BasePay” means the base salary payable by an Employer to an employee, includingamounts that would have been payable to the employee as base salary but for anelection under Section 125 of the Code, a deferral election under theSavings Plan, or a deferral election under this Plan.

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## 2.4           “Bonus”means an annual cash bonus payable by an Employer to an employee, including anyportion of such a bonus that would have been payable to the employee but for anelection under Section 125 of the Code, a deferral election under the SavingsPlan, or a deferral election under this Plan. However, the term “Bonus” shall not include any amount arising from, orpaid under or in connection with a long-term incentive program, or a stockappreciation right, stock option, restricted stock or stock unit, or otherequity-based incentive award, plan or arrangement.  Notwithstanding the preceding, no amountshall be treated as a “Bonus” unless it satisfies the criteria forperformance-based compensation within the meaning of Code section 409A. 

## 2.5           A “Change inControl” shall be deemed to have taken place forpurposes of the Plan upon the occurrence of any of the following events afterthe Effective Date: (i) any sale, lease, exchange or other transfer (in onetransaction or a series of related transactions) of all or substantially all ofthe assets of the Company on a consolidated basis to any Person or group ofrelated persons for purposes of Section 13(d) of the Securities Exchange Act of1934 (a “Group”), together with any CIC Affiliates thereof other than to aMajority Stockholder; (ii) the approval by the holders of the outstandingvoting power of the Company of any plan or proposal for the liquidation ordissolution of the Company; (iii) (A) any Person or Group (other than theMajority Stockholder) shall become the beneficial owner (within the meaning ofSection 13(d) of the Exchange Act), directly or indirectly, of Common Stockrepresenting more than 40% of the aggregate outstanding voting power of theCompany and such Person or Group actually has the power to vote such CommonStock in any such election and (B) the Majority Stockholder beneficially owns(within the meaning of Section 13(d) of the Securities Exchange Act of 1934),directly or indirectly, in the aggregate a lesser percentage of the votingpower of the Company

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## than such other Person orGroup; (iv) the replacement of a majority of the Board of Directors of theCompany over a two-year period from the directors who constituted the Board ofDirectors of the Company at the beginning of such period, and such replacementshall not have been approved by a vote of at least a majority of the Board ofDirectors of the Company then still in office who either were members of suchBoard of Directors at the beginning of such period or whose election as amember of such Board of Directors was previously so approved or who werenominated by, or designees of, a Majority Stockholder; or (v) consummation of amerger or consolidation of the Company with another entity in which holders ofthe Common Stock of the Company immediately prior to the consummation of thetransaction hold, directly or indirectly, immediately following theconsummation of the transaction, less than 50% of the common equity interest inthe surviving corporation in such transaction and the Majority Stockholder doesnot hold a sufficient amount of voting power (or similar securities) to elect amajority of the surviving entity’s board of directors.  

Forpurposes of this Section 2.5, the following terms shall have the followingmeanings:

(a)           “CIC Affiliate”shall mean, with respect to any entity, any other corporation,organization, association, partnership, sole proprietorship or other type ofentity, whether incorporated or unincorporated, directly or indirectlycontrolling or controlled by or under direct or indirect common control withsuch entity.

(b)           “Common Stock” shall mean the commonstock of the Company, $0.01 par value per share.

(c)           “Majority Stockholder” shall mean ,collectively or individually as the context requires, Newton Holding, LLC, TPG Newton III, LLC,TPG Partners IV, L.P., TPG Newton Co-Invest I, LLC, Warburg PincusPrivate Equity VIII, L.P., Warburg

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PincusNetherlands Private Equity VIII C.V. I, Warburg Pincus Germany Private EquityVIII K.G , Warburg Pincus Private Equity IX, L.P and/or their respective CICAffiliates.  

(d)           “Person” shall mean an individual,partnership, corporation, limited liability company, unincorporatedorganization, trust or joint venture, or a governmental agency or political subdivision thereof. 

## 2.6           “Code”means the Internal Revenue Code of 1986, as amended from time to time.  Reference to any section or subsection of theCode includes reference to any comparable or succeeding provisions of anylegislation which amends, supplements or replaces such section or subsection.

## 2.7           “Committee”means The Neiman Marcus Group, Inc. Employee Benefits Committee or anysuccessor committee appointed by the Board of Directors of The Neiman MarcusGroup, Inc. or its delegate.

