**EXHIBIT 10.25**

 

**AMENDMENT TO EMPLOYMENT AGREEMENT**

 

This Amendmentto Employment Agreement (the “Amendment”) is made and entered into effective asof January 1, 2009, by and between The Neiman Marcus Group, Inc., aDelaware corporation (“NMG”) and Karen Katz (the “Executive”).

 

W I T NE S S E T H:

 

WHEREAS, NMGand the Executive entered into an Employment Agreement effective as of October 6,2005 (the “Employment Agreement”); and

 

WHEREAS, NMGand the Executive now desire to amend the Employment Agreement for compliancewith Internal Revenue Code Section 409A and the Treasury Regulationsthereunder, and to make certain other changes;

 

NOW,THEREFORE, in consideration of the premises, the parties do hereby agree asfollows:

 

1.             The last sentence of Paragraph1(c) is hereby deleted in its entirety.

 

2.             Paragraph 1(d) ofthe Employment Agreement is hereby deleted in its entirety, with such paragraphreserved for future use.

 

3.             Paragraph 1(j) ofthe Employment Agreement is hereby amended by the addition of the followingsentence:

 

In addition tothe foregoing, if the Executive experiences a “separation from service” (asdetermined in accordance with Treasury Regulation Section 1.409A-1(h))prior to her termination of employment as a result of action taken by NMG withoutthe consent of the Executive, the separation from service shall constitute “GoodReason” hereunder; provided that the Executive delivers a Notice of Terminationto NMG within 10 days following such separation from service.

 

4.             Paragraph 1(k) ofthe Employment Agreement is hereby amended and restated in its entirety asfollows:

 

(k)  “Management Equity Incentive Plan” means the Neiman Marcus, Inc.Management Equity Incentive Plan (formerly known as the Newton Acquisition, Inc.Management Equity Incentive Plan), adopted November 29, 2005.

 

5.             Paragraph 2 of theEmployment Agreement is hereby amended and restated in its entirety as follows:

 

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2.  Employment. NMG agrees to continue to employ the Executive, and the Executive agreesto continue to be employed, for the period set forth in Paragraph 3, in theposition and with the duties and responsibilities set forth in Paragraph 4, andupon the other terms and conditions set out in this Agreement.  The Executive acknowledges and agrees thatthe terms of the grant of an award pursuant to the Management Equity IncentivePlan shall be governed exclusively by the terms of such grant, including,without limitation, the vesting provisions thereof.  Accordingly, there shall be no acceleration ofvesting as a result of a termination of employment for any reason.

 

6.             Paragraph 4(a) ofthe Employment Agreement is hereby amended and restated in its entirety asfollows:

 

(a)  The Executive shall serve as theChief Executive Officer and President of Neiman Marcus Stores, a division ofNMG (“NMS”) and as an Executive Vice President of NMG.  In such capacity, the Executive, subject tothe ultimate control and direction of the Board, shall have and exercise directcharge of and general supervision over the business and affairs of NMS and overthe strategy, business development and marketing 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 and the Chief Executive Officer ofNMG; provided, however, that such duties, functions, responsibilities, andauthority are reasonable and customary for a person serving in the same orsimilar capacity of an enterprise comparable to NMS.  The Executive shall report and be accountableto the Board and the President and Chief Executive Officer of NMG or theirrespective designees.

 

7.             Paragraph 4(b) ofthe Employment Agreement is hereby amended and restated in its entirety asfollows:

 

(b)  During the Employment Term, theExecutive shall devote her full time, skill, and attention and her best effortsto the business and affairs of NMS and NMG to the extent necessary to dischargefully, faithfully, and efficiently the duties and responsibilities delegatedand assigned to the Executive in or pursuant to this Agreement, except forusual, ordinary, and customary periods of vacation and absence due to illnessor other disability.  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 preceding provisions of 

 

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this paragraph do not significantly interfere with the performance andfulfillment of the Executive’s duties and responsibilities as an executive ofNMS or NMG in accordance with this Agreement.

 

8.             Paragraph 5(a) ofthe Employment Agreement is hereby amended by the addition of the followingsentence:

 

Effective as of January 1, 2009, Base Salary shall be increased by$25,000, in exchange for Executive’s relinquishment of her annual clothingallowance.

