**EXHIBIT 10.18**

 

**AMENDMENT TO THE**

**NEWTON ACQUISITION, INC.**

**MANAGEMENT EQUITY INCENTIVE PLAN**

 

This Amendmentto the Newton Acquisition, Inc. Management Equity Incentive Plan (the “Amendment”)is made effective as of January 1, 2009, with respect to all Optionsoutstanding as of such date and granted on or after such date, by Neiman Marcus, Inc.,a Delaware corporation (formerly known as Newton Acquisition, Inc.) (the “Company”).

 

W I T N E S SE T H:

 

WHEREAS, theCompany established the Newton Acquisition, Inc. Management EquityIncentive Plan (the “Plan”) effective as of November 29, 2005; and

 

WHEREAS, theCompany now desires to amend the Plan and the Options issued thereunder forcompliance with Internal Revenue Code Section 409A and the TreasuryRegulations thereunder, and to make certain other changes;

 

NOW,THEREFORE, pursuant to the authority reserved in Section 4.12, the Plan isamended as follows:

 

1.                                       ThePlan is hereby amended to be the Neiman Marcus, Inc. Management EquityIncentive Plan.

 

2.                                       Section 2(b) ofthe Plan is hereby amended and restated in its entirety as follows:

 

(b)  “Affiliate” shall mean any corporation in a chain ofcorporations in which each corporation has a controlling interest (asdetermined in accordance with Treas. Reg. § 1.409A-1(b)(5)(iii)(E)) in anothercorporation in the chain beginning with the Company and ending with suchcorporation.

 

3.                                       Section 2(i) ofthe Plan is hereby amended and restated in its entirety as follows:

 

(i)  “Company” shall mean Neiman Marcus, Inc.

 

4.                                       Section 2(q) ofthe Plan is hereby amended and restated in its entirety as follows:

 

(q)  “Fair Market Value” shall mean, as of any date:

 

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a.                                       forCommon Stock not readily tradable on an established securities market (asdetermined in accordance with Treas. Reg. §§ 1.409A-1(b)(5)(vi)(G) and1.409A-1(k)), the value per share of Common Stock as determined in good faithby the Board and based upon the reasonable application of a reasonablevaluation method in accordance with Treas. Reg. § 1.409A-1(b)(5)(iv)(B); or

 

b.                                      for Common Stockreadily tradable on an established securities market (as determined inaccordance with Treas. Reg. §§ 1.409A-1(b)(5)(vi)(G) and 1.409A-1(k)), (i) theclosing price on such day of a share of Common Stock as reported on theprincipal securities exchange on which shares of Common Stock are then listedor admitted to trading or (ii) if not so reported, the average of theclosing bid and ask prices on such day as reported on the National Associationof Securities Dealers Automated Quotation System or (iii) if not soreported, as furnished by any member of the National Association of SecuritiesDealers, Inc. (“NASD”) selected by the Board.  The Fair MarketValue of a share of Common Stock as of any such date on which the applicableexchange or inter-dealer quotation system through which trading in the CommonStock regularly occurs is closed shall be the Fair Market Value determinedpursuant to the preceding sentence as of the immediately preceding date onwhich the Common Stock is traded, a bid and ask price is reported or a tradingprice is reported by any member of NASD selected by the Board.  In theevent that the price of a share of Common Stock shall not be so reported orfurnished, the Fair Market Value shall be determined in good faith by the Boardand based upon any other reasonable method using actual transactions in suchCommon Stock as reported by any member of NASD selected by the Board.  However, in no event shall the Fair MarketValue of Common Stock readily tradable on an established securities market bedetermined in a manner which fails to satisfy the requirements of Treas. Reg. §1.409A-1(b)(5)(iv)(A).