## 2.8           “Company”means The Neiman Marcus Group, Inc., a Delaware corporation, and any successor,including a successor to all or substantially all of the Company’s assets orbusiness which assumes the obligations of the Company.

## 2.9           “Compensation”means Base Pay and any Bonus payable by an Employer to an employee. 

## 2.10         “DiscretionaryCredit” means an amount credited to the Account of a Participant by anEmployer pursuant to Section 4.3.

## 2.11         “EffectiveDate” means January 1, 2006.

## 2.12         “ElectiveDeferral” means the portion of Compensation which is deferred by a Participantunder Section 4.1.

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## 2.13         “EligibleEmployee” means each employee of an Employer who, on the Effective Date orthe first day of any month thereafter,

### (a)           hascompleted at least one Year of Service, or such shorter period of service asmay be specified by the Chief Executive Officer of The Neiman Marcus Group,Inc. in such officer’s sole discretion; 

### (b)           hadin effect on August 1 of the preceding calendar year (or, if later, on theemployee’s date of hire) an annual rate of Base Pay of at least $300,000; and

### (c)           hasbeen designated by the Committee as eligible to participate in the Plan.

AnEligible Employee shall remain an Eligible Employee notwithstanding anyreduction in his or her annual rate of Base Pay below the applicable minimumunder (b) above; provided, however, that the Committee in its discretion maywithdraw an employee’s designation under (d) above as an Eligible Employee atany time and for any reason effective with respect to any subsequent Plan Year.

## 2.14         “Employer”means the Company and any Affiliate that adopts the Plan with the consent ofthe Company as provided in Section 9.8.

## 2.15         “ERISA”means the Employee Retirement Income Security Act of 1974, as amended from timeto time.  Reference to any section orsubsection of ERISA includes reference to any comparable or succeedingprovisions of any legislation which amends, supplements or replaces suchsection or subsection.

## 2.16         “MatchingDeferral” means a deferral made for the benefit of a Participant underSection 4.2. 

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## 2.17         “MaximumSavings Plan Deferral” means a Participant’s maximum permissible electivedeferral under the Savings Plan, regardless of whether the Participant actuallymade a deferral election under the Savings Plan.

## 2.18         “MaximumSavings Plan Match” means a Participant’s maximum permissible matchingcontribution under the Savings Plan, assuming maximum elective deferrals underthe Savings Plan, regardless of whether the Participant actually made adeferral election under the Savings Plan.

## 2.19         “Participant”means any individual who participates in the Plan in accordance with Article 3.

## 2.20         “Plan”means The Neiman Marcus Group, Inc. Key Employee Deferred Compensation Plan,effective as of January 1, 2006, as set forth herein and all subsequentamendments hereto.

## 2.21         “PlanYear” means the calendar year.

## 2.22         “Retirement”means termination of employment on or after the date the Participant has either(i) attained age 65 and reached the fifth anniversary of the date he or shefirst performed an hour of service (as defined in Section 2.24 below), or (ii)attained age 55 and reached the fifteenth anniversary of the date he or shefirst performed an hour of service (as defined in Section 2.24 below).

## 2.23         “Savings Plan” means The Neiman Marcus Group, Inc.Employee Savings Plan, as amended from time to time.

## 2.24         “Yearof Service” means completion of the twelve consecutive month periodbeginning on the date the employee first performs an hour of service uponinitial employment with an Employer or an Affiliate during which the employeeis continuously employed by an

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## Employer or an Affiliate or,with respect to an employee who terminates employment prior to completing aYear of Service, completion of the twelve consecutive month period beginning onthe date the employee first performs an hour of service upon reemployment withan Employer or an Affiliate during which the employee is continuously employedby an Employer or an Affiliate.  Forpurposes of this Plan, an “hour of service” shall mean each hour for which anemployee is paid or entitled to payment for the performance of duties for anEmployer or an Affiliate.

# ARTICLE 3.  PARTICIPATION

## 3.1           Commencementof Participation.  Any EligibleEmployee shall become a Participant on the effective date of an election todefer Compensation in accordance with Section 4.1 or, if earlier, on the datean Employer makes a Discretionary Credit to his or her Account.

## 3.2           ContinuedParticipation.  An individual whohas become a Participant in the Plan shall continue to be a Participant so longas any amount remains credited to his or her Account.

