Document:

EXHIBIT 10.22

 

AMENDMENT TO THE

STOCK OPTION GRANT AGREEMENT

 

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

 

W I T N E S S E T H:

 

WHEREAS, the
Company and the Participant entered into a Stock Option Grant Agreement (the “Agreement”)
effective as of November 29, 2005, pursuant to the terms of the Newton
Acquisition, Inc. Management Equity Incentive Plan (the “Plan”); and

 

WHEREAS, the Company has amended the Plan for compliance with Internal
Revenue Code Section 409A and the Treasury Regulations thereunder; and

 

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

 

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

 

1.             Paragraph 7 of the
Agreement is hereby amended and restated in its entirety as follows:

 

7.  Certain Rights on a Change
of Control.  If (a) a Change of Control occurs, (b) the
surviving corporation following such Change of Control is an entity for whose
stock there is no Public Market, (c) the surviving corporation assumes the
Participant’s outstanding Options in connection with such Change of Control and
such Options convert into options to purchase common stock or other equity
interests of the surviving corporation (the “Assumed Options”) and (d) the
Participant thereafter experiences a Qualifying Termination at any time prior
to the occurrence of an Initial Public Offering of the surviving corporation,
the Participant will be entitled to sell to the Company or such surviving
corporation, within ninety (90) days of such Qualifying Termination, all or any
portion of the Assumed Options that the Participant had not exercised at the
time of such sale and elects to sell to the Company or such surviving
corporation (the “Eligible Assumed Options”), and the Company or such surviving
corporation will be obligated to purchase from the Participant, in full
satisfaction of the Participant’s rights with respect to such Eligible Assumed
Options, all such Eligible Assumed Options, for a price equal to the aggregate
fair market value, as determined in accordance 

 

 

with Treas. Reg. § 1.409A-1(b)(5)(iv), of the shares of common stock or
other equity interests underlying such Eligible Assumed Options, minus the
aggregate Exercise Price of such Eligible Assumed Options that such Participant
would have been required to pay in order to exercise such Eligible Assumed
Options.

 

2.             The last sentence
of Paragraph 8 of the Agreement is hereby amended and restated in its entirety
as follows:

 

It is intended that the Option be exempt from Code Section 409A,
and this Agreement shall be administered and construed to the fullest extent
possible to reflect and implement such intent.

 

3.             By execution of this Amendment the
Participant hereby consents to the amendment of the Plan attached hereto as Exhibit A.

 

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

 

IN WITNESS
WHEREOF, the parties hereto have caused this Amendment to be executed on this
the 10th day of December, 2008.

 

	
   

  	
   

  	
    NEIMAN
  MARCUS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
    Nelson
  A. Bangs

  
	
   

  	
   

  	
    Senior
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
    PARTICIPANT

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

2EXHIBIT 10.25

 

AMENDMENT TO EMPLOYMENT AGREEMENT

 

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

 

W I T N
E S S E T H:

 

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

 

WHEREAS, NMG
and the Executive now desire to amend the Employment Agreement for compliance
with Internal Revenue Code Section 409A and the Treasury Regulations
thereunder, and to make certain other changes;

 

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

 

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

 

2.             Paragraph 1(d) of
the Employment Agreement is hereby deleted in its entirety, with such paragraph
reserved for future use.

 

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

 

In addition to
the foregoing, if the Executive experiences a “separation from service” (as
determined in accordance with Treasury Regulation Section 1.409A-1(h))
prior to her termination of employment as a result of action taken by NMG without
the consent of the Executive, the separation from service shall constitute “Good
Reason” hereunder; provided that the Executive delivers a Notice of Termination
to NMG within 10 days following such separation from service.

 

4.             Paragraph 1(k) of
the Employment Agreement is hereby amended and restated in its entirety as
follows:

 

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

 

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

 

 

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

 

6.             Paragraph 4(a) of
the Employment Agreement is hereby amended and restated in its entirety as
follows:

 

(a)  The Executive shall serve as the
Chief Executive Officer and President of Neiman Marcus Stores, a division of
NMG (“NMS”) and as an Executive Vice President of NMG.  In such capacity, the Executive, subject to
the ultimate control and direction of the Board, shall have and exercise direct
charge of and general supervision over the business and affairs of NMS and over
the strategy, business development and marketing of NMG.  In addition, the Executive shall have such
other duties, functions, responsibilities, and authority as are from time to
time delegated to the Executive by the Board and the Chief Executive Officer of
NMG; provided, however, that such duties, functions, responsibilities, and
authority are reasonable and customary for a person serving in the same or
similar capacity of an enterprise comparable to NMS.  The Executive shall report and be accountable
to the Board and the President and Chief Executive Officer of NMG or their
respective designees.

