**Exhibit 10.4**

 

***Execution Copy***

 

Newton Acquisition, Inc.

 

October 4, 2005

 

Mr. Burton TanskyChief Executive OfficerThe Neiman Marcus Group, Inc.1618 Main StreetDallas, Texas 75201

 

Re:  Opportunity to Acquire Shares and Options

 

Dear Burt,

 

As youknow, The Neiman Marcus Group, Inc. (“NMG”) is in the process ofundergoing a change of control, and following the change of control, 100% ofits outstanding shares will be owned by an entity called Newton Acquisition, Inc.(“Newco”).  This transaction ispursuant to an Agreement and Plan of Merger, dated as of May 1, 2005, byand among Newco, Newton Acquisition Merger Sub, Inc. and NMG (the “MergerAgreement”).  Although a delay ispossible, we expect that the closing of the transaction will occur on October 6,2005 (the “Closing”).

 

Inconnection with the transaction, we are pleased to offer you the opportunity toinvest in shares of common stock of Newco (the “Shares”) on the termsand conditions set out below.  Inaddition, pursuant to the terms of the non-qualified stock option agreements(each, an “Option Grant Agreement”) awarding those options as set forthon Schedule I hereto (the “Rollover Options”), the Committee (asdefined in each such Option Grant Agreement) has determined on October 3,2005 (the “Committee Determination”) that these Rollover Options willnot be subject to the cash-out provisions of Section 2.2 of the MergerAgreement and will therefore remain outstanding as of the Closing unless youchoose to exercise them prior thereto, and Newco has agreed to assume andadjust the Rollover Options not so exercised to provide you with options topurchase shares of common stock of Newco (the “Newco Options” andtogether with the Shares, your “Newco Equity”) on the same terms andconditions as set forth in the applicable Option Grant Agreement and the planpursuant to which such awards were made, except as expressly set forthherein.  In addition to the RolloverOptions, you hold shares of common stock of NMG and are being given theopportunity to invest on a tax-deferred basis by “rolling over” some of theseshares of common stock of NMG (any such shares being rolled over, the “RolloverShares”).

 

1.             MergerConsideration; Rollover Equity.  As aresult of the transactions contemplated by the Merger Agreement, absent anelection to contribute or “rollover” the Rollover Shares as contemplated inthis agreement (this “Agreement”), you would be entitled, with respectto your

 

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Rollover Shares, to the “MergerConsideration” (as defined in the Merger Agreement).  In particular, you would be entitled to theMerger Consideration in exchange for each Rollover Share (the aggregate suchamount with respect to the Rollover Shares, the “Rollover Share MergerConsideration”).  You would also beentitled to the same consideration for shares you received pursuant to anelection, prior to the Closing, to exercise some or all of the Rollover Options(the aggregate such amount with respect to the Rollover Options, the “RolloverOption Merger Consideration” and, with the Rollover Share MergerConsideration, the “Rollover Merger Consideration”).  By completing the Acceptance Form below,you agree (i) not to exercise the Rollover Options and (ii) tocontribute your Rollover Shares to Newco. Newco agrees to accept your Rollover Shares and assume and adjust yourRollover Options as provided herein. This rollover will occur as set forth below in “Sale and Purchase ofNewco Equity; Rollover Mechanics”, and you hereby agree that as a result youwill not be entitled to receive any Rollover Merger Consideration.

 

2.             Saleand Purchase of Newco Shares; Rollover Mechanics.  By completing and returning the Acceptance Form below,you agree to, immediately prior to the Closing, contribute your Rollover Sharesto Newco and agree to forego any Rollover Share Merger Consideration to whichyou would otherwise have been entitled absent an election to invest in theShares.  The Rollover Shares socontributed will be canceled and retired without any conversion thereof orpayment or distribution thereon, as set forth in Section 2.1(b) ofthe Merger Agreement.  Additionally,pursuant to the terms of the Option Grant Agreements, you will, immediatelyprior to the Closing, cease to have any rights with respect to your RolloverOptions including any Rollover Option Merger Consideration to which you wouldotherwise have been entitled absent the Committee Determination and youragreement not to exercise the Rollover Options. The Rollover Options will be converted into the Newco Options withoutany payment or distribution thereon.

 

Inexchange for the Rollover Shares, you will receive such number of Shares havingan aggregate value equal (based on the valuation and capitalization set forthin Schedule I) to the aggregate value of the Rollover Shares immediatelyprior to the Closing as indicated on the Acceptance Form.  As soon as practicable following the Closing,you will either become the holder of record or receive physical certificates ofthe Shares.

 

3.             RolloverShare Certificates; Assumption and Adjustment of the Rollover Options.  With respect to the Rollover Shares, youhereby authorize NMG to take such action as may be necessary to cause theRollover Shares to be rolled over.

 

Youagree that you will not exercise the Rollover Options prior to the Closing.  Newco agrees to assume the Rollover Optionson their current terms and conditions, except that:

 

(a)   theNewco Options will be fully vested at all times, except as provided in Section 7(b) below;

 

(b)   theNewco Options will be exercisable for Shares;

 

(c)   theexercise price per Share of each Newco Option will equal the lesser of (i) 25%of the fair market value of a Share, or (ii) the percentage of the fairmarket value of a Share that equals the ratio of the exercise price per NMGshare of such option to the Merger Consideration;

 

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(d)   thenumber of Shares underlying each Newco Option shall be as set forth in Schedule I;and

 

(e)   atleast 10 days prior to the termination or expiration of any Newco Option forany reason, if there is not a Public Market (as defined in the Stockholders’Agreement) for the Shares, Newco will permit you to exercise any such vestedNewco Options through net-physical settlement (i.e., by delivery of Shares netof the number of Shares having a Fair Market Value (as defined in theStockholders’ Agreement, defined below) equal to the applicable exercise priceand applicable withholding taxes at the minimum statutory rate), unless (i) Newco’sindependent auditors determine that net-physical settlement of any such NewcoOptions would produce less-favorable accounting consequences for Newco or itsaffiliates than if you paid the exercise price for any such vested NewcoOptions in cash (other than those that would have an immaterial effect) or (ii) Newcoreceives advice from counsel, in accordance with Section 10 below, thatsuch net-physical exercise would result in a penalty under Section 409A ofthe Internal Revenue Code of 1986, as amended (the “Code”).  If, in accordance with this paragraph, youare entitled to exercise Newco Options through net-physical exercise, FairMarket Value will be determined as set forth in the Stockholders’ Agreement,including any right to an Outside Appraisal (as defined therein).

 

4.             Acceptanceand Closing; Conditions.  You mayaccept this offer and the terms of this Agreement by completing and returningthe Acceptance Form below, in which case the closing of the acquisition ofyour Newco Equity will occur immediately after the Closing.  This offer is conditioned upon the occurrenceof the Closing.  If the Closing does notoccur on or before October 17, 2005 (the “Closing Deadline”), thisAgreement will be canceled and you will have no rights with respect hereto andany Rollover Shares that you have transferred or cash payment that you havemade pursuant to Section 3 will be returned to you; provided, thatif Newco determines on or before the Closing Deadline and in good faith thatthe Closing is likely to occur on or before October 31, 2005, the ClosingDeadline shall automatically be extended to October 31, 2005.

 

5.             Limitation.  Newco, in its discretion, may limit thenumber of Shares that you may purchase, and therefore may choose not to acceptthe full amount of your investment election with respect to your RolloverShares.  Rollover Shares not so acceptedpursuant to the preceding sentence will be treated in accordance with theprovisions of the Merger Agreement.

 

6.             Vesting.  Your Shares when issued will be fully vested.

 

7.             Stockholders’Agreement; Certain Other Agreements.

 

(a)   Bycompleting and returning the Acceptance Form below, you agree to become aparty to the Management Stockholders’ Agreement, a copy of which is attachedhereto as Annex A, as may be amended from time to time in accordance with itsterms (the “Stockholders’ Agreement”) and you will be subject to theterms and conditions thereof with respect to your Shares; provided thatthe Shares shall not be subject to the call right in Section 3(b).  Newco agrees that it will, and that it willcause the Majority Stockholder (as defined below) to, also become a party tothe Stockholders’ Agreement.

 

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(b)   Inaddition to the terms and conditions of the Stockholders’ Agreement, withrespect to Newco Options for a total of 1,810.4095 Shares, as determinedpursuant to Schedule I (the “Excess Options”), in the event that,on or before the first anniversary of the Closing, your employment with NMG orany of its affiliates terminates as a result of NMG or its affiliatesterminating your employment for Cause (as such term is defined in youremployment agreement with NMG, dated October 6, 2005 (your “EmploymentAgreement”)), your voluntary resignation other than for your retirement orfor Good Reason (as such term is defined in your Employment Agreement), Newcoand its affiliates shall have the right, at any time until the earlier of (x)the fifth anniversary of the Closing or (y) a Public Market (as such term isdefined in the Stockholders’ Agreement) exists for the Shares, to, at any timeafter delivery of a notice to you or your estate:

 

i.            Canceleach Excess Option in exchange for a cash payment for each Share underlyingsuch Excess Option being canceled equal to the difference between (1) thelesser of (A) Fair Market Value of the Share (as such term is defined inthe Stockholders’ Agreement and subject to any right to seek an OutsideAppraisal in accordance with the Stockholders’ Agreement) underlying suchExcess Option and (B) $1,445 (whichever such amount applies, the “ExcessShare Buyout Price”) and (2) the per Share exercise price of suchExcess Option being canceled; or

 

ii.           Purchaseany or all Shares you hold as a result of the exercise of any or all of theExcess Options for the Excess Buyout Price.