# ARTICLE 4.  DEFERRALS AND CREDITS

## 4.1           ElectiveDeferrals.

## (a)           BasePay.  An individual who is or will bean Eligible Employee as of any January 1 may elect to defer a designated wholepercentage, not to exceed 15 percent, of all Base Pay that is payable to theindividual for services to be performed on or after that date by filing anelection with the Committee prior to that January 1.  Any such election shall be irrevocable as ofsuch January 1 (or such earlier date as the Committee may prescribe).  In addition, an individual who first becomesan Eligible Employee after January 1, 2006 may elect before the date he or shefirst becomes an Eligible Employee, or within 30 days thereafter, to defer adesignated whole percentage, not to exceed 15

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## percent, of all Base Pay that is payable tothe individual for services to be performed after such election (or, if later,after the date he or she becomes an Eligible Employee).  Any such election shall be irrevocable as ofthe date that is 30 days after the date the employee first became an EligibleEmployee and shall be effective with respect to the first payroll periodbeginning after the date the election is delivered to the Committee.  Notwithstanding the preceding provisions ofthis paragraph, a Participant may revoke or otherwise modify an existingelection, or make a new deferral election, effective as of any January 1subsequent to the date of such revocation, modified election, or new election,but only with respect to Base Pay earned thereafter.  Such revocation, modification or new electionmust be delivered to the Committee no later than the December 31 immediatelypreceding the effective date of the election (or such earlier date as theCommittee may prescribe).  The samedeferral percentage shall apply to each payment of Base Pay covered by theelection.

### (b)           Bonuses.  An individual who is an Eligible Employee mayelect to defer a designated whole percentage, not to exceed 15 percent, of anyBonus payable to the individual for Employer fiscal years ending after the dateof the election, by filing an irrevocable election with the Committee at leastsix months prior to the end of any such fiscal year.  Notwithstanding the preceding provisions ofthis paragraph, a Participant may revoke or otherwise modify an existingelection, or make a new deferral election, effective with respect to a Bonus tobe paid for any fiscal year ending more than six months subsequent to the dateof such revocation, modified election, or new election. 

### (c)           Theprovisions of paragraphs (a) and (b) to the contrary notwithstanding, in theevent that an employee receives a hardship distribution from the Savings Planat a

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### time at which the Savings Plan requires thesuspension of all elective contributions and deferrals under all plansmaintained by an Employer upon the receipt of such a hardship withdrawal, then(i) any election to defer Base Pay pursuant to this Plan in effect at the timeof such hardship distribution from the Savings Plan shall be revoked at thetime the employee receives such distribution and such employee shall not beeligible to make a new election to defer Base Pay for any period beginningprior to the January 1 following the date that is six months after the date suchhardship distribution was made, and (ii) any election to defer a Bonus pursuantto this Plan for a fiscal year ending less than six months after the date ofthe receipt of the hardship distribution from the Savings Plan shall be revokedat the time the employee receives such hardship distribution from the SavingsPlan and such employee shall not be eligible to make a new election to defer aBonus for any fiscal year ending less than six months after the date suchhardship distribution was made. 

### (d)           Eachelection under this Section 4.1 shall be made in writing on a form approved orprescribed by the Committee.  The amountof each payment that is deferred hereunder shall be credited to theParticipant’s Account as of the date such amount would otherwise have been paidto the Participant.

## 4.2           MatchingDeferrals.  As of the last day ofeach payroll period during which a credit is made to a Participant’s Accountwith respect to such Participant’s election to defer Base Pay or Bonus pursuantto Section 4.1, such Participant’s Employer shall credit to the Participant’sAccount a Matching Deferral equal to: 

### (a)           100%of the sum of (i) the Participant’s Elective Deferrals for such payroll periodand (ii) the Participant’s Maximum Savings Plan Deferrals for such payrollperiod,

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### to the extent that such sum does not exceedthe first two percent (2%) of his or her Compensation for such payroll period, plus

### (b)           25%of the sum of (i) the Participant’s Elective Deferrals for such payroll periodand (ii) the Participant’s Maximum Savings Plan Deferrals for such payrollperiod, to the extent that such sum does not exceed the next four percent (4%)of his or her Compensation for such payroll period, minus

### (c)           theParticipant’s Maximum Savings Plan Match for such payroll period.

## 4.3           DiscretionaryCredits.  In addition to thedeferrals made pursuant to Section 4.1 and 4.2, with the approval of the Boardof Directors of the Company, at any time during a Plan Year an Employer maymake a Discretionary Credit to the Account of any Eligible Employee in theemploy of such Employer.  Any suchDiscretionary Credit shall be made solely in the discretion of the Employermaking such credit and shall be credited to the Eligible Employee’s Account asof such date and in such amount as such Employer shall determine, subject tothe approval of the Board of Directors of the Company.

