**Exhibit 10.1**

 

***Execution Copy***

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”),effective as of the Effective Date, is by and among The Neiman Marcus Group, Inc.,a Delaware corporation (“NMG”), Newton Acquisition Merger Sub, Inc., aDelaware corporation (“Merger Sub”), Newton Acquisition, Inc., a Delawarecorporation (“Parent”) and Burton M. Tansky (the “Executive”).

 

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

 

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

 

(b)           “Board”means the Board of Directors of NMG.

 

(c)           “Cause”shall have the meaning set forth in the Change of Control Agreement.

 

(d)           “Changeof Control” shall have the meaning set forth in the Stockholders’ Plan.  For purposes of clarification, the closing ofthe transactions contemplated by the Merger Agreement will not constitute a “Changeof Control” for any purpose under this Agreement.

 

(e)           “Changeof Control Agreement” means the Change of Control Termination Protection Agreementby and between NMG and Executive, dated as of April 1, 2005.

 

(f)            “Changeof Control Resignation” means a resignation by the Executive for any reason(other than Good Reason) during the thirty-day period following the six-monthanniversary of a Change of Control.

 

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

 

(h)           “ConfidentialInformation” means, without limitation, all documents or information, inwhatever form or medium, concerning or evidencing sales; costs; pricing;strategies; forecasts and long range plans; financial and tax information;personnel information; business, marketing and operational projections, plansand opportunities; and customer, vendor, and supplier information; butexcluding any such information that is or becomes generally available to thepublic other than as a result of any breach of this Agreement or otherunauthorized disclosure by the Executive.

 

(i)            “EffectiveDate” means the Closing Date, as such term is defined in the Merger Agreement.

 

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

 

(k)           “GoodReason” means any of the following actions if taken without the Executive’sprior consent: (i) any material failure by NMG to comply with itsobligations under Paragraph 5 (Compensation and Related Matters); (ii) anymaterial failure by NMG to comply with its obligations under Paragraph 20(Assumption by Successor); (iii) a substantial reduction in the Executive’sresponsibilities or duties except in accordance with the terms of thisAgreement; (iv) any relocation of Executive’s principal place of businessof 50 miles or more, other than normal travel consistent with past practice, orany requirement that Executive engage in excessive business-related travel in amanner inconsistent with past practice in any material respect; (v) duringthe Subsequent Term, the assignment by NMG of duties that are inconsistent withthe Executive’s role as Chairman under Paragraph 4(b); (vi) the reductionin title of the Executive as Chief Executive Officer or his reportingrelationships, except in accordance with the terms of this Agreement; or (vii) amaterial breach of this Agreement by NMG; provided that (iii) and (vi) shallnot apply after the end of the CEO Term. 

 

(l)            “Inabilityto Perform” means and shall be deemed to have occurred if the Executive hasbeen determined under NMG’s long-term disability plan to be eligible forlong-term disability benefits.  In theabsence of the Executive’s participation in such plan, “Inability to Perform”means that, in the Board’s sole judgment, the Executive is unable to performany of the material duties of his regular position because of an illness orinjury for (i) 80% or more of the normal working days during sixconsecutive calendar months or (ii) 50% or more of the normal working daysduring twelve consecutive calendar months.

 

(m)          “InitialPublic Offering” shall be deemed tooccur on the effective date of the first registration statement (other than aregistration on Form S-4 or S-8, or any successor form) filed to registerat least 20% of the total then-outstanding equity interests in Parent or anyother entity substantially all of whose assets directly or indirectly consistof NMG common stock under the U.S. Securities Act of 1933, as amended.

 

(n)           “ManagementEquity Incentive Plan” means the NMG Management Equity Incentive Plan to beadopted by NMG as soon as practicable after the Effective Date in a formmutually acceptable to the parties.

 

(o)           “Merger”means the merger of Newton Acquisition Merger Sub, Inc. with and into NMG,as contemplated by the Merger Agreement.

 

(p)           “MergerAgreement” means the Agreement and Plan of Merger, by and among Parent,MergerSub Inc., a Delaware corporation, and NMG, dated as of May 1, 2005. 

 

(q)           “Stockholders’Agreement” means the Management Stockholders’ Agreement, dated as of October 6,2005, by and among Newton Acquisition, the Majority Stockholder (as definedtherein) and the Management Stockholders (as defined therein), including theExecutive.

 

(r)            “TargetBonus” means 85% of Base Salary, payable if targeted level of performance isachieved as established under NMG’s annual incentive programs.

 

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(s)           “WorkProduct” means all ideas, works of authorship, inventions and other creations,whether or not patentable, copyrightable, or subject to other intellectual-propertyprotection, that are made, conceived, developed or worked on in whole or inpart by the Executive while employed by NMG and/or any of its Affiliates, thatrelate in any manner whatsoever to the business, existing or proposed, of NMGand/or any of its Affiliates, or any other business or research or developmenteffort in which NMG and/or any of its Affiliates engages during the Executive’semployment.  Work Product includes anymaterial previously conceived, made, developed or worked on during theExecutive’s employment with NMG prior to the Effective Date.

 

2.             Employment;Prior Agreements.  NMG agrees tocontinue to employ the Executive, and the Executive agrees to continue to beemployed, for the period set forth in Paragraph 3, in the position and with theduties and responsibilities set forth in Paragraph 4, and upon the other termsand conditions set out in this Agreement. The employment agreement entered into between the Executive and NMG,dated August 3, 2003, is hereby terminated and replaced in its entirety bythis Agreement without further right or obligation thereunder on the part ofeither party thereto (other than to pay or provide the Executive any unpaidcompensation thereunder).  The Change ofControl Agreement is expressly assumed hereby as contemplated in Paragraph 10and the “Good Reason” definition in Schedule A thereof, and shall remainin effect until the second anniversary of the Effective Date, provided,however, that Executive and NMG hereby agree that the Change of ControlAgreement is hereby amended to (a) delete Paragraph 3(g) thereof inits entirety, (b) provide that Paragraph 16 of this Agreement replacesParagraph 5 of the Change of Control Agreement in its entirety with respect toany Payments (as defined in Paragraph 16) made in connection with a Change ofControl that occurs after the Effective Date and (c) the release attachedhereto as Exhibit B shall replace the release required under the Change ofControl Agreement and such release shall be governed by Paragraph 7(j)herein.  

 

TheExecutive hereby acknowledges and agrees that the foregoing assumption by NMGof the Change of Control Agreement, and the entrance by NMG into thisAgreement, is in full satisfaction of NMG’s obligations under Paragraph 10 ofthe Change of Control agreement to expressly, absolutely and unconditionallyassume and agree to perform the Change of Control Agreement and any otheremployment agreements to which the Executive and NMG are parties, and that theExecutive will not have the right to terminate his employment for “Good Reason”as defined in the Change of Control Agreement under item 5 of such definition.

 

3.             Term.  The term of the Agreement shall commence onthe Effective Date and extend until the end of the day immediately preceding thefifth anniversary thereof (the “Employment Term”), unless sooner terminated as provided in thisAgreement.  The Employment Term isdivided into two periods, the “CEO Term” and the “Subsequent Term,” as definedin Paragraph 4.  The Executive’semployment will end upon the expiration of the Employment Term, but the end ofthe Executive’s employment in that circumstance shall not constitute atermination of employment by either party under this Agreement or give rise toany of the obligations of NMG that arise under this Agreement as a result of atermination of employment.

 

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4.             Positionand Duties.