 

9.             The first sentence ofParagraph 5(d) (SERP Enhancement) of the Employment agreement is hereby amendedand restated in its entirety as follows:

 

During the Employment Term, the Executive shall continue to accruebenefits under The Neiman Marcus Group, Inc. Supplemental Executive RetirementPlan (the “SERP”), provided that (i) the SERP shall not be amended orterminated in any way that adversely affects the Executive without the consentof Executive, and (ii) after the Executive has reached the 25-year maximumset forth in the SERP, she shall be entitled to an additional one year ofcredit for each full year of service thereafter.

 

10.           Paragraphs 5(d) (EmployeeBenefits) through 5(h) (Indemnification) are hereby redesignatedParagraphs 5(e) through 5(i) respectively.

 

11.           Paragraph 5(f) (FringeBenefits) of the Employment Agreement is hereby amended by the addition of thefollowing sentence:

 

Notwithstanding the preceding, effective as of January 1, 2009,Executive shall no longer receive a clothing allowance.

 

12.           Paragraph 7(a) ofthe Employment Agreement is hereby amended and restated in its entirety asfollows:

 

(a)  Death.  If the Executive’s employment is terminatedby reason of the Executive’s death, NMG shall pay to the Executive’s estatewithin 60 days of the Employment Termination Date (i) any unpaid portionof the Executive’s Base Salary through the Employment Termination Date and anybonus payable for the preceding fiscal year that has otherwise not already beenpaid; provided that the payment of any such bonus may not be delayed past thedate the bonus is payable under the terms of any bonus plan (together, the “CompensationPayment”), (ii) any accrued but unused vacation days (the “VacationPayment”), (iii) any reimbursement for business travel and other expensesto which the Executive is entitled (the “Reimbursement”), and (iv) anamount of annual incentive pay, as described in Paragraph 5(b), equal to aprorated portion of the Target Bonus amount for the year in which theEmployment Termination Date 

 

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occurs (the “Prorated Bonus”). This Paragraph 7(a) does not limit the entitlement of the Executive’sestate or beneficiaries to any death or other vested benefits to which theExecutive may be entitled under any life insurance, stock ownership, stockoptions, or other benefit plan or policy that is maintained by NMG for theExecutive’s benefit.

 

13.           Paragraph 7(b) ofthe Employment Agreement is hereby amended and restated in its entirety asfollows:

 

(b)  Disability.  If the Executive’s employment is terminatedby reason of the Executive’s Disability, NMG shall pay to the Executive within60 days of the Employment Termination Date (i) the Compensation Payment,provided that the payment of the bonus portion of the Compensation Payment maynot be delayed past the date the bonus is payable under the terms of any bonusplan, (ii) the Vacation Payment, (iii) the Reimbursement, and (iv) theProrated Bonus.  This Paragraph 7(b) doesnot limit the entitlement of the Executive to any amounts payable pursuant tothe terms of any applicable disability insurance plan, policy, or similararrangement that is maintained by NMG for the Executive’s benefit.

 

14.           Paragraph 7(c) ofthe Employment Agreement is hereby amended and restated in its entirety asfollows:

 

(c)  Termination by theExecutive Without Good Reason or Following Executive Non-Renewal.  If the Executive’s employment is terminated bythe Executive pursuant to and in compliance with Paragraph 6(e) or byreason of the provision of a Notice of Non-Renewal by the Executive, NMG shallpay to the Executive within 60 days of the Employment Termination Date (i) theCompensation Payment, provided that the payment of the bonus portion of theCompensation Payment may not be delayed past the date the bonus is payableunder the terms of any bonus plan, (ii) the Vacation Payment, and (iii) theReimbursement.

 

15.           Paragraph 7(d) ofthe Employment Agreement is hereby amended and restated in its entirety asfollows:

 

(d)  Termination for Cause.  If the Executive’s employment is terminatedby NMG for Cause, NMG shall pay to the Executive within 60 days of theEmployment Termination Date (i) the Compensation Payment, provided thatthe payment of the bonus portion of the Compensation Payment may not be delayedpast the date the bonus is payable under the terms of any bonus plan, (ii) theVacation Payment, and (iii) the Reimbursement.

 

16.           Paragraph 7(e) ofthe Employment Agreement is hereby amended and restated in its entirety asfollows:

 

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(e)  Termination Without Causeor With Good Reason or Following NMG Notice of Non-Renewal.