# ARTICLE 5.  ACCOUNTS; INTEREST

## 5.1           Accounts.  An Employer shall establish and maintain onits books an Account for each Participant employed by such Employer.  Each such Account shall be designated by thename of the Participant for whom it is established.  An Employer shall continue to maintain aParticipant’s Account as long as a positive balance remains credited to suchAccount.  A Participant’s Account shallbe credited with the amounts of Elective Deferrals, Matching Deferrals, andDiscretionary Credits, if any, as provided in the Plan and any adjustmentshereunder.  Within 45 days after the endof each calendar quarter, the Committee shall provide the Participant with astatement of his or her Account.

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## 5.2           Interest.  As of the last day of each calendar month,the Committee shall credit each Participant’s Account with interest on thebalance of such Account as of the last day of the preceding calendar month lessany distributions or withdrawals made during such calendar month, plus intereston any amounts credited to such Account during such calendar month from thedate such amounts were credited.  Inaddition, payments under Article 6 shall include interest on the amount of suchpayment from the end of the preceding calendar month (except that with respectto the portion of the payment attributable to an amount credited to the Accountafter the end of the preceding calendar month, such portion of the paymentshall include interest only from the later date as of which the amount wascredited to the Account).  The interestto be credited pursuant to this Section shall be at an annual rate equal to theaverage prime interest rate published in the Eastern Edition of The WallStreet Journal on the last business day of the preceding calendar quarter(or, if two or more such rates are published, the average of such rates),increased by two percentage points.

## 5.3           Payments.  Each Participant’s Account shall be reducedby the amount of any payment made to or on behalf of the Participant under thePlan as of the date such payment is made.

# ARTICLE 6. PAYMENTS

## 6.1           Election of Time and Form ofPayment .

(a)           Each individual who is or will be anEligible Employee as of January 1, 2006 and who makes an election pursuant to Section4.1(a) to commence making Elective Deferrals to the Plan effective as ofJanuary 1, 2006 shall, on or before January 1, 2006 (or such earlier date asthe Committee prescribe), elect the time and form of payment from among theoptions set forth in this Section for the amounts credited to his

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or her Account.  Each other individual who is or will be anEligible Employee as of or after January 1, 2006 who does not elect to commencemaking Elective Deferrals to the Plan effective as of January 1, 2006 but whomakes an initial election subsequent to January 1, 2006 to commence makingElective Deferrals to the Plan pursuant to Section 4.1(a) or (b) at a time whenhe or she had not yet become a Participant shall, on or before the deadlineapplicable to such initial election to begin making Elective Deferrals to thePlan, elect the time and form of payment from among the options set forth inthis Section for the amounts credited to his or her Account.  Each other individual who is an EligibleEmployee but who has not made an election to make Elective Deferrals to thePlan who first becomes a Participant in the Plan on the date an Employer makesa Discretionary Credit to an Account for such Participant shall, prior to thedate that is thirty (30) days after the date such Eligible Employee firstbecomes a Participant, elect the time and form of payment from among theoptions set forth in this Section for the amount credited to his or herAccount.

(b)           The options available for thecommencement of payment from a Participant’s Account are:

### (i)            thefirst calendar quarter following the calendar quarter in which the Participantceases to be employed by an Employer or any Affiliate of an Employer; or

### (ii)           thefirst calendar quarter of the calendar year immediately following the calendaryear in which the Participant ceases to be employed by an Employer or anyAffiliate of an Employer.

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(c)           The options available for the form ofpayment from a Participant’s Account are:

#### (i)            asingle lump sum payment; or

#### (ii)           annualinstallments to be paid in the same calendar quarter each year over a periodelected by the Participant up to ten (10) years, the amount of each installmentto equal the balance of his or her Account immediately prior to the installmentdivided by the number of installments remaining to be paid.

(d)           The foregoing elections shall be madeon a form approved or prescribed by the Committee.  Each such election shall be irrevocable as ofthe deadline for making such election as provided above, except as otherwiseprovided in Section 6.6.  In the event aParticipant fails to make a valid election by the time provided in thisSection, the Participant shall be deemed to have elected options (b)(i) and(c)(i) above.

