Document:

Exhibit 10.1

EMPLOYMENT AGREEMENT

 

 

This Employment Agreement (“Agreement”) is entered into effective as of June 15, 2015 (the “Effective Date”) between Donald Grimes (the “Executive”) and The Neiman Marcus Group LLC, a Delaware limited liability company (“NMG”).  All capitalized terms used but not defined herein shall have the meanings assigned to them in Appendix A, which is attached hereto and incorporated fully herein by reference.

 

1.                         Employment.  NMG agrees to employ the Executive, and the Executive agrees to be employed in the position and with the duties and responsibilities set forth in Section 3, and upon the other terms and conditions set out in this Agreement.

 

2.                         At-Will Employment.  The Executive acknowledges and agrees that the Executive’s employment is on an “at-will” basis and may be terminated by either party at any time for any reason, or for no reason.

 

3.                         Position and Duties.

 

(a)                                 The Executive shall serve as Executive Vice President, Chief Operating Officer and Chief Financial Officer of NMG.  In such capacities, the Executive shall report to and be accountable to the President and Chief Executive Officer of NMG and Parent (the “CEO”).  The Executive shall have such duties, functions, responsibilities, and authority as are from time to time delegated to the Executive by the CEO; provided such duties, functions, responsibilities and authority are consistent with his titles and reasonable or customary for a person serving in the same or similar capacity of a comparable enterprise.

 

(b)                                While employed by NMG, the Executive shall devote his full time, skill, and attention and his best efforts to the business and affairs of 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 prior written approval of the Parent 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, professional, and civic organizations, and (iii) manage personal and family investments; provided, that any such activities as described in (i), (ii) or (iii) of the preceding provisions of this Section 3(b) do not interfere with the performance and fulfillment of the Executive’s duties and responsibilities as an executive of NMG in accordance with this Agreement.

 

(c)                                 In connection with the Executive’s employment by NMG, the Executive shall be based in NMG’s offices in Dallas, Texas, except for such travel as the performance of the Executive’s duties in the business of NMG and its Affiliates may require.

 

(d)                               All services that the Executive may render to NMG or any of its Affiliates in any capacity while employed by NMG shall be deemed to be services required by this Agreement and the consideration for such services is that provided for in this Agreement.

 

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4.                         Compensation and Related Matters.

 

(a)                                 Base Salary.  While employed by NMG, NMG shall pay to the Executive for his services under this Agreement a base salary bi-weekly in the amount of $27,884.61 ($725,000 annualized) (such amount, as may be increased by NMG, the “Base Salary”), less required withholding. The Base Salary shall be payable in installments in accordance with the general payroll practices of NMG, no less frequently than monthly.

 

(b)                                Annual Incentives.  Beginning in NMG’s fiscal year beginning August 2, 2015, the Executive will be eligible to participate in NMG’s annual incentive bonus program(s) applicable to the Executive’s position, in accordance with the terms of such program(s), and shall have the opportunity to earn an annual bonus thereunder based on the achievement of performance objectives determined by the Parent Board.  During each fiscal year, the Executive’s target bonus will be 75% of his annual Base Salary with a maximum bonus opportunity of 150% of his annual Base Salary.  The actual amount of any annual incentive bonus paid to the Executive will be determined according to the terms of the annual incentive bonus program(s), including any such terms that place the amount of any annual incentive bonus within the discretion of the Parent Board.  No annual incentive bonus will be paid pursuant to this Section 4(b) unless the Executive has remained continuously employed with NMG through the applicable payment date, except as otherwise expressly provided for in Section 5 hereof.

 

(c)                                 Long-term Incentives.  The Executive will participate in such long-term incentive programs as the Board may determine.  The Executive acknowledges and agrees that the terms of the grant of an award pursuant to the Parent’s Management Equity Incentive Plan (the “Equity Plan”) shall be governed exclusively by the terms of such plan and award agreement, including, without limitation, with respect to the vesting (which may consist of time vesting, performance vesting or a combination thereof).  Following the Effective Date, subject to the approval of the Parent Board, the Executive will be awarded 11,000 options (“Options”) to purchase Class A Common Stock and Class B Common Stock of Parent (collectively, a “Parent Common Unit”), 50% of which shall be subject to time-based vesting and 50% of which shall be subject to performance-based vesting, in each case, in accordance with the terms of the Equity Plan and the applicable award agreement(s) at Fair Market Value (as defined in the Equity Plan) at the date of grant (the “Option Exercise Price”).  Notwithstanding the foregoing, in lieu of granting the Executive the Options under the Equity Plan, the Parent Board may elect, in its sole discretion to grant the Executive a number of options under a new equity incentive plan of Parent. In such case, such options shall be subject to the terms of such equity plan and any applicable award agreement(s); provided that the economic terms of such options shall be consistent with the economic terms set forth in this section.

 

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(d)                               Employee Benefits.  While employed by NMG, the Executive shall be entitled to participate in the employee benefit plans, programs, and arrangements that are generally made available by NMG to its senior executives; provided that medical and dental benefits shall begin on the first month following Executive’s 60th day of employment by NMG.  For the period of employment prior to the Executive’s participation in a group medical plan offered by NMG, NMG shall pay the Executive the difference between the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) rate payable by the Executive with his prior employer and the rate that similarly situated executives of NMG pay out-of-pocket for medical insurance; provided the Executive submits documentation of such COBRA payments in accordance with Section 4(h).  The Executive shall cooperate with, and participate in any medical or physical examinations as may be required by, any insurance company in connection with the applications for any life and/or disability insurance policies, in all cases, provided such examinations and the results therefrom are consistent with governing law.

 

(e)                                 Signing Bonus.  The Executive shall receive a one-time signing bonus of $300,000 (the “Signing Bonus”), payable in a lump sum less required withholding, to be paid in the first pay period following the Effective Date.  If the Executive’s employment is terminated for any reason prior to the first anniversary of the Effective Date, other than (i) by NMG without Cause, (ii) by the Executive for Good Reason, or (iii) by reason of the Executive’s Total Disability or death, the Executive shall repay the Signing Bonus to NMG within 60 days following the date of the Executive’s termination of employment, prorated for the number of months that the Executive was employed by NMG.

 

(f)                                  Relocation.  A relocation program will be made available to the Executive to assist the Executive with relocation to the greater Dallas, Texas area, a summary of which will be provided to the Executive. As agreed between the Executive and the Company, a residence of the Executive will be eligible for the Amended Value Sale program (as defined in the relocation policy) and a residence of the Executive may be eligible for the Guaranteed Purchase benefit should it not sell within 90 days, as provided in the relocation policy. If the Executive’s employment with NMG is terminated for Cause, or if the Executive resigns his employment for any reason other than Good Reason or retirement, in each case, prior to the 24 month anniversary of the Effective Date (the “Reimbursement Period”), the Executive shall reimburse NMG a prorated amount of the cost associated with his relocation.  The amount of the reimbursement payable to NMG by the Executive shall be determined by (i)  dividing (A) the number of months remaining in the Reimbursement Period by (B) 24, then (ii) multiplying the result by the total cost of the relocation.  Any amounts that have been paid by NMG to gross-up the Executive for taxes associated with the relocation costs shall be included in the calculation toward the total costs of the relocation.  It will be the Executive’s responsibility to file personal taxes for moving expenses.                                       The Executive acknowledges that he has read and understands the Neiman Marcus Relocation Policy, and his obligations thereunder.