 

5.                                       Section 2(s) ofthe Plan is hereby amended and restated in its entirety as follows:

 

(s)  “Good Reason”shall mean any of the following actions if taken without the Participant’sprior written consent:  (i) a materialdiminution in a Participant’s duties and responsibilities other than a changein such Participant’s duties and responsibilities that results from becomingpart of a larger organization following a Change of Control, (ii) amaterial decrease in a Participant’s base compensation other than a decrease inbonus opportunity or benefits that applies to all employees of 

 

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the Company or its Affiliates otherwise eligible to participate in theaffected plan or (iii) a relocation of a Participant’s primary worklocation more than 50 miles from the Participant’s work location on the GrantDate; provided that, within thirty days following the initial occurrence of anyof the events set forth herein, the Participant shall have delivered writtennotice to the Company of his or her intention to terminate his or herEmployment for Good Reason, which notice specifies in reasonable detail thecircumstances claimed to give rise to the Participant’s right to terminateEmployment for Good Reason, the Company shall not have cured such circumstanceswithin thirty days following the Company’s receipt of such notice, and theParticipant actually terminates Employment for Good Reason within ninety daysof the initial occurrence of the event constituting Good Reason.

 

6.                                       Section 2(w) ofthe Plan is hereby amended and restated in its entirety as follows:

 

(w)  “Majority Stockholder” shall mean, collectively or individuallyas the context requires, Newton Holding, LLC, TPG Newton III, LLC, TPG PartnersIV, L.P., TPG Newton Co-Invest I, LLC, Warburg Pincus Private Equity VIII,L.P., Warburg Pincus Netherlands Private Equity VIII C.V. I, Warburg PincusGermany Private Equity VIII K.G, Warburg Pincus Private Equity IX, L.P and/ortheir respective affiliates.

 

7.                                       Thesecond paragraph of Section 3.4 of the Plan is hereby amended and restatedin its entirety as follows:

 

The Company may, in its discretion, defer theeffectiveness of an exercise of an Option hereunder or the issuance or transferof Common Stock pursuant to any Grant to ensure compliance under federal orstate securities laws, provided that the Company shall take anycommercially reasonable steps to reduce or eliminate any restrictions requiringsuch a period of deferral (it being understood that this proviso shall in noevent obligate the Company or its Affiliates to file a registration statement)and that such a period of deferral not exceed more than 30 days after suchexercise, issuance or transfer would no longer violate federal or statesecurities laws.  The Company shallinform the Participant in writing of its decision to defer the effectiveness ofthe exercise of an Option or the issuance or transfer of Common Stock pursuantto any Grant.  During the period that theeffectiveness of the exercise of an Option has been deferred, the Participantmay, by written notice, withdraw such exercise and obtain the refund of anyamount paid with respect thereto.

 

8.                                       Thelast sentence of Section 4.4(a) is hereby amended and restated in itsentirety as follows:

 

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Unless theCommittee provides otherwise, the vesting of an Option granted under this Planmay be suspended during any leave of absence as may be set forth by Companypolicy, if any; provided that any such suspension occur during the originalterm of the Option.

 

9.                                       Section 4.13(a) ofthe Plan is hereby amended and restated in its entirety as follows:

 

(a)  Stock Split or Stock Dividend.  Subject to anyrequired action by the stockholders of the Company, in the event of a stocksplit (including a reverse stock split) or stock dividend (but only on theshares of Common Stock) the only effect of which is to increase (or decrease)on a pro rata basis the number of shares of Common Stock owned by eachstockholder, the Board shall proportionally adjust the Exercise Price andnumber of shares of Common Stock subject to an Option to reflect the stocksplit or stock dividend; provided that the aggregate exercise price of anOption is not less than the aggregate Exercise Price before the stock split orstock dividend.

 

10.                                 Section 4.13(b) ofthe Plan is hereby deleted in its entirety, with such paragraph reserved forfuture use.