 

(c)   If,after the Closing Date but prior to the existence of a Public Market, Newco orNewton Holding, LLC (“Newton LLC”) proposes to issue additional sharesof common stock of Newco or membership interests of Newton LLC (in each casewith the exception of any issuance in connection with any merger, acquisitionor similar corporate event or to employees pursuant to an employee incentiveplan), Newco or Newton LLC, as applicable, shall provide written notice (the “IssuanceNotice”) to you of such anticipated issuance no later than ten (10) daysprior to the anticipated issuance date. The Issuance Notice shall set forth the material terms and conditions ofthe issuance, including the proposed purchase price for the new shares ofcommon stock of Newco or membership interests of Newton LLC.  You shall have the right, upon receipt of theIssuance Notice, to purchase additional shares of common stock of Newco up toyour pro rata portion (based on the number of shares of common stock of Newcoyou own or subject to vested stock options you hold immediately prior to suchissuance), at the price and on the terms and conditions specified in theIssuance Notice by delivering an irrevocable written notice to Newco no laterthan five (5) days before the anticipated issuance date, setting out thenumber of new shares of common stock of Newco for which the right is exercised;provided that if the issuance is of membership interests in Newton LLC,your pro rata portion shall be calculated as if the shares of common stock ofNewco held by you and all other holders of the shares of common stock of Newco(other than Newton LLC) were converted into membership interests in Newton LLCand you held such membership interests together with all of the holders ofmembership interests in Newton LLC on the date the notice was delivered.  If you fail to exercise all or a portion ofyour preemptive rights, Newco or Newton LLC, as applicable, shall be permittedto complete the proposed issuance without any further notice or action relatedto the rights provided in this Section 7(d).  In the event that Newton LLC proposes toissue new membership interests, Newton LLC and Newco may determine, in theirsole discretion, to permit

 

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you to exercise yourpreemptive rights to purchase membership interests in Newton LLC rather thanadditional shares of common stock of Newco.

 

8.             TaxReporting.  It is intended that therollover of the Rollover Shares and Rollover Options contemplated herein shallbe treated as a tax-free transfer under the Code.

 

**All discussions of U.S. federal taxconsiderations in this document have been written to support the marketing ofthe Shares.  Such discussions were notintended or written to be used, and cannot be used by any taxpayer, for thepurpose of avoiding U.S. federal tax penalties. You should consult your own tax advisers in determining the taxconsequences of the rollover and of holding the Shares, including theapplication to your particular situation of the U.S. federal tax considerationsdiscussed herein, as well as the application of state, local, foreign, or othertax laws.**

 

9.             Representations;Acknowledgements.  By signing below and completing and returningthe Acceptance Form, you hereby represent and warrant to Newco and NMG that:

 

(i)                                     you have the requisite power, authority andcapacity to execute this Agreement and to deliver or cause to be delivered theRollover Shares, to perform your obligations under this Agreement and toconsummate the transactions contemplated hereby;

 

(ii)                                  the Acceptance Form has been duly andvalidly executed and delivered by you and constitutes your legal, valid andbinding obligation, enforceable against you in accordance with its terms,except to the extent that such validly binding effect and enforceability may belimited by applicable bankruptcy, reorganization, insolvency, moratorium andother laws relating to or affecting creditors’ rights generally;

 

(iii)                               the Shares are being acquired for your ownaccount, for investment purposes only and not with a view to or in connectionwith any distribution, reoffer, resale, public offering or other dispositionthereof not in compliance with the Securities Act of 1933 (the “SecuritiesAct”), as may be amended from time to time, or any applicable United Statesfederal or state securities laws or regulations;

 

(iv)                              you are an “accredited investor”, as definedin Rule 501(a) under the Securities Act, which means you are:

 

a.               A person whose individual net worth, or jointnet worth with your spouse, exceeds $1,000,000;         OR

 

b.              A person whose income exceeded $200,000 ineach of the two most recent years, or joint income with your spouse exceeded$300,000 in each of those years, and you have a reasonable expectation ofreaching the same income level in this year;

 

(v)                                 you possess such expertise, knowledge, andsophistication in financial and business matters generally, and in the type oftransaction in which NMG and Newco propose to engage in particular;

 

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(vi)                              you have had access to all of the informationand individuals with respect to the Shares and your investment that you deemnecessary to make a complete evaluation thereof;

 

(vii)                           you have had an opportunity to consult anindependent tax and legal advisor and your decision to acquire the interest forinvestment has been based solely upon your evaluation;

 

(viii)                        you are aware that the Internal RevenueService or other relevant taxing authority may take a position regarding therollover contemplated in this Agreement and/or the tax classification of Newcoand the Shares contrary to that intended by Newco as provided in this Agreementand except as specifically provided in Section 10 herein you shall besolely responsible for any and all tax or other liabilities that may resultfrom the IRS’s or other relevant taxing authority’s position; and

 

(ix)                                you are aware that the Stockholders’Agreement provides significant restrictions on your ability to dispose of theNewco Equity.

 

**By electing to contribute the Rollover Shares and not toexercise your Rollover Options pursuant to this Agreement, you acknowledge thatyou are instructing Newco and its affiliates to distribute to you, followingthe Closing, Shares and Newco Options instead of cash, as described above, andyou hereby acknowledge that you do not have, and will not assert that you have,any claim against Newco, the Majority Stockholder (as defined below) or theirrespective affiliates to receive the Merger Consideration or any other paymentin exchange for the Rollover Shares, except as contemplated herein.**

** **

The “MajorityStockholder” shall mean, collectively or individually as the context requires, Newton Holding, LLC, TPG Newton III, LLC, TPG Partners IV, L.P., TPGNewton Co-Invest I, LLC, Warburg Pincus Private Equity VIII, L.P., Warburg Pincus Netherlands Private EquityVIII C.V. I, Warburg Pincus Germany Private Equity VIII K.G, Warburg PincusPrivate Equity IX, L.P and/or their respective affiliates, successors or assigns.

 

10.           Section 409Aof the Code; Other Tax Provisions. If Newco receives the advice of counsel selected by Newco and reasonablyacceptable to you that any payment or distribution with respect to the RolloverShares or Rollover Options (or the Shares and Newco Options you receive as aresult of rolling over the Rollover Shares or Rollover Options) or theconversion of the Rollover Shares or Rollover Options into Shares and NewcoOptions pursuant to the terms of this Agreement (the “Payment”) wouldresult in the imposition of a 20% additional tax pursuant to Section 409Aof the Code, Newco shall have the right to make such modifications oramendments to Shares and/or Newco Options as are reasonably necessary to avoidthe application of Section 409A of the Code, after consultation with youand your counsel.  In making any suchamendments or modifications, Newco shall take all steps to put you insubstantially the same economic position as you would have been in had suchmodifications or amendments not been made, to the extent reasonablypractical.  You hereby stipulate thatCleary Gottlieb Steen and Hamilton LLP is acceptable counsel for purposes ofthis Section 10.  If, after givingeffect to any such modifications or amendments, any Payment results in theimposition of an 20% additional tax, penalties and interest under Section 409Aof the Code, Newco will pay the Executive an additional amount (the “Gross-UpPayment”) such that the net amount retained

 

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by the Executive afterdeduction of any 20% additional tax imposed under Section 409A of theCode, and any federal, state and local income, employment and excise taximposed upon any Gross-Up Payment shall be equal to such 20% additional tax,penalties and interest.

 

Inaddition, the parties hereto expect that the rollover will be treated forfederal income tax purposes as a tax-free rollover.  In the event the Internal Revenue Servicechallenges the structure of the rollover of your Rollover Shares or RolloverOptions into Newco Equity, as set forth herein, the parties shall use theirreasonable efforts and take reasonable actions to minimize any adverse taxtreatment, including, without limitation, exercising Options.  If, after taking all reasonable andappropriate actions, you incur penalties or interest as a result of theInternal Revenue Service’s challenge, Newco will indemnify you for suchpenalties and interest costs on a net after-tax basis as described in thepreceding paragraph.

 

11.           OtherNMG Interests.  You acknowledge thatany other equity or equity-based interests that you hold in NMG that you do notelect to roll over, or which are not accepted for rollover for any reasonpursuant to this Agreement, will be treated in accordance with the MergerAgreement.

 

12.           GoverningLaw.  All questions concerning theconstruction, validity and interpretation of this Agreement will be governed byand construed in accordance with the laws of the State of Delaware, withoutgiving effect to any choice of law or conflict of law provision or rule thatwould cause the application of the laws of any jurisdiction other than theState of Delaware.