 

(g)                                Financial Planning and Advice.  The Executive shall be entitled to receive reimbursement for up to $5,000 per each calendar year while employed by NMG for fees and expenses incurred by him for personal financial and tax advice and planning, including without limitation fees and expenses covering services relating to personal financial and tax advice and 

 

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planning arising from the Executive’s compensation and benefits provided pursuant to this Agreement and otherwise by NMG.  The Executive shall provide to NMG a request for reimbursement along with a reasonably detailed receipt indicating the nature of the services provided for any such fees and expenses within 30 days of the occurrence of such fees and expenses.  Any such reimbursement shall be made as soon as administratively possible, but in any event no later than the maximum time permitted by Treasury Regulation Section 1.409A-3(i)(1)(iv).  The amount of expenses incurred that are eligible for reimbursement pursuant to this Section 4(g) with respect to any calendar year shall not affect the amount eligible for reimbursement in any other calendar year.

 

(h)                                Expenses.  The Executive shall be entitled to receive reimbursement for all reasonable expenses incurred by the Executive in performing his duties and responsibilities under this Agreement, consistent with NMG’s policies or practices for reimbursement of expenses incurred by other NMG senior executives.

 

(i)                                    Vacations.  While employed by NMG, the Executive shall be eligible to accrue five weeks of vacation per year, and shall be eligible for sick pay and other paid and unpaid time off in accordance with the policies and practices of NMG from time to time.  The Executive agrees to use his vacation and other paid time off at such times that are (i) consistent with the proper performance of his duties and responsibilities and (ii) mutually convenient for NMG and the Executive.

 

(j)                                    Withholding Taxes.  NMG shall withhold from any payments to be made to the Executive pursuant to this Agreement such amounts (including social security contributions and federal income taxes) as shall be required by federal, state, and local withholding tax laws.

 

5.                         Termination of Employment.

 

(a)                                 Termination by NMG for Cause, Total Disability or Death; Termination by the Executive without Good Reason.  If the Executive’s employment is terminated (x) by NMG for Cause, (y) by reason of his Total Disability, or death, or (z) by the Executive without Good Reason, NMG shall pay to the Executive within 30 days of the date of the Executive’s termination of employment (i) any unpaid portion of the Executive’s Base Salary accrued through the date of the Executive’s termination of employment, (ii) any accrued but unused vacation days, and (iii) any reimbursement for business travel and other expenses to which the Executive is entitled pursuant to Section 4(h) (prongs (i) through (iii), the “Accrued Amounts”).

 

(b)                                While the Executive is employed at-will by NMG, if (i) NMG terminates the Executive’s employment for any reason other than for Cause, his Total Disability, or his death, or the Executive terminates his employment for Good Reason in accordance with Section 5(g), and (ii) the Executive executes in a timely fashion, and does not revoke, the Release, then, subject to Sections 5(c), (d) and (f) below, in addition to the Accrued Amounts, NMG shall provide the Executive with benefits (“Termination Benefits”) consisting of:

 

(1)  an amount equivalent to one and one-half (1 1⁄2) times the then-current annualized Base Salary, less required withholding, which amount shall be paid over an 18-month period (hereinafter, the “Salary Continuance Period”) 

 

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in regular, bi-weekly installments beginning with the first payroll period on or following the 30th day after the date of the Executive’s termination of employment  (with any payments that otherwise would have been paid during such 30-day period being made in a lump sum in the first payment);

 

(2)  the Executive’s pro-rated annual incentive bonus for the year of the Executive’s termination of employment, less required withholding, pursuant to the terms of the NMG annual incentive plan and payable at the time bonuses are paid generally pursuant to the NMG annual incentive plan;

 

(3)  any earned and unpaid annual incentive bonus for the year prior to the year of the Executive’s termination of employment, less required withholding, payable in accordance with the terms of the NMG annual incentive plan; and

 

(4)  if, at the time of the Executive’s termination of employment, the Executive participates in a group medical plan offered by NMG and the Executive is eligible for and elects to receive continued coverage under such plan in accordance with COBRA or any successor law, NMG will pay the Executive during the Salary Continuance Period a monthly amount equal to cost of the monthly COBRA medical insurance premiums for the Executive as of the date of the Executive’s termination of employment, less required withholdings on such amounts.

 

(c)                                 If, in the reasonable judgment of NMG, the Executive engages in any of the Restricted Activities described in Section 7 of this Agreement, NMG’s obligation to provide the Termination Benefits shall end as of the date NMG so notifies the Executive in writing.

 

(d)                               If 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 him by any regulatory agency, in each case, for actions or omissions related to his employment with NMG, or if NMG reasonably determines in its sole judgment that the Executive has committed any act or omission that would have entitled NMG to terminate his employment for Cause, whether such act or omission was committed during his employment with NMG or during the Salary Continuance Period, then (i) NMG’s obligation to provide Termination Benefits shall immediately end, and (ii) the Executive shall repay to NMG any amounts paid to him as Termination Benefits within 30 days after a written request to do so by NMG.

 

(e)                                 The Executive will not be required to mitigate the amount of any payment provided herein by seeking other employment or otherwise, nor will the amount of payment provided for under this Agreement be reduced by any earnings received by the Executive from any third party.

 

(f)                                  As indicated in subsection 5(b)(ii) above, the payment to the Executive of the Termination Benefits is conditioned on the Executive’s timely execution and non-revocation of the Release within 30 days of the Executive’s termination of employment.  If (i) the Executive does not execute the Release within such period; or (ii) the Executive revokes the Release within such period, NMG shall have no obligation to pay the Executive any of the Termination 

 

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Benefits.  The Executive understands and agrees, however, that, in such event, the Executive’s agreements, obligations and restrictions set forth in Sections 6 and 7 hereof shall continue to be in full force and effect.

 

(g)                                The Executive may terminate his employment for Good Reason.  To exercise his right to terminate for Good Reason, the Executive must provide written notice to NMG of his belief that Good Reason exists within 90 days of the initial existence of the circumstance(s) believed to constitute Good Reason, and such notice shall describe the circumstance(s) believed to constitute Good Reason.  If such circumstance(s) may reasonably be remedied, as determined by NMG, NMG shall have 30 days to effect that remedy.  If not remedied within that 30-day period, the Executive may terminate his employment for Good Reason by delivery of written notice to NMG; provided, however, that a termination for Good Reason must occur no later than 135 days after the initial existence of the circumstance(s) believed to constitute Good Reason; otherwise, the Executive is deemed to have accepted the circumstance(s) that may have given rise to the existence of Good Reason.