 

(a)           Fromthe Effective Date and until the third anniversary thereof (the “CEO Term”),the Executive shall serve as the Chief Executive Officer of NMG andParent.  In such capacity, the Executive,subject to the ultimate control and direction of the Board and the Board ofDirectors of Parent (“Parent Board”), shall have and exercise direct charge ofand general supervision over the business and affairs of NMG.  In addition, the Executive shall have suchother duties, functions, responsibilities, and authority as are from time totime delegated to the Executive by the Board; provided, however, that suchduties, functions, responsibilities, and authority are reasonable and customaryfor a person serving in the same or similar capacity of an enterprisecomparable to NMG.  The Executive shallreport and be accountable to the Board and the Parent Board.  The Executive and NMG acknowledge that onepurpose of this Agreement is to provide for a smooth and orderly transition toa new chief executive officer in the future. Accordingly, during the CEO Term the Executive agrees to work withreasonable diligence to identify a successor to the position of Chief ExecutiveOfficer of NMG and Parent.  Nothing inthis Agreement, however, prohibits the Board from undertaking its own searchfor a successor to the positions.  Duringthe Employment Term, the Executive shall serve as a member of the Board andshall be appointed to the Parent Board and any other entity substantially allof whose assets consist of NMG capital stock.

 

(b)           Fromthe third anniversary of the Effective Date until the end of the EmploymentTerm (the “Subsequent Term”), the Executive shall serve as the Chairman of theBoard and shall have such duties as are assigned by the Board and customary forsuch position.  During the SubsequentTerm, the Executive shall be treated as an “executive officer” of NMG solelyfor purposes of the Executive’s participation in employee benefit plans,programs or arrangements of NMG and not in connection with his duties asChairman.

 

(c)           During theCEO Term, the Executive shall devote his full time (and, during the SubsequentTerm, the time necessary), skill, and attention and his best efforts to thebusiness and affairs of NMG to the extent necessary to discharge fully,faithfully, and efficiently the duties and responsibilities delegated andassigned to the Executive in or pursuant to this Agreement, except for usual,ordinary, and customary periods of vacation and absence due to illness or otherdisability.  Notwithstanding theforegoing, the Executive may (i) subject to the approval of the Board,serve as a director or as a member of an advisory board of a noncompetingcompany, (ii) serve as an officer or director or otherwise participate innon-profit educational, welfare, social, religious and civil organizations,including, without limitation, all such positions and participation in effectas of the Effective Date, and (iii) manage personal and familyinvestments; provided, however, that any such activities as described in (i), (ii) or (iii) of the precedingprovisions of this paragraph do not significantly interfere with the performanceand fulfillment of the Executive’s duties and responsibilities as an executive,or, if applicable, Chairman of the Board, of NMG in accordance with thisAgreement.

 

(d)           Inconnection with the Executive’s employment by NMG under this Agreement, theExecutive shall be based at the principal executive offices of NMG in Dallas,Texas, except for such reasonable travel as the performance of the Executive’sduties in the business of NMG may require.

 

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(e)           Allservices that the Executive may render to NMG or any of its Affiliates in anycapacity during the Employment Term shall be deemed to be services required bythis Agreement and the consideration for such services is that provided for inthis Agreement.

 

5.             Compensationand Related Matters.

 

(a)           BaseSalary.  During the Employment Term, NMGshall pay to the Executive for his services under this Agreement an annual basesalary (“Base Salary”).  

 

(i)            Atthe commencement of the CEO Term, the Base Salary shall be $1,300,000.00.  During the CEO Term, the Base Salary will bereviewed annually and is subject to adjustment at the discretion of the Board,but in no event shall NMG pay the Executive a Base Salary less than that setforth above during the CEO Term.  The BaseSalary shall be payable in installments in accordance with the general payrollpractices of NMG, or as otherwise mutually agreed upon.

 

(ii)           Atthe commencement of the Subsequent Term, the Base Salary shall be equal to 75%of the Base Salary payable to the Executive immediately preceding thecommencement of the Subsequent Term. During the Subsequent Term, the Base Salary will be reviewed annuallyand is subject to adjustment at the discretion of the Board, but in no eventshall NMG pay the Executive a Base Salary less than that established at thecommencement of the Subsequent Term.  TheBase Salary shall be payable in installments in accordance with the generalpayroll practices of NMG, or as otherwise mutually agreed upon.

 

(b)           AnnualIncentives.  The Executive willparticipate in NMG’s annual incentive bonus program(s) applicable to theExecutive’s position, in accordance with the terms of such program(s), andshall have the opportunity to earn an annual bonus thereunder based on theachievement of performance objectives determined by the Board afterconsultation with the Executive. Notwithstanding the foregoing, the performance objectives applicable tothe Executive’s annual bonus opportunity and the corresponding bonuspercentages (including the level of achievement required for the Executive toearn the Target Bonus) for the fiscal year in which the Effective Date occursand for the first fiscal year commencing after the Effective Date occurs willbe mutually agreed by the Board and the Executive.  During each fiscal year, the minimum bonuspayable to the Executive if the bonus targets for such year are achieved willbe 50% of the Executive’s Base Salary for such fiscal year, the Target Bonuswill be 85% of Base Salary and the maximum bonus payable to the Executive willbe 170% of Base Salary.  The actualamount of any annual incentive bonus paid to the Executive will be determinedaccording to the terms of the annual incentive bonus program(s), including anysuch terms that place the amount of any annual incentive bonus within thediscretion of the Board.  In determiningwhether the bonus targets for any fiscal year of NMG have been achieved, theBoard will disregard any fees paid to the Sponsors (as defined in theManagement Equity Incentive Plan) other than director fees paid to the Sponsors’representatives for their service on the Board. 

 

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(c)           Long-termIncentives and SERP.

 

(i)            Assoon as practicable after the Effective Date, Parent shall grant the Executivean option to purchase 16,349.1797 shares of common stock of Parent (the “Shares”).  As to 7,269.3852 Shares, the option will havea fixed exercise price per Share equal to $1,445.00, and will vest and becomeexercisable as to 459.5392 Shares on the first anniversary of the EffectiveDate, and as to 2269.9487 Shares on each of the second, third and fourthanniversaries of the Effective Date.  Asto 9,079.7946 Shares, the option (the “Performance Option”) will have anexercise price per Share that is initially equal to $1,445.00 increasing at a10.00% compound rate on each anniversary of the Effective Date until theearlier to occur of (i) exercise of such Option, (ii) the fifthanniversary of the Effective Date, or (iii) the occurrence of a Change ofControl, and will vest and become exercisable as to 2269.9487 Shares on each ofthe first through fourth anniversaries of the Effective Date.  In the event the Majority Stockholder (asdefined in the Stockholders’ Agreement) redeems or disposes of a portion of itsdirect or indirect equity interests in Parent prior to the fifth anniversary ofthe Effective Date in a transaction that does not constitute a Change ofControl, the compounding interest rate shall cease as to a proportionate shareof the Performance Option that bears the same ratio as the equity interestsredeemed or disposed of by the Majority Stockholder bears to the total equityinterest held by the Majority Stockholder. Vesting of the entire option will accelerate immediately prior to a Changeof Control or upon termination of the Executive’s employment pursuant toParagraph 6(a) or 6(b).  Inaddition, upon a termination of employment by NMG pursuant to Paragraph 6(e) orby the Executive pursuant to Paragraph 6(d), the option will vest as to (i) thenumber of Shares that would have become vested on the next anniversary of theEffective Date, plus (ii) if the Employment Termination Date occurs priorto the third anniversary of the Effective Date, the number of Shares that wouldhave become vested on the next anniversary of the Effective Date, multiplied bya fraction, the numerator of which is the number of days from the precedinganniversary of the Effective Date (or the Effective date if such terminationoccurs prior to the first anniversary thereof) and the denominator of which is365.   The Executive shall be permittedto exercise the vested portion of the option through net-physical settlement(i.e., by delivery of Shares net of the number of Shares having a value equalto the applicable exercise price and applicable withholding taxes at theminimum statutory rate) if such exercise occurs after termination of theExecutive’s employment pursuant to Paragraph 6(a) or 6(b), by NMG pursuantto Paragraph 6(e), by the Executive pursuant to Paragraph 6(d), or by theExecutive pursuant to Paragraph 6(e) on or after the fifth anniversary ofthe Effective Date.  The option shall begranted pursuant to and subject to the terms of the Management Equity IncentivePlan, which shall contain rights to dividend equivalents in a manner intendedto comply with Section 409A of the Code. The numbers of Shares and exercise price per Share set forth above arebased on the capitalization table attached as Exhibit A hereto. 

