Document:

Exhibit 10.44

 

TIER II

 

Form of

 

CHANGE OF CONTROL TERMINATION PROTECTION
AGREEMENT

 

AGREEMENT effective
April 1, 2005 between The Neiman Marcus Group, Inc. and                                  (the
“Executive”).

 

Executive is a skilled and dedicated employee who has important
management responsibilities and talents which benefit the Company.  The Company believes that its best interests
will be served if Executive is encouraged to remain with the Company or its
Subsidiaries.  The Company has determined
that Executive’s ability to perform Executive’s responsibilities and utilize
Executive’s talents for the benefit of the Company, and the Company’s ability
to retain Executive as an employee, will be significantly enhanced if Executive
is provided with fair and reasonable protection from the risks of a change in
control of the Company.  Accordingly, the
Company and Executive agree as follows:

 

1.             Defined Terms.

 

Unless otherwise indicated, capitalized terms used in this Agreement
which are defined in Schedule A shall have the meanings set forth in Schedule A.

 

2.             Effective Date;
Term.

 

This Agreement shall be effective as of April 1, 2005 (the “Effective
Date”) and shall remain in effect until April 1, 2007 (the “Term”); provided,
however, that commencing with April 1, 2006 and on each anniversary
thereof (each an “Extension Date”), the Term shall be automatically
extended for an additional one-year period, unless the Company or Executive
provides the other party hereto at least 60 days’ prior written notice
before the applicable Extension Date that the Term shall not be so
extended.  Notwithstanding the foregoing,
this Agreement and the Term shall, if in effect on the date of a Change of
Control, remain in effect for two years following the Change of Control.

 

3.             Change of Control
Benefits.

 

Upon the occurrence of a Change of Control during the Term, any time
periods, conditions or contingencies relating to the exercise or realization
of, or lapse of restrictions under, any outstanding equity incentive award then
held by Executive shall be automatically accelerated or waived effective as of
the date of the Change of Control; provided, however, that in the
event any such outstanding equity incentive award is replaced as of the
occurrence of the Change of Control by comparable types of awards of greater or
at least substantially equivalent value, as determined in the sole discretion
of the administrator of the equity incentive award plan under which the
outstanding award was granted, no such automatic acceleration or waiver shall
occur, except to the extent the administrator of the applicable equity
incentive award plan, in its sole discretion, provides for such acceleration or
waiver, or unless such acceleration or waiver is

 

 

expressly provided for in connection with such replacement or under the
terms of the applicable award agreement.

 

If Executive’s employment with the Company and its Subsidiaries is
terminated at any time within two years following a Change of Control by the
Company and any of its Subsidiaries without Cause or by Executive for Good
Reason (the effective date of either such termination hereafter referred to as
the “Termination Date”), Executive shall be entitled to, and the Company
shall be required to provide, subject to Executive’s execution of a general
release in favor of the Company substantially in the form attached hereto as
Exhibit A (the “Release”) (which Release is not revoked by
Executive), the payments and benefits provided hereafter in this Section 3
and as set forth in this Agreement.  If
Executive’s employment by the Company and any of its Subsidiaries is terminated
prior to a Change of Control by the Company and any of its Subsidiaries without
Cause in connection with or in anticipation of such Change of Control at the
request of, or upon the initiative of, the buyer in the Change of Control
transaction (an “Anticipatory Termination”), Executive shall be entitled
to, and the Company shall be required to provide, subject to Executive’s
execution of the Release (which Release is not revoked by Executive), the
benefits provided hereafter in Section 3 and as otherwise set forth in
this Agreement (but only if an anticipated Change of Control actually occurs
during the Term) and Executive’s Termination Date shall be deemed to have
occurred immediately following the Change of Control.

 

Notice of termination without Cause or for Good Reason shall be given
in accordance with Section 13, and shall indicate the specific termination
provision hereunder relied upon, the relevant facts and circumstances and the
Termination Date.

 

a.             Severance Payments.  Within the later of (i) 15 business days
after the Termination Date or (ii) the expiration of the revocation
period, if applicable, under the Release (the “Payment Period”), except
with respect to any additional bonus amount payable after the Payment Period to
the extent required pursuant to clause (3) below, the Company shall pay
Executive a cash lump sum equal to:

 

(1)           the Severance Multiple times
the greater of Executive’s Base Salary in effect (i) immediately prior to
the date of the Change of Control or (ii) immediately prior to the event
set forth in the notice of termination giving rise to the Termination Date; and

 

(2)           the Severance Multiple times
the Target Bonus; and

 

(3)           Executive’s Target Bonus
multiplied by a fraction, the numerator of
which shall equal the number of days Executive was employed by the Company or
any of its Subsidiaries in the Company fiscal year in which the Executive’s
termination occurs and the denominator of which shall equal 365 (the “Bonus
Fraction”); provided that if the Termination Date occurs after more
than 75% of the Company’s fiscal year has elapsed, then, if it is ultimately

 

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determined
that the Bonus Executive would have been entitled to receive for the fiscal
year in which such Termination Date occurs, determined based solely upon actual
Company performance for such fiscal year and excluding any qualitative
performance criteria that would otherwise apply to such determination (i.e.,
assuming any qualitative or subjective performance requirements were satisfied
in full) (the “Year-End Bonus”), is greater than the Target Bonus,
within 15 business days following such determination (and in any event, no
later than the date annual bonuses for such fiscal year are otherwise paid to
active employees of the Company), the Company shall also pay Executive an
amount in cash equal to the excess of the Year-End Bonus over the Target Bonus
multiplied by the Bonus Fraction; and

 

(4)           in the event of an
Anticipatory Termination, an amount equal to Executive’s Base Salary from the
date of Executive’s termination through the Termination Date and any Bonus for
the previously completed fiscal year, if not previously paid due to Executive’s
earlier termination of employment.

 

b.             Continuation of Active Employee
Benefits. For a
period of years following the Termination Date equal to the Severance Multiple
(the “Welfare Continuation Period”), the Company shall provide Executive
and Executive’s spouse and dependents (each as defined under the applicable
program) with the following benefits: 
(i) medical and dental insurance coverages at the same benefit
level as provided to Executive immediately prior to the Change of Control, for
which the Company will (A) reimburse Executive during the first
18 months of the Welfare Continuation Period or, if shorter, the period of
actual COBRA continuation coverage received by Executive during the Welfare
Continuation Period, for the total amount of the monthly COBRA medical and
dental insurance premiums payable by Executive for such continued benefits (by
reducing such premium obligations to zero) and (B) provide coverage for
the remainder of the Welfare Continuation Period at the same cost to Executive
as is generally provided to similarly situated active employees of the Company
(provided, however, that if, during the Welfare Continuation
Period, Executive becomes employed by a new employer, continuing medical and
dental coverage from the Company will become secondary to any coverage afforded
by the new employer in which Executive becomes enrolled); and (ii) life
insurance coverage at the same benefit level as provided to Executive
immediately prior to the Change of Control and at the same cost to Executive as
is generally provided to similarly situated active employees of the Company (or
if such coverage is no longer provided by the Company, then at the Executive’s
cost immediately prior to the Change of Control.

 

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c.             Payment of Earned But Unpaid
Amounts.  Within the Payment Period, the Company shall
pay Executive any unpaid Base Salary through the Termination Date, any Bonus
earned but unpaid as of the Termination Date for any previously completed
fiscal year of the Company, and all compensation previously deferred by
Executive but not yet paid as well as the Company’s matching contribution with
respect to such deferred compensation with respect to the year in which such
Termination Date occurs and all accrued interest thereon.  In addition, Executive shall be entitled to
prompt reimbursement of any unreimbursed expenses properly incurred by
Executive in accordance with Company policies prior to the Termination Date.  Executive shall also receive such other benefits,
if any, to which Executive may be entitled pursuant to the terms and conditions
of the employee compensation, incentive, equity, benefit or fringe benefit
plans, policies or programs of the Company, other than any Company severance
policy and as provided in Section 14 of this Agreement (payments and
benefits in this subsection (c), the “Accrued Benefits”).

 

d.             Retirement Benefits.  As of the Termination Date, (i) Executive, to
the extent not then a participant in, shall be deemed a participant in, and to
the extent not then vested, shall become fully vested in Executive’s benefits
under, The Neiman Marcus Group, Inc. Supplemental Executive Retirement Plan as
in effect immediately prior to the Change of Control (the “SERP”) and
(ii) Executive shall become entitled to, and the Company shall pay, within the
Payment Period, Executive a cash lump sum equal to the excess of:

 

(1)           the Actuarial
Equivalent of the single life annuity that would be payable to Executive under
the terms of the SERP based on the accrued benefit as of the Termination Date,
after crediting Executive with an additional number of years of service and age
equal to the Severance Multiple beyond that accrued as of the Termination Date
(subject, in each case, to the 25 maximum years of service limitation set forth
in the SERP, as applicable) for purposes of eligibility for participation,
eligibility for retirement, for early commencement of actuarial subsidies and
for purposes of benefit accrual; over

 

(2)           the Actuarial
Equivalent of the single life annuity that would be payable to Executive under
the terms of SERP (assuming Executive was fully vested therein) in accordance
with its terms as in effect immediately prior to the Change of Control, based
on the accrued benefit as of the Termination Date.

 

The Actuarial Equivalent shall be determined based upon the assumptions
set forth in the NMG Retirement Plan (Basic Plan) and the benefit under this
Section 3(d) shall be calculated in a manner consistent with the

 

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methodology and assumptions set forth in the illustrative example
attached as Exhibit C.

 

e.             Retiree Medical.  Following Executive’s entitlement to
continued active employee benefits pursuant to Section 3(b), if Executive
was eligible for retiree medical benefits as of the Termination Date, using the
eligibility criteria in effect immediately prior to the Change of Control,
Executive shall be entitled to, and Company shall be required to provide,
retiree medical coverage at the same benefit level and at the same cost to
Executive as specified by the retiree medical plan in effect immediately prior
to the Change of Control.

 

f.              Other Benefits.  For a period of years following the
Termination Date equal to the Severance Multiple, the Company shall promptly
pay (or, in the discretion of Executive, reimburse Executive for all reasonable
expenses incurred) for professional outplacement services by Drake Beam Morin,
Inc. or another comparable qualified consultant selected by the Company, but for
no longer than the date Executive first obtains full-time employment after the
Termination Date.  At all times from and
following the Termination Date, the Company shall provide to Executive and
Executive’s spouse and dependents (each as defined under the Company’s
applicable policies) all merchandise discounts available to the Company’s
employees immediately prior to the Change of Control.

 

g.             Equity Incentive Awards.  Any time periods, conditions or contingencies
relating to the exercise or realization of, or lapse of restrictions under, any
outstanding equity incentive award then held by Executive, if not previously
accelerated or waived pursuant to the first paragraph of this Section 3,
shall be automatically accelerated or waived effective as of the Termination
Date.

 

In consideration of the provision of the foregoing benefits provided in
this Section 3 and as otherwise set forth in this Agreement, Executive
hereby agrees to be bound by the restrictive covenants set forth in
Exhibit B attached hereto.

 

4.             Mitigation.

 

Executive shall not be required to mitigate damages or the amount of
any payment provided for under this Agreement by seeking other employment or
otherwise, and, subject to Section 3(b), compensation earned from such
employment or otherwise shall not reduce the amounts otherwise payable under
this Agreement.  No amounts payable under
this Agreement shall be subject to reduction or offset in respect of any claims
which the Company or any of its Subsidiaries (or any other person or entity) may
have against Executive.

 

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5.             Gross-Up.