 

(i)            If, following the second anniversary of theEffective Date, the Executive’s employment (x) is terminated by NMG duringthe Employment Term for any reason other than death, Disability, or Cause, (y) isterminated by the Executive for Good Reason during the Employment Term, or (z) terminatesupon expiration of the Employment Term following the provision of a Notice ofNon-Renewal by NMG, then NMG shall pay to the Executive within 60 days of theEmployment Termination Date (i) the Compensation Payment, provided thatthe payment of the bonus portion of the Compensation Payment may not be delayedpast the date the bonus is payable under the terms of any bonus plan, (ii) theVacation Payment, and (iii) the Reimbursement.

 

(ii)           In addition, subject to (x) theoccurrence of the conditions in subparagraph (i) above and (y) theExecutive’s execution of a release and waiver of claims against NMG and itsAffiliates in such form as NMG may reasonably require within 45 days of theEmployment Termination Date and provided that the Executive does not revokesuch release and waiver within any revocation period, NMG will:

 

(A) pay to the Executive a lump-sum payment equal to:  the Prorated Bonus, plus an amount equal tothe Executive’s monthly COBRA premium multiplied by six (6), as a supplementfor the cost of post-employment welfare benefits, plus two (2) times thesum of the Base Salary provided for in Paragraph 5(a) and the Target Bonusunder Paragraph 5(b), at the level in effect as of the Employment TerminationDate;

 

(B) in the event Executive’s termination of employment constitutesa “separation from service” under Treasury Regulation Section 1.409A-1(h),and if immediately prior to the Employment Termination Date the Executiveparticipates in group medical or dental coverage offered by NMG and theExecutive is eligible for and elects continued coverage in accordance with theConsolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) or anysuccessor law, reimburse the Executive monthly during the period of COBRAcontinuation coverage for the total amount of the monthly COBRA premiumsactually paid by Executive; and

 

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(C) for a period of 2 years following the Employment TerminationDate, provide the Executive and the Executive’s spouse and dependents lifeinsurance coverage at the same benefit level as provided to Executiveimmediately prior to the Employment Termination Date and at the same cost toExecutive as is generally provided to similarly situated active employees ofNMG.  The amount expended for theprovision of life insurance during a taxable year of the Executive shall notaffect the amount expended for the provision of life insurance in any othertaxable year.

 

(iii)          The payment provided under Paragraph 7(e)(ii)(A) shallbe made (x) in the event the Executive’s termination of employmentconstitutes a “separation from service” under Treasury Regulation Section 1.409A-1(h),on the 65th day following the Employment Termination Date,(y) in the event the Executive does not experience a separation fromservice until after her termination of employment, on the 65th day following such separation from service, or(z) in the event the Executive experiences a separation from service whichconstitutes Good Reason under Paragraph 1(j) prior to her termination ofemployment, on the 65th day following such separation fromservice.  Notwithstanding the foregoing,if the Executive experiences a separation from service which does notconstitute Good Reason under Paragraph 1(j) prior to her termination ofemployment, then the payment due to the Executive under Paragraph 7(e)(ii)(A) shallbe forfeited.

 

(iv)          The Executive shall be required to repay theamounts described in clause (ii)(A), and the benefits described in clauses (ii)(B) and(ii)(C) shall cease if:

 

(A) the Executive receives written notice from NMG that, in thereasonable judgment of NMG, the Executive engaged or is engaging in any conductthat violates Paragraph 8 or engaged or is engaging in any of the RestrictedActivities described in Paragraph 9, unless within 30 days of the date NMG sonotifies the Executive in writing, the Executive provides information to NMGthat NMG determines is sufficient to establish that the Executive did notengage in any conduct that violated Paragraph 8 or engage in any of theRestricted Activities described in Paragraph 9; or

 

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(B) the Executive is arrested or indicted for any felony, otherserious criminal offense, or any violation of federal or state securities laws,or has any civil enforcement action brought against her by any regulatoryagency, for actions or omissions related to her employment with NMG or any ofits Affiliates, or if NMG reasonably believes that the Executive has committedany act or omission, either during her employment under this Agreement or ifrelated to such employment thereafter, that during her employment would haveentitled NMG to terminate her employment for Cause under provisions (i), (ii),(iv), or (vi) of the definition of Cause, and the Executive is foundguilty or enters into a plea agreement, consent decree or similar arrangementwith respect to any such criminal or civil proceedings, or if the Board makes afinding that the Executive has committed such an act or omission.  If any such criminal or civil proceedings donot result in a finding of guilt or the entry of a plea agreement or consentdecree or similar arrangement, or if the Board makes a finding that theExecutive has not committed such an act or omission, the Executive shall not berequired to repay any amounts hereunder.