 

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(ii)           Uponthe occurrence of the earlier of a Change in Control or an Initial PublicOffering, the Executive will be entitled to a cash bonus equal to $3,080,911,provided that no such bonus will be paid unless (A) the Executive remainsemployed with NMG through the earlier of (x) the date of the Change in Control,(y) the Initial Public Offering or (z) the fourth anniversary of the EffectiveDate, and (B) the internal rate of return to the Majority Stockholder (asdefined in the Stockholders’ Agreement) in respect of their direct and indirectinvestment in Parent is positive.  TheMajority Stockholder’s internal rate of return shall be calculated in the caseof an Initial Public Offering as if the Majority Stockholder sold all of itsdirect and indirect equity interests in Parent at a per share price equal tothe Initial Public Offering price or, in the case of a Change in Control, basedon the value of its equity interests implied by the transaction giving rise tothe Change of Control, and in each case, taking into account all investmentsmade directly or indirectly in Parent, all management and transaction fees paidby Parent or its subsidiaries to the Majority Stockholder and all expensesincurred by the Majority Stockholder in connection with the investment.  If the Executive’s employment hereunderterminates for other than Cause prior to the bonus payment becoming due asdescribed above and, subsequent to such termination, a Change in Control orInitial Public Offering occurs in which the Majority Stockholder recognizes apositive internal rate of return determined in accordance with the foregoingprovisions, the Executive will be entitled to a payment equal to the product of$3,080,911 and the percentage determined as follows: (1) if the terminationof employment is pursuant to Paragraph 6(a) or 6(b), 100%; (2) if thetermination of employment is by the Executive pursuant to Paragraph 6(e), 25%multiplied by the number of full years (and not fractions thereof) from theEffective Date to the Employment Termination Date; and (3) if thetermination is by the Executive pursuant to Paragraph 6(d) or by NMGpursuant to Paragraph 6(e), the sum (not to exceed 100%) of 25% multiplied bythe number of full years and fractions thereof from the Effective Date to theEmployment Termination Date and 25%.

 

(iii)          Inthe event Parent declares and pays an extraordinary dividend while theExecutive’s Newco Options (as defined in that certain Letter Agreement, dated October 4,2005, by and among NMG, Parent and Executive, the “Letter Agreement”) areoutstanding, the Parent shall pay Executive a cash bonus equal to the amountthat he would have received if he owned the shares underlying thethen-outstanding Newco Options (other than any Newco Options for which the Companyhas an effective and exercisable call right pursuant to the Letter Agreement)pursuant to such dividend payment, provided such bonus payment complies with Section 409Aof the Internal Revenue Code of 1986 and does not result in any adverse taxtreatment in respect of the Newco Options. In the event it is determined that such payment does not comply with Section 409Aor it adversely effects the Newco Options, the parties hereto shall use theirreasonable efforts and take reasonable actions necessary to put the Executivein the same position he would have been in if the payment was permitted under Section 409Ato the extent reasonably practicable.   

 

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(iv)          SERPEnhancement.  At the time of theExecutive’s termination of employment with NMG and all of its Affiliates, theExecutive’s years of service for purposes of calculating his benefit under TheNeiman Marcus Group, Inc. Supplemental Executive Retirement Plan (the “SERP”)shall be determined by multiplying his actual service for purposes of the SERPby 2, subject to the 25-year maximum set forth in the SERP, and by thenproviding the Executive with an additional credit for each year of service bythe Executive to NMG following his attainment of age sixty-five (65)(disregarding the 25-year maximum set forth in the SERP).  Following the Effective Date, NMG shall takeany necessary steps to amend the SERP or create a supplemental SERP for theExecutive in order to effectuate the crediting provisions set forth in thisParagraph 5.  During the Employment Term,the SERP shall not be terminated or amended in any way that adversely affectsthe Executive.

 

(d)           EmployeeBenefits and Perquisites.  During theEmployment Term, the Executive will be entitled to (i) participate in allemployee benefit plans, programs, and arrangements that are generally madeavailable by NMG to its senior executives, including without limitation NMG’slife insurance, long-term disability, and health plans and (ii) theperquisites and other fringe benefits that are made available by NMG to itssenior executives generally and to such perquisites and fringe benefits thatare made available by NMG to the Executive in particular, subject to anyapplicable terms and conditions of any specific perquisite or other fringebenefit.  NMG agrees that the employeebenefit plans, programs and arrangements and perquisites and other fringebenefits that are made available to the Executive during the Employment Term willnot be materially diminished in the aggregate from those benefit plans,programs and arrangements and perquisites and fringe benefits made availableimmediately prior to the Effective Date (subject to any diminution during theSubsequent Term that results from the diminution in the Executive’s Base Salaryfrom the CEO Term to the Subsequent Term). The Executive agrees to cooperate and participate in any medical orphysical examinations as may be required by any insurance company in connectionwith the applications for such lifeand/or disability insurance policies.

 

(e)           Supportduring Subsequent Term.  During theSubsequent Term, NMG will provide the Executive with a full-time administrativeassistant and an executive office space and furnishings appropriate to hisposition and status.

 

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

 

(g)           Vacations.  The Executive shall be eligible for vacation,sick pay, and other paid and unpaid time off in accordance with the policiesand practices of NMG.  The Executiveagrees to use his vacation and other paid time off at such times that are (i) consistentwith the proper performance of his duties and responsibilities and (ii) mutuallyconvenient for NMG and the Executive.

 

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

 

6.             Terminationof Employment.

 

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

 

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

 

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

 

(d)           Terminationby the Executive for Good Reason.  TheExecutive may terminate his employment for Good Reason.  To exercise his right to terminate for GoodReason, the Executive must provide written notice to NMG of his belief thatGood Reason exists, and that notice shall describe the circumstance believed toconstitute Good Reason.  If thatcircumstance may reasonably be remedied, NMG shall have 30 days to effect thatremedy.  If not remedied within that 30-dayperiod, the Executive may submit a Notice of Termination; provided, however,that the Notice of Termination invoking the Executive’s right to terminate hisemployment for Good Reason must be given no later than 6 months after the laterof (i) the first date the Executive knew that Good Reason existed, and (ii) theend of NMG’s 30-day cure period, if applicable; otherwise, the Executive isdeemed to have accepted the circumstance(s) that may have given rise to theexistence of Good Reason.

 

(e)           Terminationby Either Party Without Cause or Without Good Reason.  Either NMG or the Executive may terminate theExecutive’s employment without Cause or Good Reason upon at least three months’prior written notice to the other party.

 

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(f)            Noticeof Termination.  Any termination of theExecutive’s employment by NMG or by the Executive (other than a terminationpursuant to Paragraph 6(a)) shall be communicated by a Notice ofTermination.  A “Notice of Termination”is a written notice that must (i) indicate the specific terminationprovision in this Agreement relied upon; (ii) in the case of a terminationfor Inability to Perform, Cause, or Good Reason, set forth in reasonable detailthe facts and circumstances claimed to provide a basis for termination of theExecutive’s employment under the provision invoked, including the particularact or acts or failure(s) to act that is or are the basis of any terminationfor Cause or Good Reason; and (iii) if the termination is by the Executiveunder Paragraph 6(e), or by NMG for any reason, specify the EmploymentTermination Date.  The failure by NMG toset forth in the Notice of Termination any fact or circumstance thatcontributes to a showing of Cause shall not waive any right of NMG or precludeNMG from asserting such fact or circumstance in enforcing NMG’s rights.

 

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

 

(h)           Resignation.  In the event of termination of the Executive’semployment (for any reason other than the death of the Executive), theExecutive agrees that if at such time he is a member of the Board or is anofficer of NMG or a director or officer of any of its Affiliates, he shall bedeemed to have resigned from such position(s) effective on the EmploymentTermination Date.