 

a.             In the event it shall be
determined that any payment, benefit or distribution (or combination thereof)
by the Company, any of its Affiliates, or one or more trusts established by the
Company for the benefit of its employees, to or for the benefit of Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement, or otherwise) (a “Payment”) is subject to the excise
tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, hereinafter collectively
referred to as the “Excise Tax”), Executive shall be entitled to receive
an additional payment (a “Gross-Up Payment”) in an amount such that
after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and the
Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.  Notwithstanding the foregoing provisions of
this Section 5(a), if it shall be determined that Executive is entitled to
a Gross-Up Payment, but that the Payment does not exceed 110% of the greatest
amount 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
Executive and the amounts payable under this Agreement shall be reduced so that
the Payment, in the aggregate, is reduced to the Safe Harbor Amount.  The reduction of the amounts payable hereunder,
if applicable, shall be made by first reducing the payments under
Section 3(a), unless an alternative method of reduction is elected by
Executive.

 

b.             All determinations required to
be made under this Section 5, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by a nationally
recognized accounting firm selected by the Company (the “Accounting Firm”)
which shall provide detailed supporting calculations both to the Company and
Executive within ten business days of the receipt of notice from Executive that
there has been a Payment, or such earlier time as is requested by the Company; provided
that for purposes of determining the amount of any Gross-Up Payment, Executive
shall be deemed to pay federal income tax at the highest marginal rates
applicable to individuals in the calendar year in which any such Gross-Up
Payment is to be made and deemed to pay state and local income taxes at the
highest effective rates applicable to individuals in the state or locality of
Executive’s residence or place of employment in the calendar year in which any
such Gross-Up Payment is to be made, net of the maximum reduction in federal
income taxes that can

 

6

 

be obtained from deduction of such state and
local taxes, taking into account limitations applicable to individuals subject
to federal income tax at the highest marginal rates.  All fees and expenses of the Accounting Firm
shall be borne solely by the Company. 
Any Gross-Up Payment, as determined pursuant to this Section 5,
shall be paid by the Company to Executive (or to the appropriate taxing
authority on Executive’s behalf) when the applicable tax is due.  If the Accounting Firm determines that no
Excise Tax is payable by Executive, it shall so indicate to Executive in
writing.  Any determination by the
Accounting Firm shall be binding upon the Company and Executive.  As a result of the uncertainty in the
application of Section 4999 of the Code, it is possible that the amount of
the Gross-Up Payment determined by the Accounting Firm to be due to (or on
behalf of) Executive was lower than the amount actually due (“Underpayment”).  In the event that the Company exhausts its
remedies pursuant to Section 5(c) and Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of Executive.

 

c.             Executive shall notify the
Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of any Gross-Up
Payment.  Such notification shall be
given as soon as practicable but no later than ten business days after
Executive is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid.  Executive shall not pay such claim
prior to the expiration of the thirty day period following the date on which it
gives such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due).  If the Company notifies Executive in writing
prior to the expiration of such period that it desires to contest such claim,
Executive shall (i) give the Company any information reasonably requested
by the Company relating to such claim, (ii) take such action in connection
with contesting such claim as the Company shall reasonably request in writing
from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably selected by
the Company, (iii) cooperate with the Company in good faith in order to
effectively contest such claim and (iv) permit the Company to participate
in any proceedings relating to such claim; provided, however,
that the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs and
expenses.  Without

 

7

 

limitation on the foregoing provisions of
this Section 5(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, further, that if the Company directs
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to Executive, on an interest-free basis, and shall
indemnify and hold Executive harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; provided, further, that if Executive is
required to extend the statute of limitations to enable the Company to contest
such claim, Executive may limit this extension solely to such contested
amount.  The Company’s control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

 

d.             If, after the receipt by
Executive of an amount paid or advanced by the Company pursuant to this
Section 5, Executive becomes entitled to receive any refund with respect
to a Gross-Up Payment, Executive shall (subject to the Company’s complying with
the requirements of Section 5(c)) promptly pay to the Company the amount
of such refund received (together with any interest paid or credited thereon
after taxes applicable thereto).  If,
after the receipt by Executive of an amount advanced by the Company pursuant to
Section 5(c), a determination is made that Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify
Executive in writing of its intent to contest such denial of refund prior to
the expiration of thirty days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of the Gross-Up Payment
required to be paid.

 

6.             Excluded
Termination Events.

 

Nothing in this Agreement shall be construed to prevent the Company or
any of its Subsidiaries from terminating Executive’s employment for Cause or
due to Executive’s Total Disability.  If
Executive is terminated (i) during the Term by the Company for Cause or
Total Disability or due to Executive’s death or resignation without Good Reason
or (ii) for any reason

 

8

 

following the expiration of the
Term, the Company shall have no obligation to make any payments under this
Agreement.

 

7.             Indemnification; Director’s
and Officer’s Liability Insurance.

 

(a) Executive shall retain all rights to indemnification under the
Company’s Certificate of Incorporation or By-Laws, and (b) the Company
shall maintain Director’s and Officer’s liability insurance on behalf of
Executive, in both cases at the level in effect immediately prior to the
Termination Date or immediately prior to the Change in Control, whichever is
greater, for a number of years equal to the Severance Multiple following the
Termination Date, and throughout the period of any applicable statute of
limitations.

 

8.             Arbitration.

 

All disputes and controversies arising under or in connection with this
Agreement shall be settled by arbitration conducted before one arbitrator
sitting in Dallas, Texas, or such other location agreed by the parties hereto,
in accordance with the rules for expedited resolution of employment disputes of
the American Arbitration Association then in effect.  The determination of the arbitrator shall be
made within thirty days following the close of the hearing on any dispute or
controversy and shall be final and binding on the parties.  Judgment may be entered on the award of the
arbitrator in any court having proper jurisdiction.

 

9.             Costs of
Proceedings.

 

The Company shall pay all costs and expenses of the Company and, at
least monthly, Executive in connection with any arbitration relating to the
interpretation or enforcement of any provision of this Agreement; provided
that if Executive instituted the proceeding and the arbitrator or other
individual presiding over the proceeding affirmatively finds that Executive
instituted the proceeding in bad faith, Executive shall reimburse the Company
for all costs and expenses of Executive previously paid by the Company pursuant
to this Section 9.

 

10.           Assignment.

 

Except as otherwise provided herein, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the Company and Executive
and their respective heirs, legal representatives, successors and assigns.  If the Company shall be merged into or
consolidated with another entity, the provisions of this Agreement shall be
binding upon and inure to the benefit of the entity surviving such merger or
resulting from such consolidation.  The
Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Company, by agreement, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place.  The provisions of this
Section 10 shall continue to apply to each subsequent employer of
Executive hereunder in the event of any subsequent merger, consolidation or
transfer of assets of such subsequent employer.

 

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11.           Withholding and
Deferral.

 

Notwithstanding any other provision of this Agreement, the Company may,
to the extent required by law, withhold applicable federal, state and local
income and other taxes from any payments due to Executive hereunder.  Notwithstanding any other provision of this
Agreement or certain compensation and benefit plans of the Company or its Subsidiaries,
any payments or benefits due under this Agreement or such plans upon or in
connection with a termination of Executive’s employment shall be deferred and
paid no earlier than 6 months following such termination of Executive’s
employment, if, and only to the extent, required to comply with Section 409A of
the Code.

 

12.           Applicable Law.

 

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

 

13.           Notice.

 

For the purpose of this Agreement, any notice and all other
communication provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when received at the respective addresses set
forth below, or to such other address as either party may have furnished to the
other in writing in accordance herewith.

 

If to the Company:

 

The Neiman Marcus Group, Inc.

1618 Main Street

Dallas, TX 75201

Attention:  General Counsel

 

If to Executive:

 

To the most recent address of Executive set forth in the personnel
records of the Company.

 

14.           Entire Agreement;
Offset; Modification.

 

a.             This Agreement constitutes the
entire agreement between the parties and, except as expressly provided herein,
supersedes the provisions of all other prior agreements expressly concerning
the payment of severance benefits upon a termination of employment in
connection with or following a Change of Control during the Term.  Without limiting the generality of the
preceding sentence, the payment of any amounts and provision of any benefits
pursuant to Section 3 of this Agreement shall be in lieu of and shall
supersede Executive’s entitlement to payments or benefits pursuant to
paragraph 1(a) of the Prior Agreement. 
In all other respects, the Prior Agreement shall remain in full force
and effect, including with respect to

 

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any amounts payable or benefits to be
provided prior to and otherwise not in connection with a Change of Control; provided,
that in no event shall payments or benefits provided pursuant to the Prior
Agreement or any other severance agreement or policy entitle Executive to a
duplication of payments and benefits pursuant to this Agreement and, in the
event of an Anticipatory Termination, any amount payable hereunder shall be
offset and reduced by the amount of any termination payments or benefits
previously provided to Executive under the Prior Agreement or any other
severance arrangement with the Company.

 

b.             Except as expressly provided
herein, this Agreement shall not interfere in any way with the right of the
Company to reduce Executive’s compensation or other benefits or terminate
Executive’s employment, with or without Cause. 
Any rights that Executive shall have in that regard shall be as set
forth in any applicable employment agreement between Executive and the
Company.  This Agreement may be changed
only by a written agreement executed by the Company and Executive.

 

15.           Counterparts.

 

This Agreement may be signed in counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.

 

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IN WITNESS WHEREOF,
the parties have executed this Agreement on the 1st day of April, 2005.

 

	
   

  	
   

  	
  THE NEIMAN MARCUS GROUP, IN.C

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Nelson A. Bangs

  
	
   

  	
   

  	
  Senior Vice President & General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Executive

  

 

 

CERTAIN DEFINITIONS

 

As used in this Agreement, and unless the context requires a different
meaning, the following terms, when capitalized, have the meaning indicated:

 

I.              “Affiliate”
means, with respect to any entity, any other corporation, organization,
association, partnership, sole proprietorship or other type of entity, whether
incorporated or unincorporated, directly or indirectly controlling or controlled
by or under direct or indirect common control with such entity.

 

II.            “Base
Salary” means Executive’s annual rate of base salary in effect on the date
in question.

 

III.           “Board”
means the board of directors of the Company.

 

IV.           “Bonus”
means the amount payable to Executive under the Company’s applicable annual
incentive bonus plan with respect to a fiscal year of the Company.

 

V.            “Cause”
means

 

(1)           the willful and
continued failure by Executive to substantially perform duties consistent with
Executive’s position with the Company (other than any such failure resulting
from incapacity due to physical or mental illness or termination by Executive
for Good Reason), after a demand for substantial performance is delivered to
Executive by the Board, together with a copy of the resolution of the Board
that specifically identifies the manner in which the Board believes that
Executive has not substantially performed Executive’s duties, which resolution
must be passed by at least 2/3 of the entire Board at a
meeting called for the purpose and after an opportunity for Executive and
Executive’s counsel to be heard by the Board, and Executive has failed to
resume substantial performance of Executive’s duties on a continuous basis
within 14 days of receiving such demand;

 

(2)           the willful engaging by
Executive in conduct that is demonstrably and materially injurious to the
Company, monetarily or otherwise, as set forth in a resolution of the Board,
which resolution must be passed by at least 2/3 of the
entire Board at a meeting called for the purpose and after an opportunity for
Executive and Executive’s counsel to be heard by the Board; or

 

(3)           Executive’s conviction
of a felony, or conviction of a misdemeanor involving assets of the Company.

 

For purposes of this definition, no act, or failure to act, on
Executive’s part shall be deemed “willful” unless done, or omitted to be done,
by Executive not in good faith and without reasonable belief that Executive’s
action or omission was in the best interest of the Company.