 

6.                         Confidential Information. The Executive acknowledges and agrees that (i) NMG is engaged in a highly competitive business; (ii) NMG has expended considerable time and resources to develop goodwill with its customers, vendors, and others, and to create, protect, and exploit Confidential Information; (iii) NMG 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; (iv) in the specialty retail business, his participation in or direction of NMG’s day-to-day operations and strategic planning are an integral part of NMG’s continued success and goodwill; (v) given his position and responsibilities, he necessarily will be creating Confidential Information that belongs to NMG and enhances NMG’s goodwill, and in carrying out his responsibilities he in turn will be relying on NMG’s goodwill and the disclosure by NMG to him of Confidential Information; (vi) he will have access to Confidential Information that could be used by any competitor of NMG in a manner that would irreparably harm NMG’s competitive position in the marketplace and dilute its goodwill; and (vii) he necessarily would use or disclose Confidential Information if he were to engage in competition with NMG.  NMG acknowledges and agrees that the Executive must have and continue to have throughout his employment the benefits and use of its goodwill and Confidential Information to properly carry out his responsibilities.  NMG accordingly promises to provide the Executive with access to new and additional Confidential Information and authorize him to engage in activities that will create new and additional Confidential Information. NMG and the Executive thus acknowledge and agree that during the Executive’s employment with NMG he (1) will receive new and additional Confidential Information that is unique, proprietary, and valuable to NMG, (2) will create new and additional Confidential Information that is unique, proprietary, and valuable to NMG, and (3) will benefit, including without limitation by way of increased earnings and earning capacity, from the goodwill NMG has generated and from the Confidential Information.  Accordingly, the Executive acknowledges and agrees that at all times during his employment by NMG and thereafter:

 

(a)                                 all Confidential Information shall remain and be the sole and exclusive property of NMG;

 

(b)                                the Executive will protect and safeguard all Confidential Information;

 

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(c)                                 the 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 NMG to the extent necessary for the proper performance of his responsibilities unless authorized to do so by NMG or compelled to do so by law or valid legal process; provided that nothing in this Agreement shall be construed to prohibit him from reporting possible violations of law or regulation to any governmental agency or regulatory body or making other disclosures that are protected under any law or regulation, or from filing a charge with or participating in any investigation or proceeding conducted by any governmental agency or regulatory body, and that he does not need the prior authorization of NMG to make any such reports or disclosures and he is not required to notify NMG that he has made such reports or disclosures;

 

(d)                               if the Executive believes he is compelled by law or valid legal process to disclose or divulge any Confidential Information, subject to the proviso in Section 6(c) above, he will notify NMG in writing sufficiently in advance of any such disclosure to allow NMG the opportunity to defend, limit, or otherwise protect its interests against such disclosure;

 

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

 

(f)                                  absent the promises and representations of the Executive in this Section 6 and Section 7 below, NMG would require him immediately to return any tangible Confidential Information in his possession, would not provide the Executive with new and additional Confidential Information, would not authorize the Executive to engage in activities that will create new and additional Confidential Information, and would not enter or have entered into this Agreement.

 

7.                         Restricted Activities. In consideration of the new and additional Confidential Information which the Executive will obtain in connection with his employment with NMG, the goodwill of NMG that will be created by the Executive’s employment, and to permit NMG to protect such Confidential Information and goodwill, as well as the other promises and undertakings of NMG in this Agreement, the Executive agrees that, while he is employed by NMG and for a period of 18 months following the end of that employment for any reason, he shall not engage in any of the following activities (the “Restricted Activities”):

 

(a)                                 the Executive will not directly or indirectly make or publish any disparaging or derogatory statements or otherwise disparage NMG or its Affiliates, any products, services, or operations of NMG or its Affiliates, or any of the former, current, or future officers, directors, or employees of NMG or its Affiliates;

 

(b)                                the Executive will not, whether on his own behalf or on behalf of any other individual, partnership, firm, corporation or business organization, either (i) solicit or attempt to hire any individual who is at that time employed by or otherwise engaged to perform services for NMG or its Affiliates or (ii) 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 NMG or its Affiliates to leave that employment or cease performing or materially reduce services.  Notwithstanding the foregoing, (i) this restriction only applies to 

 

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those employees and service providers with whom the Executive had contact or from whom the Executive received Confidential Information, (ii) general solicitations not directed at employees of NMG or its Affiliates shall not constitute a violation of this provision;

 

(c)                                 the Executive will not, whether on his 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 NMG or any of its Affiliates to cease being a customer, supplier, or vendor of NMG or any of its Affiliates or to divert all or any part of such person’s or entity’s business from NMG or any of its Affiliates; and

 

(d)                               the Executive will not, directly or indirectly, as an employee, officer, director, agent, partner, stockholder, owner, representative, or consultant, provide services to any Competitor.  After the end of the Executive’s employment with NMG and any Affiliate, the restriction just set forth in this Section 7(d) applies only to conduct of the Executive that takes place anywhere in, or is directed at any part of, the Noncompetition Area.   The Executive shall not be in violation of this Section 7(d) solely as a result of his 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 he and the members of his immediate family do not, directly or indirectly, hold more than a total of one (1) percent of all such shares of stock or other securities issued and outstanding. The Executive acknowledges and agrees that engaging in the Restricted Activities described in this subsection would result in the inevitable disclosure or use of Confidential Information, and the damage or diminution of NMG’s goodwill, for the Competitor’s benefit or to the detriment of NMG.

 

The Executive acknowledges and agrees that the restrictions contained in this Section 7 are ancillary to an otherwise enforceable agreement, including without limitation the mutual promises and undertakings set forth in Section 6 of this Agreement; that NMG’s promises and undertakings set forth in Section 6 of this Agreement, and the Executive’s position and responsibilities with NMG, give rise to NMG’s interest in restricting the Executive’s post-employment activities; that such restrictions are designed to enforce the Executive’s promises and undertakings set forth in this Section 7 and his common-law obligations and duties owed to NMG; 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 NMG’s goodwill, Confidential Information, and other legitimate business interests; that he will immediately notify NMG in writing should he believe or be advised that the restrictions are not valid or enforceable under Texas law or the law of any other state that he contends or is advised is applicable; and that absent the promises and representations made by the Executive in Sections 6 and 7 of this Agreement, NMG would require him to return any Confidential Information in his possession, would not provide the Executive with new and additional Confidential Information, would not authorize the Executive to engage in activities that will create new and additional Confidential Information, and would not enter or have entered into this Agreement or employed the Executive.

 

8.                         Invention Assignment.  The Executive hereby assigns to NMG all right, title and interest to all Work Product that (i) relates to NMG’s actual or anticipated business, research and development or existing or future products or services, or (ii) is conceived, reduced to practice, developed or made using any equipment, supplies, facilities, assets, information or resources of 

 

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NMG (including, without limitation, any intellectual property rights).  The Executive shall promptly disclose Work Product to NMG and perform all actions reasonably requested by NMG (whether during or after the Executive’s period of employment) to establish and confirm the ownership and proprietary interest of NMG in any Work Product (including, without limitation, the execution of assignments, consents, powers of attorney, applications and other instruments).  The Executive shall not file any patent or copyright applications related to any Work Product except with NMG’s written consent.

 

9.                         Resignation of Positions.  Upon the Executive’s termination of employment for any reason (unless otherwise agreed in writing by Parent and the Executive), the Executive will be deemed to have resigned without any further action by the Executive, from any and all officer and director positions that the Executive, immediately prior to such termination, (a) held with Parent or any of its subsidiaries and (b) held with any other entities at the direction of, or as a result of the Executive’s affiliation with, Parent or any of its subsidiaries.

 

10.                 Indemnification.  The Executive will be entitled to indemnification on the same terms as indemnification is made available by NMG to its other senior executives, whether through NMG’s bylaws or otherwise.

 

11.                 Payment of the Termination Benefits (conditioned upon execution and non-revocation of the Release) constitute all of NMG’s obligations to the Executive with respect to the Executive’s termination of employment with NMG.  However, nothing in this Agreement is intended to limit any accrued and vested benefits (other than any entitlement to severance or separation pay, if any) that the Executive may have under the applicable provisions of any benefit plan of NMG in which the Executive is participating at the time of his termination of employment or resignation, or any rights under applicable law.