 

7.             CompensationUpon Termination of Employment.

 

(a)           Death.  If the Executive’s employment is terminated byreason of the Executive’s death, NMG shall pay to the Executive’s estate (i) anyunpaid portion of the Executive’s Base Salary through the EmploymentTermination Date and any bonus payable for preceding fiscal year that hasotherwise not already been paid (together, the “Compensation Payment”), (ii) anyaccrued but unused vacation days (the “Vacation Payment”), (iii) anyreimbursement for business travel and other expenses to which the Executive isentitled (the “Reimbursement”), and (iv) 85% of the Base Salary in effectimmediately prior to the Employment Termination Date, multiplied by a fraction,the numerator of which is the number of days during the fiscal year up to andincluding the Employment Termination Date and the denominator of which is 365 (the“Prorated Bonus”).  This Paragraph 7(a) doesnot limit the entitlement of the Executive’s estate or beneficiaries to anydeath or other vested benefits to which the Executive may be entitled under anylife insurance, stock ownership, stock options, or other benefit plan or policythat is maintained by NMG for the Executive’s benefit, including any amountsExecutive is entitled to pursuant to Paragraph 5(c).

 

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(b)           Inabilityto Perform.  If the Executive’semployment is terminated by reason of the Executive’s Inability to Perform, NMGshall pay to the Executive (i) the Compensation Payment, (ii) theVacation Payment, (iii) the Reimbursement, and (iv) the ProratedBonus.  This Paragraph 7(b) does notlimit the entitlement of the Executive to any amounts payable pursuant to theterms of any applicable disability insurance plan, policy, or similararrangement that is maintained by NMG for the Executive’s benefit.  This Paragraph 7(b) does not limit theentitlement of the Executive’s estate or beneficiaries to any death or othervested benefits to which the Executive may be entitled under any lifeinsurance, stock ownership, stock options, or other benefit plan or policy thatis maintained by NMG for the Executive’s benefit, including any amountsExecutive is entitled to pursuant toParagraph 5(c).

 

(c)           Terminationby the Executive Without Good Reason.  Ifthe Executive’s employment is terminated by the Executive pursuant to and incompliance with Paragraph 6(e) (other than in connection with a Change ofControl Resignation), NMG shall pay to the Executive (i) the CompensationPayment, (ii) the Vacation Payment, and (iii) the Reimbursement.  This Paragraph 7(c) does not limit theentitlement of the Executive’s estate or beneficiaries to any death or othervested benefits to which the Executive may be entitled under any lifeinsurance, stock ownership, stock options, or other benefit plan or policy thatis maintained by NMG for the Executive’s benefit, including any amountsExecutive is entitled to pursuant to Paragraph 5(c).

 

(d)           Terminationfor Cause.  If the Executive’s employmentis terminated by NMG for Cause, NMG shall pay to the Executive (i) theCompensation Payment, (ii) the Vacation Payment, and (iii) theReimbursement.  This Paragraph 7(d) doesnot limit the entitlement of the Executive’s estate or beneficiaries to anydeath or other vested benefits to which the Executive may be entitled under anylife insurance, stock ownership, stock options, or other benefit plan or policythat is maintained by NMG for the Executive’s benefit, including any amountsExecutive is entitled to pursuant to Paragraph 5(c).

 

(e)           Terminationwithout Cause or with Good Reason; Change of Control Resignation.  If (x) the Executive’s employment isterminated by NMG for any reason other than death, Inability to Perform, orCause, or is terminated by the Executive for Good Reason and, in each suchcase, the Executive is not entitled to receive payments or benefits under theChange of Control Agreement in connection with such termination or (y) theExecutive’s employment terminates by reason of a Change of Control Resignation,NMG shall pay to the Executive (1) the Compensation Payment, (2) theVacation Payment, and (3) the Reimbursement.  In addition, subject to the Executive’sexecution of a mutual release and waiver of claims against NMG in the formattached as Exhibit B, NMG will pay the Executive a lump-sumpayment equal to: the Prorated Bonus plus (A) if such termination occursprior to the commencement of the Subsequent Term and is not a Change of ControlResignation, three (3) times the sum of the Executive’s Base Salary andTarget Bonus in effect on the Employment Termination Date, and (B) if suchtermination occurs during the Subsequent Term or is a Change of ControlResignation, two (2) times the sum of the Executive’s Base Salary andTarget Bonus in effect on the Employment Termination Date; provided, however,that the Executive shall be required to repay the above-described payments if:

 

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(i)            theExecutive receives written notice from NMG that in the reasonable judgment ofNMG, the Executive engaged or is engaging in any conduct that violatesParagraph 8 or engaged or is engaging in any of the Restricted Activitiesdescribed in Paragraph 9, unless within 30 days of the date NMG so notifies theExecutive in writing, the Executive provides information to NMG that NMGdetermines is sufficient to establish that the Executive did not engage in anyconduct that violated Paragraph 8 or engage in any of the Restricted Activitiesdescribed in Paragraph 9; or

 

(ii)           theExecutive is arrested or indicted for any felony, other serious criminal offense,or any violation of federal or state securities laws, or has any civilenforcement action brought against him by any regulatory agency, for actions oromissions related to his employment with NMG or any of its Affiliates, or NMGreasonably believes that the Executive has committed any act or omission,either during his employment under this Agreement or, if related to suchemployment thereafter, that during his employment would have entitled NMG toterminate his employment for Cause under provisions (i), (ii), (iv), or (vi) ofthe definition of Cause and the Executive is found guilty or enters into a pleaagreement, consent decree or similar arrangement with respect to any suchcriminal or civil proceedings, or if the Board makes a finding that the Executivehas committed such an act or omission. If any such criminal or civil proceedings do not result in a finding ofguilt or the entry of a plea agreement or consent decree or similararrangement, or if the Board makes a finding that the Executive has notcommitted such an act or omission, the Executive shall not be required to repayany amounts hereunder.

 

This Paragraph 7(e) doesnot limit the entitlement of the Executive’s estate or beneficiaries to anydeath or other vested benefits to which the Executive may be entitled under anylife insurance, stock ownership, stock options, or other benefit plan or policythat is maintained by NMG for the Executive’s benefit, including any amountsExecutive is entitled to pursuant to Paragraph 5(c).

 

(f)            WelfareBenefits.  If, on or following the secondanniversary of the Effective Date, the Executive’s employment with NMG or anyAffiliate of NMG ends on account of a termination by NMG for any reason otherthan for death or Cause, or a termination by the Executive for Good Reason, theExecutive will receive the benefits described in Paragraph 3b of the Change ofControl Agreement, provided that the “Welfare Continuation Period” shall bereduced to 2 years if such termination occurs during the Subsequent Term or is aChange of Control Resignation.

 

(g)           Terminationunder Change of Control Agreement.  Ifthe Executive’s employment with NMG or an Affiliate or successor of NMGterminates under circumstances that would entitle the Executive to receivepayments or benefits under the Change of Control Agreement, Executive shall notbe entitled to receive any payments or benefits under Paragraph 7 of thisAgreement, but shall instead be entitled to receive the payments and benefitsspecified in the Change of Control Agreement, which payments and benefits shallbe subject to the

 

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obligationsprovided in the Change of Control Agreement and shall be in lieu of anyseverance payments or benefits that may otherwise be payable pursuant toParagraph 7 of this Agreement.

 

(h)           NoMitigation.  The Executive will not berequired to mitigate the amount of any payment provided for in this Agreementby seeking other employment or otherwise, nor will the amount of any paymentprovided for under this Agreement be reduced by any profits, income, earnings,or other benefits received by the Executive from any source other than NMG orits successor.