 

A-2

 

VI.           “Change
of Control” means, and shall be deemed to have occurred:

 

(1)           upon the consummation
of any transaction or series of transactions under which the Company is merged
or consolidated with any other company, other than a merger or consolidation
that would result in the stockholders of the Company immediately prior thereto
owning voting securities immediately thereafter (either by the securities such
stockholders owned immediately prior thereto remaining outstanding or by the
securities such stockholders owned immediately prior thereto being converted
into voting securities of the surviving entity) representing more than 50% of
the combined voting power of the voting securities of the Company, the acquiring
entity or such surviving entity, as the case may be, outstanding immediately
after such merger or consolidation;

 

(2)           if any person or group
(as used in Section 13(d) of the Exchange Act) (other than the Company, any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, or any company owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of
stock of the Company) becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act) of securities of the Company
representing more than 40% of (a) the shares of the Company’s Class B
Common Stock then outstanding or (b) the combined voting power (other than in
the election of directors) of all voting securities of the Company then
outstanding;

 

(3)           if, during any period
of 24 consecutive months, individuals who at the beginning of such period
constituted the Board, and any director whose election or nomination for
election by the Company’s stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason (other than death or
disability) to constitute at least a majority thereof; or

 

(4)           upon the complete
liquidation of the Company or the sale or disposition by the Company of all or
substantially all of the Company’s assets, other than a liquidation of the Company
into a wholly-owned subsidiary.

 

VII.          “Class B
Common Stock” means Class B Common Stock, par value $.01 per share, of
the Company.

 

VIII.        “COBRA”
means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

 

IX.           “Code”
means the Internal Revenue Code of 1986, as amended.

 

A-3

 

X.            “Company”
means The Neiman Marcus Group, Inc. and, after a Change of Control, any
successor or successors thereto.

 

XI.           “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

XII.         “Good
Reason” means any of the following actions on or after a Change of Control,
without Executive’s express prior written approval, other than due to Executive’s
Total Disability or death:

 

(1)           any decrease in, or any
failure to increase in accordance with an agreement between Executive and the
Company or any of its Subsidiaries, Base Salary or Target Bonus;

 

(2)           any material diminution
in the aggregate employee benefits afforded to the Executive immediately prior
to the Change of Control; for this purpose employee benefits shall include, but
not be limited to pension benefits, life insurance and medical and disability
benefits (excluding, for the avoidance of doubt, the Company’s election not to
extend the Agreement in accordance with, and subject to, the provisions of
Section 2 of this Agreement);

 

(3)           any diminution in
Executive’s title or primary reporting relationship, or substantial diminution
in duties or responsibilities; provided, however, that no such
diminution or substantial diminution, as applicable, shall be deemed to occur
solely as a result of (x) the Company ceasing to be a publicly held
corporation or (y) the Company becoming a subsidiary or division of
another entity, provided that (A) such subsidiary or division
continues to represent substantially all of the business operations of the
Company as in effect immediately prior to the Change of Control and
(B) the Executive does not suffer a diminution in title or primary
reporting relationship or substantial diminution in duties or responsibilities
with respect to such subsidiary or division relative to his or her title or
primary reporting relationship or duties or responsibilities with the Company
immediately prior to such Change of Control;

 

(4)           any relocation of
Executive’s principal place of business of 50 miles or more, other than
normal travel consistent with past practice, or any requirement that Executive
engage in excessive business-related travel in a manner inconsistent with past
practice in any material respect; or

 

(5)           the failure of any
successor or assignee (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Company in connection with any Change of Control, by agreement in
writing in form and substance reasonably satisfactory to Executive, expressly,
absolutely and unconditionally to assume and agree to perform this Agreement,
the Prior Agreement or any other employment agreement to which the Company and Executive
are party, in each case, which remains in effect as of immediately prior to
such Change of Control, in the same manner

 

A-4

 

and to the
same extent that the Company would be required to perform any such agreement if
no such succession or assignment had taken place.

 

Executive shall have six months from the time Executive first becomes
aware of the existence of Good Reason to resign for Good Reason.

 

XIII.        “Prior
Agreement” means the Confidentiality, Non-Competition and Termination
Benefits Agreement between Executive and the Company to the extent such
agreement is currently in effect.

 

XIV.        “Severance
Multiple” means 2.

 

XV.         “Subsidiary”
means a subsidiary corporation, as defined in Section 424(f) of the Code
(or any successor section thereto).

 

XVI.        “Target
Bonus” means the greater of (i) Executive’s target Bonus in effect on
the date of the Change of Control or (ii) Executive’s target Bonus in
effect immediately prior to the event set forth in the notice of termination
giving rise to the Termination Date.

 

XVII.       “Total
Disability” means that, in the Company’s reasonable judgment, either
(1) Executive has been unable to perform Executive’s duties because of a
physical or mental impairment for 80% or more of the normal working days during
six consecutive calendar months or 50% or more of the normal working days
during 12 consecutive calendar months, or (2) Executive has become
totally and permanently incapable of performing the usual duties of his employment
with the Company on account of a physical or mental impairment.

 

A-5

 

Exhibit A

 

WAIVER AND RELEASE OF CLAIMS

 

In consideration of, and subject to, the payments to be made to me by
The Neiman Marcus Group, Inc., or any of its subsidiaries, or its or their
successor(s) or assigns (the “Company”), pursuant to the attached Change
of Control Termination Protection Agreement (“TPA”) dated April 1, 2005,
I agree to and do release and forever discharge the Company, and its respective
past and present officers, directors, shareholders, employees and agents from
any and all claims and causes of action, known or unknown, arising out of or
relating to my employment with the Company or the termination thereof, including,
but not limited to, wrongful discharge, breach of contract, tort, fraud, the
Civil Rights Act, Age Discrimination in Employment Act, Employee Retirement
Income Security Act, Americans with Disabilities Act, or any other federal,
state or local legislation or common law relating to employment or
discrimination in employment.

 

Notwithstanding the foregoing or any other provision hereof, nothing in
this Waiver and Release of Claims shall adversely affect (i) my rights
under the TPA; (ii) my rights to benefits other than severance benefits
under plans, programs and arrangements of the Company which are accrued but
unpaid as of the date of my termination; or (iii) my rights to
indemnification under any indemnification agreement, applicable law, and certificates
of incorporation and bylaws of the Company, and my rights under any directors’
and officers’ liability insurance policy covering me.

 

I acknowledge that I have signed this Waiver and Release of Claims
voluntarily, knowingly, of my own free will and without reservation or duress,
and that no promises or representations have been made to me by any person to
induce me to do so other than the promise of payment set forth in the first
paragraph above and the Company’s acknowledgement of my rights reserved under
the second paragraph above.

 

I acknowledge that I have been given not less than [twenty-one (21)]
[forty-five (45)] days to review and consider this Waiver and Release of
Claims, and that I have had the opportunity to consult with an attorney or
other advisors of my choice and have been advised by the Company to do so if I
choose. I may revoke this Waiver and Release of Claims seven days or less after
its execution by providing written notice to the Company.

 

Finally, I acknowledge that I have read this Waiver and Release of
Claims and understand all of its terms.

 

	
   

  	
   

  	
   

  
	
   

  	
  Employee’s
  Signature

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print name

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date Signed

  	
   

  

 

 

Exhibit B

 

CONFIDENTIALITY AND NON-COMPETITION
RESTRICTIVE COVENANTS

 

I.              Executive
acknowledges and agrees that (a) the Company is engaged in a highly
competitive business; (b) the Company has expended considerable time and
resources to develop goodwill with its customers, vendors, and others, and to
create, protect, and exploit Confidential Information (as defined in Section V
below); (c) the Company must continue to prevent the dilution of its
goodwill and unauthorized use or disclosure of its Confidential Information to
avoid irreparable harm to its legitimate business interests; (d) in the
specialty retail business, Executive’s participation in or direction of the
Company’s day-to-day operations and strategic planning are and will be an
integral part of the Company’s continued success and goodwill; (e) given
Executive’s position and responsibilities, Executive necessarily will be
creating Confidential Information that belongs to the Company and enhances the
Company’s goodwill, and in carrying out Executive’s responsibilities Executive
in turn will be relying on the Company’s goodwill and the disclosure by the
Company to him of Confidential Information; (f) Executive will have access
to Confidential Information that could be used by any competitor of the Company
in a manner that would irreparably harm the Company’s competitive position in
the marketplace and dilute its goodwill; and (g) Executive necessarily would
use or disclose Confidential Information if Executive were to engage in
competition with the Company.  The
Company acknowledges and agrees that Executive must have and continue to have
throughout Executive’s employment the benefits and use of its goodwill and
Confidential Information in order to properly carry out Executive’s
responsibilities.  The Company
accordingly promises upon execution and delivery of the Agreement to provide Executive immediate access to new
and additional Confidential Information and authorize him to engage in
activities that will create new and additional Confidential Information.  The Company and Executive thus acknowledge
and agree that upon execution and delivery of the Agreement Executive
(x) has received, will receive, and will continue to receive, Confidential
Information that is unique, proprietary, and valuable to the Company,
(y) has created, will create, and will continue to create, Confidential
Information that is unique, proprietary, and valuable to the Company, and
(z) has benefited, will benefit, and will continue to benefit, including
without limitation by way of increased earnings and earning capacity, from the
goodwill the Company has generated and from the Confidential Information.  Accordingly, Executive acknowledges and
agrees that at all times during Executive’s employment by the Company and
thereafter:

 

(i)            all Confidential
Information shall remain and be the sole and exclusive property of the Company;

 

(ii)           Executive will protect
and safeguard all Confidential Information;

 

(iii)          Executive will hold all
Confidential Information in strictest confidence and not, directly or
indirectly, disclose or divulge any Confidential Information to any person
other than an officer, director, or employee of the Company to the extent
necessary for the proper performance of Executive’s responsibilities unless
authorized to do so by the Company or compelled to do so by law or valid legal
process;

 

 

(iv)          if Executive believes
Executive is compelled by law or valid legal process to disclose or divulge any
Confidential Information, Executive will notify the Company in writing
sufficiently in advance of any such disclosure to allow the Company the
opportunity to defend, limit, or otherwise protect its interests against such
disclosure;

 

(v)           at the end of Executive’s
employment with the Company for any reason or at the request of the Company at
any time, Executive will return to the Company all Confidential Information and
all copies thereof, in whatever tangible form or medium (including electronic);
and

 

(vi)          absent the promises and
representations of Executive in this Section I and in Section II below, the
Company would require him immediately to return any tangible Confidential
Information in Executive’s possession, would not provide Executive with new and
additional Confidential Information, would not authorize Executive to engage in
activities that will create new and additional Confidential Information, and
would not enter or have entered into the Agreement.