 

11.                                 Section 4.13(c) ofthe Plan is hereby amended and restated in its entirety as follows:

 

(c) Substitution, Assumption or Cash-out.  Inthe event of a corporate transaction (as defined in Treas. Reg. §1.424-1(a)(3)), the Board shall either provide for the substitution orassumption of the Options in accordance with Treas. Reg. § 1.409A-1(b)(5)(v)(D),and/or, if appropriate, cancel, effective immediately prior to such corporatetransaction, any outstanding Option (whether or not exercisable or vested) andin full consideration of such cancellation pay to the Participant an amount incash, with respect to each underlying share of Common Stock, equal to theexcess of (1) the value, as determined by the Board in its discretion, ofsecurities and/or property (including cash) received by such holders of sharesof Common Stock as a result of such corporate transaction over (2) theExercise Price.

 

12.                                 Section 4.13(d) ofthe Plan is hereby amended and restated in its entirety as follows:

 

(d)  Extraordinary Dividends.  In the event the Companydeclares and pays an extraordinary cash dividend, (i) with respect tounvested Options then outstanding on the date such extraordinary cash dividendis paid, the Company shall pay to the Participant a cash bonus equal to theamount that he would have received pursuant to such dividend payment if 

 

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he owned theShares underlying his then outstanding unvested Options within 30 days of thedate such unvested Options vest, and (ii) with respect to Options whichbecome vested on or prior to the date such extraordinary cash dividend is paid,whether or not such Options have been exercised, the Company shall pay to theParticipant a cash bonus equal to the amount that he would have receivedpursuant to such dividend payment if he owned the Shares underlying such vestedOptions granted to him within 30 days of the date such extraordinary cashdividend is paid; provided, however, that Options which have expired pursuantto Section 4.5 of the Plan or the terms of the Stock Option GrantAgreement shall not be taken into consideration for purposes of this Section 4.13(d).  Notwithstanding the previous sentence, this Section 4.13(d) shallcease to be effective immediately following the earlier to occur of a Change inControl or an Initial Public Offering. In the event it is determined that such payments do not comply with Section 409Aor adversely effect the Options, the Company and the Option holder shall usetheir reasonable efforts and take reasonable actions necessary to bring suchpayments into compliance with Section 409A to the extent reasonablypracticable.

 

13.                                 Section 4.13(e) ofthe Plan is hereby amended and restated in its entirety as follows:

 

(e)  Other Changes.  In theevent of any change in the capitalization of the Company or a corporate changeother than those specifically referred to in Sections 4.13(a) or (c) hereof,the Board shall make such adjustments in the number and kind of shares or securitiessubject to Options outstanding on the date on which such change occurs and inthe per-share Exercise Price of each such Option as the Board may considerappropriate in its discretion to prevent dilution or enlargement of rights;provided that no adjustment shall be made to the extent such adjustment wouldbe a modification or extension of the Option under Treas. Reg. § 1.409A-1(b)(5)(v) whichcauses the Option to constitute a deferral of compensation under Treas. Reg. §1.409A-1(b)(5)(i).

 

14.                                 Section 4.13(g) ofthe Plan is hereby deleted in its entirety, with such paragraph reserved forfuture use.

 

15.                                 ThePlan is hereby amended by the addition of the following as Section 5.9:

 

5.9  Code Section 409A.  Itis the intent of the Company that any Option granted under this Plan not besubject to the tax imposed by Code Section 409A, and the Plan shall beadministered and construed to the fullest extent possible to reflect andimplement such intent.

 

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16.                                 Exceptas otherwise specifically set forth herein, all other terms and conditions ofthe Plan shall remain in full force and effect.

 

IN WITNESSWHEREOF, the Company has caused this Amendment to be executed on its behalf byits duly authorized officer on this the 10th dayof November, 2008.

 

 
| ** ** | ** ** | ** ** | **  NEIMAN  MARCUS, INC.** |
|------------|------------|------------|--------------------------------------|
| ** ** | ** ** | ** ** | ** **                           |
| ** ** | ** ** | ** ** | ** **                           |
|       |       | By:        | /s/ Nelson  A. Bangs                 |
|       |       |       |   Nelson  A. Bangs         |
|       |       |       |   Senior  Vice President   |

 

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