 

(i)            Offset.  The Executive agrees that NMG may set offagainst, and he authorizes NMG to deduct from, any payments due to theExecutive, or to his heirs, legal representatives, or successors, as a resultof the termination of the Executive’s employment (other than pursuant to theChange of Control Agreement) any specified amounts which the Board determinesin good faith are due and owing to NMG by the Executive, whether arising underthis Agreement or otherwise.

 

(j)            MutualRelease.  Following receipt of theExecutive’s signed mutual release pursuant to this Agreement or the Change inControl Agreement (as modified by this Agreement), NMG and Parent shall haveten (10) days from the date such release becomes irrevocable to executethe release and deliver a copy to the Executive.  If NMG or Parent fail to execute such releasewithin the time frame established by the preceding sentence, the release shallbe null and void and the Executive shall be entitled to receive any benefitsunder this Agreement or the Change in Control Agreement, as applicable, as hewould otherwise be entitled to receive had the mutual release been fullyexecuted.

 

8.             ConfidentialInformation.

 

(a)           TheExecutive acknowledges and agrees that (i) NMG is engaged in a highlycompetitive business; (ii) NMG has expended considerable time andresources to develop goodwill with its customers, vendors, and others, and tocreate, protect, and exploit Confidential Information; (iii) NMG mustcontinue to prevent the dilution of its goodwill and unauthorized use ordisclosure of its Confidential Information to avoid irreparable harm to itslegitimate business interests; (iv) in the luxury specialty retailbusiness, his participation in or direction of NMG’s day-to-day operations andstrategic planning are an integral part of NMG’s continued success andgoodwill; (v) given his position and responsibilities, he necessarily willbe creating Confidential Information that belongs to NMG and enhances NMG’sgoodwill, and in carrying out his responsibilities he in turn will be relyingon NMG’s goodwill and the disclosure by NMG to him of Confidential Information;(vi) he will have access to Confidential Information that could be used byany Competitor of NMG in a manner that would irreparably harm NMG’s competitiveposition in the marketplace and dilute its goodwill; and (vii) henecessarily would use or disclose Confidential Information if he were to engagein competition with NMG.

 

(b)           NMGacknowledges and agrees that the Executive must have and continue to havethroughout his employment the benefits and use of its and its Affiliates’goodwill and Confidential Information in order to properly carry out hisresponsibilities.  NMG accordinglypromises upon execution and delivery of this Agreement to provide the Executiveimmediate

 

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access to new andadditional Confidential Information and authorize him to engage in activitiesthat will create new and additional Confidential Information.

 

(c)           NMGand the Executive thus acknowledge and agree that during the Executive’semployment with NMG and upon execution and delivery of this Agreement he (i) hasreceived, will receive, and will continue to receive, Confidential Informationthat is unique, proprietary, and valuable to NMG and/or its Affiliates; (ii) hascreated, will create, and will continue to create, Confidential Informationthat is unique, proprietary, and valuable to NMG and/or its Affiliates; and (iii) hasbenefited, will benefit, and will continue to benefit, including withoutlimitation by way of increased earnings and earning capacity, from the goodwillNMG and its Affiliates have generated and from the Confidential Information.

 

(d)           Accordingly,the Executive acknowledges and agrees that at all times during his employmentby NMG and/or any of its Affiliates and thereafter:

 

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

 

(ii)           hewill protect and safeguard all Confidential Information;

 

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

 

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

 

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

 

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

 

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9.             Noncompetitionand Nondisparagement Obligations.  Inconsideration of NMG’s promises to provide the Executive with new andadditional Confidential Information and to authorize him to engage inactivities that will create new and additional Confidential Information uponexecution and delivery of this Agreement, and the other promises andundertakings of NMG in this Agreement, the Executive agrees that, while he isemployed by NMG and/or any of its Affiliates and for a three-year periodfollowing the end of that employment for any reason, he shall not engage in anyof the following activities (the “Restricted Activities”):

 

(a)           Hewill not directly or indirectly disparage NMG or its Affiliates, any products,services, or operations of NMG or its Affiliates, or any of the former,current, or future officers, directors, or employees of NMG or its Affiliates;

 

(b)           Hewill not, whether on his own behalf or on behalf of any other individual,partnership, firm, corporation or business organization, either directly orindirectly solicit, induce, persuade, or entice, or endeavor to solicit,induce, persuade, or entice, any person who is then employed by or otherwiseengaged to perform services for NMG or its Affiliates to leave that employmentor cease performing those services;

 

(c)           Hewill not, whether on his own behalf or on behalf of any other individual,partnership, firm, corporation or business organization, either directly orindirectly solicit, induce, persuade, or entice, or endeavor to solicit,induce, persuade, or entice, any person who is then a customer, supplier, orvendor of NMG or any of its Affiliates to cease being a customer, supplier, orvendor of NMG or any of its Affiliates or to divert all or any part of suchperson’s or entity’s business from NMG or any of its Affiliates; and

 

(d)           Hewill not associate directly or indirectly, as an employee, officer, director,agent, partner, stockholder, owner, member, representative, or consultant, withany Competitor of NMG or any of its Affiliates, unless (i) he has advisedNMG in writing in advance of his desire to undertake such activities and thespecific nature of such activities; (ii) NMG has received writtenassurances (that will be designed, among other things, to protect NMG’s and itsAffiliates’ goodwill, Confidential Information, and other important commercialinterests) from the Competitor and the Executive that are, in NMG’s solediscretion, adequate to protect its interests; (iii) NMG, in its solediscretion, has approved in writing such association; and (iv) theExecutive and the Competitor adhere to such assurances.  This restriction (i) extends to theperformance by the Executive, directly or indirectly, of the same or similaractivities the Executive has performed for NMG or any of its Affiliates or suchother activities that by their nature are likely to lead to the disclosure ofConfidential Information, and (ii) with respect to the post-employmentrestriction, applies to any Competitor that has a retail store within 50 milesof, or in the same Metropolitan Statistical Area as, any retail store of NMG orany of its Affiliates.  The Executiveshall not be in violation of this Paragraph 9(d) solely as a result of hisinvestment in stock or other securities of a Competitor or any of itsAffiliates listed on a national securities exchange or actively traded in theover-the-counter market if he and the members of his immediate family do not,directly or indirectly, hold more than a total of one percent of all suchshares of stock or other securities issued and outstanding.  The Executive acknowledges and agrees thatengaging in the activities restricted by this Paragraph 9(d) would resultin the

 

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inevitabledisclosure or use of Confidential Information for the Competitor’s benefit orto the detriment of NMG or its Affiliates.

 

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

 

10.           IntellectualProperty.

 

(a)           Inconsideration of NMG’s promises and undertakings in this Agreement, theExecutive agrees that all Work Product will be disclosed promptly by the Executiveto NMG, shall be the sole and exclusive property of NMG, and is hereby assignedto NMG, regardless of whether (i) such Work Product was conceived, made,developed or worked on during regular hours of his employment or his time awayfrom his employment, (ii) the Work Product was made at the suggestion ofNMG; or (iii) the Work Product was reduced to drawing, writtendescription, documentation, models or other tangible form.  Without limiting the foregoing, the Executiveacknowledges that all original works of authorship that are made by theExecutive, solely or jointly with others, within the scope of his employmentand that are protectable by copyright are “works made for hire,” as that termis defined in the United States Copyright Act (17 U.S.C., Section 101),and are therefore owned by NMG from the time of creation.

 

(b)           TheExecutive agrees to assign, transfer, and set over, and the Executive doeshereby assign, transfer, and set over to NMG, all of his right, title andinterest in and to all Work Product, without the necessity of any furthercompensation, and agrees that NMG is entitled to obtain and hold in its ownname all patents, copyrights, and other rights in respect of all WorkProduct.  The Executive agrees to (i) cooperatewith NMG during and after his employment with NMG in obtaining patents orcopyrights or other intellectual-property

 

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protection for allWork Product; (ii) execute, acknowledge, seal and deliver all documentstendered by NMG to evidence its ownership thereof throughout the world; and (iii) cooperatewith NMG in obtaining, defending and enforcing its rights therein.