 

7.             Paragraph 4(b) of
the Employment Agreement is hereby amended and restated in its entirety as
follows:

 

(b)  During the Employment Term, the
Executive shall devote her full time, skill, and attention and her best efforts
to the business and affairs of NMS and NMG to the extent necessary to discharge
fully, faithfully, and efficiently the duties and responsibilities delegated
and assigned to the Executive in or pursuant to this Agreement, except for
usual, ordinary, and customary periods of vacation and absence due to illness
or other disability.  Notwithstanding the
foregoing, the Executive may (i) subject to the approval of the Board,
serve as a director or as a member of an advisory board of a noncompeting
company, (ii) serve as an officer or director or otherwise participate in
non-profit educational, welfare, social, religious and civil organizations,
including, without limitation, all such positions and participation in effect
as of the Effective Date, and (iii) manage personal and family
investments; provided, however, that any such activities as described in (i), (ii) or
(iii) of the preceding provisions of 

 

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

 

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

 

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

 

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

 

During the Employment Term, the Executive shall continue to accrue
benefits under The Neiman Marcus Group, Inc. Supplemental Executive Retirement
Plan (the “SERP”), provided that (i) the SERP shall not be amended or
terminated in any way that adversely affects the Executive without the consent
of Executive, and (ii) after the Executive has reached the 25-year maximum
set forth in the SERP, she shall be entitled to an additional one year of
credit for each full year of service thereafter.

 

10.           Paragraphs 5(d) (Employee
Benefits) through 5(h) (Indemnification) are hereby redesignated
Paragraphs 5(e) through 5(i) respectively.

 

11.           Paragraph 5(f) (Fringe
Benefits) of the Employment Agreement is hereby amended by the addition of the
following sentence:

 

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

 

12.           Paragraph 7(a) of
the Employment Agreement is hereby amended and restated in its entirety as
follows:

 

(a)  Death.  If the Executive’s employment is terminated
by reason of the Executive’s death, NMG shall pay to the Executive’s estate
within 60 days of the Employment Termination Date (i) any unpaid portion
of the Executive’s Base Salary through the Employment Termination Date and any
bonus payable for the preceding fiscal year that has otherwise not already been
paid; provided that the payment of any such bonus may not be delayed past the
date the bonus is payable under the terms of any bonus plan (together, the “Compensation
Payment”), (ii) any accrued but unused vacation days (the “Vacation
Payment”), (iii) any reimbursement for business travel and other expenses
to which the Executive is entitled (the “Reimbursement”), and (iv) an
amount of annual incentive pay, as described in Paragraph 5(b), equal to a
prorated portion of the Target Bonus amount for the year in which the
Employment Termination Date 

 

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

 

13.           Paragraph 7(b) of
the Employment Agreement is hereby amended and restated in its entirety as
follows:

 

(b)  Disability.  If the Executive’s employment is terminated
by reason of the Executive’s Disability, NMG shall pay to the Executive within
60 days of the Employment Termination Date (i) the Compensation Payment,
provided that the payment of the bonus portion of the Compensation Payment may
not be delayed past the date the bonus is payable under the terms of any bonus
plan, (ii) the Vacation Payment, (iii) the Reimbursement, and (iv) the
Prorated Bonus.  This Paragraph 7(b) does
not limit the entitlement of the Executive to any amounts payable pursuant to
the terms of any applicable disability insurance plan, policy, or similar
arrangement that is maintained by NMG for the Executive’s benefit.

 

14.           Paragraph 7(c) of
the Employment Agreement is hereby amended and restated in its entirety as
follows:

 

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

 

15.           Paragraph 7(d) of
the Employment Agreement is hereby amended and restated in its entirety as
follows:

 

(d)  Termination for Cause.  If the Executive’s employment is terminated
by NMG for Cause, NMG shall pay to the Executive within 60 days of the
Employment Termination Date (i) the Compensation Payment, provided that
the payment of the bonus portion of the Compensation Payment may not be delayed
past the date the bonus is payable under the terms of any bonus plan, (ii) the
Vacation Payment, and (iii) the Reimbursement.

 

16.           Paragraph 7(e) of
the Employment Agreement is hereby amended and restated in its entirety as
follows:

 

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

 

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

 

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

 

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

 

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

 

5

 

(C) for a period of 2 years following the Employment Termination
Date, provide the Executive and the Executive’s spouse and dependents life
insurance coverage at the same benefit level as provided to Executive
immediately prior to the Employment Termination Date and at the same cost to
Executive as is generally provided to similarly situated active employees of
NMG.  The amount expended for the
provision of life insurance during a taxable year of the Executive shall not
affect the amount expended for the provision of life insurance in any other
taxable year.