 

17.           Paragraph 7(f) ofthe Employment Agreement is hereby deleted in its entirety, with such paragraphreserved for future use.

 

18.           Paragraph7(h) of the Employment Agreement is hereby amended and restated in its entiretyas follows:

 

(h)  Offset.  The Executive agrees that NMG may set offagainst, and she authorizes NMG to deduct from, any payments due to theExecutive, or to her heirs, legal representatives, or successors, as a resultof the termination of the Executive’s employment any specified amounts whichmay be due and owing to NMG by the Executive, whether arising under thisAgreement or otherwise; provided, however, that no offset is allowed against paymentsto the Executive which are subject to Code Section 409A.

 

19.           Paragraph 12 of theEmployment Agreement is hereby amended and restated in its entirety as follows:

 

12.  Assistance in Litigation.  After the Employment Term and for the life ofthe Executive, the Executive shall, upon reasonable notice, furnish suchinformation and assistance to NMG or any of its Affiliates as may reasonably berequested by NMG in connection with any litigation in which NMG or any of itsAffiliates is, or may become, a party. NMG shall reimburse the Executive for all reasonable out-of-pocketexpenses, 

 

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including travel expenses, meals and lodging, incurred by the Executivein rendering such assistance, but shall have no obligation to compensate theExecutive for her time in providing information and assistance in accordancewith this Paragraph 12.  The Executiveshall provide to NMG a receipt or voucher for any reimbursable expense within60 days of the occurrence of such expense. Any such reimbursement shall be made as soon as administrativelypossible, but in any event no later than 10 business days following receipt ofsuch receipt or voucher.  Further, theamount of expenses eligible for reimbursement during the Executive’s taxableyear shall not affect the expenses eligible for reimbursement in any othertaxable year.

 

20.           Paragraph 13(b) ofthe Employment Agreement is hereby amended and restated in its entirety asfollows:

 

(b)  Notwithstanding anything tothe contrary contained herein, in the event the Executive is a “specifiedemployee” (as defined below) and is entitled to receive a payment on separationfrom service that is subject to Code Section 409A, the payment may not bemade earlier than six months following the date of the Executive’s separationfrom service if required by Code Section 409A and the regulationsthereunder, in which case, the accumulated postponed amount shall be paid in alump sum payment within ten (10) days after the end of the six-monthperiod.  If the Executive dies during thepostponement period prior to the payment of the postponed amount, the amountswithheld on account of Code Section 409A shall be paid to the personalrepresentative of the Executive’s estate within 60 days after the date of theExecutive’s death.  A “specified employee”shall mean an employee who, at any time during the 12-month period ending onthe identification date, is a “specified employee” under Code Section 409A,as determined by the Board.  Thedetermination of “specified employees,” including the number and identity ofpersons considered “specified employees” and the identification date, shall bemade by the Board in accordance with the provisions of Code Sections 416(i) and409A and the regulations issued thereunder.

 

21.           Paragraph 13 of theEmployment Agreement is hereby amended by the addition of the following assubparagraph 13(c):

 

(c)  Notwithstanding anything to thecontrary contained herein, this Agreement is intended to satisfy therequirements of Code Section 409A. Accordingly, all provisions herein, or incorporated by reference, shallbe construed and interpreted to satisfy the requirements of Code Section 409A.  Further, for purposes of Code Section 409A,each payment of compensation under this Agreement shall be treated as aseparate payment of compensation.  Anyreimbursements or in-kind benefits provided under this Agreement shall be madeor provided in accordance with the requirements of Code Section 409A,including, where applicable, the 

 

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requirement that (i) any reimbursement is for expenses incurredduring the period of time specified in this Agreement, (ii) the amount ofexpenses eligible for reimbursement, or in kind benefits provided, during acalendar year may not affect the expenses eligible for reimbursement, or inkind benefits to be provided, in any other calendar year, (iii) thereimbursement of an eligible expense will be made no later than the last day ofthe calendar year following the year in which the expense is incurred, and (iv) theright to reimbursement or in kind benefits is not subject to liquidation orexchange for another benefit.  Allreferences to “separation from service” contained in this Agreement shall mean “separationfrom service” as determined in accordance with Treasury Regulation Section 1.409A-1(h).