 

(c)           TheExecutive represents that there are no other contracts to assign inventions orother intellectual property that are now in existence between the Executive andany other person or entity.  TheExecutive further represents that he has no other employment or undertakingsthat might restrict or impair his performance of this Agreement.  The Executive will not in connection with hisemployment by NMG, use or disclose to NMG any confidential, trade secret, orother proprietary information of any previous employer or other person that theExecutive is not lawfully entitled to disclose.

 

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

 

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

 

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

 

14.           Survival.  The expiration or termination of theEmployment Term will not impair the rights or obligations of any party heretothat accrue hereunder prior to such expiration or termination, except to theextent specifically stated herein.  Inaddition to the foregoing, NMG’s obligations under Paragraphs 5(h), 7 and 16,and the Executive’s obligations under Paragraphs 8, 9, 10 and 12, will survivethe expiration or termination of the Executive’s employment.

 

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

 

16.           ExciseTax Provisions in Connection with a Change of Control.  

 

(a)           If,after the Effective Date, there occurs a transaction that constitutes a “changeof control” under Regulation 1.280G and, immediately prior to the consummationof such change of control, NMG is an entity whose stock is readily tradeable onan established

 

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securities market(or otherwise) such that Excise Tax Exemption is not available, the followingprovisions will apply:

 

(i)            In the event it shallbe determined that any Payment is subject to the excise tax imposed by Section 4999of the Code or any interest or penalties are incurred by Executive with respectto such excise tax (such excise tax, together with any such interest andpenalties, hereinafter collectively referred to as the “Excise Tax”), Executiveshall be entitled to receive an additional payment (a “Gross-Up Payment”) in anamount such that after payment by Executive of all taxes (including anyinterest or penalties imposed with respect to such taxes), including, withoutlimitation, any income taxes (and any interest and penalties imposed withrespect thereto) and the Excise Tax imposed upon the Gross-Up Payment,Executive retains an amount of the Gross-Up Payment equal to the Excise Taximposed upon the Payments.  Notwithstanding the foregoing provisions ofthis Paragraph 16(b), if it shall be determined that Executive is entitledto a Gross-Up Payment, but that the Payment does not exceed 110% of the greatestamount that could be paid to Executive without giving rise to any Excise Tax(the “Safe Harbor Amount”), then no Gross-Up Payment shall be made to Executiveand the amounts payable under this Agreement shall be reduced so that thePayment, in the aggregate, is reduced to the Safe Harbor Amount.  Thereduction of the amounts payable hereunder, if applicable, shall be made byfirst reducing the payments under Paragraph 7(e), unless an alternativemethod of reduction is elected by Executive. 

** **

(ii)           All determinationsrequired to be made under this Paragraph 16, including whether and when aGross-Up Payment is required and the amount of such Gross-Up Payment and theassumptions to be utilized in arriving at such determination, shall be made bya nationally recognized accounting firm selected by NMG (the “Accounting Firm”)which shall provide detailed supporting calculations both to NMG and theExecutive within ten business days of the receipt of notice from Executive thatthere has been a Payment, or such earlier time as is requested by NMG; providedthat for purposes of determining the amount of any Gross-Up Payment, theExecutive shall be deemed to pay federal income tax at the highest marginalrates applicable to individuals in the calendar year in which any such Gross-UpPayment is to be made and deemed to pay state and local income taxes at thehighest effective rates applicable to individuals in the state or locality ofthe Executive’s residence or place of employment in the calendar year in whichany such Gross-Up Payment is to be made, net of the maximum reduction infederal income taxes that can be obtained from deduction of such state andlocal taxes, taking into account limitations applicable to individuals subjectto federal income tax at the highest marginal rates.  All fees andexpenses of the Accounting Firm shall be borne solely by NMG.  AnyGross-Up Payment, as determined pursuant to this Paragraph 16, shall bepaid by NMG to the Executive (or to the appropriate taxing authority on the Executive’sbehalf) when the applicable tax is due.  If the Accounting Firm determinesthat no Excise Tax is payable by the Executive, it shall so indicate to theExecutive in writing.  Any determination by the Accounting Firm shall bebinding upon NMG and the

 

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Executive.  As a result of the uncertainty in theapplication of Section 4999 of the Code, it is possible that the amount ofthe Gross-Up Payment determined by the Accounting Firm to be due to (or onbehalf of) the Executive was lower than the amount actually due (“Underpayment”). In the event that NMG exhausts its remedies pursuant to Paragraph 16(b) andthe Executive thereafter is required to make a payment of any Excise Tax, theAccounting Firm shall determine the amount of the Underpayment that hasoccurred and any such Underpayment shall be promptly paid by NMG to or for thebenefit of Executive.

** **

(iii)          TheExecutive shall notify NMG in writing of any claim by the Internal RevenueService that, if successful, would require the payment by NMG of any Gross-UpPayment.  Such notification shall be given as soon as practicable but nolater than ten business days after the Executive is informed in writing of suchclaim and shall apprise NMG of the nature of such claim and the date on whichsuch claim is requested to be paid.  The Executive shall not pay suchclaim prior to the expiration of the thirty day period following the date onwhich it gives such notice to NMG (or such shorter period ending on the datethat any payment of taxes with respect to such claim is due).  If NMGnotifies the Executive in writing prior to the expiration of such period thatit desires to contest such claim, the Executive shall (i) give NMG anyinformation reasonably requested by NMG relating to such claim, (ii) takesuch action in connection with contesting such claim as NMG shall reasonablyrequest in writing from time to time, including, without limitation, acceptinglegal representation with respect to such claim by an attorney reasonably selectedby NMG, (iii) cooperate with NMG in good faith in order to effectivelycontest such claim and (iv) permit NMG to participate in any proceedingsrelating to such claim; provided, however, that NMG shall bear and pay directlyall costs and expenses (including additional interest and penalties) incurredin connection with such contest and shall indemnify and hold the Executiveharmless, on an after-tax basis, for any Excise Tax or income tax (includinginterest and penalties with respect thereto) imposed as a result of suchrepresentation and payment of costs and expenses.  Without limitation onthe foregoing provisions of this Paragraph 16(b), NMG shall control allproceedings taken in connection with such contest and, at its sole option, maypursue or forego any and all administrative appeals, proceedings, hearings andconferences with the taxing authority in respect of such claim and may, at itssole option, either direct the Executive to pay the tax claimed and sue for arefund or contest the claim in any permissible manner, and the Executive agreesto prosecute such contest to a determination before any administrativetribunal, in a court of initial jurisdiction and in one or more appellatecourts, as NMG shall determine; provided, further, that if NMG directs theExecutive to pay such claim and sue for a refund, NMG shall advance the amountof such payment to the Executive, on an interest-free basis, and shallindemnify and hold the Executive harmless, on an after-tax basis, from anyExcise Tax or income tax (including interest or penalties with respect thereto)imposed with respect to such advance or with respect to any imputed income withrespect to such advance; provided, further, that if the Executive is requiredto extend the statute of limitations to enable NMG to contest such claim, theExecutive may limit this extension solely to such contested

 

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amount.  NMG’s control of the contest shall belimited to issues with respect to which a Gross-Up Payment would be payablehereunder and the Executive shall be entitled to settle or contest, as the casemay be, any other issue raised by the Internal Revenue Service or any othertaxing authority.

 

(iv)          If,after the receipt by the Executive of an amount paid or advanced by NMGpursuant to this Paragraph 16(b), the Executive becomes entitled toreceive any refund with respect to a Gross-Up Payment, the Executive shall(subject to NMG’s complying with the requirements of Paragraph 16(b))promptly pay to NMG the amount of such refund received (together with anyinterest paid or credited thereon after taxes applicable thereto).  If,after the receipt by the Executive of an amount advanced by NMG pursuant toParagraph 16(b), a determination is made that the Executive shall not beentitled to any refund with respect to such claim and NMG does not notify theExecutive in writing of its intent to contest such denial of refund prior tothe expiration of thirty days after such determination, then such advance shallbe forgiven and shall not be required to be repaid and the amount of suchadvance shall offset, to the extent thereof, the amount of the Gross-Up Paymentrequired to be paid.