(e)           Notwithstanding the precedingprovisions of this Section, if the total amount credited to a Participant’sAccount as of the date the Participant ceases to be employed by an Employer orany Affiliate of an Employer is less than $10,000, distribution of the entireAccount shall be made in the form of a single lump sum payment to be made nolater than the later of December 31 of the calendar year in which theParticipant ceased being employed by an Employer or any Affiliate of anEmployer, or the 15th day of the third month following the date onwhich the Participant ceased being employed by an Employer or any Affiliate ofan Employer.

## 6.2           Retirement and Other Terminationof Employment.  Upon termination of aParticipant’s employment with the Employers and all Affiliates on account ofthe Participant’s Retirement, the Participant’s Account shall be paid to theParticipant at the time and in the form

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## elected pursuant to Section6.1.  Upon termination of a Participant’semployment with the Employers and all Affiliates for any reason other thandeath or Retirement, the Participant’s Account shall be paid to the Participantin a single lump sum payment during the calendar quarter immediately followingthe calendar quarter in which such termination of employment occurs.

## 6.3           Death.  If a Participant dies prior to the completedistribution of his or her Account, the balance of the Account shall be paid ina single lump sum payment in the first calendar quarter following the calendarquarter in which the Participant died to the Participant’s designatedbeneficiary or beneficiaries.  Anydesignation of beneficiary shall be made by the Participant in writing on aform approved or prescribed by the Committee, shall be effective upon receiptby the Committee, and may be changed by the Participant at any time.  If there is no such designation or nodesignated beneficiary survives the Participant, payment shall be made to theParticipant’s surviving spouse or, if none, to his or her issue perstirpes,in a single lump sum payment.  If nospouse or issue survives the Participant, payment shall be made in a singlelump sum to the Participant’s estate.

## 6.4           Change in Control.  In the event of a Change in Control on orafter January 1, 2006, all amounts credited to a Participant’s Account shall bedistributed in a single lump sum payment at the time of such Change in Controlor within five business days thereafter. Notwithstanding the preceding, a Change in Control shall not be deemedto have occurred with respect to the Account of a Participant for purposes ofthis Section unless such Change in Control is a permitted distribution eventwith respect to such Participant pursuant to Code Section 409A(a)(2)(A)(v).

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## 6.5           Hardship Distributions.  If a Participant encounters an unforeseeableemergency, as determined by the Committee, the Committee shall direct theEmployer maintaining such Participant’s Account to pay to such Participant anddeduct from such Account such portion of the vested amount then credited tosuch Account (including, if appropriate, the entire amount) as the Committeeshall determine to be necessary to alleviate the severe financial hardship ofsuch Participant caused by such unforeseeable emergency (which may includeamounts necessary to pay any Federal, state, or local income taxes or penaltiesreasonably anticipated to result from the distribution).  For this purpose, an “unforeseeable emergency”shall be a severe financial hardship of the Participant resulting from anillness or accident of the Participant, the Participant’s spouse or theParticipant’s dependent (as defined in Code section 152(a)), loss of theParticipant’s property due to casualty (including the need to rebuild a homefollowing damage to a home not otherwise covered by insurance), or othersimilar extraordinary and unforeseeable circumstances arising as a result ofevents beyond the control of the Participant. The circumstances that will constitute an unforeseeable emergency willdepend upon the facts of each case, but in any case, payment may not be made tothe extent that such hardship is or may be relieved (i) through reimbursementor compensation by insurance or otherwise or (ii) by liquidation of theParticipant’s assets, to the extent liquidation of such assets would not itselfcause severe financial hardship  Nodistribution shall be made to a Participant pursuant to this Section unlesssuch Participant requests such a distribution in writing and provides to theCommittee such information and documentation with respect to his or herunforeseeable emergency as may be requested by the Committee.  This Section shall be interpreted in a mannerconsistent with the distribution requirements of Section 409A of the Code.