 

13.           Counterparts.  This Agreement may be executed in any numberof counterparts, each of which shall be deemed to be an original and all ofwhich together shall be deemed to be one and the same instrument.

 

*              *              *              *              *

 

*[Signature Page Follows]*

 

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**Pleasesign your name on the space provided below and please indicate whether and howyou would like to invest in Newco by completing and executing the Acceptance Form attachedto the end of this Agreement.  Pleasereturn an executed copy of this Agreement and the Acceptance Form inoriginal form or by****FAX no later than 1:00 p.m.(Central Daylight Time) on Monday, October 4, 2005 to the attention ofMarita O’Dea**, **The Neiman Marcus Group,****1618 Main Street Dallas, TX 75201. The fax numberis 214-743-7605.  (If you fax yourelection form on Monday, the original should be delivered to Marita O’Dea nolater than Wednesday, October 5, 2005).**

 
|                        | Sincerely,                     |
|-----------------------------|--------------------------------|
|                        |                           |
|                        | /s/ David Spuria               |   |
|                        | Newton  Acquisition, Inc. |
|                        | By:                            | David Spuria |   |
|                        | Title:                         | Vice President |   |
|                        |                           |   |   |
| Agreed to and  Accepted by: |                           |   |   |
|                        |                           |   |   |
| /s/ Burton M.  Tansky       |                           |   |   |   |
| Burton M. Tansky            |                           |   |   |
|                        |                           |   |   |
|                             |                                |  |  |  |  |

 

 
| By execution  below, NMG and its respective affiliates agree, if so directed by you, to use  reasonable efforts to effect a rollover pursuant to this Agreement as a  tax-free distribution, unless otherwise required pursuant to a final  determination, as defined in Section 1313 of the Code: |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

 

 
| /s/ Nelson A.  Bangs                    |                   |
|-----------------------------------------|------------------------|
| *for*The Neiman Marcus Group, Inc. |
| By:                                     | Nelson A. Bangs        |   |
| Title:                                  | Senior Vice  President | ** ** |
|                                         |                        |  |  |

 

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**Acceptance of Offer to Acquire Sharesand Options of Newco (the “Acceptance Form”)**

 

Pursuant to the terms andconditions set forth in letter to me dated October 4, 2005 (the “Letter”),I, Burton M. Tansky, hereby elect make an investment in Newco in the amount andmanner below:

 

 

1.  I will purchase Shares by contributing toNewco 13,419 shares of common stock of NMG having a value of $1,341,900 (at$100 per share).

 

2. I will not exerciseany of the options to purchase NMG shares listed on Schedule I, which havean aggregate in-the-money value of $7,908,125.

 

**AggregateInvestment = $9,250,025 (sum of 1 and 2)**

 

 
| /s/ Burton M.  Tansky |   |   |
|-----------------------|--------|--------|
| Burton M. Tansky      |   |
|                  |   |
|                  |   |
| October 4,  2005 |   |   |
| Date                  |   |

 

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**SCHEDULEI**

 
| **Assumptions:**                                                |   |           |             |
|-----------------------------------------------------------------|--------|----------------|------------------|
| Equity Investment by  Sponsors:                                 |   | $              | 1,445,000,000.00 |   |
| Shares Issued to LLC                                            |   | 1,000,000      |             |
| Fair Market Value Per  Share of Parent                          |   | $              | 1,445.00         |   |
|                                                            |   |           |             |
| Fair Market Value Per  NMG Share                                |   | $              | 100.00           |   |
| Total Management  Investment (including Tansky option rollover) |   | $              | 25,629,355.00    |   |
| Management Invest  (excluding Tansky roll)                      |   | $              | 17,721,230.00    |   |
| Tansky option roll  (spread)                                    |   | $              | 7,908,125        |   |
| Shares Issued to  Management at Closing                         |   | 12,263.8270    |             |
| Number of Shares Would  Get with $7,908,125 Investment          |   | 5,472.7509     |             |
| Shares after management  invests (fully diluted basis)          |   | 1,017,736.5779 |             |
| Original Pool (Before  Adjustment for Tansky Options)           |   | 82,519.1820    |             |
| Pool Issued at Closing  (Before Adjustment for Tansky Options)  |   | 77,017.9032    |             |
| Tansky Portion of the  Pool (23.5784%)                          |   | 18,159.5893    |             |
| Tansky Portion of  Options that are Time-Based                  |   | 9,079.7946     |             |
| Tansky Portion of  Time-Based Options that Vest Each Year       |   | 2,269.9487     |             |

 

**Existing Options - $100/share**

 
| **Expiration  Date** | ** ** | **Strike  Price** | ** ** | **Number  of Options** | ** ** | **Spread**     | ** ** |   |   |   |   |   |   |
|----------------------|------------|-------------------|------------|------------------------|------------|----------------|------------|--------|--------|--------|--------|--------|--------|
| 9/23/2010            |       | $35.6250          |       | 63,000                 |       | 4,055,625.0000 |       |   |   |   |   |   |   |
|                 |       |              |       |                   |       |           |       |   |   |   |   |   |   |
| 5/16/2011            |       | $36.5000          |       | 25,000                 |       | 1,587,500.0000 |       |   |   |   |   |   |   |
|                 |       |              |       |                   |       |           |       |   |   |   |   |   |   |
| 9/22/2011            |       | $24.5000          |       | 30,000                 |       | 2,265,000.0000 |       |   |   |   |   |   |   |
|                 |       |              |       |                   |       |           |       |   |   |   |   |   |   |
|                 |       |              |       | 118,000                |       | 7,908,125.0000 |       |   |   |   |   |   |   |

 

**RolloverOptions**

 
| **Expiration Date** | ** ** | **Unadjusted  Strike Price** | ** ** | **Number  of Options** | ** ** | **Adjusted  Strike Price** | ** ** | **Adjusted  Number of Options** | ** ** | **Spread**     | ** ** | **Excess  Options** | ** ** |
|---------------------|------------|------------------------------|------------|------------------------|------------|----------------------------|------------|---------------------------------|------------|----------------|------------|---------------------|------------|
|                |       |                         |       |                   |       |                       |       |                            |       |           |       |                |       |
| 9/23/2010           |       | $514.7813                    |       | 4,359.8616             |       | $361.2500                  |       | 3,742.2145                      |       | 4,055,625.0000 |       | 935.5536            |       |
|                |       |                         |       |                   |       |                       |       |                            |       |           |       |                |       |
| 5/16/2011           |       | $527.4250                    |       | 1,730.1038             |       | $361.2500                  |       | 1,464.8212                      |       | 1,587,500.0000 |       | 366.2053            |       |
|                |       |                         |       |                   |       |                       |       |                            |       |           |       |                |       |
| 9/22/2011           |       | $354.0250                    |       | 2,076.1246             |       | $354.0250                  |       | 2,076.1246                      |       | 2,265,000.0000 |       | 508.6505            |       |
|                |       |                         |       |                   |       |                       |       |                            |       |           |       |                |       |
|                |       |                         |       | 8,166.0900             |       |                       |       | 7,283.1603                      |       |           |       | 1,810.4095          |       |

 

**TanskyOption Summary**

 
| Total Adjusted Rollover  Options Granted at Closing:*                 |   |     |   | 7,283.1603 |   |       |   |   |   |   |   |
|-----------------------------------------------------------------------|--------|----------|--------|------------|--------|------------|--------|--------|--------|--------|--------|
|                                                                  |   |     |   |       |   |       |   |   |   |   |   |   |   |
| Excess Options                                                        |   |     |   |       |   | 1,810.4095 |   |   |   |   |   |   |   |
| Tranche 1 of 23.5784% of  7.0% Pool after reduction for excess option |   | 459.5392 |   |       |   |       |   |   |   |

 

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* If Tansky had investedhis option spread at closing he would have been entitled to 5,472.7509 options.To maintain proper leverage, Tansky’s option grant under the Management EquityIncentive Plan 7% Pool must be reduced by 1,810.4095, which equals the numberof shares underlying his Adjusted Rollover Options minus the number of shareshe would have received had he invested cash at closing.

 

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** **

**MANAGEMENT STOCKHOLDERS’ AGREEMENT**

** **

MANAGEMENT STOCKHOLDERS’ AGREEMENT (this “Agreement”),dated as of October 6, 2005, between Newton Acquisition, Inc. (the “Company”),the Majority Stockholder (as defined below) and the individuals listed onSchedule A attached hereto (the “Management Stockholder”).

 

WHEREAS, the Management Stockholder may be the ownerof shares of common stock of the Company, $0.01 par value per share (“CommonStock”) and/or may be granted options to purchase Common Stock (the “Options”),pursuant to The Newton Acquisition, Inc. Management Equity Incentive Plan(the “Plan”); and

 

WHEREAS, as a condition to the issuance of any sharesof Common Stock by the Company to the Management Stockholder, the ManagementStockholder is required to execute this Agreement; and

 

WHEREAS, the Management Stockholder, the MajorityStockholder and the Company desire to enter into this Agreement and to havethis Agreement apply to any shares of Common Stock acquired by the ManagementStockholder from whatever source (in the aggregate, the “Shares”);

 

NOW THEREFORE, in consideration of the premiseshereinafter set forth, and other good and valuable consideration, the receiptof which is hereby acknowledged, the parties hereto agree as follows.