 

II.            In
consideration of the Company’s promises to provide Executive with new and
additional Confidential Information and to authorize him to engage in
activities that will create new and additional Confidential Information upon
execution and delivery of the Agreement, and the other promises and
undertakings of the Company in the Agreement, Executive agrees that, while
Executive is employed by the Company and for a period of 12 months following
the end of that employment for any reason, Executive shall not engage in any of
the following activities (the “Restricted Activities”):

 

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

 

(b)           Executive will not,
whether on Executive’s own behalf or on behalf of any other individual,
partnership, firm, corporation or business organization, either directly or
indirectly solicit, induce, persuade, or entice, or endeavor to solicit,
induce, persuade, or entice, any person who is then employed by or otherwise
engaged to perform services for the Company or its Affiliates to leave that
employment or cease performing those services;

 

(c)           Executive will not,
whether on Executive’s own behalf or on behalf of any other individual,
partnership, firm, corporation or business organization, either directly or
indirectly, solicit, induce, persuade, or entice, or endeavor to solicit,
induce, persuade, or entice, any person who is then a customer, supplier, or
vendor of the Company or any of its Affiliates to cease being a customer,
supplier, or vendor of the Company or any of its Affiliates or to divert all or
any part of such person’s or entity’s business from the Company or any of its
Affiliates; and

 

(d)           Executive will not
associate directly or indirectly, as an employee, officer, director, agent,
partner, stockholder, owner, representative, or consultant, with any Competitor
(as defined in Section V below), unless (i) Executive has advised the Company
in writing in advance of Executive’s desire to undertake such activities and
the specific nature of such activities; (ii) the Company has received
written assurances (that will be designed, among other

 

B-2

 

things, to protect the Company’s and its Affiliates’ goodwill,
Confidential Information, and other important commercial interests) from the
Competitor and Executive that are, in the Company’s sole discretion, adequate
to protect its interests; (iii) the Company, in its sole discretion, has
approved in writing such association; and (iv) Executive and the
Competitor adhere to such assurances.  After
the end of Executive’s employment with the Company and any Affiliate, the
restriction immediately set forth above in this Section II(d) applies only to
conduct of Executive that takes place anywhere in, or is directed at any part
of, the Noncompetition Area (as defined in Section V below).  Executive shall not be in violation of this
Section II(d) solely as a result of Executive’s investment in stock or other
securities of a Competitor or any of its Affiliates listed on a national
securities exchange or actively traded in the over-the-counter market if
Executive and the members of Executive’s immediate family do not, directly or
indirectly, hold more than a total of one percent (1%) of all such shares of
stock or other securities issued and outstanding.  Executive acknowledges and agrees that
engaging in the Restricted Activities described in this subparagraph would
result in the inevitable disclosure or use of Confidential Information for the
Competitor’s benefit or to the detriment of the Company.

 

Executive acknowledges and agrees that the restrictions contained in
this Section II are ancillary to an otherwise enforceable agreement, including
without limitation the mutual promises and undertakings set forth in Section
II; that the Company’s promises and undertakings set forth in Section II, and
Executive’s position and responsibilities with the Company, give rise to the
Company’s interest in restricting Executive’s post-employment activities; that
such restrictions are designed to enforce Executive’s promises and undertakings
set forth in this Section II and Executive’s common-law obligations and duties
owed to the Company; that the restrictions are reasonable and necessary, are
valid and enforceable under Texas law, and do not impose a greater restraint
than necessary to protect the Company’s goodwill, Confidential Information, and
other legitimate business interests; that Executive will immediately notify the
Company in writing should Executive believe or be advised that the restrictions
are not valid or enforceable under Texas law or the law of any other state that
Executive contends or is advised is applicable; that the mutual promises and
undertakings of the Company and Executive under Section I and Section II are
not contingent on the duration of Executive’s employment with the Company; and
that absent the promises and representations made by Executive in Section I and
Section II, the Company would require him to return any Confidential
Information in Executive’s possession, would not provide Executive with new and
additional Confidential Information, would not authorize Executive to engage in
activities that will create new and additional Confidential Information, and
would not enter or have entered into the Agreement.

 

III.           Executive
acknowledges and agrees that the Company would not have an adequate remedy at
law and would be irreparably harmed in the event that any of the provisions of
Section I or Section II were not performed in accordance with their specific
terms or were otherwise breached. 
Accordingly, Executive agrees that the Company shall be entitled to
equitable relief, including preliminary and permanent injunctions and specific
performance, in the event Executive breaches or threatens to breach any of the
provisions of such Sections, without the necessity of posting any bond or
proving special damages or irreparable injury. 
Such remedies shall not be deemed to be the exclusive remedies for a
breach or threatened breach of the provisions of Section I or Section II by
Executive, but shall be in addition to all other remedies available to the
Company at law or equity.  Executive
acknowledges and agrees that the

 

B-3

 

Company shall be entitled to recover its attorneys’ fees, expenses, and
court costs, in addition to any other remedies to which it may be entitled, in
the event Executive breaches the provisions of Section I or Section II.  Executive acknowledges and agrees that no
breach by the Company of this Agreement or failure to enforce or insist on its rights
under this Agreement shall constitute a waiver or abandonment of any such
rights or defense to enforcement of such rights.

 

IV.           If
the provisions of Section I or Section II are ever deemed by a court to exceed
the limitations permitted by applicable law, Executive and the Company agree
that such provisions shall be, and are, automatically reformed to the maximum
limitations permitted by such law.

 

V.            Definitions:

 

“Competitor” means (a) each of Saks Incorporated, Nordstrom,
Inc., Barneys New York, Inc., any Affiliate of any of them, and any other
person or entity that owns, operates or controls any of them or any of their
Affiliates, directly or indirectly; (b) the successors to or assigns of the
persons or entities identified in (a); and (c) the retail operations of any
person or entity, or successor or assign of such person or entity, who, at any
time during Executive’s employment with the Company or within 12 months
following the end of Executive’s employment with the Company, was a vendor of
the Company and had an annual gross revenue of $100 million or more, and the
Affiliates of such vendors.  To the
extent that any of the corporate names used in (a) of this definition are not
the legally correct corporate names of the entities commonly referred to by the
corporate names used above absent the corporate form designation, the
definition shall be deemed to apply to the entities with the correct corporate
names, along with the Affiliates, successors, and assigns of such correctly
named entities.

 

“Confidential Information” shall mean, without limitation, all
documents or information, in whatever form or medium, concerning or evidencing
sales; costs; pricing; strategies; forecasts and long range plan; financial and
tax information; personnel information; business, marketing and operational
projections, plans and opportunities; and customer, vendor, and supplier
information; but excluding
any such information that is or becomes generally available to the public other
than as a result of any breach of Section I or Section II above or other
unauthorized disclosure by Executive.

 

“Noncompetition Area” means the following geographic areas:
(a) any foreign country where the Company or its Affiliates engage in
business of any kind, including selling, purchasing, or ordering goods, at any
time during Executive’s employment with the Company or its Affiliates; and
(b) the United States of America.

 

B-4

 

Exhibit C

 

Methodology for Change of Control Lump Sum
Calculation

And Definition of Actuarial Equivalent

 

(Capitalized terms used herein without
definition have the meanings specified in the

Agreement or Plan to which this Exhibit C is attached)

 

The methodology for the Change of Control Lump Sum Calculation follows
the steps below:

 

1.     Calculate
the participant’s total benefit under the SERP as of the date of the
participant’s termination of employment (the “Termination Date”) after adding
the participant’s Severance Multiple to the number of years of age and service
(the “Age and Service Enhancement”) for purposes of eligibility for
participation, eligibility for retirement, for early commencement of actuarial
subsidies and for purposes of benefit accrual (the “Enhanced Change of Control
Benefit”).  Calculate the early retirement
benefit payable at the Termination Date (if eligible) or the age 65 accrued
benefit amount (if not eligible for early retirement).  This calculation is without offset for the
benefit under the NMG Retirement Plan (Basic Plan) (the “Basic Plan”).

2.     Calculate
the Lump Sum of the benefit in step 1, based on the Actuarial Equivalent
described below.

3.     Calculate
the participant’s total benefit under the SERP as of the Termination Date
without taking into account the Age and Service Enhancement (the “Normal SERP
Benefit”).  Calculate the early
retirement benefit payable at the Termination Date (if eligible) or the age 65
accrued benefit amount (if not eligible for early retirement).  This calculation is also without offset for
the Basic Plan benefit.

4.     Calculate
the Lump Sum of the benefit in step 3, based on the Actuarial Equivalent
described below.

5.     Subtract
the Lump Sum in step 4 from the Lump Sum in step 2 to determine the Lump Sum
amount of the incremental Change of Control benefit.

 

Note that these calculations are not offset by the Basic Plan benefit
because the SERP provisions provide for a more generous early retirement
subsidy than the Basic Plan, and that subsidy is calculated on the full SERP
benefit (before the benefit under the Basic Plan is offset from it).  Therefore, in order to capture the full value
of the SERP benefit at early retirement (and, by extension, the full value of
the incremental Change of Control benefit), the benefits prior to the Basic
Plan offset must be used.

 

There are three different calculation scenarios, depending on the
Participant’s age and service as of the Termination Date:

 

(1) If the participant is eligible for an immediate SERP benefit
(without taking into account the Age and Service Enhancement), then the Lump
Sum amounts for both the

 

C-1

 

Normal SERP Benefit and the Enhanced Change of Control Benefit are
based on the immediately payable early retirement benefits.

 

(2) If the participant is not eligible for an immediate SERP
benefit even with the Age and Service Enhancement, then the Lump Sum amounts
for both the Normal SERP Benefit and the Enhanced Change of Control Benefit are
based on the Age 65 accrued benefits.

 

(3) If the participant is eligible for an immediate SERP benefit
only because of the Age and Service Enhancement, then the Lump Sum for the
Normal SERP Benefit is based on the Age 65 accrued benefit and the Lump Sum for
the Enhanced Change of Control Benefit is based on the immediately payable early
retirement benefit.

 

The following example illustrates this third scenario:

 

	
  Severance
  Multiple:

  	
   

  	
  2.0 years

  
	
   

  	
   

  	
   

  
	
  Actual Age
  at Termination Date

  	
   

  	
  54.0 years

  
	
  Enhanced Age
  at Termination Date:

  	
   

  	
  56.0 years

  
	
   

  	
   

  	
   

  
	
  Service at
  Termination Date:

  	
   

  	
  20.0 years

  
	
  Enhanced
  Service at Termination Date:

  	
   

  	
  22.0 years

  

 

This participant is not eligible for an immediate benefit under the
regular SERP provisions.  With the Age
and Service Enhancement, he is eligible for an immediate benefit, so the full
early retirement subsidy is provided by the Enhanced Change of Control benefit.

 

Total Enhanced Change of Control Benefit at Termination Date

(a) Total Enhanced Change of Control Benefit at Termination Date
Payable at age 65 = $7,000

(b) Total Enhanced Change of Control Early Retirement Benefit Payable
at age 54 = $5,320

(Early Retirement Factor of .76 based on enhanced age 56 * (a))

(c) Age 54 Immediate Lump Sum Factor = 15.2476

(d) Lump Sum Value of Total Enhanced Change
of Control Benefit at Termination = (b) * (c) * 12 = $973,407

 

Total Normal SERP Benefit at Termination Date

(e) Total SERP accrued benefit at Termination Date Payable at age 65 =
$5,000

(f) Age 54 Deferred to Age 65 Lump Sum Factor = 6.7961

(g) Lump Sum Value of Normal SERP Benefit at Termination Date = (e) *
(f) * 12 = $407,766

 

(h) Incremental Change of Control Benefit = $973,407 - $407,766 =
$565,641

 

C-2

 

The lump sum factors are based on the Actuarial Equivalent definition
from the Basic Plan used for determining a lump sum value, i.e., the GATT
specified mortality and interest under IRC Section 417(e)(3).  The assumptions are (a) the 1994 Group
Annuity Reserve mortality table, (b) the 30-Year Treasury Rate for the month of
March in the Plan Year prior to the Plan Year of distribution, and (c) the
participant’s actual age at distribution date.

 

The example shown above assumes that both the Termination Date and
distribution date are in the Plan Year Ending July 31, 2005, so the interest
rate used is the March 2004 30-Year Treasury Rate of 4.74%.  The March 2005 30-Year Treasury Rate which
would be used for distributions made in the Plan Year Ending July 31, 2006 is
not yet known.

 

A participant who is not vested in the SERP upon his actual termination
date is automatically vested under the Change of Control contract language (but
with no Basic Plan benefit available to him). 
In addition, any employee who is not yet a participant in the Basic Plan
as of his actual Termination Tate but who would otherwise be eligible for the
SERP, is automatically a participant under the SERP (again, with no Basic Plan
benefit).