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## 6.6           Changes in Time and Form ofPayment.  A Participant may changehis or her elections under Section 6.1 regarding the time at which his or herAccount will be paid or begin to be paid, or the form of such payment, or both,after commencing participation in the Plan provided that (i) no such changeshall be effective until 12 months after the date such modified election ismade, (ii) no change related to a payment that is to be made at a fixed time orpursuant to a fixed schedule may be made less than twelve months prior to thedate the payment is scheduled to be paid or, in the case of installmentpayments elected pursuant to Section 6.1(ii) (which shall be treated forpurposes of this Plan as a “single payment”), twelve months prior to the datethe first amount was scheduled to be paid, and (iii) except with respect topayments to be made on account of death or an unforeseeable emergency, thepayment made pursuant to any such subsequent election is deferred for a periodof not less than five years from the date such payment would otherwise havebeen paid or, in the case of installment payments elected pursuant to Section6.1(ii) (which shall be treated for purposes of this Plan as a “single payment”),five years from the date the first amount was scheduled to be paid.

## 6.7           Withholding.  There shall be deducted from all amounts paidunder this Plan any taxes and other amounts required to be withheld by anyFederal, state, local or other government. The Participant and/or his or her beneficiary (including his or herestate) shall bear all taxes on amounts paid under this Plan to the extent thatno taxes are withheld, irrespective of whether withholding is required.  The Participant will be required to pay tohis or her Employer the amount of any federal, state or local taxes required bylaw to be withheld in connection with the Plan in the event that such Participantis not being paid by an Employer or amounts being paid by an Employer to suchParticipant are insufficient to satisfy any such withholding obligation.

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## 6.8           Specified Employees.  Any provision of the Plan to the contrarynotwithstanding, if a Participant is a “specified employee” within the meaningof Section 409A(a)(2)(B)(i) of the Code as of the date of the Participant’stermination of employment with the Employer and all Affiliates, no distributionshall be made or commence with respect to such Participant pursuant to thisSection sooner than six months from the date of such Participant’s terminationof employment (or, if earlier, the date of the Participant’s death).  In such case, all payments that werescheduled to be made within such six-month period shall be accumulated (withinterest as provided in Section 5.2) and paid in a single lump sum in thecalendar quarter following the calendar quarter in which such six-month periodends.

## 6.9           409A Income Inclusion.  Any provision of the Plan to the contrarynotwithstanding, although the Plan is designed to comply in form and operationwith the requirements of Code Section 409A, in the event a Participant is requiredto include in income an amount attributable to the Plan prior to the payment ofany such amount pursuant to this Plan on account of a violation of Code Section409A, the amount so required to be included in income shall be paid to theParticipant as soon as practicable.

# ARTICLE 7. COMMITTEE

## 7.1           Plan Administration andInterpretation.  The Committee shalloversee the administration of the Plan. The Committee shall have complete control and authority to determine therights and benefits and all claims, demands and actions arising out of theprovisions of the Plan of any Participant, beneficiary, deceased Participant,or other person having or claiming to have any interest under the Plan.  The Committee shall have the exclusive anddiscretionary power to interpret the Plan and to decide all matters under thePlan.  Such interpretation and decisionshall be final, conclusive and binding on all Participants and any

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## person claiming under orthrough any Participant, in the absence of clear and convincing evidence thatthe Committee acted arbitrarily and capriciously.  Any individual serving on the Committee whois a Participant will not vote or act on any matter relating solely to himselfor herself.  When making a determinationor calculation, the Committee shall be entitled to rely on informationfurnished by a Participant, a beneficiary, or an Employer.  The Committee shall be deemed to be the Planadministrator with responsibility for complying with any reporting anddisclosure requirements of ERISA.

## 7.2           Powers, Duties, Procedures, Etc.  The Committee may adopt such rules andregulations as it deems necessary, desirable or appropriate in administeringthe Plan so long as they are not inconsistent with the terms of the Plan.  Any act which this Plan authorizes orrequires the Committee to do may be done by a majority of the members of theCommittee acting hereunder; and the action of such majority of the members ofthe Committee, expressed from time to time by a vote at a meeting or in writingwithout a meeting, shall constitute the action of the Committee and shall havethe same effect for all purposes as if assented to by all of the members of theCommittee at the time in a regular or special meeting.  A dissenting Committee member who, within areasonable time after he or she has knowledge of any action or failure to actby the majority, registers his or her dissent in writing delivered to the otherCommittee members and the Company shall not be responsible for any action orfailure to act.  The Committee may electone of its members as chairman and it may appoint a secretary who may, but neednot be, a Committee member.  In addition,the Committee may appoint other agents and representatives, who may but neednot be in the employ of the Employer, to keep its records and assist it indoing other acts or things to be done or performed by the Committee.  Any such person, corporation or firm sodesignated by the Committee may, when so authorized

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## by the Committee, sign in thename of the Committee all applications and other documents required hereunder.All usual and reasonable expenses of the Committee including, without limitingthe generality thereof, the reasonable cost of record keeping, accountants’fees, consultants’ fees, counsel fees, and administrative costs shall be paidby the Employers.