 

1.                                       Definitions.  As used in this Agreement, the followingcapitalized terms shall have the following meanings:

 

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

 

(b)                                 “Board” shall mean the Board ofDirectors of the Company or any committee appointed by the Board to administerthe Plan pursuant to the terms of the Plan.

 

(c)                                  “Cause”shall mean, when usedin connection with the termination of a Management Stockholder’s Employment,unless otherwise provided in any stock option grant agreement entered betweenthe Company and the Management Stockholder with respect to any Options that maybe granted under the Plan, effective employment agreement or other writtenagreement with respect to the termination of a Management Stockholder’sEmployment, the termination of the Management Stockholder’s Employment with theCompany and all Affiliates on account of****(i) afailure of the Management Stockholder to substantially perform his or herduties (other than as a result of physical or mental illness or injury) thathas continued after NMG has provided written notice of such failure andExecutive has not cured such failure within 30 days of the date of such writtennotice; (ii) the Management Stockholder’s willful misconduct or grossnegligence which is materially injurious to the Company; (iii) a breach bya Management Stockholder of the Management Stockholder’s fiduciary duty or dutyof loyalty to the Company and its Affiliates; (iv) the ManagementStockholder’s unauthorized removal from the premises of the Company or anAffiliate of any document (in any medium or form) relating to the Company or anAffiliate or the customers of the Company or an Affiliate; or (v) thecommission by the Management Stockholder of any felony or other serious crimeinvolving moral turpitude.  Any rightsthe Company or an Affiliate may have hereunder in respect of the events givingrise to Cause shall be in addition to the rights the Company or Affiliate mayhave under any other agreement with the Management Stockholder or at law or inequity.  If, subsequent to a ManagementStockholder’s termination of Employment, it is discovered that such ManagementStockholder’s Employment could have been terminated for Cause, the ManagementStockholder’s Employment shall, at the election of the Board, in its sole discretion,be deemed to have been terminated for Cause retroactively to the date theevents giving rise to Cause occurred. Notwithstanding the foregoing, a failure to meet performanceexpectations shall not, by itself, constitute Cause hereunder where the Boarddetermines that the Management Stockholder has performed his duties in goodfaith.

 

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(d)                                 “Change of Control” shall mean theoccurrence of any of the following events after the Effective Time: (i) anysale, lease, exchange or other transfer (in one transaction or a series ofrelated transactions) of all or substantially all of the assets of the Companyon a consolidated basis to any Person or group of related persons for purposesof Section 13(d) of the Exchange Act (a “Group”), togetherwith any Affiliates thereof other than to a Majority Stockholder; (ii) theapproval by the holders of the outstanding voting power of the Company of anyplan or proposal for the liquidation or dissolution of the Company; (iii) (A) anyPerson or Group (other than the Majority Stockholder) shall become the beneficial owner(within the meaning of Section 13(d) of the Exchange Act), directlyor indirectly, of Common Stock representing more than 40% of the aggregateoutstanding voting power of the Company and such Person or Group actually hasthe power to vote such Common Stock in any such election and (B) theMajority Stockholder beneficially owns (within the meaning of Section 13(d) ofthe Exchange Act), directly or indirectly, in the aggregate a lesser percentageof the voting power of the Company than such other Person or Group; (iv) thereplacement of a majority of the Board over a two-year period from thedirectors who constituted the Board at the beginning of such period, and suchreplacement shall not have been approved by a vote of at least a majority ofthe Board then still in office who either were members of such Board at thebeginning of such period or whose election as a member of such Board waspreviously so approved or who were nominated by, or designees of, a MajorityStockholder; or (v) consummation of a merger or consolidation of theCompany with another entity in which holders of the Common Stock of the Companyimmediately prior to the consummation of the transaction hold, directly orindirectly, immediately following the consummation of the transaction, lessthan 50% of the common equity interest in the surviving corporation in suchtransaction and the Majority Stockholder does not hold a sufficient amount ofvoting power (or similar securities) to elect a majority of the survivingentity’s board of directors.

 

Notwithstanding theforegoing, a Change of Control shall not be deemed to occur as a result of anyevent or transaction to the extent that treating such event or transaction as aChange of Control would cause any tax to become due under Section 409A ofthe Code.

 

(e)                                  “Code” shall mean the Internal Revenue Code of1986, as amended.

 

(f)                                    “Disability” shall mean, unlessotherwise provided in any stock option grant agreement entered between theCompany and the Management Stockholder with respect to any Options that may begranted under the Plan, effective employment agreement or other writtenagreement, a permanent disability as defined in the Company’s or an Affiliate’sdisability plans, or as defined from time to time by the Company, in itsdiscretion.

 

(g)                                 “Effective Time” shall have themeaning set forth in the Agreement and Plan of Merger by and among the Company,Newton Acquisition Merger Sub, Inc. and The Neiman Marcus Group, Inc,dated as of May 1, 2005.

 

(h)                                 “Employment”shall mean employmentwith the Company or any Affiliate and shall include the provision of servicesas a director or consultant for the Company or any Affiliate.  “Employee”and “Employed” shall have correlative meanings.

 

(i)                                     “ExchangeAct” shall meanthe Securities Exchange Act of 1934, as amended.

 

(j)                                     “FairMarket Value” shallmean, as of any date:

 

i.                  prior to the existence of a Public Market (as definedin Section 6 below) for the Common Stock, the value per share of CommonStock as determined in good faith by the Board; or

 

ii.               on which a Public Market for the Common Stock exists, (i) closingprice on such day of a share of Common Stock as reported on the principalsecurities exchange on which shares of Common Stock are then listed or admittedto trading or (ii) if not so reported, the average of the closing bid andask prices on such day as reported on the National Association of SecuritiesDealers Automated Quotation System or (iii) if not so reported, asfurnished by any member of the National Association of Securities Dealers, Inc.(“NASD”) selected by the Board. The Fair Market Value of a share of Common Stock as of any such date onwhich the applicable exchange or inter-dealer quotation system through whichtrading in the Common Stock regularly occurs is closed shall be the Fair MarketValue determined pursuant to the preceding sentence as of the immediatelypreceding date on which the

 

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Common Stock is traded, a bid and ask price isreported or a trading price is reported by any member of NASD selected by theBoard.  In the event that the price of ashare of Common Stock shall not be so reported or furnished, the Fair MarketValue shall be determined by the Board in good faith to reflect the fair marketvalue of a share of Common Stock.

 

(k)                                  “Good Reason” shall mean, unlessotherwise provided in any stock option grant agreement entered between theCompany and the Management Stockholder with respect to any Options that may begranted under the Plan, effective employment agreement or other writtenagreement with respect to the termination of a Management Stockholder’sEmployment,  (i) a materialdiminution in a Management Stockholder’s duties and responsibilities other thana change in such Management Stockholder’s duties and responsibilities thatresults from becoming part of a larger organization following a Change ofControl, (ii) a decrease in a Management Stockholder’s base salary, bonusopportunity or benefits other than a decrease in bonus opportunity or benefitsthat applies to all employees of the Company or its Affiliates otherwiseeligible to participate in the affected plan, or (iii) a relocation of aManagement Stockholder’s primary work location more than 50 miles from theManagement Stockholder’s work location immediately prior to the ManagementStockholder’s execution of this Agreement, without the Management Stockholder’sprior written consent; provided that, within thirty days following theoccurrence of any of the events set forth herein, the Management Stockholdershall have delivered written notice to the Company of his or her intention toterminate his or her Employment for Good Reason, which notice specifies inreasonable detail the circumstances claimed to give rise to the ManagementStockholder’s right to terminate Employment for Good Reason, and the Companyshall not have cured such circumstances within thirty days following theCompany’s receipt of such notice.

 

(l)                                     “Majority Stockholder,” forpurposes of this Agreement, shall mean, collectively or individually as thecontext requires, Newton Holding, LLC, TPG Newton III, LLC, TPG Partners IV, L.P., TPGNewton Co-Invest I, LLC, Warburg Pincus Private Equity VIII, L.P., Warburg Pincus Netherlands Private EquityVIII C.V. I, Warburg Pincus Germany Private Equity VIII K.G , Warburg PincusPrivate Equity IX, L.P and/or their respective Affiliates.

 

(m)                               “Person”means an individual,partnership, corporation, limited liability company, unincorporatedorganization, trust or joint venture, or a governmental agency or politicalsubdivision thereof.

 

(n)                                 “Retirement” shall mean, when usedin connection with the termination of a Management Stockholder’s Employment, avoluntary resignation of Employment by the Management Stockholder that occurson or after (i) the first date on which the Management Stockholder hasboth attained age 60 and completed 10 years of service with the Company or itsAffiliates or (ii) the date on which the Management Stockholder attainsage 65.

 

(o)                                 “Securities Act” shall mean theSecurities Act of 1933, as amended.