 

12.                 Remedies.  The Executive acknowledges and agrees that NMG would not have an adequate remedy at law and would be irreparably harmed if any of the provisions of Section 6 and 7 of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  Accordingly, the Executive agrees that NMG shall be entitled to equitable relief, including preliminary and permanent injunctions and specific performance, if the 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 this Agreement by the Executive, but shall be in addition to all other remedies available to NMG at law or equity.  The Executive acknowledges and agrees that NMG shall be entitled to seek to recover its attorneys’ fees, expenses, and court costs, in addition to any other remedies to which it may be entitled, if he breaches this Agreement.  Each party acknowledges and agrees that no breach by the other party 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.

 

13.                 Tolling.  If the Executive violates the restrictive covenants set forth in Section 6 and 7 of this Agreement and NMG brings legal action for injunctive or other relief and obtains such relief, the terms of such restrictions, as applicable, shall be extended by computing the applicable period of time from the date relief is granted for NMG and then reducing such period by the amount of time, after the Executive’s termination of employment with NMG, during which the Executive complied with such restrictions.

 

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14.                 Reformation.  If the provisions of Sections 6 or 7 of this Agreement are ever deemed by a court to exceed the limitations permitted by applicable law, the Executive and NMG agree that such provisions shall be, and are, automatically reformed to the maximum limitations permitted by such law.

 

15.                 Entire Agreement; Severability.  This Agreement contains the entire agreement between the parties and supersedes all prior agreements and understandings, oral or written, with respect to the ending of the Executive’s at-will employment and the subject matter of this Agreement, including the Offer Letter between the Executive and NMG, dated April 16, 2015.  This Agreement may not be changed orally. It may be changed only by written agreement signed by the party against whom any waiver, change, amendment, modification or discharge is sought to be enforced.  This Agreement is to be construed as a whole, according to its fair meaning, and not strictly for or against any of the parties.  If any provision of this Agreement shall be determined by a court to be invalid or unenforceable, the remaining provisions of this Agreement shall not be affected thereby, shall remain in full force and effect, and shall be enforceable to the fullest extent permitted by applicable law.

 

16.                 Governing Law; Arbitration.  The validity, performance and enforceability of this Agreement shall be determined and governed by the laws of the State of Texas, without regard to its conflict of laws principles.  Except with respect to claims by NMG for equitable relief under Section 12 of this Agreement, all disputes under, or relating to, this Agreement shall be subject to, and resolved exclusively under, The Neiman Marcus Group LLC Mandatory Arbitration Agreement effective as of March 1, 2013, and as amended from time to time (“Mandatory Arbitration Agreement”).  The Executive hereby acknowledges and agrees that the Executive is a Covered Employee under the Mandatory Arbitration Agreement, and is subject to the Mandatory Arbitration Agreement in all respects.  With respect to claims by NMG for equitable relief under Section 12 of this Agreement, NMG and the Executive agree that the exclusive forum for any such claim shall be in a court of competent jurisdiction in Dallas County, Texas, with respect to a state court, or the Dallas Division of the United States District Court for the Northern District of Texas, with respect to a federal court.

 

17.                 Representations. The Executive hereby represents, warrants and agrees that: (i) there are no restrictions or agreements, oral or written, to which the Executive is a party or by which the Executive is bound that prevent or make unlawful the Executive’s employment by NMG or execution and delivery of, or performance under, this Agreement; (ii) to the best actual knowledge and belief of the Executive, none of the information supplied by the Executive to NMG in connection with the Executive’s employment by NMG misstated a material fact or omitted material facts necessary to make the information supplied by the Executive not materially misleading; (iii) the Executive will not, as of the Effective Date, have any business or employment relationship that creates a conflict between the interests of the Executive and NMG or any of its Affiliates; and (iv) the Executive will not disclose to NMG, or use, or induce NMG to use, any proprietary information or trade secrets of others.

 

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18.                 Cooperation.  Following the Executive’s termination of employment, the Executive shall (a) cooperate with NMG, as reasonably requested by NMG, to effect a transition of the Executive’s responsibilities and to ensure that NMG is aware of all matters being handled by the Executive and (ii) cooperate and provide assistance to NMG at its reasonable request in connection with any action, suit or proceeding brought by or against NMG or any of its Affiliates (or in which any of them is or may be a party) or that relates in any way to the Executive’s acts or omissions while employed by NMG.  NMG agrees to promptly reimburse the Executive for reasonable expenses incurred by him in connection with assisting NMG in the manner described in the immediately preceding sentence (including reasonable legal fees approved in advance by NMG).  Reimbursement shall be made in accordance with the applicable policy of NMG then in effect. NMG shall provide reasonable notice of any need for assistance, and shall use reasonable best efforts to not materially interfere with his employment or business activities.

 

19.                 Successors and Assigns.  This Agreement is intended to bind and inure to the benefit of and be enforceable by the Executive, NMG and their respective heirs, successors and assigns, except that the Executive may not assign his rights or delegate his duties or obligations hereunder without the prior written consent of NMG.  NMG may (i) assign any or all of their respective rights and interests hereunder to one or more of their Affiliates, (ii) designate one or more of their Affiliates to perform their respective obligations hereunder, and (iii) assign this Agreement in connection with the sale of all or substantially all of NMG’s or any of its subsidiary’s equity interests (directly or indirectly), business or assets (whether by merger, sale of stock or assets, recapitalization or otherwise).  The rights of NMG hereunder are enforceable by their Affiliates, who are the intended third party beneficiaries hereof.  NMG shall require any entity that acquires all or substantially all the business and/or assets of NMG to assume and agree to perform this Agreement in the same manner and to the same extent that NMG would be required to perform it if no such acquisition had taken place.  If NMG fails to obtain such agreement, such failure (after notice and opportunity to cure as set forth in Section 5(g)) shall constitute Good Reason; provided that the Termination Benefits to which the Executive is entitled upon a termination for Good Reason pursuant to Section 5(b) shall be the sole remedy of the Executive for any failure by NMG to obtain such agreement.  As used in this Agreement, “NMG” shall include any acquirer of all or substantially all the business and/or assets of NMG that executes and delivers the agreement provided for in this section or that otherwise becomes obligated under this Agreement by operation of law

 

20.                 Survival.  The Executive’s termination of employment will not impair the rights or obligations of any party hereto that accrue hereunder prior to such termination, except to the extent specifically stated herein.  In addition to the foregoing, NMG’s obligation under Sections 5 or 10, and the Executive’s obligations under Sections 4(e), 4(f), 6, 7, 8, and 18, will survive the Executive’s termination of employment.

 

21.                 Section 409A.  It is the intent of the parties that this Agreement be interpreted and administered in compliance with the requirements of Code section 409A to the extent applicable.  In no event whatsoever shall NMG be liable for any additional tax, interest or penalties that may be imposed on the Executive by Code section 409A or any damages for failing to comply with Code section 409A.  In furtherance, but not in limitation of the foregoing:  (a) in the event that the Executive is a “specified employee” within the meaning of Code section 409A, payments which constitute a “deferral of compensation” under Code section 409A and which would otherwise become due during the first six (6) months following the Executive’s termination of employment shall be delayed and all such delayed payments shall be paid in full in the seventh (7th) month after the Executive’s termination of employment, and all subsequent payments shall 

 

11

 

be paid in accordance with their original payment schedule, provided that the above delay shall not apply to any payments that are excepted from coverage by Code section 409A, such as those payments covered by the “short-term deferral” exception described in Treasury Regulations section 1.409A-1(b)(4), or the exception for an “involuntary separation from service” described in Treasury Regulations section 1.409A-1(n); and (b) notwithstanding any other provision of this Agreement, a termination of the Executive’s employment hereunder shall mean, and be interpreted consistent with, a “separation from service” within the meaning of Code section 409A. For purposes of Code section 409A, the Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement that is considered non-qualified deferred 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 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.