## 7.3           Information.  To enable the Committee to perform itsfunctions, the Employers shall supply full and timely information to theCommittee on all matters relating to the compensation of Participants, theiremployment, retirement, death, termination of employment, and such otherpertinent facts as the Committee may require.

## 7.4           Indemnification of Committee.  The Employers agree to indemnify and todefend to the fullest extent permitted by law any officer or employee whoserves as a member of the Committee (including any such individual who formerlyserved as a member of the Committee) against all liabilities, damages, costsand expenses (including attorneys’ fees and amounts paid in settlement of anyclaims approved by the Company) occasioned by any act or omission to act inconnection with the Plan, if such act or omission is in good faith.

## 7.5           Claims Procedure.  If any person (hereinafter called the “Claimant”)feels that he or she is being denied a benefit to which he or she is entitledunder this Plan, such Claimant may file a written claim for said benefit withthe Committee.  Within sixty daysfollowing the receipt of such claim the Committee shall determine and notifythe Claimant as to whether he or she is entitled to such benefit.  Such notification shall be in writing and, ifdenying the claim for benefit, shall set forth the specific reason or reasonsfor the denial, make specific reference to the pertinent provisions of thisPlan, describe any additional information necessary for the Claimant to perfectthe claim and explain why the information is necessary, advise the Claimantthat he or she may, within sixty days following the receipt of such notice, inwriting request to appear

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## before the Committee or its designatedrepresentative for a hearing to review such denial, and state that the Claimanthas the right to bring a civil action under Section 502(a) of the EmployeeRetirement Income Security Act of 1974, as amended, (“ERISA”) following adenial of the claim on review.  Anyhearing shall be scheduled at the mutual convenience of the Committee or itsdesignated representative and the Claimant, and at any such hearing theClaimant and/or his or her duly authorized representative may examine anyrelevant documents and present evidence and arguments to support the grantingof the benefit being claimed.  The finaldecision of the Committee with respect to the claim being reviewed shall bemade within sixty days following the hearing thereon, and Committee shall inwriting notify the Claimant of said final decision, again specifying thereasons therefor and the pertinent provisions of this Plan upon which saidfinal decision is based.  The writtennotice will also include a statement that the Claimant is entitled to receive,upon request and free of charge, reasonable access to, and copies of, alldocuments and other information relevant to the claim and a statement that theClaimant has a right to bring a civil action under Section 502(a) of ERISA.  The final decision of the Committee shall beconclusive and binding upon all parties having or claiming to have an interestin the matter being reviewed.

# ARTICLE 8. AMENDMENT AND TERMINATION

## 8.1           Amendments.  The Company shall have the right to amendthis Plan from time to time, subject to Section 8.3, by an instrument inwriting which has been executed by its duly authorized officer.

## 8.2           Termination of Plan.  This Plan is strictly a voluntary undertakingon the part of the Employers and shall not be deemed to constitute a contractbetween the Employers and any employee or a consideration for, or an inducementor condition of employment for, the

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## performance of services by anyemployee.  The Company reserves the rightto terminate this Plan at any time effective with respect to any subsequentPlan Year, subject to Section 8.3, by an instrument in writing which has beenexecuted by its duly authorized officer. In the event the Plan is terminated, no further contributions or creditsshall be made after the effective date of the Plan’s termination other thaninterest credits made pursuant to Section 5.2 and payments shall be made inaccordance with the payment provisions of Article 6; provided, however, thatthe Board of Directors of the Company may in its discretion terminate the Planeffective as of a date prior to the first day of a subsequent Plan Year andprovide for accelerated payments of all amounts credited to Accounts upon sucha termination of the Plan to the extent such termination and acceleration ofpayments satisfies the requirements of Code section 409A.

## 8.3           Existing Rights.  No amendment or termination of the Plan shalladversely affect the rights of any Participant with respect to amounts creditedto his or her Account prior to the date of such amendment or termination.