 

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

 

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

 

(A) the Executive receives written notice from NMG that, in the
reasonable judgment of NMG, the Executive engaged or is engaging in any conduct
that violates Paragraph 8 or engaged or is engaging in any of the Restricted
Activities described in Paragraph 9, unless within 30 days of the date NMG so
notifies the Executive in writing, the Executive provides information to NMG
that NMG determines is sufficient to establish that the Executive did not
engage in any conduct that violated Paragraph 8 or engage in any of the
Restricted Activities described in Paragraph 9; or

 

6

 

(B) the Executive is arrested or indicted for any felony, other
serious criminal offense, or any violation of federal or state securities laws,
or has any civil enforcement action brought against her by any regulatory
agency, for actions or omissions related to her employment with NMG or any of
its Affiliates, or if NMG reasonably believes that the Executive has committed
any act or omission, either during her employment under this Agreement or if
related to such employment thereafter, that during her employment would have
entitled NMG to terminate her employment for Cause under provisions (i), (ii),
(iv), or (vi) of the definition of Cause, and the Executive is found
guilty or enters into a plea agreement, consent decree or similar arrangement
with respect to any such criminal or civil proceedings, or if the Board makes a
finding that the Executive has committed such an act or omission.  If any such criminal or civil proceedings do
not result in a finding of guilt or the entry of a plea agreement or consent
decree or similar arrangement, or if the Board makes a finding that the
Executive has not committed such an act or omission, the Executive shall not be
required to repay any amounts hereunder.

 

17.           Paragraph 7(f) of
the Employment Agreement is hereby deleted in its entirety, with such paragraph
reserved for future use.

 

18.           Paragraph
7(h) of the Employment Agreement is hereby amended and restated in its entirety
as follows:

 

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

 

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

 

12.  Assistance in Litigation.  After the Employment Term and for the life of
the Executive, the Executive shall, upon reasonable notice, furnish such
information and assistance to NMG or any of its Affiliates as may reasonably be
requested by NMG in connection with any litigation in which NMG or any of its
Affiliates is, or may become, a party. 
NMG shall reimburse the Executive for all reasonable out-of-pocket
expenses, 

 

7

 

including travel expenses, meals and lodging, incurred by the Executive
in rendering such assistance, but shall have no obligation to compensate the
Executive for her time in providing information and assistance in accordance
with this Paragraph 12.  The Executive
shall provide to NMG a receipt or voucher for any reimbursable expense within
60 days of the occurrence of such expense. 
Any such reimbursement shall be made as soon as administratively
possible, but in any event no later than 10 business days following receipt of
such receipt or voucher.  Further, the
amount of expenses eligible for reimbursement during the Executive’s taxable
year shall not affect the expenses eligible for reimbursement in any other
taxable year.

 

20.           Paragraph 13(b) of
the Employment Agreement is hereby amended and restated in its entirety as
follows:

 

(b)  Notwithstanding anything to
the contrary contained herein, in the event the Executive is a “specified
employee” (as defined below) and is entitled to receive a payment on separation
from service that is subject to Code Section 409A, the payment may not be
made earlier than six months following the date of the Executive’s separation
from service if required by Code Section 409A and the regulations
thereunder, in which case, the accumulated postponed amount shall be paid in a
lump sum payment within ten (10) days after the end of the six-month
period.  If the Executive dies during the
postponement period prior to the payment of the postponed amount, the amounts
withheld on account of Code Section 409A shall be paid to the personal
representative of the Executive’s estate within 60 days after the date of the
Executive’s death.  A “specified employee”
shall mean an employee who, at any time during the 12-month period ending on
the identification date, is a “specified employee” under Code Section 409A,
as determined by the Board.  The
determination of “specified employees,” including the number and identity of
persons considered “specified employees” and the identification date, shall be
made by the Board in accordance with the provisions of Code Sections 416(i) and
409A and the regulations issued thereunder.

 

21.           Paragraph 13 of the
Employment Agreement is hereby amended by the addition of the following as
subparagraph 13(c):

 

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

 

8

 

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

 

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

 

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

 

(a)  In the event it shall be determined
that any payment, benefit or distribution (or combination thereof) by NMG, or
any of its Affiliates, to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this
Agreement, or otherwise) which must be taken into account under Section 280G
of the Code in determining the amount of any “parachute payment” (each a “Payment”
and collectively the “Payments”) is subject to the excise tax imposed by Section 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 Paragraph 16(a), if it shall be determined that Executive is entitled
to a Gross-Up Payment, but that the Payments do 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 

 

9

 

be reduced so that the Payments, 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 those Payments provided under
Paragraph 7(e)(ii)(A) and, if needed, such additional Payments that are
not subject to Code Section 409A.