 

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

 

if to NMG, at:

 

The NeimanMarcus Group, Inc.Attn: General Counsel1618 Main StreetDallas, TX 75201

 

with a copy to:

 

Cleary GottliebSteen & Hamilton LLPAttn:  Robert J. RaymondOne Liberty Plaza New York, NY 10006

 

If to the Executive, at theExecutive’s then-current home address on file with NMG, with a copy to:

 

Morgan Lewis &Bockius LLPAttn:  Gary Rothstein101 Park AvenueNew York, NY 10178

 

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18.           InjunctiveRelief.  The Executive acknowledgesand agrees that NMG would not have an adequate remedy at law and would beirreparably harmed in the event that any of the provisions of Paragraphs 8, 9,and 10 were not performed in accordance with their specific terms or wereotherwise breached.  Accordingly, theExecutive agrees that NMG shall be entitled to equitable relief, includingpreliminary and permanent injunctions and specific performance, in the eventthe Executive breaches or threatens to breach any of the provisions of suchParagraphs, without the necessity of posting any bond or proving specialdamages or irreparable injury.  Suchremedies shall not be deemed to be the exclusive remedies for a breach orthreatened breach of this Agreement by the Executive, but shall be in additionto all other remedies available to NMG at law or equity.

 

19.           BindingEffect; No Assignment by the Executive; No Third Party Benefit.  This Agreement shall be binding upon andinure to the benefit of the parties and their respective heirs, legalrepresentatives, successors, and assigns; provided, however, that the Executiveshall not assign or otherwise transfer this Agreement or any of his rights orobligations herein.  NMG is authorized toassign or otherwise transfer this Agreement or any of its rights or obligationsherein to an Affiliate of NMG. The Executive shall not have any right topledge, hypothecate, anticipate, or in any way create a lien upon any paymentsor other benefits provided under this Agreement; and no benefits payable underthis Agreement shall be assignable in anticipation of payment either byvoluntary or involuntary acts, or by operation of law, except by will orpursuant to the laws of descent and distribution. Nothing in this Agreement,express or implied, is intended to or shall confer upon any person other thanthe parties, and their respective heirs, legal representatives, successors, andpermitted assigns, any rights, benefits, or remedies of any nature whatsoeverunder or by reason of this Agreement.

 

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

 

21.           Arbitration.  All disputes and controversies arising underor in connection with this Agreement shall be settled by arbitration conductedbefore one arbitrator sitting in Dallas, Texas, or such other location agreedby the parties hereto, in accordance with the rules for expeditedresolution of employment disputes of the American Arbitration Association thenin

 

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effect.  The determination of the arbitrator shall bemade within thirty days following the close of the hearing on any dispute orcontroversy and shall be final and binding on the parties.  Judgment may be entered on the award of thearbitrator in any court having proper jurisdiction.

 

22.           Costsof Proceedings.  The Company shallpay all costs and expenses of the Company and, at least monthly, of theExecutive (including legal fees) in connection with any arbitration relating tothe interpretation or enforcement of any provision of this Agreement, whetheror not the Executive instituted the proceeding and whether or not the Executiveprevails; provided that if the Executive instituted the proceeding and thearbitrator or other individual presiding over the proceeding affirmativelyfinds that the Executive instituted the proceeding in bad faith, the Executiveshall reimburse the Company for all costs and expenses of the Executivepreviously paid by the Company pursuant to this Paragraph 22.

 

23.           Section 409ASavings Clause.  Notwithstandinganything to the contrary contained herein, in the event that NMG receivesadvice of counsel selected by NMG and reasonably acceptable to the Executive,that payments under this Agreement are subject to Section 409A of the Code(or the Executive makes such determination and informs NMG of such determination):  (i) any payments in the nature ofseverance under this Agreement that would be treated as non-qualified deferredcompensation under 409A shall not commence until six months after the Executive’sDate of Termination (or, if earlier, the date Executive dies) if required underSection 409A of the Code; and (ii) after consultation with theExecutive and counsel, NMG may amend the Agreement to make such other changesit reasonably determines are required to comply with Section 409A of theCode in a manner that preserves the economics to the Executive to the extentreasonable practicable.  The Executivehereby stipulates that Cleary Gottlieb Steen and Hamilton LLP is acceptablecounsel for purposes of this Paragraph 23

 

24.           ApplicableLaw.  This Agreement shall begoverned by and construed in accordance with the laws of the State of Texas,without regard to conflicts of laws principles thereof. 

 

25.           EntireAgreement.  This Agreement and theChange of Control Agreement contain the entire agreement between the partiesconcerning the subject matter hereof and supersede all prior agreements andunderstandings, written and oral, between the parties with respect to thesubject matter of this Agreement and the Change of Control Agreement.  

 

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

 

27.           Construction.  This Agreement is to be construed as a whole,according to its fair meaning, and not strictly for or against any of theparties.

 

22

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

 

29.           Counterparts.  This Agreement may be executed by the partiesin any number of counterparts, each of which shall be deemed an original, butall of which shall constitute one and the same agreement.

 

23

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IN WITNESS WHEREOF, NMG has caused this Agreement tobe executed on its behalf by its duly authorized officer, and the Executive hasexecuted this Agreement, effective as of the Effective Date.

 

 
| ** ** | **THE  NEIMAN MARCUS GROUP, INC.**       |
|------------|------------------------------------------|
| ** ** | ** **                               |
| ** ** | ** **                               |
|       | By:                                      | /s/ | Nelson A. Bangs |   |
|       | Name:                                    | Nelson A. Bangs |
|       | Title:                                   | Senior Vice  President and General Counsel |
|       |                                     |
|       |                                     |
| ** ** | **NEWTON  ACQUISITION, INC.**            |
| ** ** | ** **                               |
| ** ** | ** **                               |
|       | By:                                      | /s/ | David Spuria |   |
|       | Name:                                    | David Spuria |
|       | Title:                                   | Vice President |
|       |                                     |
|       |                                     |
| ** ** | **NEWTON  ACQUISITION MERGER SUB, INC.** |
| ** ** | ** **                               |
| ** ** | ** **                               |
|       | By:                                      | /s/ | David Spuria |   |
|       | Name:                                    | David Spuria |
|       | Title:                                   | Vice President |
|       |                                     |
|       |                                     |
|       | **EXECUTIVE:**                           |
|       |                                     |
|       |                                     |
|       | /s/ Burton M.  Tansky                    |   |
|       | Name:                                    | Burton M. Tansky |

 

24

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**EXHIBITA**

 
| **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 |   |   |   |   |   |   |   |
|                                                                  |       |                                  |       |   |   |   |   |   |   |   |   |   |   |
| **Rollover Options**                                             |       |                                  |       |   |   |   |   |   |   |   |   |   |   |
|                                                                  |       |                                  |       |   |   |   |   |   |   |   |   |   |   |
| **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 |   |
|                                                                  |       |                                  |       |   |   |   |   |   |   |   |   |   |   |
| **Tansky Option 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 invested his option spread at closing he would have beenentitled to 5,472.7509 options. To maintain proper leverage, Tansky’s optiongrant under the Management Equity Incentive Plan 7% Pool must be reduced by1,810.4095, which equals the number of shares underlying his Adjusted RolloverOptions minus the number of shares he would have received had he invested cashat closing.

 

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EXHIBIT B

 

GENERAL RELEASE

 

THIS GENERAL RELEASE is entered into between The Neiman Marcus Group, Inc.,a Delaware corporation (“**NMG**”),Newton Acquisition Inc. (together with NMG, the “**NMG Group**”) and Burton M. Tansky (the “**Employee**”) as of the           day of                                ,              .  The NMG Group and the Employee agree asfollows:

 

1.             EmploymentStatus.  The Employee’s employmentwith the NMG Group shall terminate effective as of                              ,                          .