 

C-3Exhibit 10.45

 

TIER III

 

THE NEIMAN MARCUS GROUP, INC.

EXECUTIVE

CHANGE OF CONTROL SEVERANCE PLAN

 

THIS EXECUTIVE CHANGE OF CONTROL SEVERANCE PLAN, made and executed at
Dallas, Texas, by THE NEIMAN MARCUS GROUP, INC., a Delaware corporation, is
being established to provide for the payment of severance benefits to certain
of its eligible employees.

 

Section 1.               Definitions.  Unless the context clearly indicates
otherwise, when used in this Plan:

 

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

 

(b)           “Base Salary” means Executive’s annual rate of base
salary in effect on the date in question, determined prior to reduction for any
employee-elected salary reduction contributions made to an Employer-sponsored
non-qualified deferred compensation plan or an Employer-sponsored plan pursuant
to Section 401(k) or 125 of the Internal Revenue Code, and excluding
bonuses, overtime, allowances, commissions, deferred compensation payments and
any other extraordinary remuneration.

 

(c)           “Board” means the board of directors of the Company.

 

(d)           “Bonus” means the amount payable to Executive under
the Company’s applicable annual incentive bonus plan with respect to a fiscal
year of the Company.

 

(e)           “Cause” means

 

(1)           the willful and continued failure by Executive to substantially
perform duties consistent with Executive’s position with the Company (other
than any such failure resulting from incapacity due to physical or mental
illness or termination by Executive for Good Reason), after a demand for
substantial performance is delivered to Executive by the Board, together with a
copy of the resolution of the Board that specifically identifies the manner in
which the Board believes that Executive has not substantially performed
Executive’s duties, which resolution must be passed by at least 2/3
of the entire Board at a meeting called for the purpose and after an
opportunity for Executive and Executive’s counsel to be heard by the Board, and
Executive has failed to resume substantial performance of Executive’s duties on
a continuous basis within 14 days of receiving such demand;

 

 

(2)           the willful engaging by Executive in conduct that is
demonstrably and materially injurious to the Company, monetarily or otherwise,
as set forth in a resolution of the Board, which resolution must be passed by
at least 2/3 of the entire Board at a meeting called for
the purpose and after an opportunity for Executive and Executive’s counsel to
be heard by the Board; or

 

(3)           Executive’s conviction of a felony, or conviction of a
misdemeanor involving assets of the Company.

 

For purposes of this
definition, no act, or failure to act, on Executive’s part shall be deemed “willful”
unless done, or omitted to be done, by Executive not in good faith and without
reasonable belief that Executive’s action or omission was in the best interest
of the Company.

 

(f)            “Change of Control”
means, and shall be deemed to have occurred:

 

(1)           upon the consummation of any transaction or series of
transactions under which the Company is merged or consolidated with any other company,
other than a merger or consolidation that would result in the stockholders of
the Company immediately prior thereto owning voting securities immediately
thereafter (either by the securities such stockholders owned immediately prior
thereto remaining outstanding or by the securities such stockholders owned
immediately prior thereto being converted into voting securities of the
surviving entity) representing more than 50% of the combined voting power of
the voting securities of the Company, the acquiring entity or such surviving
entity, as the case may be, outstanding immediately after such merger or
consolidation;

 

(2)           if any person or group (as used in Section 13(d) of the
Exchange Act) (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any company owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company) becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of
the Company representing more than 40% of (a) the shares of the Company’s
Class B Common Stock then outstanding or (b) the combined voting
power (other than in the election of directors) of all voting securities of the
Company then outstanding;

 

(3)           if, during any period of 24 consecutive months,
individuals who at the beginning of such period constituted the Board, and any
director whose election or nomination for election by the Company’s stockholders
was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason (other than death or disability)
to constitute at least a majority thereof; or

 

2

 

(4)           upon the complete liquidation of the Company or the sale or
disposition by the Company of all or substantially all of the Company’s assets,
other than a liquidation of the Company into a wholly-owned subsidiary.

 

(g)           “COBRA” means the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.

 

(h)           “Code” means the Internal Revenue Code of 1986, as
amended.

 

(i)            “Committee” means the
committee designated pursuant to Section 7 to administer this Plan.

 

(j)            “Company” means The
Neiman Marcus Group, Inc., a Delaware corporation and, after a Change of
Control, any successor or successors thereto.

 

(k)           “Eligible Executive” means an Executive whose
employment with Executive’s Employer (i) is involuntarily terminated by
the Employer for any reason other than Cause (A) in connection with or in
anticipation of a Change of Control at the request of, or upon the initiative
of, the buyer in the Change of Control transaction (an “Anticipatory
Termination”), but
only if an anticipated Change of Control actually occurs during the period in
which this Plan is effective (in which case Executive’s date of termination
shall be deemed to have occurred immediately following the Change of Control)
or (B) during the two-year period beginning on the effective date of a
Change of Control, or (ii) terminates during the two-year period beginning
on the effective date of a Change of Control on account of such Executive’s
resignation for Good Reason within six months from the date the Executive first
becomes aware of the existence of Good Reason; provided, however,
that the employment of an Executive shall not be considered to have been “involuntarily
terminated” in any of the following circumstances:

 

(1)           if an Executive’s employment with an Employer is terminated
by reason of a transfer to the employ of another Employer or an Affiliate,

 

(2)           if an Executive’s employment with an Employer is terminated
by reason of a transfer to the employ of another entity into which the Employer
is merged or otherwise consolidated; provided such entity adopts this
Plan,

 

(3)           if an Executive’s employment with an Employer is terminated
upon the expiration of a leave of absence by reason of his or her failure to
return to work at such time or the absence at such time of an available
position for which the Executive is qualified,

 

(4)           if an Executive’s employment with an Employer is terminated
in connection with the sale of stock or the sale or lease by such Employer of
all or part of its assets if (i) such Employer determines in its sole
discretion that either (A) in connection with such sale or lease such
Executive was offered employment for a comparable position at a comparable
salary, annual bonus opportunity and employee benefits with the purchaser or
lessee, as the case may be, of the Employer’s stock or assets or (B) such
Executive voluntarily elected not to

 

3

 

participate in the
selection process for such employment and (ii) the purchaser or lessee
adopts this Plan,

 

(5)           if an Executive resigns from employment with an Employer
under circumstances that do not constitute Good Reason, and

 

(6)           if Executive’s employment is terminated due to a death or
Total Disability.

 

(l)            “Employer” means the
Company and any other Affiliate of the Company which adopts this Plan with the
consent of the Board.

 

(m)          “Exchange Act” means the Securities Exchange Act of
1934, as amended.

 

(n)           “Executive” means an employee of an Employer as of
the date of a Change of Control who is listed on Schedule A
attached hereto.

 

(o)           “Good Reason” means any of the following actions on
or after a Change of Control, without Executive’s express prior written approval,
other than due to Executive’s Total Disability or death:

 

(1)           any decrease in, or any failure to increase in accordance
with an agreement between Executive and the Company or any of its Subsidiaries,
Base Salary or Target Bonus;

 

(2)           any material diminution in the aggregate employee benefits
afforded to the Executive immediately prior to the Change of Control; for this
purpose employee benefits shall include, but not be limited to pension
benefits, life insurance and medical and disability benefits (excluding, for
the avoidance of doubt, the Company’s termination of the Plan in accordance
with, and subject to, the provisions of Section 9 of the Plan);

 

(3)           any diminution in Executive’s title or primary reporting
relationship, or substantial diminution in duties or responsibilities; provided,
however, that no such diminution or substantial diminution, as
applicable, shall be deemed to occur (a) solely as a result of
(x) the Company ceasing to be a publicly held corporation or (y) the
Company becoming a subsidiary or division of another entity, provided
that (A) such subsidiary or division continues to represent substantially
all of the business operations of the Company as in effect immediately prior to
the Change of Control and (B) the Executive does not suffer a diminution
in title or primary reporting relationship or substantial diminution in duties
or responsibilities with respect to such subsidiary or division relative to his
or her title, primary reporting relationship or duties or responsibilities with
the Company immediately prior to such Change of Control or (b) as a result
of a diminution in connection with a corporate or management reorganization or
restructuring which similarly affects a substantial percentage of other Company
executives with similar responsibility levels at the Company;

 

4

 

(4)           any relocation of Executive’s principal place of business of
50 miles or more, other than normal travel consistent with past practice,
or any requirement that Executive engage in excessive business-related travel
in a manner inconsistent with past practice in any material respect; or

 

(5)           the failure of any successor or assignee (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company in connection
with any Change of Control, by agreement in writing in form and substance
reasonably satisfactory to Executive, expressly, absolutely and unconditionally
to assume and agree to perform this Plan, or the Confidentiality,
Non-Competition and Termination Benefits Agreement or any other employment
agreement to which the Company and Executive are party, in each case, which
remains in effect as of immediately prior to such Change of Control, in the
same manner and to the same extent that the Company would be required to
perform any such agreement if no such succession or assignment had taken place.

 

Executive shall have six months from the time
Executive first becomes aware of the existence of Good Reason to resign for
Good Reason.

 

(p)           “Plan” means THE NEIMAN MARCUS GROUP, INC. EXECUTIVE
CHANGE OF CONTROL SEVERANCE PLAN as in effect from time to time.

 

(q)           “Plan Year” means the calendar year.

 

(r)            “Release” means a release
to be signed by an Eligible Executive in such form as the Company shall
determine, which shall, to the extent permitted by law, waive all claims and
actions against the Employers and Affiliates and such other related parties and
entities as the Company chooses to include in the release except for claims and
actions for benefits provided under the terms of this Plan (which Release is
not revoked by the Eligible Executive).

 

(s)           “Target Bonus” means the greater of
(1) Executive’s target Bonus in effect on the date of the Change of
Control or (2) Executive’s target Bonus in effect immediately prior to the
event set forth in the notice of termination given in accordance with
Section 13.

 

(t)            “Total Disability” “
means that, in the Company’s reasonable judgment, either (1) Executive has
been unable to perform Executive’s duties because of a physical or mental
impairment for 80% or more of the normal working days during six consecutive
calendar months or 50% or more of the normal working days during
12 consecutive calendar months, or (2) Executive has become totally
and permanently incapable of performing the usual duties of his employment with
the Company on account of a physical or mental impairment.

 

Section 2.               Severance Benefits.  Each Eligible Executive who executes a
Release at the time and in the manner prescribed by the Company (and who does
not revoke such Release)

 

5

 

and who agrees to be subject to
the restrictive covenants set forth on Exhibit A shall be entitled to the
following:

 

(a)           Severance Pay.  Such an Eligible Executive shall be entitled
to receive severance pay from his or her Employer in a lump sum amount equal to
(i) 1.5 multiplied by the greater of the Eligible Executive’s Base
Salary in effect (A) immediately prior to the date of the Change of
Control or (B) immediately prior to the event set forth in the notice of
termination given in accordance with Section 13, (ii) 1.5 multiplied
by the Target Bonus and (iii) the Target Bonus multiplied by a fraction, the numerator of which shall
equal the number of days the Eligible Executive was employed by the Eligible
Executive’s Employer in the Employer fiscal year in which the Eligible
Executive’s termination occurs and the denominator of which shall equal 365 (the
“Bonus Fraction”); provided that if the effective date of the
Eligible Executive’s termination occurs after more than 75% of the Company’s
fiscal year has elapsed, then, if it is ultimately determined that the Bonus
the Eligible Executive would have been entitled to receive for the fiscal year
in which such termination occurs, determined based solely upon actual Employer
performance for such fiscal year and excluding any qualitative performance
criteria that would otherwise apply to such determination (i.e.,
assuming any qualitative or subjective performance requirements were satisfied
in full) (the “Year-End Bonus”), is greater than the Target Bonus,
within 15 business days following such determination (and in any event, no
later than the date annual bonuses for such fiscal year are otherwise paid to
active employees of the Employer), the Employer shall also pay the Eligible
Executive an amount in cash equal to the excess of the Year-End Bonus over the
Target Bonus multiplied by the Bonus Fraction. 
In the event of an Anticipatory Termination, such Eligible Executive
shall also be entitled to receive an amount equal to Executive’s Base Salary
from the date of Executive’s termination through the date immediately following
the Change of Control and any Bonus for the previously completed fiscal year,
if not previously paid due to Executive’s earlier termination of employment.