 

(p)                                 “Transfer” shall mean anytransfer, sale, assignment, gift, testamentary transfer, pledge, hypothecationor other disposition of any interest.  “Transferee”and “Transferor” shall have correlative meanings.

 

2.                                       Investment; Issuance of Shares.

 

(a)                                  The Management Stockholder representsthat the Shares are being acquired for investment and not with a view towardthe distribution thereof.

 

(b)                                 Issuance of Shares. The Management Stockholder acknowledges and agrees that the certificatefor the Shares shall bear the following legends (except that the secondparagraph of this legend shall not be required after the Shares have beenregistered and except that the first paragraph of this legend shall not berequired after the termination of this Agreement):

 

**Theshares represented by this certificate are subject to the terms and conditionsof a Management Stockholders’ Agreement dated as of October 6, 2005 andmay not be sold, transferred, hypothecated, assigned or encumbered, except asmay be permitted by the aforesaid Agreement. A**

 

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**copy ofthe Management Stockholders’ Agreement may be obtained from the Secretary ofthe Company.**

 

**Theshares represented by this certificate have not been registered under theSecurities Act of 1933.  The shares havebeen acquired for investment and may not be sold, transferred, pledged orhypothecated in the absence of an effective registration statement for theshares under the Securities Act of 1933 or an opinion of counsel for theCompany that registration is not required under said Act.**

 

Upon the termination of this Agreement, or uponregistration of the Shares under the Securities Act, the Management Stockholdershall have the right to exchange any Shares containing the above legend (i) inthe case of the registration of the Shares, for Shares legended only with thefirst paragraph described above and (ii) in the case of the termination ofthis Agreement, for Shares legended only with the second paragraph describedabove.

 

3.                                       Transfer of Shares; Call Rights; PutRights.

 

(a)                                  The Management Stockholder agrees that hewill not cause or permit the Shares or his interest in the Shares to be sold,transferred, hypothecated, assigned or encumbered except as expressly permittedby this Section 3; provided, however, that the Shares or anysuch interest may be Transferred (i) on the Management Stockholder’s deathby bequest or inheritance to the Management Stockholder’s executors,administrators, testamentary trustees, legatees or beneficiaries, (ii) subjectto compliance with all applicable tax, securities and other laws, any “FamilyMember” as such term is defined in the Form S-8 Registration Statementunder the Securities Act as of the date of Transfer, and (iii) inaccordance with Section 4 of this Agreement, subject in each case to theagreement by each Transferee (other than the Company or as otherwise permittedby the Company) in writing to be bound by the terms of this Agreement as ifsuch Transferee had been an original signatory hereto and provided in any suchcase that, in the case of a Transfer pursuant to Section 3(a)(i) or(ii), such Transfer will not be permitted if it would cause the Company to berequired to register the Common Stock under Section 12(g) of theExchange Act.

 

(b)                                 (i)  In the event the ManagementStockholder’s Employment with the Company is terminated by the Company forCause or by the Management Stockholder for any reason other than Good Reason,death, Disability or Retirement, the Company (or its designated assignee) shallhave the right, during the 120-day period following the later to occur of (x) suchtermination of Employment and (y) the date on which the ManagementStockholder or Transferee has held the Shares most recently acquired to be soldpursuant to this Section 3(c) for at least six (6) months, topurchase from the Management Stockholder or the Management Stockholder’sTransferee, and upon the exercise of such right the Management Stockholder orsuch Transferee shall sell to the Company (or its designated assignee), all orany portion of the Shares acquired by the Management Stockholder or Transfereeon the exercise of Options and held by the Management Stockholder or Transfereeas of the date as of which such right is exercised at a per Share price equalto the Fair Market Value of a share of Common Stock determined as of the datesuch right is exercised.  The Company (orits designated assignee) shall exercise such right by delivering to theManagement Stockholder or Transferee, as applicable, a written noticespecifying its intent to purchase Shares held by the Management Stockholder orTransferee (the “Call Notice”), the date as of which such right is to beexercised and the number of Shares to be purchased.  Such purchase and sale shall occur on suchdate as the Company (or its designated assignee) shall specify, which dateshall be within thirty (30) days after the date on which the Call Notice isdelivered or the Outside Appraisal is delivered.  The Company will use commercially reasonableefforts to make the payment for the Shares in cash on the date of such purchaseand sale; providedthat, despite using such efforts, if suchpayment will result in the violation of the terms or provisions of, or resultin a default or event of default under, any guarantee, financing or securityagreement or document entered into by the Company or any of its Affiliates andin effect on such date (hereinafter a “Financing Agreement”), theCompany may delay any such payment for no more than two (2) years.  In the event the payment of the purchaseprice is delayed as a result of a restriction imposed by a Financing Agreementas provided above, such payment shall be made without the application offurther conditions or impediments as soon as practicable after the payment ofsuch purchase price would no longer result in the violation of the terms orprovisions of, or result in a default or event of default under, any FinancingAgreement, and such payment shall equal the amount that would have been paid tothe Management Stockholder or Transferee if no delay had occurred plus interestfor the period from the date on which the purchase price would have been paidbut for the delay in payment provided herein to the

 

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date on which suchpayment is made (the “Delay Period”), calculated at an annual rate equalto the average annual prime rate charged during the Delay Period by anationally recognized bank designated by the Board plus two (2) percentagepoints.  In the event that the Company isnot able to make payment within two (2) years after the date specified inthe Call Notice, the Company will, upon the written request of the ManagementStockholder or Transferee, cancel the Call Notice and return to the ManagementStockholder or Transferee the Shares subject to the Call Notice (as adjusted totake into account any corporate transactions during the intervening period) inexchange for cancellation of the debt and any interest payments that would haveotherwise been payable thereon.

 

(ii)                                  In the event that the ManagementStockholder or Transferee disagrees with the Company’s determination of theFair Market Value of a Share, the Management Stockholder or Transferee shallhave the right to require the Company to seek an appraisal to determine theFair Market Value of a Share in lieu of the Board determination (an “OutsideAppraisal”); provided that the Transferee shall not be entitled toan Outside Appraisal in the event an appraisal to determine the Fair MarketValue of a Share has been done within the three-month period immediatelypreceding delivery of the Call Notice and the Board determines in good faiththat no event has occurred that would result in the prior determination of FairMarket Value being materially inaccurate. Any such Outside Appraisal shall be made by one qualified person (whichcan be an accounting firm or investment banking firm or similar firm) (each, an“Appraiser”), having substantial experience in the valuation of similarenterprises in the United States.  TheCompany and the Management Stockholder or Transferee shall mutually agree uponsuch Appraiser within 30 days of the Call Notice; provided that in theevent an appraisal to determine Fair Market Value of a Share has been donewithin the twelve-month period immediately preceding delivery of the CallNotice, the Outside Appraisal shall be done by the same Appraiser thatperformed the prior appraisal unless the Company consents to a differentAppraiser.  The Company shall each bear100% of the fees and expenses of the Appraiser.

 

(c)(i)                       In the event the Management Stockholder’s Employmentwith the Company terminates due to the death or Disability of the ManagementStockholder, such Management Stockholder or Transferee shall have the right,during the 120-day period following the later to occur of (x) suchtermination of Employment and (y) the date on which the ManagementStockholder or Transferee has held the Shares most recently acquired to be soldpursuant to this Section 3(c) for at least six (6) months, tosell to the Company (or its designated assignee), and upon the exercise of suchright the Company (or its designated assignee) shall purchase from theManagement Stockholder or Transferee, all or any portion of the Shares held bythe Management Stockholder or Transferee as of the date as of which such rightis exercised at a per Share price equal to the Fair Market Value of a Share ofCommon Stock determined as of the date as of which such right isexercised.  The Management Stockholder orTransferee shall exercise such right by delivering to the Company a writtennotice (the “Put Notice”) specifying his or her intent to sell Sharesheld by the Management Stockholder or Transferee, the date as of which suchright is to be exercised and the number of Shares to be sold.  Such purchase and sale shall occur on suchdate as the Company (or its designated assignee) and the Stockholder shallagree, which date shall be within thirty (30) days after the later of thedelivery of the Put Notice or the delivery of the Outside Appraisal.  The Company will use commercially reasonableefforts to make the payment for the Shares in cash on the date of such purchaseand sale; providedthat, despite using such efforts, if suchpayment will result in the violation of the terms or provisions of, or resultin a default or event of default under, a Financing Agreement, the Company maydelay any such payment for no more than two (2) years.  In the event the payment of the purchaseprice is delayed as a result of a restriction imposed by a Financing Agreementas provided above, the Company shall notify the Management Stockholder orTransferee as soon as practicable of the need for such a delay (the “DelayNotice”), and shall permit the Management Stockholder or Transferee, withinten (10) days of the delivery of the Delay Notice, to rescind the PutNotice.  If the Management Stockholder orTransferee does not rescind the Put Notice as provided in the precedingsentence, the Put Notice shall remain outstanding and any payment in respectthereof shall be made without the application of further conditions or impedimentsas soon as practicable after the payment of such purchase price would no longerresult in the violation of the terms or provisions of, or result in a defaultor event of default under, any Financing Agreement, and such payment shallequal the amount that would have been paid to the Management Stockholder orTransferee if no delay had occurred plus interest for the Delay Period,calculated at an annual rate equal to the average annual prime rate chargedduring the Delay Period by a nationally recognized bank designated by the Boardplus two (2) percentage points.  Inthe event that the Company is not able to make payment within two (2) yearsafter the date specified in the Put Notice, the Company will, upon the writtenrequest of the Management Stockholder or Transferee, cancel the Put Notice inexchange for cancellation of the debt and any interest payments that would haveotherwise been payable thereon.