 

2.             Paymentand Benefits.  Upon the effectivenessof the terms set forth herein, NMG shall provide the Employee with the paymentsand benefits set forth in Section 7 of the Employment Agreement betweenNMG and the Employee, dated as of                         (as amended from time to time, the “**EmploymentAgreement**”), or the payments and benefits set forth in Section 3(a) ofthe Change of Control Termination Protection Agreement dated as of April 1,2005, between the Employee and The Neiman Marcus Group, Inc. (the “**CIC Agreement**”).

 

3.             NoLiability.  This Release does notconstitute an admission by the NMG Group, or any of their subsidiaries,affiliates, divisions, trustees, officers, directors, partners, agents, oremployees, or by the Employee, of any unlawful acts or of any violation offederal, state or local laws.

 

4.             Release.  In consideration of the payments and benefitsset forth in Section 7(e) and (f) of the Employment Agreement,the Employee for himself, his heirs, administrators, representatives,executors, successors and assigns (collectively, “**Employee Releasors**”) does hereby irrevocably andunconditionally release, acquit and forever discharge the NMG Group and each oftheir subsidiaries, affiliates, divisions, successors, assigns, trustees,officers, directors, partners, agents, and former and current employees,including without limitation all persons acting by, through, under or inconcert with any of them, including without limitation the MajorityStockholders (as defined in the Management Stockholders’ Agreement dated as of                   among the Employee and the other parties specified therein) and Newton Holding,LLC  (collectively, “**NMG Releasees**”), and each of them from anyand all charges, complaints, claims, liabilities, obligations, promises,agreements, controversies, damages, remedies, actions, causes of action, suits,rights, demands, costs, losses, debts and expenses (including attorneys’ feesand costs) of any nature whatsoever, known or unknown, whether in law or equityand whether arising under federal, state or local law and in particularincluding any claim for discrimination based upon race, color, ethnicity, sex,national origin, religion, disability age (including without limitation underthe Age Discrimination in Employment Act of 1967 as amended by the OlderWorkers Benefit Protection Act (“ADEA”), Title VII of the Civil Rights Act of1964 as amended by the Civil Rights Act of 1991, the Equal Pay Act of 1962, andthe Americans with Disabilities Act of 1990) or any other unlawful criterion orcircumstance, which Employee Releasors had, now have, or may have or claim tohave in the future against each or any of the NMG Releasees by reason of anymatter, cause or thing occurring, done or omitted to be done from the beginningof the world until the date of the execution of this Release; provided, 

 

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however, that nothing herein shall release (i) anyobligation of NMG under Sections 5(c), 7, 16 or 22 of the Employment Agreementor Section 3, 5 or 9 of the CIC Agreement as applicable, (ii) anyobligation of Newton Acquisition, Inc. under Section 5(c) of theEmployment Agreement and Section 10 of the Letter Agreement (as defined inthe Employment Agreement) or (iii) any right of indemnification or todirector and officer liability insurance coverage under any of the company’sorganizational documents or at law under any plan or agreement and applicableto the Employee.

 

In addition, nothing in this Release is intended to interfere with theEmployee’s right to file a charge with the Equal Employment OpportunityCommission in connection with any claim the Employee believes he may haveagainst the NMG Releasees.  However, byexecuting this Release, the Employee hereby waives the right to recover in anyproceeding that the Employee may bring before the Equal Employment OpportunityCommission or any state human rights commission or in any proceeding brought bythe Equal Employment Opportunity Commission or any state human rightscommission on the Employee’s behalf.  Inaddition, this release is not intended to interfere with the Employee’s rightto challenge that his waiver of any and all ADEA claims pursuant to thisRelease is a knowing and voluntary waiver, notwithstanding the Employee’sspecific representation to the NMG Group that he has entered into thisAgreement knowingly and voluntarily.

 

5.             NMGRelease.  The NMG Group on behalf ofitself and its subsidiaries, affiliates, divisions, successors, assigns,officers, directors, agents, partners and current and former employees,including without limitation the Majority Stockholders and Newton Holding, LLC(collectively, the “**Releasors**”)agrees to and does hereby irrevocably and unconditionally release, acquit andforever discharge the Employee, and his heirs, executors, administrators,representatives, successors and assigns (hereinafter collectively referred toas the “**Employee Releasees**”), withrespect to and from any and all charges, complaints, claims, liabilities,obligations, promises, agreements, controversies, damages, remedies, causes ofaction, suits, rights, demands, costs, losses, debts, and expenses (includingattorneys’ fees and costs) of any kind whatsoever, known or unknown, whether inlaw or equity and whether arising under federal, state or local law, which theReleasors had, now have, or may have or claim to have in the future againsteach or any of the Employee Releasees by reason of any matter, course or thingwhatsoever from the beginning of the world until the date of execution of thisRelease; provided, however, that nothing herein shall release theEmployee from (i) obligations or restrictions arising under or referred toor described in the Employment Agreement and nothing herein shall impair theright or ability of NMG to enforce such provisions in accordance with the termsof the Employment Agreement, or (ii) any claims arising out of theEmployee’s fraud or willful misconduct in connection with the conduct of thebusiness of the NMG Group.

 

6.             Bar.  The Employee acknowledges and agrees that ifhe should hereafter make any claim or demand or commence or threaten tocommence any action, claim or proceeding against the NMG Releasees with respectto any cause, matter or thing which is the subject of the release underParagraph 4 of this Release (other than a claim brought under ADEA), thisRelease may be raised as a complete bar to any such action, claim orproceeding, and the applicable NMG Releasee may recover from the Employee allcosts incurred in connection with such action, claim or proceeding, includingattorneys’ fees.  The NMG Groupacknowledges and agrees that if it should hereafter make any claim or demand orcommence or threaten to 

 

2

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commence any action, claim or proceeding against anyof the Employee Releasees with respect to any cause, matter or thing which isthe subject of the release under Paragraph 5 of this Release, this Releasemay be raised as a complete bar to any such action, claim or proceeding, andthe applicable Employee Releasee may recover from NMG all costs incurred inconnection with such action, claim or proceeding, including attorneys’ fees

 

7.             RestrictiveCovenants.  The Employee acknowledgesthat the provisions of Sections 8, 9, 10 and 11 of the Employment Agreementshall continue to apply pursuant to their terms.

 

8.             GoverningLaw.  This Release shall be governedby and construed in accordance with the laws of the State of Texas, withoutregard to conflicts of laws principles.

 

9.             Acknowledgment.  The parties hereto have read this Release,understand it, and voluntarily accept its terms, and the Employee acknowledgesthat he has been advised by NMG to seek the advice of legal counsel beforeentering into this Release, and has been provided with a period of twenty-one(21) days in which to consider entering into this Release.

 

10.           Revocation.  The Employee has a period of seven (7) daysfollowing the execution of this Release during which the Employee may revokethis Release, and this Release shall not become effective or enforceable untilsuch revocation period has expired.  If,within the ten (10) day period following such expiration, NMG or NewtonAcquisition, Inc. fails to execute this Release, then this Release shallbecome null and void and have no force or effect.

 

11.           Counterparts.  This Release may be executed by the partieshereto in counterparts, which taken together shall be deemed one original.

 

3

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IN WITNESS WHEREOF, the parties have executed thisRelease on the date first set forth above.

 
|   |                                |
|--------|-------------------------------------|
|   | Burton M. Tansky                    |
|   |                                |
|   |                                |
|   | Newton  Acquisition, Inc.      |
|   |                                |
|   |                                |
|   | By:                                 |
|   | Title:                              |
|   |                                |
|   |                                |
|   | The Neiman Marcus  Group, Inc. |
|   |                                |
|   |                                |
|   | By:                                 |
|   | Title:                              |

 

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