 

22.                 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 is discussed in good faith with the Executive prior to being implemented, and provides the Executive at least the same economic benefit under this Agreement as he had prior to the amendment.

 

 

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, NMG has caused this Agreement to be executed on its behalf by its duly authorized officer, and the Executive has executed this Agreement, effective as of the Effective Date.

 

 

	
EXECUTIVE:
    	
 
    	
 
    	
THE NEIMAN MARCUS GROUP LLC
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
/s/ Donald Grimes
    	
 
    	
By:
    	
/s/  Joe Weber
    
	
 
    	
 
    	
 
    	
Senior Vice President   and Chief
    
	
 
    	
 
    	
 
    	
Human Resources Officer
    
	
 
    	
 
    	
 
    	
 
    

 

13

 

APPENDIX A

 

Definitions

 

1.                                    “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.

 

2.                                    “Cause” means, any of the following, as determined in NMG’s sole discretion, (i) the commission of any acts of fraud, dishonesty (other than inadvertent acts or omissions), disloyalty to NMG or its affiliates, or moral turpitude; (ii) conduct that is materially detrimental to NMG, monetarily or otherwise, or reflects unfavorably on NMG or the Executive; (iii) acts of the Executive in material violation of his obligations under this Agreement or at law; (iv) the Executive’s failure to comply with or enforce NMG’s policies concerning equal employment opportunity, including engaging in sexually or otherwise harassing conduct; (v) the Executive’s insubordination, failure to perform any duties reasonably assigned to him by NMG or failure to comply with or enforce other personnel policies of NMG or its Affiliates (other than by reason of physical or mental illness or injury); (vi) the Executive’s failure to devote his full working time and best efforts to the performance of his responsibilities to NMG or its Affiliates; (vii) any act of material misconduct or gross negligence by the Executive in the performance of his duties relating to his employment; or (viii) the Executive’s indictment for or entry of a plea agreement or consent decree or similar arrangement with respect to, a felony, other serious criminal offense, or any violation of federal or state securities laws; provided, however, that with respect to items (iii), (v) and (vi), the Executive has been provided prior written notice of the failure and afforded a reasonable opportunity to correct same.

 

3.                                    “Code” means the Internal Revenue Code of 1986, as amended, or any successor statute.

 

4.                                    “Competitor” means (i) the retail operations of any Person who, at any time during the Executive’s employment with NMG was a vendor of NMG or any of its Affiliates and who, during any consecutive 12-month period during the five years immediately preceding the Executive’s termination of employment with NMG had annual gross sales to NMG and its Affiliates in the aggregate of $150 million or more at retail; (ii) any Person (Other than NMG or an Affiliate of NMG ) that owns or operates a luxury specialty retail store in New York, New York metropolitan area; (iii) Saks Incorporated, Nordstrom, Inc., Barneys New York, Inc., Macy’s Inc., Hudson’s Bay Company, Amazon.com, Inc., Net-a-Porter LLC, Gilt Groupe, Inc., or if those corporate names are not correct, the businesses commonly referred to as “Saks,” “Nordstrom’s,” “Barney’s,” “Bloomingdales,” “Lord & Taylor,” “Amazon,” “Net-a-Porter,” and “Gilt” or any of their respective parent companies, if applicable; and (iv) the Affiliates of, successors to and assigns of the Persons described in (i) and (iii).

 

14

 

5.                                    “Confidential Information” shall mean, without limitation, all documents or information, in whatever form or medium, that relates to the business, products, financial condition, services or research or development of Parent, any of its subsidiaries, or any of their respective suppliers, distributors, customers, independent contractors, consultants or other business relations (unless and to the extent that the Confidential Information becomes generally known to and available for use by the public other than as a result of any breach of this Agreement or other unauthorized disclosure by the Executive).  Confidential Information includes, but is not limited to, the following:  (i) internal business and financial information (including information relating to strategic and staffing plans and practices, business, finances, training, marketing, promotional and sales plans and practices, cost, rate and pricing structures and accounting and business methods); (ii) identities of, individual requirements of, specific contractual arrangements with, and information about, Parents’ and any of its Affiliates’ suppliers, distributors, customers, independent contractors, consultants or other business relations and their confidential information; (iii) trade secrets, know-how, compilations of data and analyses, techniques, systems, formulae, recipes, research, records, reports, manuals, documentation, models, data and data bases relating thereto; (iv) inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information (whether or not patentable); and (v) other Work Product.  Confidential Information shall not include information that (a) is or becomes generally available to the public other than a result of a disclosure by the Executive, or (b) is required to be disclosed by applicable law.

 

6.                                    “Good Reason” shall mean any of the following actions if taken without the Executive’s prior written consent:  (i) a material diminution in the Executive’s base compensation (other than pursuant to action of NMG or its Affiliates reducing the base compensation of all NMG senior executives by substantially equal amounts or substantially equal percentages as the reduction of the Executive’s base compensation); (ii) a material diminution in the Executive’s authority or duties or (iii) a material change in the primary geographic location at which the Executive must perform services.

 

7.                                    “Management Equity Incentive Plan” means the NM Mariposa Holdings, Inc. Management Equity Incentive Plan.

 

8.                                    “Noncompetition Area” means the following geographic areas: (i) any foreign country where NMG or its Affiliates engage in business of any kind, including selling, purchasing or ordering goods, at any time during the Executive’s employment with NMG or its Affiliate, and where the Executive has, during the twenty-four (24) month period immediately predating the termination of employment, engaged in business on behalf of NMG or its Affiliates, either in person or remotely; (ii) the United States of America; and (iii) each metropolitan statistical area, as defined by the US Office of Management and Budget, where, during the twenty-four (24) month period immediately predating the termination of employment, the Executive engaged in business on behalf of NMG or its Affiliates, either in person or remotely.

 

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9.                                    “Parent” means NM Mariposa Holdings, Inc.

 

10.                            “Parent Board” means the Board of Directors of Parent, or any successor governing body of Parent or its successors.

 

11.                            “Person” means any individual, corporation, partnership, sole proprietorship, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, government or other entity.

 

12.                            “Release” means the Agreement and Release to be executed by the Executive in favor of NMG, which Agreement and Release shall be in the form prepared by NMG, but which shall contain no post-employment restrictions other than as stated herein.

 

13.                            “Total Disability” means that the Executive has been determined under NMG’s long-term disability plan to be eligible for long-term disability benefits, or, in the absence of the Executive’s participation in such plan, in NMG’s reasonable judgment, either (i) the Executive has been unable to perform his 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 twelve consecutive calendar months, or (ii) the Executive has become totally and permanently incapable of performing the usual duties of his employment with NMG on account of a physical or mental impairment.

 

14.                            “Work Product” means all patents and patent applications, all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, creative works, discoveries, software, computer programs, modifications, enhancements, know-how, formulations, concepts and ideas, and all similar or related information (in each case whether or not patentable), all copyrights and copyrightable works, all trade secrets, confidential information, and all other intellectual property and intellectual property rights that are conceived, reduced to practice, developed or made by the Executive either alone or with others in the course of employment with NMG (including employment prior to the date of this Agreement).