 

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(ii)                                  In the event that the ManagementStockholder or Transferee disagrees with the Company’s determination of theFair Market Value of a Share, the Management Stockholder or Transferee shallhave the right to require the Company to seek an Outside Appraisal inaccordance with the terms and conditions set forth in Section 3(b) ofthis Agreement, substituting “Put Notice” in place of “Call Notice.”

 

(d)                                 In addition, if the Board receives theadvice of counsel selected by the Company and reasonably acceptable to theManagement Stockholder or any Transferee that the inclusion of the call rightor the put right described in this Section 3 would result in the Option orShares becoming subject to Section 409A of the Code, the Board shall havethe right to make such modifications or amendments to this Section 3 asthe Board determines are reasonably necessary to avoid the application of Section 409Aof the Code without the consent of the Management Stockholder or anyTransferee.  In making any suchamendments or modifications, the Board shall take all steps to put the partiesin substantially same economic position as they would have been in had suchmodifications or amendments not been made to the extent reasonablypractical.  The Management Stockholderand any Transferee hereby stipulate that Cleary Gottlieb Steen and Hamilton LLPis acceptable counsel for purposes of this Section 3(d).

 

4.                                       Certain Rights.

 

(a)                                  Drag Along Rights. If one or more Majority Stockholder desires to sell all or substantiallyall of the Shares of Common Stock in which it has a “pecuniary interest” asdefined in Rule 16a-1 of the Exchange Act (including through thedisposition of interests in Newton Holding, LLC) or a portion of the Shares ofCommon Stock representing Control of the Company, in either case to a goodfaith independent purchaser (a “Purchaser”) (other than any other MajorityStockholder, other investment partnership, limited liability company or otherentity established for investment purposes and controlled by one or more of themembers (other than passive investors) or the principals of the MajorityStockholder or any of their Affiliates and other than any Employees of theMajority Stockholder or their Affiliates hereinafter referred to as a “PermittedTransferee”) and said Purchaser desires to acquire all or substantially allof the issued and outstanding Shares of Common Stock (or all or substantiallyall of the assets of the Company) upon such terms and conditions as agreed towith the Majority Stockholder, the Management Stockholder or Transferee agreesto sell to such Purchaser a number of its Shares of Common Stock, not to exceed(a) the number of shares of Common Stock held by such ManagementStockholder or Transferee multiplied by (b) a fraction, the numerator ofwhich is the aggregate number of Shares of Common Stock in which the MajorityStockholder has a pecuniary interest that such Majority Stockholder hasproposed to be transferred, and the denominator of which is the aggregatenumber of Shares of Common Stock in which the Majority Stockholder has apecuniary interest (or to vote such number of his Shares in favor of any mergeror other transaction which would effect a sale of such shares of Common Stockor assets of the Company) at the same price per Share of Common Stock andpursuant to the same terms and conditions with respect to payment for theShares of Common Stock in which the Majority Stockholder has a pecuniaryinterest as agreed to by the Majority Stockholder; provided that, exceptwith respect to any liability incurred by such Management Stockholder or anyTransferee individually, the Management Stockholders and any Transferees shallnot be liable to a Purchaser for an amount greater than the proceeds from thesale.  In such case, the MajorityStockholder shall give written notice of such sale to the ManagementStockholder or Transferee at least fifteen (15) days prior to the consummationof such sale, setting forth (i) the consideration to be received by theholders of Shares of Common Stock, (ii) the identity of the Purchaser, (iii) anyother material items and conditions of the proposed transfer and (iv) thedate of the proposed transfer.  TheCompany shall be responsible for the proportionate Share of the costs of theproposed Transfer incurred by the Management Stockholders and any Transfereesto the extent not paid or reimbursed by the proposed Purchaser.

 

For purposes of this Section 4(a), “Control ofthe Company” shall mean the sale or disposition in a single transaction ora series of related transactions of at least fifty percent (50)% of the issued andoutstanding Shares of Common Stock or securities representing at least fiftypercent (50)% of the voting power of the Company, including a disposition ofinterests in Newton Holding, LLC that represents 50% or more of the votingpower of the Company.

 

(b)                                 Tag Along Rights.  (i) Subjectto paragraph (iv) of this Section 4(b), if one or more MajorityStockholder or its Permitted Transferee proposes to transfer its direct orindirect pecuniary interest (as defined in Rule 16a-1 under the ExchangeAct) in any Shares of Common Stock to a Purchaser (other than a

 

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Permitted Transferee),then the Majority Stockholder or his Permitted Transferee (hereinafter referredto as a “Selling Stockholder”) shall give written notice of suchproposed transfer to the Management Stockholder or Transferee (the “SellingStockholder’s Notice”) at least thirty (30) days prior to the consummationof such proposed transfer, and shall provide notice to all other stockholdersof the Company to whom the Majority Stockholder has granted similar “tag-along”rights (such stockholders together with the Management Stockholder orTransferee, referred to herein as the “Other Stockholders”) settingforth the proposed material terms and conditions of such Transfer (includingprice per Share).

 

(ii)                                  The Management Stockholder or Transfereeshall have the right to elect, by delivery of written notice to the MajorityStockholder within twenty (20) days from delivery of the Selling Stockholder’sNotice, to sell to the proposed transferee a number of its Shares of CommonStock, not to exceed (a) the number of shares of Common Stock and Sharesunderlying vested options held by such Management Stockholder or Transfereemultiplied by (b) a fraction, the numerator of which is the aggregatenumber of Shares of Common Stock in which the Majority Stockholder has apecuniary interest that such Majority Stockholder has proposed to betransferred, and the denominator of which is the aggregate number of Shares ofCommon Stock in which the Majority Stockholder has a pecuniary interest, on thesame terms and conditions (including price per share of Common Stock) as theMajority Stockholder.  In the event thatthe transferee does not wish to acquire all of the Shares offered by theManagement Stockholder or Transferee, the number of Shares of Common Stock tobe purchased by such transferee shall be allocated pro rata among the MajorityStockholders and the Other Stockholders in accordance with the number of sharesof Common Stock and Shares underlying vested Options that each such stockholderelected to transfer to the transferee.

 

(iii)                               Any transfer of Shares by the ManagementStockholder or Transferee shall be at the same price per Share of Common Stockand pursuant to the same terms and conditions with respect to payment for theShares of Common Stock as agreed to by the Selling Stockholder with respect tothe sale of its pecuniary interest in the Shares, provided, that in order to beentitled to exercise its tag-along rights pursuant to this Section 4(b),the Management Stockholder or Transferee must agree to make to the proposedPurchaser, representations, warranties, covenants, indemnities and agreementscomparable to those made by the Selling Stockholder in connection with theproposed transfer and agree to the same conditions to the proposed transfer as theSelling Stockholder agrees, it being understood that all such representation,warranties, covenants, indemnities and agreements shall be made by the SellingStockholder, the Management Stockholder or Transferee and any Other Stockholderexercising similar tag-along rights severally and not jointly.  The Selling Stockholder, the ManagementStockholder and any Other Stockholder who exercises similar tag-along rightsshall be responsible for their proportionate share of the costs of the proposedTransfer to the extent not paid or reimbursed by the proposed Purchaser or theCompany.

 

(iv)                              In connection with the exercise of itstag-along rights under this Section 4(b), if the Management Stockholder orTransferee desires to exercise vested Options to acquire up to the number ofShares the Management Stockholder or Transferee is permitted to sell pursuantto the exercise of its tag-along rights pursuant to this Section 4(b), theCompany will permit the Management Stockholder or Transferee to exercise anysuch vested Options through net-physical settlement (net of the applicableexercise price and applicable withholding taxes) if the Company’s independentauditors determine that net-physical settlement of any such Options would notproduce less-favorable accounting consequences for the Company than if theManagement Stockholder or Transferee paid the exercise price for any suchvested Options in cash.

 

(v)                                 Notwithstanding anything to the contrarycontained herein, the provisions of this Section 4(b) shall not applyduring the period from the Effective Date through the first anniversary of theEffective Date to any sale or transfer by a Majority Stockholder of itspecuniary interest in any shares of Common Stock for a price that is equal toor less than the Fair Market Value of such share of Common Stock as of theEffective Date unless and until the Majority Stockholder, after giving effectto the proposed sale or transfer, shall have sold or transferred in theaggregate (other than to Permitted Transferees) its pecuniary interest inshares of Common Stock representing 15.0% or more of the shares of Common Stockin which the Majority Stockholder collectively had a pecuniary interest as ofthe Effective Time.