 

(b)           Medical, Dental and Life
Insurance Benefit Continuation.  For 18 months
following the Eligible Executive’s termination of employment (the “Welfare
Continuation Period”), the Eligible Executive and such Eligible Executive’s
spouse and dependents (each as defined under the applicable program) shall
receive the following benefits: (i) medical and dental insurance coverages
at the same benefit level as provided to the Eligible Executive immediately
prior to the Change of Control, for which the Company will (A) reimburse
the Eligible Executive during the first 18 months of the Welfare
Continuation Period or, if shorter, the period of actual COBRA continuation
coverage received by the Eligible Executive during the Welfare Continuation
Period, for the total amount of the monthly COBRA medical and dental insurance
premiums payable by the Eligible Executive for such continued benefits (by reducing
such premium obligations to zero) and (B) provide such coverage for any
remaining portion of the Welfare Continuation Period at the same cost to the
Eligible Executive as is generally provided to similarly situated active
employees of the Company (provided, however, that if, during the
Welfare Continuation Period, the Eligible Executive becomes employed by a new
employer, continuing medical and dental coverage from the Company will become
secondary to any coverage afforded by the new employer in which the Eligible
Executive becomes enrolled); and (ii) life insurance coverage at the same
benefit level as provided

 

6

 

to the Eligible
Executive immediately prior to the Change of Control and at the same cost to
the Eligible Executive as is generally provided to similarly situated active
employees of the Company (or if such coverage is no longer provided by the
Company, then at the Executive’s cost immediately prior to the Change of
Control).

 

(c)           Accrued Benefits.  Such Eligible Executive shall be entitled to
receive any unpaid Base Salary through the date of such Eligible Executive’s
termination, any Bonus earned but unpaid as of the date of such Eligible
Executive’s termination for any previously completed fiscal year of the
Company, and all compensation previously deferred by such Eligible Executive
but not yet paid as well as the Company’s matching contribution with respect to
such deferred compensation with respect to the year in which such termination
of employment occurs and all accrued interest thereon.  In addition, such Eligible Executive shall be
entitled to prompt reimbursement of any unreimbursed expenses properly incurred
by such Eligible Executive in accordance with Company policies prior to the date
of such Eligible Executive’s termination. 
Such Eligible Executive shall also receive such other benefits, if any,
to which such Eligible Executive may be entitled pursuant to the terms and
conditions of the employee compensation, incentive, equity, benefit or fringe
benefit plans, policies or programs of the Company, other than any Company
severance policy and as provided in Section 11.

 

(d)           Retirement Benefits.  As of the Termination Date, (i) such Eligible
Executive, to the extent not then a participant in, shall be deemed a
participant in, and to the extent not then vested, shall become fully vested in
such Eligible Executive’s benefits under, The Neiman Marcus Group, Inc.
Supplemental Executive Retirement Plan as in effect immediately prior to the
Change of Control (the “SERP”) and (ii) such Eligible Executive shall
become entitled to, and the Company shall pay such Eligible Executive a cash
lump sum equal to the excess of:

 

(1) the Actuarial Equivalent of the single life annuity that would
be payable to such Eligible Executive under the terms of the SERP based on the
accrued benefit as of the Termination Date, after crediting such Eligible
Executive with an additional number of years of service and age equal to the
Severance Multiple beyond that accrued as of the Termination Date (subject, in
each case, to the 25 maximum years of service limitation set forth in the SERP,
as applicable) for purposes of eligibility for participation, eligibility for
retirement, for early commencement of actuarial subsidies and for purposes of
benefit accrual; over

 

(2) the Actuarial Equivalent of the single life annuity that would
be payable to such Eligible Executive under the terms of SERP (assuming the
Eligible Executive was fully vested therein) in accordance with its terms as in
effect immediately prior to the Change of Control, based on the accrued benefit
as of the Termination Date.

 

The Actuarial Equivalent shall be determined
based upon the assumptions set forth in the NMG Retirement Plan (Basic Plan)
and the benefit under this Section 3(d) shall be calculated in a manner
consistent with the methodology and assumptions set forth in the illustrative
example attached as Exhibit B.

 

7

 

(e)           Retiree Medical.  Following such Eligible Executive’s
entitlement to continued active employee benefits pursuant to
Section 2(b), if Executive was eligible for retiree medical benefits as of
the Termination Date, using the eligibility criteria in effect immediately
prior to the Change of Control, Executive shall be entitled to, and Company
shall be required to provide, retiree medical coverage at the same benefit
level and at the same cost to Executive as specified by the retiree medical
plan in effect immediately prior to the Change of Control.

 

(f)            Outplacement.  For 18 months following such Eligible
Executive’s termination of employment, the Company shall promptly pay (or, in
the discretion of the Eligible Executive, reimburse the Eligible Executive for
all reasonable expenses incurred) for professional outplacement services by
Drake Beam Morin, Inc. or another comparable qualified consultant selected by
the Company, but for no longer than the date the Eligible Executive first
obtains full-time employment after the date of termination of employment.

 

(g)           Discount.  At all times from and following such Eligible
Executive’s termination of employment, the Company shall provide to the
Eligible Executive and the Eligible Executive’s spouse and dependents (each as
defined under the Company’s applicable policies) all merchandise discounts
available to the Company’s employees immediately prior to the Change of
Control.

 

(h)           Equity Incentive Awards.  Any time periods, conditions or contingencies
relating to the exercise or realization of, or lapse of restrictions under, any
outstanding equity incentive award then held by such Eligible Executive shall,
if not previously accelerated or waived pursuant to Section 3, be
automatically accelerated or waived effective as of the effective date of such
Eligible Executive’s termination of employment.

 

(i)            Restrictive Covenants.  In consideration of the provision of the
foregoing benefits provided in this Section 2 and as otherwise set forth
in the Plan, Executive hereby agrees to be bound by the restrictive covenants
set forth in Exhibit A attached hereto.

 

Section 3.               Treatment of Equity Incentive
Awards.  Upon the occurrence of a Change of Control
during the period in which this Plan is effective, any time periods, conditions
or contingencies relating to the exercise or realization of, or lapse of
restrictions under, any outstanding equity incentive award then held by the
Eligible Executive shall be automatically accelerated or waived effective as of
the date of the Change of Control; provided, however, that in the
event any such outstanding equity incentive award is replaced as of the
occurrence of the Change of Control by comparable types of awards of greater or
at least substantially equivalent value, as determined in the sole discretion
of the administrator of the equity incentive award plan under which the
outstanding award was granted, no such automatic acceleration or waiver shall
occur, except to the extent the administrator of the applicable equity
incentive award plan, in its sole discretion, provides for such acceleration or
waiver, or unless such acceleration or waiver is expressly provided for in
connection with such replacement or under the terms of the applicable award
agreement.

 

8

 

Section 4.               Form and Time of Payment.  The cash severance pay benefits payable to an
Eligible Executive by his or her Employer under Section 2 shall be paid to
such Eligible Executive in a single lump sum less applicable withholdings
within the later of (i) 15 business days after the Eligible Executive’s
date of termination or (ii) the expiration of the revocation period, if
applicable, under the Release, except with respect to any additional bonus
amount payable after such time period to the extent required pursuant to Section 2(a)(iii)
above and except as provided pursuant to Section 5.

 

Section 5.               Tax Withholding and Deferral.  Each Employer shall withhold from any amount
payable to an Eligible Executive pursuant to this Plan, and shall remit to the
appropriate governmental authority, any income, employment or other tax the
Employer is required by applicable law to so withhold from and remit on behalf
of such Eligible Executive. 
Notwithstanding any other provision of this Plan or certain compensation
and benefit plans of the Employer, any payments or benefits due under this Plan
or such Employer compensation and benefit plans upon or in connection with a
termination of Executive’s employment shall be deferred and paid no earlier
than six months following such termination of Executive’s employment, if, and
only to the extent, required to comply with Section 409A of the Code.

 

Section 6.               Limitation of Certain Payments.

 

(a)           In the event the Employer determines, based upon the advice
of the independent public accountants for the Employer, that part or all of the
consideration, compensation or benefits to be paid to Executive under this Plan
constitute “parachute payments” under Section 280G(b)(2) of the Code, as
amended, then, if the aggregate present value of such parachute payments,
singularly or together with the aggregate present value of any consideration,
compensation or benefits to be paid to Executive under any other plan,
arrangement or agreement which constitute “parachute payments” (collectively,
the “Parachute Amount”) exceeds 2.99 times the Executive’s “base
amount”, as defined in Section 280G(b)(3) of the Code (the “Executive
Base Amount”), the amounts constituting “parachute payments” which would
otherwise be payable to or for the benefit of Executive shall be reduced to the
extent necessary so that the Parachute Amount is equal to 2.99 times the
Executive Base Amount (the “Reduced Amount”); provided that such
amounts shall not be so reduced if the Executive determines, based upon the
advice of an independent nationally recognized public accounting firm (which
may, but need not be the independent public accountants of the Employer), that
without such reduction Executive would be entitled to receive and retain, on a
net after tax basis (including, without limitation, any excise taxes payable
under Section 4999 of the Code), an amount which is greater than the
amount, on a net after tax basis, that the Executive would be entitled to
retain upon his receipt of the Reduced Amount.

 

(b)           If the determination made pursuant to clause (a) of
this Section 6 results in a reduction of the payments that would otherwise
be paid to Executive except for the application of clause (a) of this
Section 6, Executive may then elect, in his sole discretion, which and how
much of any particular entitlement shall be eliminated or reduced and shall
advise the Employer in writing of his election within ten days of the
determination of the reduction in payments. 
If no such election is made by Executive within such ten-day period, the
Employer may elect which and how much of any entitlement shall be

 

9

 

eliminated or
reduced and shall notify Executive promptly of such election.  Within ten days following such determination
and the elections hereunder, the Employer shall pay to or distribute to or for
the benefit of Executive such amounts as are then due to Executive under this
Plan and shall promptly pay to or distribute to or for the benefit of Executive
in the future such amounts as become due to Executive pursuant to this Plan.

 

(c)           As a result of the uncertainty in the application of
Section 280G of the Code at the time of a determination hereunder, it is
possible that payments will be made by the Employer which should not have been
made under clause (a) of this Section 6 (“Overpayment”) or
that additional payments which are not made by the Employer pursuant to
clause (a) of this Section 6 should have been made (“Underpayment”).  In the event that there is a final
determination by the Internal Revenue Service, or a final determination by a
court of competent jurisdiction, that an Overpayment has been made, any such
Overpayment shall be repaid by Executive to the Employer together with interest
at the applicable Federal rate provided for in Section 7872(f)(2) of the
Code.  In the event that there is a final
determination by the Internal Revenue Service, a final determination by a court
of competent jurisdiction or a change in the provisions of the Code or regulations
pursuant to which an Underpayment arises under this Plan, any such Underpayment
shall be promptly paid by the Employer to or for the benefit of Executive,
together with interest at the applicable Federal rate provided for in
Section 7872(f)(2) of the Code.