 

16Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

This Amended and Restated Employment Agreement (this “Agreement”), effective as of the Effective Date, is by and among James E. Skinner (the “Executive”) and The Neiman Marcus Group LLC, a Delaware limited liability company (formerly The Neiman Marcus Group, Inc. and referred to as “NMG”).

 

RECITALS

 

WHEREAS, Executive is currently employed as Executive Vice President, Chief Operating Officer, and Chief Financial Officer by NMG and Parent pursuant to an employment agreement with NMG, dated October 25, 2013 (the “Prior Agreement”);

 

WHEREAS, pursuant to Section 24 of the Prior Agreement, the Prior Agreement may be amended by a writing signed by the parties to the Prior Agreement;

 

WHEREAS, the parties desire that Executive become employed by NMG and serve as a Vice Chairman of NMG and Parent; and

 

WHEREAS, the parties desire to amend and restate the Prior Agreement in its entirety by entering into this Agreement, subject to the terms and provisions herein contained.

 

AGREEMENT

 

1.                                    Definitions.  As used in this Agreement, the following terms have the following meanings:

 

(a)                               “Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person.  As of the Effective Date, NMG and Parent are “Affiliates” of one another.

 

(b)                              “Cause” means one or more of the following: (i) the Executive’s willful and material failure to substantially perform his duties (other than as a result of physical or mental illness or injury), or other material breach of this Agreement by the Executive; (ii) the Executive’s (A) willful misconduct or (B) gross negligence, in each case which is materially injurious to NMG or any of its Affiliates; (iii) the Executive’s willful breach of his fiduciary duty or duty of loyalty to NMG or any of its Affiliates; or (iv) the commission by the Executive of any felony or other serious crime involving moral turpitude.  For purposes of the foregoing, no act or failure to act shall be treated as “willful” unless done, or omitted to be done, by the Executive not in good faith and without the reasonable belief that the Executive’s action or omission was in the best interest of NMG.

 

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

 

(d)                             “Competitor” means (i) the retail operations of any Person who, at any time during the Executive’s employment with NMG was a vendor of NMG or any of its Affiliates and

 

 

who during any consecutive 12-month period during the five years immediately preceding the Executive’s termination of employment with NMG had annual gross sales to NMG and its Affiliates in the aggregate of $150 million or more at retail; (ii) any Person (other than NMG or an Affiliate of NMG) that owns or operates a luxury specialty retail store in the New York, New York metropolitan area; (iii) Saks Incorporated, Nordstrom, Inc., Barneys New York, Inc., Macy’s, Inc., Hudson’s Bay Company, Amazon.com, Inc., Net-a-Porter LLC, Gilt Groupe, Inc. or, if those corporate names are not correct, the businesses commonly referred to as “Saks,” “Nordstrom’s,” “Barneys,” “Bloomingdales,” “Lord and Taylor,” “Amazon,” “Net-a-Porter,” and “Gilt” or any of their respective parent companies, as applicable; and (iv) the Affiliates of, successors to and assigns of the Persons described in (i) and (iii).

 

(e)                               “Confidential Information” means all confidential or proprietary information of NMG, Parent and their respective Affiliates, including (without limitation) all documents or information, in whatever form or medium, concerning or evidencing sales; costs; pricing; strategies; forecasts and long range plans; 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 this Agreement or other unauthorized disclosure by the Executive.

 

(f)                                “Effective Date” means June 15, 2015.

 

(g)                              “Employment Termination Date” means the effective date of termination of the Executive’s employment as established under Paragraph 6(e).

 

(h)                              “Parent” means Neiman Marcus Group, Inc.

 

(i)                                  “Parent Board” means the Board of Directors of Parent, or any successor governing body of Parent or its successors.

 

(j)                                  “Person” means any individual, corporation, partnership, sole proprietorship, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, government or other entity.

 

(k)                              “Target Bonus” means the target bonus under NMG’s annual incentive bonus program(s).

 

(l)                                  “Work Product” means all ideas, works of authorship, inventions and other creations, whether or not patentable, copyrightable, or subject to other intellectual-property protection, that are made, conceived, developed or worked on in whole or in part by the Executive while employed by NMG or any of its Affiliates, that relate in any manner whatsoever to the business, existing, proposed or advisable, of NMG or any of its Affiliates, or any other business or research or development effort in which NMG or any of its Affiliates engages during the Executive’s employment.  Work Product includes any material previously conceived, made, developed or worked on during the Executive’s employment with NMG or any of its Affiliates prior to the Effective Date.

 

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2.                                    Employment; Prior Agreements.  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 employment agreement entered into by and among the Executive, NMG and Neiman Marcus Group LTD Inc., effective October 6, 2010 was superseded and replaced in its entirety by the Prior Agreement.  The Prior Agreement is hereby superseded effective as of the Effective Date and replaced in its entirety by this Agreement without further right or obligation thereunder on the part of either party thereto.  The replacement of the Prior Agreement with this Agreement does not cause any right or obligation under the Prior Agreement to arise.

 

3.                                    Term.  Unless sooner terminated as provided in this Agreement, the term of the Agreement shall commence on the Effective Date and extend until February 1, 2016 (the “Employment Term”). Unless an extension of the Employment Term is agreed upon by the Executive and the Company, the Executive’s employment will end upon the expiration of the Employment Term.

 

4.                                    Position and Duties.

 

(a)                               The Executive shall serve as a Vice Chairman of NMG and Parent.  In such capacities, the Executive shall report to the Chief Executive Officer of NMG and Parent (the “CEO”).

 

(b)                              During the Employment Term, the Executive shall devote his full time, skill, and attention and his best efforts to the business and affairs of 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) serve as a director or as a member of one board of directors of one noncompeting company, (ii) subject to the prior written approval of the CEO and the Chairman of the Parent Board, serve as a director or as a member of two additional boards of directors of other noncompeting companies, (iii) serve as an officer or director or otherwise participate in non-profit educational, welfare, social, religious, professional, and civic organizations, including, without limitation, all such positions and participation in effect as of the Effective Date, and (iv) manage personal and family investments; provided, however, that any such activities as described in (i), (ii) (iii) or (iv) of the preceding provisions of this Paragraph 4(b) do not materially interfere with the performance and fulfillment of the Executive’s duties and responsibilities in accordance with this Agreement.

 

(c)                               In connection with the Executive’s employment by NMG under this Agreement, the Executive shall be based at the principal executive offices of NMG in Dallas, Texas, except for such reasonable travel as the performance of the Executive’s duties in the business of NMG and its Affiliates may require.

 

(d)                             All services that the Executive may render to NMG or any of its Affiliates in any capacity during the Employment Term shall be deemed to be services required by this Agreement and the consideration for such services is that provided for in this Agreement.

 

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5.                                    Compensation and Related Matters.

 

(a)                               Base Salary.  During the Employment Term, NMG shall pay to the Executive for his services under this Agreement an annual base salary.  The Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as the “Base Salary.” The Base Salary as of the Effective Date shall remain in effect until July 31, 2015.  Effective August 1, 2015, the Base Salary shall be $250,000 for the period between August 1, 2015 and February 1, 2016, prorated for any partial period of employment during such period.  The Base Salary shall be payable in installments in accordance with the general payroll practices of NMG.