 

(b)  All determinations required to be
made under this Paragraph 16, 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 NMG (the “Accounting Firm”) which shall
provide detailed supporting calculations both to NMG and the 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 NMG.  All fees and
expenses of the Accounting Firm shall be borne solely by NMG.  Any
Gross-Up Payment, as determined pursuant to this Paragraph 16, shall be
paid by NMG to the Executive (or to the appropriate taxing authority on the
Executive’s behalf) when the applicable tax is due.  If the Accounting
Firm determines that no Excise Tax is payable by the Executive, it shall so
indicate to the Executive in writing.  Any determination by the Accounting
Firm shall be binding upon NMG and the 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) the Executive will be lower than the amount actually
due (“Underpayment”).  In the event that NMG exhausts its remedies
pursuant to Paragraph 16(c) and the 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 NMG to or for the benefit of Executive within 10 business days
after receipt of the Accounting Firm’s determination.  In no event shall the Gross-Up Payment or the
Underpayment be made later than the end of the Executive’s taxable year next
following the Executive’s taxable year in which the related taxes are remitted
to the taxing authority.

 

(c)  The Executive shall notify NMG in
writing of any claim by the Internal Revenue Service that, if successful, would
require the payment by NMG of any Gross-Up Payment.  Such notification
shall be given as soon as practicable but no later than ten business days after
the Executive is informed in writing of such claim and shall apprise NMG of the
nature of such claim and the date on which such claim is requested to be
paid.  The 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 NMG
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due).  If NMG notifies the Executive in writing
prior to the expiration of such period that it desires to contest such claim,
the 

 

10

 

Executive shall (i) give NMG any information reasonably requested
by NMG relating to such claim, (ii) take such action in connection with
contesting such claim as NMG 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 NMG, (iii) cooperate
with NMG in good faith in order to effectively contest such claim and (iv) permit
NMG to participate in any proceedings relating to such claim; provided,
however, that NMG 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 the 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.  The payment of costs and
expenses shall be made within 10 business days after they are incurred and any
receipts, if any, are submitted to NMG, but in any event no later than the end
of the Executive’s taxable year following the Executive’s taxable year in which
the taxes that are the subject of the contest are remitted to the taxing
authority, or where as a result of such contest no taxes are remitted, the end
of the Executive’s taxable year following the Executive’s taxable year in which
the audit is completed or there is a final and nonappealable settlement or
other resolution of the litigation.  Any
Excise Taxes or income taxes imposed as a result of such representation and
payment of costs and expenses shall be reimbursed to the Executive within 10
business days after they are incurred but in any event no later than the end of
the Executive’s taxable year next following the Executive’s taxable year in
which the Executive remits the related taxes.  Without limitation on the
foregoing provisions of this Paragraph 16(c), NMG 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 the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the 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 NMG shall determine; provided, further, that if NMG directs the
Executive to pay such claim and sue for a refund, NMG shall advance the amount
of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the 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 the Executive is required
to extend the statute of limitations to enable NMG to contest such claim, the
Executive may limit this extension solely to such contested amount.  Any Excise Taxes or income taxes imposed as a
result of such advance shall be reimbursed to the Executive within 10 

 

11

 

business days after they are incurred but in any event no later than
the end of the Executive’s taxable year next following the Executive’s taxable
year in which the Executive remits the related taxes.  NMG’s control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the 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 the
Executive of an amount paid or advanced by NMG pursuant to this
Paragraph 16, the Executive becomes entitled to receive any refund with
respect to a Gross-Up Payment, the Executive shall (subject to NMG’s complying
with the requirements of Paragraph 16(c)) promptly pay to NMG the amount
of such refund received (together with any interest paid or credited thereon
after taxes applicable thereto).  If, after the receipt by the Executive
of an amount advanced by NMG pursuant to Paragraph 16(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and NMG does not notify the 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.

 

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

 

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

 

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

 

29.  Section 162(m).  The parties hereto recognize that NMG
is not currently subject to Section 162(m) of the Code but that it may
become subject to said section during the term of this Agreement.  In such event, NMG retains the right to amend
the provisions of this Agreement that impact, relate to or reference NMG’s
annual bonus program if NMG determines that such an amendment would be
necessary or appropriate to ensure that any performance-based compensation
payable under a new bonus plan satisfies the requirements for exemption under Section 162(m) of
the Code, provided, however, that any such amendment provides the 

 

12

 

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

 

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

 

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

 

13

 

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

 

	
   

  	
   

  	
    THE NEIMAN MARCUS GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/  Marita O’Dea

  
	
   

  	
  Its:

  	
    Senior Vice President and

  
	
   

  	
   

  	
    Chief Human Resource Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
    EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
    /s/  Karen W. Katz

  

 

14

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