# ARTICLE 9. MISCELLANEOUS

## 9.1           No Funding; Source of Payments.  Nothing in this Plan will be construed tocreate a trust or to obligate an Employer or any other person to segregate afund, purchase an insurance contract, or in any other way currently to fund thefuture payment of any benefits hereunder, nor will anything herein be construedto give any employee or any other person rights to any specific assets of anEmployer or of any other person.  Benefitpayments to be made with respect to a Participant’s Accounts shall be paid incash from the general assets of the Employer, and shall be the obligationsolely of the Employer maintaining such Accounts.

## 9.2           Nonassignability; DomesticRelations Order.  None of thebenefits, payments, proceeds or claims of any Participant or beneficiary shallbe subject to any claim of any creditor

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## of the Participant orbeneficiary and, in particular, the same shall not be subject to attachment orgarnishment or other legal process by any creditor of the Participant orbeneficiary, nor shall any Participant or beneficiary have any right toalienate, anticipate, commute, pledge, encumber or assign any of the benefitsor payments or proceeds which he may expect to receive, contingently orotherwise, under this Plan.  Notwithstandingthe preceding, the Committee shall direct that all or any portion of the amountcredited to a Participant’s Account be paid to an individual other than theParticipant to the extent necessary to comply with an order that the Committeehas determined to be a “domestic relations order” as defined in Code Section414(p)(1)(B).  Further, and any provisionof the Plan to the contrary notwithstanding, the payment of amounts credited toa Participant’s Account to an individual other than the Participant shall beaccelerated as may be necessary to fulfill an order that the Committee hasdetermined to be a “domestic relations order” as defined in Code Section414(p)(1)(B).

## 9.3           Limitation of Participants’ Rights.  Participation in this Plan shall not give anyEligible Employee the right to be retained in the employ of an Employer or anAffiliate or any right or interest in the Plan other than as hereinprovided.  The Employers and theirAffiliates reserve the right to dismiss any Eligible Employee without anyliability for any claim against the Employer or Affiliate, except to the extentof benefit payments provided herein.

## 9.4           Participants Bound.  Any action with respect to this Plan taken bythe Committee or the Company or any action authorized by or taken at thedirection of the Committee or the Company shall be conclusive upon allParticipants and any other persons who claim entitlement to benefits under thePlan.

## 9.5           Receipt and Release.  Any payment to any Participant or beneficiaryin accordance with the provisions of this Plan shall, to the extent thereof, bein full satisfaction of

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## all claims against theEmployers and the Committee under this Plan, and the Committee may require suchParticipant or beneficiary, as a condition precedent to such payment, toexecute a receipt and release to such effect. If any Participant or beneficiary is determined by the Committee to beincompetent by reason of physical or mental disability (including minority) togive a valid receipt and release, the Committee may cause the payment orpayments becoming due to such person to be made to another person for his orher benefit without responsibility on the part of the Committee or the Employerto follow the application of such funds.

## 9.6           Governing Law.  This Plan shall be construed, administered,and governed in all respects under and by the internal laws (and not theprinciples relating to conflicts of laws) of the State of Texas, except wheresuperseded by federal law.  If any provisionshall be held by a court of competent jurisdiction to be invalid orunenforceable, the remaining provisions hereof shall continue to be fullyeffective.

## 9.7           No Guarantee of Tax Consequences.  No person connected with the Plan in anycapacity, including, but not limited to, the Employers and any Affiliate andtheir respective directors, officers, agents and employees, makes anyrepresentation, commitment or guarantee that any tax treatment, including, butnot limited to, federal, state and local income, estate and gift tax treatment,will be applicable with respect to any amounts deferred or payable under thePlan or that such tax treatment will apply to or be available to a Participanton account of participation in the Plan.

## 9.8           Adoption by Other Employers.  With the consent of the Board of Directors ofthe Company, this Plan may be adopted by any Affiliate, such adoption to beeffective as of the date specified by such Affiliate at the time of adoption.

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## 9.9           Headings and Subheadings.  Headings and subheadings in this Plan areinserted for convenience only and are not to be considered in the constructionof the provisions hereof.

INWITNESS WHEREOF, The Neiman Marcus Group, Inc. has caused this Plan to beexecuted by its duly authorized officer this 16th day of December, 2005.
|        | ** ** | **THE NEIMAN MARCUS GROUP, INC.** |
|--------|------------|-----------------------------------|
|   |       |                              |
|   |       |                              |
|   | By:        | /s/ Marita O’Dea             |
|   |       | Senior Vice President             |

 

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