 

(b)                              Annual Incentives.  For fiscal year 2016, the Executive will participate in NMG’s annual incentive bonus program(s) applicable to the Executive’s position, in accordance with the terms of such program(s), and shall have the opportunity to earn an annual bonus thereunder based on the achievement of performance objectives determined by the Parent Board after consultation with the Executive.  The Target Bonus for fiscal year 2016 will be 40% of the Executive’s Base Salary for the period between August 1, 2015 and February 1, 2016.  The actual amount of any annual incentive bonus paid to the Executive will be (i) determined according to the terms of the annual incentive bonus program(s), including any such terms that place the amount of any annual incentive bonus within the discretion of the Parent Board and (ii) payable in 2016.  No annual incentive bonus will be paid pursuant to this Paragraph 5(b) unless the Executive has remained continuously employed with NMG through the expiration of the Employment Term, except as otherwise expressly provided for in Paragraph 7(b)(iii) hereof.

 

(c)                               Employee Benefits.  During the Employment Term, the Executive shall be entitled to participate in all employee benefit plans, programs, and arrangements that are generally made available by NMG to its senior executives, including without limitation NMG’s life insurance, long-term disability, and health plans.  The Executive agrees to cooperate and participate in any medical or physical examinations as may be required by any insurance company in connection with the applications for such life and/or disability insurance policies.

 

(d)                             Fringe Benefits.  During the Employment Term, the Executive will be entitled to the perquisites and other fringe benefits that are made available by NMG to its senior executives generally and to such perquisites and fringe benefits that are made available by NMG to the Executive in particular, subject to any applicable terms and conditions of any specific perquisite or other fringe benefit.

 

(e)                               Financial Planning and Advice.  The Executive shall be entitled to receive reimbursement for up to $5,000 per each calendar year during the Employment Term for fees and expenses incurred by him for personal financial and tax advice and planning, including without limitation fees and expenses covering services relating to personal financial and tax advice and planning arising from the Executive’s compensation and benefits provided pursuant to this Agreement and otherwise by NMG.  The Executive shall provide to NMG a request for reimbursement along with a reasonably detailed receipt indicating the nature of the services provided for any such fees and expenses within 30 days of the occurrence of such fees and expenses.  Any such reimbursement shall be made as soon as administratively possible, but in any event no later than the maximum time permitted by Treasury Regulation Section 1.409A-3(i)(1)(iv).  The amount of expenses incurred that are eligible for reimbursement pursuant to this

 

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Paragraph 5(e) with respect to any calendar year shall not affect the amount eligible for reimbursement in any other calendar year.

 

(f)                                Expenses.  The Executive shall be entitled to receive reimbursement for all reasonable expenses incurred by the Executive in performing his duties and responsibilities under this Agreement, consistent with NMG’s policies or practices for reimbursement of expenses incurred by other NMG senior executives.  Without limiting the foregoing, reasonable business expenses shall include the following items in reasonable amounts: professional license fees, professional journals and books, professional educational materials in software format, and dues to professional organizations and societies; educational expenses incurred to maintain or improve the Executive’s skills and for his actual and reasonable expenses for travel, room and meals for attending professional conventions, meetings, and education sessions.

 

(g)                              Vacations.  During the Employment Term, the Executive shall be eligible for 5 weeks of vacation on an annualized basis, and shall be eligible for sick pay and other paid and unpaid time off in accordance with the policies and practices of NMG.  The Executive agrees to use his vacation and other paid time off at such times that are (i) consistent with the proper performance of his duties and responsibilities and (ii) mutually convenient for NMG and the Executive.

 

(h)                              Indemnification.  The Executive will be entitled to indemnification on the same terms as indemnification is made available by NMG to its other senior executives, whether through NMG’s bylaws or otherwise.

 

6.                                    Termination of Employment.

 

(a)                               Termination by NMG for Cause.  NMG may terminate the Executive’s employment for Cause.  To exercise its right to terminate the Executive’s employment pursuant to clause (i), (ii) or (iii) of the definition of Cause, however, solely to the extent such event may reasonably be corrected, NMG must first provide the Executive with a reasonable period of time to correct the circumstances or events (but not more than 30 days) that NMG contends give rise to the existence of Cause under such provision.  Prior to terminating the Executive’s employment for Cause under this Paragraph 6(a), NMG must provide the Executive with a written notice of its intent to terminate his employment for Cause.  Such written notice must specify the particular act or acts or failure(s) to act that form(s) the basis for the decision to so terminate the Executive’s employment for Cause.  The Executive will be given the opportunity within 30 calendar days of his receipt of such notice to meet with the Parent Board to defend himself with regard to the alleged act or acts or failure(s) to act.  If at the conclusion of or following such a meeting, the Parent Board decides to proceed with the termination of the Executive’s employment for Cause, such a termination will be effected by providing the Executive with a Notice of Termination under Paragraph 6(d).  Upon or after NMG’s issuance of the notice of intent to terminate the Executive’s employment for Cause, NMG may suspend the Executive with pay pending the Parent Board’s decision whether to proceed with the termination.

 

(b)                              Termination by the Executive.  The Executive may terminate his employment at any time upon at least 30 days’ prior written notice to NMG; provided that, notwithstanding anything to the contrary, NMG shall have the right to accelerate the Employment Termination

 

Page 5 of 20

 

Date to an earlier date than that specified in the Executive’s written notice so long as NMG pays him all compensation to which he would have been entitled had the Employment Termination Date not been so accelerated.

 

(c)                               Termination by the Company without Cause.  NMG may terminate the Executive’s employment without Cause immediately upon written notice to the Executive.

 

(d)                             Notice of Termination.  Any termination of the Executive’s employment prior to the expiration of the Employment Term shall be communicated by a Notice of Termination.  A “Notice of Termination” is a written notice that must (i) indicate the specific termination provision in this Agreement relied upon; (ii) in the case of a termination for Cause, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision invoked, including the particular act or acts or failure(s) to act that is or are the basis of any termination for Cause; and (iii) specify the Employment Termination Date.  The failure by NMG to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Cause shall not waive any right of NMG or preclude NMG from asserting such fact or circumstance in enforcing NMG’s rights.

 

(e)                               Employment Termination Date.  The Employment Termination Date shall be as follows: (i) if the Executive’s employment is terminated by his death, the date of his death; (ii) if the Executive’s employment is terminated by NMG for Cause, the date specified in the Notice of Termination, which date shall be no earlier than the date such notice is given; (iii) if the Executive’s employment is terminated by the Executive, the date specified in the Notice of Termination, which date shall be no earlier than 30 days after the date such notice is given (subject to the provisions therein); (iv) if the termination is under Paragraph 6(c), the date specified in the Notice of Termination; or (v) if the Executive’s employment is terminated by the expiration of the Employment Term, on February 1, 2016 (without any action by the Executive or the Company).

 

(f)                                Resignation.  In the event of termination of the Executive’s employment, the Executive agrees that if at such time he is a member of the Parent Board or is an officer of NMG or a director or officer of any of its Affiliates, he shall be deemed to have resigned from such position(s) effective on the Employment Termination Date unless the parties otherwise agree.

 

7.                                    Compensation Upon Termination of Employment.

 

(a)                               Termination by NMG 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) any unpaid portion of the Executive’s Base Salary accrued through the Employment Termination Date, (ii) any accrued but unused vacation days (the “Vacation Payment”), and (iii) any reimbursement for business travel and other expenses to which the Executive is entitled pursuant to Paragraph 5(f) (the “Reimbursement”).  This Paragraph 7(a) does not limit the entitlement of the Executive to any vested benefits under any stock ownership, stock option, or other benefit plan that is maintained by NMG for the Executive’s benefit, pursuant to the terms and conditions of any such plan.

