Exhibit 10.5


 


AMENDMENT TO LETTER AGREEMENT


 


This Amendment
to Letter Agreement (the “Amendment”) is made effective as of January 1,
2009, by and between Neiman Marcus, Inc., a Delaware corporation (formerly
known as Newton Acquisition, Inc.) (the “Company”) and Burton M. Tansky (“Tansky”).


 


W I T N E S S E T H:


 


WHEREAS, the
Company and Tansky entered into a letter agreement dated October 4, 2005,
regarding the opportunity to acquire shares and options (the “Letter Agreement”);
and


 


WHEREAS, the
Company and Tansky now desire to amend the Letter Agreement for compliance with
Internal Revenue Code Section 409A and the Treasury Regulations
thereunder;


 


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


 


1.             Section 7(c) of the
Letter Agreement is hereby amended and restated in its entirety as follows:


 


(c)  If, after the Closing Date but prior to the existence of
a Public Market, Newco or Newton Holding, LLC (“Newton LLC”) proposes to
issue additional shares of common stock of Newco or membership interests of
Newton LLC in an arm’s length transaction (in each case with the exception of
any issuance in connection with any merger, acquisition or similar corporate
event or to employees pursuant to an employee incentive plan), Newco or Newton
LLC, as applicable, shall provide written notice (the “Issuance Notice”)
to you of such anticipated issuance no later than ten (10) days prior to
the anticipated issuance date.  The Issuance Notice shall set forth the
material terms and conditions of the issuance, including the proposed purchase
price for the new shares of common stock of Newco or membership interests of
Newton LLC.  You shall have the right, upon receipt of the Issuance
Notice, to purchase additional shares of common stock of Newco up to your pro
rata portion (based on the number of shares of common stock of Newco you own
immediately prior to such issuance), at the price and on the terms and
conditions specified in the Issuance Notice by delivering an irrevocable
written notice to Newco no later than five (5) days before the anticipated
issuance date, setting out the number of new shares of common stock of Newco
for which the right is exercised; provided that if the issuance is of
membership interests in Newton LLC, your pro rata portion shall be calculated
as if the shares of common stock of Newco held by you and all 


 

















 


other holders
of the shares of common stock of Newco (other than Newton LLC) were converted
into membership interests in Newton LLC and you held such membership interests
together with all of the holders of membership interests in Newton LLC on the
date the notice was delivered.  If you fail to exercise all or a portion
of your preemptive rights, Newco or Newton LLC, as applicable, shall be
permitted to complete the proposed issuance without any further notice or
action related to the rights provided in this Section 7(c).  In the
event that Newton LLC proposes to issue new membership interests, Newton LLC
and Newco may determine, in their sole discretion, to permit you to exercise
your preemptive rights to purchase membership interests in Newton LLC rather
than additional shares of common stock of Newco.


 


2.             Section 10 of the Letter
Agreement is hereby amended and restated in its entirety as follows:


 


10.           Section 409A of the Code;
Other Tax Provisions.  If Newco
receives the advice of counsel selected by Newco and reasonably acceptable to
you that any payment or distribution with respect to the Rollover Shares or
Rollover Options (or the Shares and Newco Options you receive as a result of
rolling over the Rollover Shares or Rollover Options) or the conversion of the
Rollover Shares or Rollover Options into Shares and Newco Options pursuant to
the terms of this Agreement (the “Payment”) would result in the imposition
of a 20% additional tax pursuant to Section 409A of the Code, Newco shall
have the right to make such modifications or amendments to Shares and/or Newco
Options as are reasonably necessary to avoid the application of Section 409A
of the Code, after consultation with you and your counsel.  In making any
such amendments or modifications, Newco shall take all steps to put you in
substantially the same economic position as you would have been in had such
modifications or amendments not been made, to the extent reasonably
practical.  You hereby stipulate that Cleary Gottlieb Steen and Hamilton
LLP is acceptable counsel for purposes of this Section 10.  If, after
giving effect to any such modifications or amendments, any Payment results in
the imposition of an 20% additional tax, penalties and interest under Section 409A
of the Code, Newco will pay you an additional amount (the “Gross-Up Payment”)
such that the net amount retained by you after deduction of any 20% additional
tax imposed under Section 409A of the Code, and any federal, state and
local income, employment and excise tax imposed upon any Gross-Up Payment shall
be equal to such 20% additional tax, penalties and interest.  The Gross-Up Payment shall be paid to you
within ten (10) business days of you providing notice to NMG that the related
taxes are due, but in no event later than the end of your taxable year next
following the taxable year in which such related taxes are remitted.


 


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In addition, the parties hereto expect that the rollover will be
treated for federal income tax purposes as a tax-free rollover.  In the
event the Internal Revenue Service challenges the structure of the rollover of
your Rollover Shares or Rollover Options into Newco Equity, as set forth
herein, the parties shall use their reasonable efforts and take reasonable
actions to minimize any adverse tax treatment, including, without limitation,
exercising Options.  If, after taking all reasonable and appropriate
actions, you incur penalties or interest during your lifetime as a result of
the Internal Revenue Service’s challenge, Newco will indemnify you for such
penalties and interest on a net after-tax basis as described in the preceding
paragraph.  Any such payment or
reimbursement shall be made within ten (10) business days of you providing
notice to NMG that such penalties and interest have been incurred, but in any
event no later than the last day of your taxable year following the taxable
year in which the expense was incurred. 
Further, the amount of penalties or interest eligible for payment or
reimbursement during a taxable year shall not affect the amount eligible for
payment or reimbursement in any other taxable year.


 


3.             Except as otherwise specifically
set forth herein, all other terms and conditions of the Letter Agreement shall
remain in full force and effect.


 


IN WITNESS
WHEREOF, the parties hereto have caused this Amendment to be executed on this
the 28 day of December, 2008.


 


	
   

  	
   

  	
   

  	
    NEIMAN
  MARCUS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Nelson
  A. Bangs

  
	
   

  	
   

  	
  Its:

  	
  Senior Vice
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
    /s/
  Burton M. Tanksy

  



 


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