 

22.           Paragraph 16 of theEmployment Agreement is hereby amended and restated in its entirety as follows:

 

16.  Excise Tax Provisions inConnection with a Change of Control. If, after the Effective Date, there occurs a transaction thatconstitutes a “change of control” under Treasury Regulation Section 1.280G-1and, immediately prior to the consummation of such change of control, NMG is anentity whose stock is readily tradable on an established securities market (orotherwise) such that the exemption for non-public companies is not available,the following provisions will apply:

 

(a)  In the event it shall be determinedthat any payment, benefit or distribution (or combination thereof) by NMG, orany of its Affiliates, to or for the benefit of the Executive (whether paid orpayable or distributed or distributable pursuant to the terms of thisAgreement, or otherwise) which must be taken into account under Section 280Gof the Code in determining the amount of any “parachute payment” (each a “Payment”and collectively the “Payments”) 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(a), if it shall be determined that Executive is entitledto a Gross-Up Payment, but that the Payments do 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 

 

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be reduced so that the Payments, in the aggregate, is reduced to theSafe Harbor Amount.  The reduction of the amounts payable hereunder, ifapplicable, shall be made by first reducing those Payments provided underParagraph 7(e)(ii)(A) and, if needed, such additional Payments that arenot subject to Code Section 409A.

 

(b)  All determinations required to bemade under this Paragraph 16, including whether and when a Gross-UpPayment is required and the amount of such Gross-Up Payment and the assumptionsto be utilized in arriving at such determination, shall be made by a nationallyrecognized accounting firm selected by NMG (the “Accounting Firm”) which shallprovide detailed supporting calculations both to NMG and the Executive withinten business days of the receipt of notice from Executive that there has been aPayment, or such earlier time as is requested by NMG.  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 theExecutive’s behalf) when the applicable tax is due.  If the AccountingFirm determines that no Excise Tax is payable by the Executive, it shall soindicate to the Executive in writing.  Any determination by the AccountingFirm shall be binding upon NMG and the Executive.  As a result of theuncertainty in the application of Section 4999 of the Code, it is possiblethat the amount of the Gross-Up Payment determined by the Accounting Firm to bedue to (or on behalf of) the Executive will be lower than the amount actuallydue (“Underpayment”).  In the event that NMG exhausts its remediespursuant to Paragraph 16(c) and the Executive thereafter is requiredto make a payment of any Excise Tax, the Accounting Firm shall determine theamount of the Underpayment that has occurred and any such Underpayment shall bepromptly paid by NMG to or for the benefit of Executive within 10 business daysafter receipt of the Accounting Firm’s determination.  In no event shall the Gross-Up Payment or theUnderpayment be made later than the end of the Executive’s taxable year nextfollowing the Executive’s taxable year in which the related taxes are remittedto the taxing authority.

 

(c)  The Executive shall notify NMG inwriting of any claim by the Internal Revenue Service that, if successful, wouldrequire the payment by NMG of any Gross-Up Payment.  Such notificationshall be given as soon as practicable but no later than ten business days afterthe Executive is informed in writing of such claim and shall apprise NMG of thenature of such claim and the date on which such claim is requested to bepaid.  The Executive shall not pay such claim prior to the expiration ofthe thirty day period following the date on which it gives such notice to NMG(or such shorter period ending on the date that any payment of taxes withrespect to such claim is due).  If NMG notifies the Executive in writingprior to the expiration of such period that it desires to contest such claim,the 

 

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Executive shall (i) give NMG any information reasonably requestedby NMG relating to such claim, (ii) take such action in connection withcontesting such claim as NMG shall reasonably request in writing from time totime, including, without limitation, accepting legal representation withrespect to such claim by an attorney reasonably selected by NMG, (iii) cooperatewith NMG in good faith in order to effectively contest such claim and (iv) permitNMG to participate in any proceedings relating to such claim; provided,however, that NMG shall bear and pay directly all costs and expenses (includingadditional interest and penalties) incurred in connection with such contest andshall indemnify and hold the Executive harmless, on an after-tax basis, for anyExcise Tax or income tax (including interest and penalties with respectthereto) imposed as a result of such representation and payment of costs andexpenses.  The payment of costs andexpenses shall be made within 10 business days after they are incurred and anyreceipts, if any, are submitted to NMG, but in any event no later than the endof the Executive’s taxable year following the Executive’s taxable year in whichthe taxes that are the subject of the contest are remitted to the taxingauthority, or where as a result of such contest no taxes are remitted, the endof the Executive’s taxable year following the Executive’s taxable year in whichthe audit is completed or there is a final and nonappealable settlement orother resolution of the litigation.  AnyExcise Taxes or income taxes imposed as a result of such representation andpayment of costs and expenses shall be reimbursed to the Executive within 10business days after they are incurred but in any event no later than the end ofthe Executive’s taxable year next following the Executive’s taxable year inwhich the Executive remits the related taxes.  Without limitation on theforegoing provisions of this Paragraph 16(c), 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 amount.  Any Excise Taxes or income taxes imposed as aresult of such advance shall be reimbursed to the Executive within 10 