 

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(c)                                  Permitted Transferees. Any Permitted Transferee to which a Majority Stockholder’s pecuniaryinterest in any shares of Common Stock is Transferred shall agree to executethis Agreement as a condition to such Transfer.

 

5.                                       Piggyback Registration Rights.

 

(a)                                  Notice to Management Stockholder. If the Company determines that it will file a registration statementunder the Securities Act, other than a registration statement on Form S-4or Form S-8 or any successor form, for an offering which includes sharesof Common Stock held by the Majority Stockholder, then the Company shall giveprompt written notice to the Management Stockholder or Transferee that suchfiling is expected to be made (but in no event less than 30 days nor more than60 days in advance of filing such registration statement), the jurisdiction or jurisdictionsin which such offering is expected to be made, and the underwriter orunderwriters (if any) that the Company (or the person requesting suchregistration) intends to designate for such offering.  If the Company, within 15 days after givingsuch notice, receives a written request for registration of any Shares from theManagement Stockholder or Transferee, then the Company shall include in thesame registration statement the number of Shares to be sold by the ManagementStockholder or Transferee as shall have been specified in his or her request,except that the Management Stockholder or Transferee shall not be permitted toregister more than a Pro Rata Portion of her Shares.  The Company shall bear all costs of preparingand filing the registration statement, and shall indemnify and hold harmless,to the extent customary and reasonable, pursuant to indemnification andcontribution provisions to be entered into by the Company at the time of filingof the registration statement, the seller of any shares of Common Stock coveredby such registration statement.

 

Notwithstanding anything herein to the contrary, theCompany, on prior notice to the participating Stockholder, may abandon itsintention to file a registration statement under this Section 5(a) atany time prior to such filing.

 

For purposes of Section 5 hereof, “Pro RataPortion” shall mean a number equal to the product of (x) the totalnumber of Shares, including any shares of Common Stock underlying vestedOptions, owned by the Management Stockholder or Transferee and (y) afraction, the numerator of which shall be the total number of shares of CommonStock offered (for sale or registration, as applicable) by the MajorityStockholder, and the denominator of which shall be the total number of sharesof Common Stock owned by the Majority Stockholder.

 

(b)                                 Allocation.  If themanaging underwriter shall inform the Company in writing that the number ofshares of Common Stock requested to be included in such registration exceedsthe number which can be sold in (or during the time of) such offering within aprice range acceptable to the Majority Stockholder, then the Company shallinclude in such registration such number of shares of Common Stock which theCompany is so advised can be sold in (or during the time of) suchoffering.  All holders of shares ofCommon Stock proposing to sell shares of Common Stock shall share pro rata inthe number of shares of Common Stock to be excluded from such offering, suchsharing to be based on the respective numbers of shares of Common Stock as towhich registration has been requested by such holders.

 

(c)                                  Permitted Transfer. Notwithstanding anything to the contrary contained herein, sales ofShares pursuant to a registration statement filed by the Company may be madewithout compliance with any other provision of this Agreement.

 

6.                                       Termination. This Agreement shall terminate with respect to the Common Stockimmediately following the existence of a Public Market for the Common Stockexcept that the requirements contained in Section 2 hereof shall survivethe termination of this Agreement; providedthat a ManagementStockholder or his Transferee may sell Shares pursuant to Rule 144 of theSecurities Act if such Management Stockholder or Transferee meets and complieswith all of the applicable requirements thereof.  If, and only to the extent that, theManagement Stockholder or his Transferee is not permitted to sell such Sharespursuant to Rule 144 of the Securities Act and such Shares are notincluded on a registration statement filed to register the sale of securitiesunder the Securities Act, such Management Stockholder or Transferee maytransfer such Shares only in accordance with Section 3(a) hereof.  For this purpose, a “Public Market”for the Common Stock shall be deemed to exist if at least 20% of the totaloutstanding Common Stock is registered under Section 12(b) or 12(g) ofthe Exchange Act.

 

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7.             Acknowledgement of Newton Holding, LLC and theCompany.  The Company and NewtonHolding, LLC (“Newton LLC”) hereby acknowledge that the ManagementStockholders shall not be disadvantaged with respect to the Shares or Optionssolely by reason of holding shares or options to purchase shares of the Company’sCommon Stock instead of membership interests or options to purchase membershipinterests in Newton LLC.  In the eventthere is a corporate transaction affecting the membership interests of NewtonLLC or any dividend or distribution made to holders of the membership interestsin Newton LLC in respect of such interests, the Company and Newton Holdingshall take commercially reasonable steps to assure that appropriate adjustmentsand/or dividends or distributions are made to or in respect of the Shares suchthat the Management Stockholders will be in the same position in which theywould have been had they received membership interests in Newton LLC instead ofthe Shares; provided that this Section 7 shall not be construed toentitle any Management Stockholder to any membership or other interests inNewton LLC.   For purposes of thisAgreement, no Management Stockholder shall be deemed to be disadvantaged from atax perspective by reason of his holding Options or Shares as opposed tomembership interests in a limited liability company or partnership interests ina partnership.

 

8.             Distributions With Respect To Shares.  As used herein, the term “Shares”includes securities of any kind whatsoever distributed with respect to theCompany’s Common Stock acquired by the Management Stockholder or his or herTransferee (whether pursuant to the Plan, the letter agreement dated on orabout September 30, 3005 between the Company and such ManagementStockholder or otherwise) or any such securities resulting from a stock splitor consolidation involving such Common Stock.

 

9.             Amendment; Assignment.  This Agreement may be amended, superseded,canceled, renewed or extended, and the terms hereof may be waived, only by awritten instrument signed by authorized representatives of the parties or, inthe case of a waiver, by an authorized representative of the party waivingcompliance.  No such written instrumentshall be effective unless it expressly recites that it is intended to amend,supersede, cancel, renew or extend this Agreement or to waive compliance withone or more of the terms hereof, as the case may be.  Except for the Management Stockholder’s rightto assign his or her rights under Section 4(a) or the Company’s rightto assign its rights under Section 4(b), no party to this Agreement mayassign any of its rights or obligations under this Agreement without the priorwritten consent of the other parties hereto.

 

10.           Notices. Each notice and othercommunication hereunder shall be in writing and shall be given and shall bedeemed to have been duly given on the date it is delivered in person, on thenext business day if delivered by overnight mail or other reputable overnightcourier, or the third business day if sent by registered mail, return receiptrequested, to the parties as follows:

 

If tothe Majority Stockholder, to his most recent address shown on records of theCompany or its Affiliate;

 

Witha copy to:

 

ClearyGottlieb Steen & Hamilton LLP

OneLiberty Plaza

New York,NY 10006

 

Attention:  Robert J. Raymond

 

Ifto the Company:

 

Newton Acquisition, Inc.

301 Commerce Street, Suite 3300

Fort Worth, TX 76102

 

Attention: General Counsel

 

Witha copy to:

 

----

 

ClearyGottlieb Steen & Hamilton LLP

OneLiberty Plaza

NewYork, NY 10006

 

Attention:  Robert J. Raymond

 

If tothe Management Stockholder, to its most recent address shown on records of theCompany or its Affiliate;

 

Witha copy to:

 

Morgan,Lewis & Bockius LLP

101Park Avenue

NewYork, NY 10178

 

Attention:  Gary Rothstein

 

or tosuch other address as any party may have furnished to the others in writing inaccordance herewith, except that notices of change of address shall only beeffective upon receipt.

 

11.           Counterparts.  This Agreement may be executed in two or morecounterparts, each of which shall be deemed to be an original, but each ofwhich together shall constitute one and the same document.

 

12.           Governing Law.  This Agreement shall be governed by andconstrued in accordance with the laws of the State of Delaware, withoutreference to its principles of conflicts of law.

 

13.           Binding Effect.  This Agreement shall be binding upon, inureto the benefit of, and be enforceable by the heirs, personal representatives,successors and permitted assigns of the parties hereto.  Nothing expressed or referred to in thisAgreement is intended or shall be construed to give any person other than theparties to this Agreement, or their respective heirs, personal representatives,successors or assigns, any legal or equitable rights, remedy or claim under orin respect of this Agreement or any provision contained herein.

 

14.           Entire Agreement.  This Agreement constitutes the entireagreement between the parties hereto with respect to the subject matter hereof.

 

15.           Severability.  If any term, provision, covenant orrestriction of this Agreement, is held by a court of competent jurisdiction tobe invalid, void or unenforceable, the remainder of the terms, provisions,covenants and restrictions of this Agreement shall remain in full force andeffect and shall in no way be affected, impaired or invalidated.

 

16.           Miscellaneous.  The headings contained in this Agreement arefor reference purposes only and shall not affect in any way the meaning orinterpretation of this Agreement.