 

Section 7.               Plan Administration.  This Plan shall be administered by the
Compensation Committee of the Board.  The
Committee shall have discretionary and final authority to interpret and
implement the provisions of this Plan and to determine eligibility for benefits
under the Plan.  The Committee shall
perform all of the duties and exercise all of the powers and discretion that
the Committee deems necessary or appropriate for the proper administration of
this Plan.  Every interpretation, choice,
determination or other exercise by the Committee of any power or discretion
given either expressly or by implication to it shall be conclusive and binding
upon all parties having or claiming to have an interest under this Plan or
otherwise directly or indirectly affected by such action, without restriction,
however, upon the right of the Committee to reconsider or redetermine such
action.  The Committee may adopt such
rules and regulations for the administration of this Plan as are consistent
with the terms hereof, and shall keep adequate records of its proceedings and
acts.  The Committee may employ such
agents, accountants and legal counsel (who may be agents, accountants and legal
counsel for an Employer) as may be appropriate for the administration of the Plan.  All reasonable administration expenses
incurred by the Committee in connection with the administration of the Plan
shall be paid by the Employer.

 

Section 8.               Claims Procedure.  If any person (hereinafter called the “Claimant”)
feels he or she is being denied a benefit to which he or she is entitled under
this Plan, such Claimant may file a written claim for said benefit with the
Chairman of the Committee.  Within
60 days of the receipt of such claim the Committee shall determine and
notify the Claimant as to whether he or she is entitled to such benefit.  Such notification shall be in writing and, if
denying the claim for benefit, shall set forth the specific reason or reasons
for the denial, make specific reference to the pertinent Plan provisions, and
advise the Claimant that he or she may, within 60 days of the receipt of
such notice, request in writing to appear before the Committee or its
designated

 

10

 

representative for a hearing to review such
denial.  Any such hearing shall be
scheduled at the mutual convenience of the Committee or its designated
representative and the Claimant, and at such hearing the Claimant and/or his or
her duly authorized representative may examine any relevant documents and
present evidence and arguments to support the granting of the benefit being
claimed.  The final decision of the
Committee with respect to the claim being reviewed shall be made within
60 days following the hearing thereon, and the Committee shall in writing
notify the Claimant of its final decision, again specifying the reasons
therefor and the pertinent Plan provisions upon which such decision is
based.  The final decision of the
Committee shall be conclusive and binding upon all parties having or claiming
to have an interest in the matter being reviewed.

 

Section 9.               Plan Amendment and Termination.  The Company shall have the right and power at
any time and from time to time to amend this Plan, in whole or in part, by
written document executed by its duly authorized representative and at any time
to terminate this Plan; provided, however, that no such amendment
or termination shall reduce the amount of severance pay payable under this Plan
to a former Executive whose employment with an Employer terminated prior to the
date of such amendment or termination, or defer the date for the payment of
such former Executive’s benefit hereunder except as provided pursuant to
Section 5, without the consent of such former Executive.  Any provision of this Plan to the contrary
notwithstanding, any action to amend or terminate this Plan on or after the
date on which a Change of Control occurs shall not be effective prior to the
end of the two-year period beginning on the effective date of the Change of
Control.

 

Section 10.             Nature of Plan and Rights.  This Plan is an unfunded employee welfare
benefit plan and no provision of this Plan shall be deemed or construed to
create a trust fund of any kind or to grant a property interest of any kind to
any Executive or former Executive.  Any
payment which becomes due under this Plan to an Eligible Executive shall be
made by his or her Employer out of its general assets, and the right of any
Eligible Executive to receive a payment hereunder from his or her Employer
shall be no greater than the right of any unsecured general creditor of such
Employer.

 

Section 11.             Entire Agreement; Offset;
Modification.

 

(a)           This Plan constitutes the entire agreement between the
parties and, except as expressly provided herein, supersedes the provisions of
all other prior agreements expressly concerning the payment of severance
benefits upon a termination of employment in connection with or following a
Change of Control.  Without limiting the
generality of the preceding sentence, the payment of any amounts and provision
of any benefits pursuant to Section 2 of this Plan shall be in lieu of and
shall supersede Executive’s entitlement to payments or benefits pursuant to
paragraph 1(a) of the Confidentiality, Non-Competition and Termination
Benefits Agreement between Executive and the Company (to the extent such
agreement is currently in effect).  In
all other respects, any such Confidentiality, Non-Competition and Termination
Benefits Agreement shall remain in full force and effect, including with
respect to any amounts payable or benefits to be provided prior to and
otherwise not in connection with a Change of Control; provided, that in
no event shall payments or benefits provided pursuant to the Confidentiality,
Non-Competition and Termination Benefits Agreement or any other

 

11

 

severance agreement
or policy entitle Executive to a duplication of payments and benefits pursuant
to this Plan and, in the event of an Anticipatory Termination, any amount
payable hereunder shall be offset and reduced by the amount of any termination
payments or benefits previously provided to Executive under the
Confidentiality, Non-Competition and Termination Benefits Agreement or any
other severance arrangement with the Company.

 

(b)           Except as expressly provided herein, this Plan shall not
interfere in any way with the right of the Company to reduce Executive’s
compensation or other benefits or terminate Executive’s employment, with or
without Cause.  Any rights that Executive
shall have in that regard shall be as set forth in any applicable employment
agreement between Executive and the Company.

 

Section 12.             Spendthrift Provision.  No right or interest of an Eligible Executive
under this Plan may be assigned, transferred or alienated, in whole or in part,
either directly or by operation of law, and no such right or interest shall be
liable for or subject to any debt, obligation or liability of such Eligible
Executive.

 

Section 13.             Notice.  Notice of termination without Cause or for
Good Reason shall be given in accordance with this Section, and shall indicate
the specific termination provision under the Plan relied upon, the relevant
facts and circumstances and the effective date of termination.  For the purpose of this Plan, any notice and
all other communication provided for in this Plan shall be in writing and shall
be deemed to have been duly given when received at the respective addresses set
forth below, or to such other address as the Company or the Eligible Executive
may have furnished to the other in writing in accordance herewith.

 

If to the Company:

 

The Neiman Marcus Group, Inc.

1618 Main Street

Dallas, TX 75201

Attention:  General Counsel

 

If to Executive:

 

To the most recent address of Executive set forth in the personnel
records of the Company.

 

Section 14.             Applicable Law.  This Plan shall be governed and construed in
accordance with applicable federal law.

 

12

 

Section 15.             Effectiveness.  This Plan shall be effective as of the date
of adoption by the Board and shall remain in effect until terminated pursuant
to Section 9 of this Plan.

 

IN WITNESS WHEREOF, this Plan has been executed this 1st day
of April, 2005, to be effective as of April 1, 2005.

 

	
   

  	
   

  	
  THE NEIMAN MARCUS GROUP, IN.C

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nelson a. Bangs

  
	
   

  	
   

  	
  Nelson A. Bangs

  
	
   

  	
   

  	
  Senior Vice President & General Counsel

  

 

13

 

TIER III

SCHEDULE A

 

 

Barnes

Galvin

Goddard

Hershey

Hussey

Joselove

Kaner

Kazor

Kornajcik

Lind

Paolini

Patrick

Shields

Shirley

Spaniolo

Stangle

Stapleton

Yee

 

 

Exhibit A

 

CONFIDENTIALITY AND NON-COMPETITION
RESTRICTIVE COVENANTS

 

I.              Executive
acknowledges and agrees that (a) the Company is engaged in a highly
competitive business; (b) the Company has expended considerable time and
resources to develop goodwill with its customers, vendors, and others, and to
create, protect, and exploit Confidential Information (as defined in Section V
below); (c) the Company must continue to prevent the dilution of its
goodwill and unauthorized use or disclosure of its Confidential Information to
avoid irreparable harm to its legitimate business interests; (d) in the
specialty retail business, Executive’s participation in or direction of the
Company’s day-to-day operations and strategic planning are and will be an
integral part of the Company’s continued success and goodwill; (e) given
Executive’s position and responsibilities, Executive necessarily will be
creating Confidential Information that belongs to the Company and enhances the
Company’s goodwill, and in carrying out Executive’s responsibilities Executive
in turn will be relying on the Company’s goodwill and the disclosure by the
Company to him of Confidential Information; (f) Executive will have access
to Confidential Information that could be used by any competitor of the Company
in a manner that would irreparably harm the Company’s competitive position in
the marketplace and dilute its goodwill; and (g) Executive necessarily
would use or disclose Confidential Information if Executive were to engage in competition
with the Company.  The Company
acknowledges and agrees that Executive must have and continue to have
throughout Executive’s employment the benefits and use of its goodwill and
Confidential Information in order to properly carry out Executive’s responsibilities.  The Company accordingly promises upon
execution and delivery of the Plan to provide Executive immediate access to new
and additional Confidential Information and authorize him to engage in activities
that will create new and additional Confidential Information.  The Company and Executive thus acknowledge
and agree that upon execution and delivery of the Plan Executive (x) has
received, will receive, and will continue to receive, Confidential Information
that is unique, proprietary, and valuable to the Company, (y) has created,
will create, and will continue to create, Confidential Information that is
unique, proprietary, and valuable to the Company, and (z) has benefited,
will benefit, and will continue to benefit, including without limitation by way
of increased earnings and earning capacity, from the goodwill the Company has
generated and from the Confidential Information.  Accordingly, Executive acknowledges and
agrees that at all times during Executive’s employment by the Company and thereafter:

 

(i)            all Confidential
Information shall remain and be the sole and exclusive property of the Company;

 

(ii)           Executive will protect
and safeguard all Confidential Information;

 

(iii)          Executive will hold all
Confidential Information in strictest confidence and not, directly or
indirectly, disclose or divulge any Confidential Information to any person
other than an officer, director, or employee of the Company to the extent
necessary for the proper performance of Executive’s responsibilities unless authorized
to do so by the Company or compelled to do so by law or valid legal process;

 

A-1

 

(iv)          if Executive believes
Executive is compelled by law or valid legal process to disclose or divulge any
Confidential Information, Executive will notify the Company in writing
sufficiently in advance of any such disclosure to allow the Company the
opportunity to defend, limit, or otherwise protect its interests against such
disclosure;

 

(v)           at the end of Executive’s
employment with the Company for any reason or at the request of the Company at
any time, Executive will return to the Company all Confidential Information and
all copies thereof, in whatever tangible form or medium (including electronic);
and

 

(vi)          absent the promises and
representations of Executive in this Section I and in Section II below,
the Company would require him immediately to return any tangible Confidential
Information in Executive’s possession, would not provide Executive with new and
additional Confidential Information, would not authorize Executive to engage in
activities that will create new and additional Confidential Information, and
would not enter or have entered into the Plan.