 

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business days after they are incurred but in any event no later thanthe end of the Executive’s taxable year next following the Executive’s taxableyear in which the Executive remits the related taxes.  NMG’s control ofthe contest shall be limited to issues with respect to which a Gross-Up Paymentwould be payable hereunder and the Executive shall be entitled to settle orcontest, as the case may be, any other issue raised by the Internal RevenueService or any other taxing authority.

 

(d)  If, after the receipt by theExecutive of an amount paid or advanced by NMG pursuant to thisParagraph 16, the Executive becomes entitled to receive any refund withrespect to a Gross-Up Payment, the Executive shall (subject to NMG’s complyingwith the requirements of Paragraph 16(c)) promptly pay to NMG the amountof such refund received (together with any interest paid or credited thereonafter taxes applicable thereto).  If, after the receipt by the Executiveof an amount advanced by NMG pursuant to Paragraph 16(c), a determinationis made that the Executive shall not be entitled to any refund with respect tosuch claim and NMG does not notify the Executive in writing of its intent tocontest such denial of refund prior to the expiration of thirty days after suchdetermination, then such advance shall be forgiven and shall not be required tobe repaid and the amount of such advance shall offset, to the extent thereof,the amount of the Gross-Up Payment required to be paid.

 

23.           Paragraph 24 of theEmployment Agreement is hereby amended and restated in its entirety as follows:

 

24.  Entire Agreement. This Agreement contains the entire agreement between the partiesconcerning the subject matter hereof and supersedes all other prior agreementsand understandings, written and oral, between the parties with respect to thesubject matter of this Agreement, including, but not limited to, theConfidentiality, Non-Competition and Termination Benefits Agreement dated November 20,2002 between the Executive and NMG.

 

24.           The Employment Agreement is hereby amended bythe addition of the following as Paragraph 29:

 

29.  Section 162(m).  The parties hereto recognize that NMGis not currently subject to Section 162(m) of the Code but that it maybecome subject to said section during the term of this Agreement.  In such event, NMG retains the right to amendthe provisions of this Agreement that impact, relate to or reference NMG’sannual bonus program if NMG determines that such an amendment would benecessary or appropriate to ensure that any performance-based compensationpayable under a new bonus plan satisfies the requirements for exemption under Section 162(m) ofthe Code, provided, however, that any such amendment provides the 

 

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Executive at least thesame economic benefit under this Agreement as she had prior to the amendment.

 

25.           The Executive and NMGacknowledge that this Amendment does not eliminate or reduce the obligations ofeither party under any portion of Paragraph 8 or Paragraph 9 of the EmploymentAgreement.  Moreover, with respect toParagraph 8(b) of the Employment Agreement, NMG continues to acknowledgeand agree that the Executive must have and continue to have throughout heremployment the benefits and use of its and its Affiliates’ (as defined in theEmployment Agreement) goodwill and Confidential Information (as defined in theEmployment Agreement) in order to properly carry out her responsibilities.  NMG accordingly promises upon execution anddelivery of this Amendment to provide the Executive immediate access to new andadditional Confidential Information beyond the Confidential Information towhich she previously has been provided access and to authorize her to engage inactivities that will create new and additional Confidential Information notcurrently in existence.

 

26.           Except as otherwisespecifically set forth herein, all other terms and conditions of the EmploymentAgreement shall remain in full force and effect.

 

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IN WITNESS WHEREOF, NMG has caused this Amendment to be executed on itsbehalf by its duly authorized officer, and the Executive has executed thisAmendment, on this the 22nd dayof December, 2008.

 
| ** ** | ** ** | **  THE NEIMAN MARCUS GROUP, INC.** |
|------------|------------|-----------------------------------------------|
|       |       |                                          |
|       | By:        |   /s/  Marita O’Dea  |
|       | Its:       |   Senior Vice President and         |
|       |       |   Chief Human Resource Officer      |
|       |       |                                          |
| ** ** | ** ** | **  EXECUTIVE**                     |
|       |       |                                          |
|       |       |   /s/  Karen W. Katz      |

 

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