 

*     *     *    *     *     *

 

IN WITNESS WHEREOF, the parties hereto have causedthis Agreement to be duly executed as of the day and year first above written.

 
| ** ** | ** ** | ** ** | **NEWTON ACQUISITION, INC.** |
|------------|------------|------------|------------------------------|
|       |       |       |                         |
|       | By:        |       | /s/ David A. Spuria          |
|       | Name:      |       | David A. Spuria              |
|       | Title:     |       | Vice President               |

 

----

 
| ** ** | ** ** | ** ** | **NEWTON HOLDING, LLC**                                 |
|------------|------------|------------|---------------------------------------------------------|
| ** ** | ** ** | ** ** | ** **                                              |
|       | By:        |       | /s/ David A. Spuria                                     |
|       | Name:      |       | David A. Spuria                                         |
|       | Title:     |       | Vice  President & Secretary                    |
|       |       |       |                                                    |
|       |       |       |                                                    |
| ** ** | ** ** | ** ** | **TPG NEWTON III LLC**                                  |
| ** ** | ** ** | ** ** | ** **                                              |
| ** ** | By:        | ** ** | **TPG Partners III, L.P., its  Managing Member**        |
| ** ** | By:        | ** ** | **TPG GenPar III, L.P., its General  Partner**          |
| ** ** | By:        | ** ** | **TPG Advisors III, Inc.,  its General Partner**   |
| ** ** | ** ** | ** ** | ** **                                              |
|       | By:        |       | /s/ David A. Spuria                                     |
|       | Name       |       | David A. Spuria                                         |
|       | Title:     |       | Vice President                                          |
|       |       |       |                                                    |
|       |       |       |                                                    |
| ** ** | ** ** | ** ** | **TPG PARTNERS IV, L.P.**                               |
| ** ** | ** ** | ** ** | ** **                                              |
| ** ** | By:        | ** ** | **TPG Gen Par IV, L.P., its  General Partner**          |
| ** ** | By:        | ** ** | **TPG Advisors IV, Inc., its  General Partner**    |
| ** ** | ** ** | ** ** | ** **                                              |
|       | By:        |       | /s/ David A. Spuria                                     |
|       | Name:      |       | David A. Spuria                                         |
|       | Title:     |       | Vice President                                          |
|       |       |       |                                                    |
|       |       |       |                                                    |
| ** ** | ** ** | ** ** | **TPG NEWTON CO-INVEST I LLC**                          |
| ** ** | ** ** | ** ** | ** **                                              |
| ** ** | By:        | ** ** | **TPG GenPar IV, L.P., its  Managing Member**           |
| ** ** | By:        | ** ** | **TPG Advisors IV, Inc., its  General Partner**    |
| ** ** | ** ** | ** ** | ** **                                              |
|       | By:        |       | /s/ David A. Spuria                                     |
|       | Name:      |       | David A. Spuria                                         |
|       | Title:     |       | Vice President                                          |
|       |       |       |                                                    |
|       |       |       |                                                    |
| ** ** | ** ** | ** ** | **WARBURG PINCUS PRIVATE EQUITY  VIII, L.P.**           |
| ** ** | ** ** | ** ** | ** **                                              |
| ** ** | By:        | ** ** | **Warburg Pincus Partners, LLC,  its General Partner**  |
| ** ** | By:        | ** ** | **Warburg Pincus & Co.,  its Managing Member** |
| ** ** | ** ** | ** ** | ** **                                              |
|       | By:        |       | /s/ Kewsong Lee                                         |
|       | Name:      |       | Kewsong Lee                                             |
|       | Title:     |       | Managing Director                                       |
|       |       |       |                                                    |
|       |       |       |                                                    |
| ** ** | ** ** | ** ** | **WARBURG PINCUS NETHLANDS  PRIVATE**                   |
| ** ** | ** ** | ** ** | **EQUITY VIII C.V.I.**                                  |
| ** ** | ** ** | ** ** | ** **                                              |
| ** ** | By:        | ** ** | **Warburg Pincus Partners, LLC,  its General Partner**  |
| ** ** | By:        | ** ** | **Warburg Pincus & Co.,  its Managing Member** |

 

----

 
|       | By:        |       | /s/ Kewsong Lee                                         |
|------------|------------|------------|---------------------------------------------------------|
|       | Name:      |       | Kewsong Lee                                             |
|       | Title:     |       | Managing Director                                       |
|       |       |       |                                                    |
|       |       |       |                                                    |
| ** ** | ** ** | ** ** | **WARBURG PINCUS GERMANY PRIVATE**                      |
| ** ** | ** ** | ** ** | **EQUITY VIII K.G.**                                    |
| ** ** | ** ** | ** ** | ** **                                              |
| ** ** | By:        | ** ** | **Warburg Pincus Partners, LLC,  its General Partner**  |
| ** ** | By:        | ** ** | **Warburg Pincus & Co.,  its Managing Member** |
| ** ** | ** ** | ** ** | ** **                                              |
|       | By:        |       | /s/ Kewsong Lee                                         |
|       | Name:      |       | Kewsong Lee                                             |
|       | Title:     |       | Managing Director                                       |
|       |       |       |                                                    |
| ** ** | ** ** | ** ** | **WARBURG PINCUS PRIVATE EQUITY IX,  L.P.**             |
| ** ** | ** ** | ** ** | ** **                                              |
| ** ** | By:        | ** ** | **Warburg Pincus IX LLC, its  General Partner**         |
| ** ** | ** ** | ** ** | ** **                                              |
|       | By:        |       | /s/ Kewsong Lee                                         |
|       | Name:      |       | Kewsong Lee                                             |
|       | Title:     |       | Managing Director                                       |

 

----

 

SCHEDULE A

**MANAGEMENTSTOCKHOLDERS**

 
| ** ** | By:        | ** ** | /s/ Gerald A. Barnes        |
|------------|------------|------------|-----------------------------|
| ** ** | Name:      | ** ** | Gerald A. Barnes            |
|       | ** ** |       | ** **                  |
|       | By:        |       | /s/ Steven P. Dennis        |
|       | Name:      |       | Steve P. Dennis             |
|       |       |       |                        |
|       | By:        |       | /s/ Jeanie Galvin           |
|       | Name:      |       | Jeanie Galvin               |
|       |       |       |                        |
|       | By:        |       | /s/ Ronald H. Goddard       |
|       | Name:      |       | Ronald H. Goddard           |
|       |       |       |                        |
|       | By:        |       | /s/ James J. Gold           |
|       | Name:      |       | James J. Gold               |
|       |       |       |                        |
|       | By:        |       | /s/ Neva L. Hall            |
|       | Name:      |       | Neva L. Hall                |
|       |       |       |                        |
|       | By:        |       | /s/ Ginny Hershey           |
|       | Name:      |       | Mary Virginia Hershey       |
|       |       |       |                        |
|       | By:        |       | /s/ Brendan Hoffman         |
|       | Name:      |       | Brendan Hoffman             |
|       |       |       |                        |
|       | By:        |       | /s/ Wayne A. Hussey         |
|       | Name:      |       | Wayne A. Hussey             |
|       |       |       |                        |
|       | By:        |       | /s/ Jonathan Joselove       |
|       | Name:      |       | Jonathan Joselove           |
|       |       |       |                        |
|       | By:        |       | /s/ Karen Katz              |
|       | Name:      |       | Karen Katz                  |
|       |       |       |                        |
|       | By:        |       | /s/ Lisa M. Kazor           |
|       | Name:      |       | Lisa M. Kazor               |
|       |       |       |                        |
|       | By:        |       | /s/ Steven Kornajcik        |
|       | Name:      |       | Steven Kornajcik            |
|       |       |       |                        |
|       | By:        |       | /s/ Thomas Lind             |
|       | Name:      |       | Thomas Lind                 |
|       |       |       |                        |
|       | By:        |       | /s/ Marita O’Dea Glodt |
|       | Name:      |       | Marita O’Dea Goldt     |
|       |       |       |                        |
|       | By:        |       | /s/ Ann S. Paolini          |
|       | Name:      |       | Ann S. Paolini              |
|       |       |       |                        |
|       | By:        |       | /s/ John Russell  Patrick   |
|       | Name:      |       | John Russell Patrick        |

 

A-1

----

 
|   | By:    |   | /s/ Gregory G. Shields    |
|--------|--------|--------|---------------------------|
|   | Name:  |   | Gregory G. Shields        |
|   |   |   |                      |
|   | By:    |   | /s/ Stacie Shirley        |
|   | Name:  |   | Stacie Shirley            |
|   |   |   |                      |
|   | By:    |   | /s/ James E. Skinner      |
|   | Name:  |   | James E. Skinner          |
|   |   |   |                      |
|   | By:    |   | /s/ Margaret E.  Spaniolo |
|   | Name:  |   | Margaret E. Spaniolo      |
|   |   |   |                      |
|   | By:    |   | /s/ Thomas P. Stangle     |
|   | Name:  |   | Thomas P. Stangle         |
|   |   |   |                      |
|   | By:    |   | /s/ T. Dale Stapleton     |
|   | Name:  |   | T. Dale Stapleton         |
|   |   |   |                      |
|   | By:    |   | /s/ Ann Stordahl          |
|   | Name:  |   | Ann Stordahl              |
|   |   |   |                      |
|   | By:    |   | /s/ Burton M. Tansky      |
|   | Name:  |   | Burton M. Tansky          |
|   |   |   |                      |
|   | By:    |   | /s/ Kim Yee               |
|   | Name:  |   | Kim Yee                   |

 

A-2

----