 

II.            In
consideration of the Company’s promises to provide Executive with new and
additional Confidential Information and to authorize him to engage in
activities that will create new and additional Confidential Information upon
execution and delivery of the Plan, and the other promises and undertakings of
the Company in the Plan, Executive agrees that, while Executive is employed by
the Company and for a period of 12 months following the end of that
employment for any reason, Executive shall not engage in any of the following
activities (the “Restricted Activities”):

 

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

 

(b)           Executive will not,
whether on Executive’s own behalf or on behalf of any other individual,
partnership, firm, corporation or business organization, either directly or
indirectly solicit, induce, persuade, or entice, or endeavor to solicit,
induce, persuade, or entice, any person who is then employed by or otherwise
engaged to perform services for the Company or its Affiliates to leave that
employment or cease performing those services;

 

(c)           Executive will not,
whether on Executive’s own behalf or on behalf of any other individual,
partnership, firm, corporation or business organization, either directly or
indirectly, solicit, induce, persuade, or entice, or endeavor to solicit,
induce, persuade, or entice, any person who is then a customer, supplier, or
vendor of the Company or any of its Affiliates to cease being a customer,
supplier, or vendor of the Company or any of its Affiliates or to divert all or
any part of such person’s or entity’s business from the Company or any of its
Affiliates; and

 

(d)           Executive will not
associate directly or indirectly, as an employee, officer, director, agent,
partner, stockholder, owner, representative, or consultant, with any Competitor
(as defined in Section V below), unless (i) Executive has advised the
Company in writing in advance of Executive’s desire to undertake such
activities and the specific nature of such activities; (ii) the Company
has received written assurances (that will be designed, among other

 

A-2

 

things, to protect the Company’s
and its Affiliates’ goodwill, Confidential Information, and other important
commercial interests) from the Competitor and Executive that are, in the
Company’s sole discretion, adequate to protect its interests; (iii) the
Company, in its sole discretion, has approved in writing such association; and
(iv) Executive and the Competitor adhere to such assurances.  After the end of Executive’s employment with
the Company and any Affiliate, the restriction immediately set forth above in
this Section II(d) applies only to conduct of Executive that takes place
anywhere in, or is directed at any part of, the Noncompetition Area (as defined
in Section V below).  Executive shall
not be in violation of this Section II(d) solely as a result of Executive’s
investment in stock or other securities of a Competitor or any of its
Affiliates listed on a national securities exchange or actively traded in the
over-the-counter market if Executive and the members of Executive’s immediate
family do not, directly or indirectly, hold more than a total of one
percent (1%) of all such shares of stock or other securities issued and
outstanding.  Executive acknowledges and
agrees that engaging in the Restricted Activities described in this subparagraph
would result in the inevitable disclosure or use of Confidential Information
for the Competitor’s benefit or to the detriment of the Company.

 

Executive acknowledges and agrees that the restrictions contained in
this Section II are ancillary to an otherwise enforceable agreement,
including without limitation the mutual promises and undertakings set forth in
Section II; that the Company’s promises and undertakings set forth in
Section II, and Executive’s position and responsibilities with the Company,
give rise to the Company’s interest in restricting Executive’s post-employment
activities; that such restrictions are designed to enforce Executive’s promises
and undertakings set forth in this Section II and Executive’s common-law
obligations and duties owed to the Company; that the restrictions are
reasonable and necessary, are valid and enforceable under Texas law, and do not
impose a greater restraint than necessary to protect the Company’s goodwill,
Confidential Information, and other legitimate business interests; that
Executive will immediately notify the Company in writing should Executive
believe or be advised that the restrictions are not valid or enforceable under
Texas law or the law of any other state that Executive contends or is advised
is applicable; that the mutual promises and undertakings of the Company and
Executive under Section I and Section II are not contingent on the
duration of Executive’s employment with the Company; and that absent the
promises and representations made by Executive in Section I and
Section II, the Company would require him to return any Confidential
Information in Executive’s possession, would not provide Executive with new and
additional Confidential Information, would not authorize Executive to engage in
activities that will create new and additional Confidential Information, and
would not enter or have entered into the Plan.

 

III.           Executive
acknowledges and agrees that the Company would not have an adequate remedy at
law and would be irreparably harmed in the event that any of the provisions of
Section I or Section II were not performed in accordance with their
specific terms or were otherwise breached. 
Accordingly, Executive agrees that the Company shall be entitled to
equitable relief, including preliminary and permanent injunctions and specific
performance, in the event Executive breaches or threatens to breach any of the
provisions of such Sections, without the necessity of posting any bond or
proving special damages or irreparable injury. 
Such remedies shall not be deemed to be the exclusive remedies for a
breach or threatened breach of the provisions of Section I or
Section II by Executive, but shall be in addition to all other remedies
available to the Company at law or equity. 
Executive acknowledges and agrees that the Company shall be entitled to
recover its attorneys’ fees, expenses, and court costs, in addition to

 

A-3

 

any other remedies to which it may be entitled, in the event Executive
breaches the provisions of Section I or Section II.  Executive acknowledges and agrees that no
breach by the Company of this Plan or failure to enforce or insist on its
rights under this Plan shall constitute a waiver or abandonment of any such
rights or defense to enforcement of such rights.

 

IV.           If
the provisions of Section I or Section II are ever deemed by a court
to exceed the limitations permitted by applicable law, Executive and the
Company agree that such provisions shall be, and are, automatically reformed to
the maximum limitations permitted by such law.

 

V.            Definitions:

 

“Competitor” means (a) each of Saks Incorporated,
Nordstrom, Inc., Barneys New York, Inc., any Affiliate of any of them, and any
other person or entity that owns, operates or controls any of them or any of
their Affiliates, directly or indirectly; (b) the successors to or assigns
of the persons or entities identified in (a); and (c) the retail
operations of any person or entity, or successor or assign of such person or
entity, who, at any time during Executive’s employment with the Company or
within 12 months following the end of Executive’s employment with the
Company, was a vendor of the Company and had an annual gross revenue of
$100 million or more, and the Affiliates of such vendors.  To the extent that any of the corporate names
used in (a) of this definition are not the legally correct corporate names of
the entities commonly referred to by the corporate names used above absent the
corporate form designation, the definition shall be deemed to apply to the
entities with the correct corporate names, along with the Affiliates,
successors, and assigns of such correctly named entities.

 

“Confidential Information” shall mean, without limitation, all
documents or information, in whatever form or medium, concerning or evidencing
sales; costs; pricing; strategies; forecasts and long range plan; financial and
tax information; personnel information; business, marketing and operational
projections, plans and opportunities; and customer, vendor, and supplier
information; but excluding
any such information that is or becomes generally available to the public other
than as a result of any breach of Section I or Section II above or
other unauthorized disclosure by Executive.

 

“Noncompetition Area” means the following geographic areas:  (a) any foreign country where the
Company or its Affiliates engage in business of any kind, including selling,
purchasing, or ordering goods, at any time during Executive’s employment with
the Company or its Affiliates; and (b) the United States of America.

 

A-4

 

Exhibit B

 

Methodology for Change of Control Lump Sum
Calculation

And Definition of Actuarial Equivalent

 

(Capitalized terms used herein without
definition have the meanings specified in the

Agreement or Plan to which this Exhibit B is attached)

 

The methodology for the Change of Control Lump Sum Calculation follows
the steps below:

 

1.     Calculate
the participant’s total benefit under the SERP as of the date of the
participant’s termination of employment (the “Termination Date”) after adding
the participant’s Severance Multiple to the number of years of age and service
(the “Age and Service Enhancement”) for purposes of eligibility for
participation, eligibility for retirement, for early commencement of actuarial
subsidies and for purposes of benefit accrual (the “Enhanced Change of Control
Benefit”).  Calculate the early
retirement benefit payable at the Termination Date (if eligible) or the age 65
accrued benefit amount (if not eligible for early retirement).  This calculation is without offset for the
benefit under the NMG Retirement Plan (Basic Plan) (the “Basic Plan”).

2.     Calculate
the Lump Sum of the benefit in step 1, based on the Actuarial Equivalent
described below.

3.     Calculate
the participant’s total benefit under the SERP as of the Termination Date
without taking into account the Age and Service Enhancement (the “Normal SERP
Benefit”).  Calculate the early
retirement benefit payable at the Termination Date (if eligible) or the age 65
accrued benefit amount (if not eligible for early retirement).  This calculation is also without offset for
the Basic Plan benefit.

4.     Calculate
the Lump Sum of the benefit in step 3, based on the Actuarial Equivalent
described below.

5.     Subtract
the Lump Sum in step 4 from the Lump Sum in step 2 to determine the Lump Sum
amount of the incremental Change of Control benefit.

 

Note that these calculations are not offset by the Basic Plan benefit
because the SERP provisions provide for a more generous early retirement
subsidy than the Basic Plan, and that subsidy is calculated on the full SERP
benefit (before the benefit under the Basic Plan is offset from it).  Therefore, in order to capture the full value
of the SERP benefit at early retirement (and, by extension, the full value of
the incremental Change of Control benefit), the benefits prior to the Basic
Plan offset must be used.

 

There are three different calculation scenarios, depending on the
Participant’s age and service as of the Termination Date:

 

(1) If the participant is eligible for an immediate SERP benefit
(without taking into account the Age and Service Enhancement), then the Lump
Sum amounts for both the Normal SERP Benefit and the Enhanced Change of Control
Benefit are based on the immediately payable early retirement benefits.

 

B-1

 

(2) If the participant is not eligible for an immediate SERP
benefit even with the Age and Service Enhancement, then the Lump Sum amounts
for both the Normal SERP Benefit and the Enhanced Change of Control Benefit are
based on the Age 65 accrued benefits.

 

(3) If the participant is eligible for an immediate SERP benefit
only because of the Age and Service Enhancement, then the Lump Sum for the
Normal SERP Benefit is based on the Age 65 accrued benefit and the Lump Sum for
the Enhanced Change of Control Benefit is based on the immediately payable
early retirement benefit.

 

The following example illustrates this third scenario:

 

	
  Severance
  Multiple:

  	
   

  	
  2.0 years

  
	
   

  	
   

  	
   

  
	
  Actual Age
  at Termination Date

  	
   

  	
  54.0 years

  
	
  Enhanced Age
  at Termination Date:

  	
   

  	
  56.0 years

  
	
   

  	
   

  	
   

  
	
  Service at
  Termination Date:

  	
   

  	
  20.0 years

  
	
  Enhanced
  Service at Termination Date:

  	
   

  	
  22.0 years

  

 

This participant is not eligible for an immediate benefit under the
regular SERP provisions.  With the Age
and Service Enhancement, he is eligible for an immediate benefit, so the full
early retirement subsidy is provided by the Enhanced Change of Control benefit.

 

Total Enhanced Change of Control Benefit at Termination Date

(a) Total Enhanced Change of Control Benefit at Termination Date
Payable at age 65 = $7,000

(b) Total Enhanced Change of Control Early Retirement Benefit
Payable at age 54 = $5,320

(Early Retirement Factor of .76 based on enhanced age 56 * (a))

(c) Age 54 Immediate Lump Sum Factor = 15.2476

(d) Lump Sum Value of Total Enhanced
Change of Control Benefit at Termination = (b) * (c) * 12 = $973,407

 

Total Normal SERP Benefit at Termination Date

(e) Total SERP accrued benefit at Termination Date Payable at age
65 = $5,000

(f) Age 54 Deferred to Age 65 Lump Sum Factor = 6.7961

(g) Lump Sum Value of Normal SERP Benefit at Termination Date =
(e) * (f) * 12 = $407,766

 

(h) Incremental Change of Control Benefit = $973,407 - $407,766 =
$565,641

 

The lump sum factors are based on the Actuarial Equivalent definition
from the Basic Plan used for determining a lump sum value, i.e., the GATT
specified mortality and interest under IRC Section 417(e)(3).  The assumptions are (a) the 1994 Group
Annuity Reserve mortality table, (b) the 30-Year Treasury Rate for the month of
March in the Plan Year prior to the Plan Year of distribution, and (c) the
participant’s actual age at distribution date.

 

B-2

 

The example shown above assumes that both the Termination Date and
distribution date are in the Plan Year Ending July 31, 2005, so the interest
rate used is the March 2004 30-Year Treasury Rate of 4.74%.  The March 2005 30-Year Treasury Rate which
would be used for distributions made in the Plan Year Ending July 31, 2006 is
not yet known.

 

A participant who is not vested in the SERP upon his actual termination
date is automatically vested under the Change of Control contract language (but
with no Basic Plan benefit available to him). 
In addition, any employee who is not yet a participant in the Basic Plan
as of his actual Termination Tate but who would otherwise be eligible for the
SERP, is automatically a participant under the SERP (again, with no Basic Plan
benefit).

 

B-3

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