 

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(b)                              Termination for any other reason.

 

(i)           If the Executive’s employment is terminated for any reason other than by NMG for Cause, then NMG shall pay to the Executive within 60 days of the Employment Termination Date (i) any unpaid portion of the Executive’s Base Salary accrued through the Employment Termination Date and any earned or accrued bonus payable for the preceding fiscal year that has otherwise not already been paid (together, 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.  This Paragraph 7(b) does not limit the entitlement of the Executive to any vested benefits under any stock ownership, stock option, or other benefit plan that is maintained by NMG for the Executive’s benefit, pursuant to the terms and conditions of any such plan.

 

(ii)                              In addition, if the Executive’s employment is terminated for any reason other than by the Company for Cause and if such termination of employment also constitutes a “separation from service” under Treasury Regulation Section 1.409A-1(h), then, subject to the Executive’s execution, within 30 days of the Employment Termination Date, of a release and waiver of claims against NMG and its Affiliates (in such form as NMG reasonably requires and delivers to the Executive within 2 days of the Employment Termination Date) (a “Release”), and provided that such Release becomes non-revocable under applicable law during such 30-day period, NMG will provide to the Executive the “Salary Continuation Payments” and the “Severance Payment” as described below:

 

(A)                          The Salary Continuation Payments shall equal $595,000, which amount, except as provided below, shall be paid over an 18-month period in bi-weekly installments following the Employment Termination Date as set forth on Schedule A.  Notwithstanding the preceding sentence, the Salary Continuation Payments shall not begin until the 37th week following the Executive’s separation from service (or, if later, such time as required by Paragraph 13).

 

(B)                       The “Severance Payment,” shall constitute a lump-sum amount equal to $1,169,763 and will be paid on the 35th day following the Employment Termination Date.

 

(iii)                        If the Executive’s employment is terminated by NMG without Cause prior to the expiration of the Employment Term, then, subject to the Executive’s execution, within 30 days of the Employment Termination Date, of a Release, and provided that such Release becomes non-revocable under applicable law during such 30-day period, the Executive shall be entitled

 

Page 7 of 20

 

to receive an amount equal to the Target Bonus for fiscal year 2016 as set forth in Section 5(b) (the “Target Bonus Payment”), which amount will be paid on the 35th day following the Employment Termination Date.

 

(iv)                          The Executive shall be required to repay the Severance Payment, any portion of the Salary Continuation Payments, and any Target Bonus Payment he has received, and any obligation to pay any unpaid Severance Payment, unpaid Salary Continuation Payments and any unpaid Target Bonus Program 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

 

(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 him by any regulatory agency, for actions or omissions related to his employment with NMG or any of its Affiliates, or if NMG reasonably believes that the Executive has committed any act or omission, either during his employment under this Agreement or if related to such employment thereafter, that during his employment would have entitled NMG to terminate his employment for Cause under provisions (i), (ii), (iii), or (iv) 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 Parent 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 Parent 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.

 

(c)                               No Mitigation.  The Executive will not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor will the amount of any payment provided for under this Agreement be reduced by any profits, income, earnings, or other benefits received by the Executive from any source other than NMG or its successor.

 

Page 8 of 20

 

(d)                             Offset.  The Executive agrees that NMG may set off against, and he authorizes NMG to deduct from, any payments due to the Executive, or to his 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 Section 409A of the Code if such offset cannot be made in a manner that complies with Section 409A of the Code.

 

8.                                    Confidential Information.

 

(a)                               The Executive acknowledges and agrees that (i) NMG is engaged in a highly competitive business; (ii) NMG has expended considerable time and resources to develop goodwill with its customers, vendors, and others, and to create, protect, and exploit Confidential Information; (iii) NMG 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; (iv) in the luxury specialty retail business, his participation in or direction of NMG’s day-to-day operations and strategic planning are an integral part of NMG’s continued success and goodwill; (v) given his position and responsibilities, he necessarily will be creating Confidential Information that belongs to NMG and enhances NMG’s goodwill, and in carrying out his responsibilities he in turn will be relying on NMG’s goodwill and the disclosure by NMG to him of Confidential Information; (vi) he will have access to Confidential Information that could be used by any Competitor in a manner that would irreparably harm NMG’s competitive position in the marketplace and dilute its goodwill; and (vii) he necessarily would use or disclose Confidential Information if he were to engage in competition with NMG.

 

(b)                              NMG acknowledges and agrees that the Executive must have and continue to have throughout his employment the benefits and use of its and its Affiliates’ goodwill and Confidential Information in order to properly carry out his responsibilities.  NMG accordingly promises upon execution and delivery of this Agreement to provide the Executive immediate access to new and additional Confidential Information and authorize him to engage in activities that will create new and additional Confidential Information.

 

(c)                               NMG and the Executive thus acknowledge and agree that during the Executive’s employment with NMG and upon execution and delivery of this Agreement he (i) has received, will receive, and will continue to receive, Confidential Information that is unique, proprietary, and valuable to NMG or its Affiliates; (ii) has created, will create, and will continue to create, Confidential Information that is unique, proprietary, and valuable to NMG or its Affiliates; and (iii) has benefited, will benefit, and will continue to benefit, including without limitation by way of increased earnings and earning capacity, from the goodwill NMG and its Affiliates have generated and from the Confidential Information.

 

(d)                             Accordingly, the Executive acknowledges and agrees that at all times during his employment by NMG or any of its Affiliates and thereafter:

 

(i)                                  all Confidential Information shall remain and be the sole and exclusive property of NMG or its Affiliates;

 

Page 9 of 20

 

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

 

(iii)        he will hold all Confidential Information in the strictest confidence and not, directly or indirectly, disclose or divulge any Confidential Information to any Person other than an officer, director, or employee of, or legal counsel for, NMG or its Affiliates, to the extent necessary for the proper performance of his responsibilities unless authorized to do so by NMG or compelled to do so by law or valid legal process;

 

(iv)         if he believes he is compelled by law or valid legal process to disclose or divulge any Confidential Information, he will notify NMG in writing within 24 hours after receipt of legal process or other writing that causes him to form such a belief, or as soon as practicable if he receives less than 24 hours’ notice, so that NMG may defend, limit, or otherwise protect its interests against such disclosure;

 

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

 

(vi)        absent the promises and representations of the Executive in this Paragraph 8 and in Paragraph 9, NMG would require him immediately to return any tangible Confidential Information in his possession, would not provide the Executive with new and additional Confidential Information, would not authorize the Executive to engage in activities that will create new and additional Confidential Information, and would not enter or have entered into this Agreement.

 

9.                                    Noncompetition and Nondisparagement Obligations.  In consideration of NMG’s promises to provide the 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 this Agreement, and the other promises and undertakings of NMG in this Agreement (including without limitation Paragraph 7), the Executive agrees that, while he is employed by NMG and/or any of its Affiliates and for an 18-month period following the end of that employment for any reason, he shall not engage in any of the following activities (the “Restricted Activities”):

 

(a)                               He will not directly or indirectly disparage NMG or any of its Affiliates, any products, services, or operations of NMG or any of its Affiliates, or any of the former, current, or future shareholders, partners, directors, officers, employees, agents or representatives of NMG or any of its Affiliates;

 

(b)                              He will not, whether on his own behalf or on behalf of any other Person, either directly or indirectly solicit, induce, persuade, entice or hire, or endeavor to solicit, induce, persuade, entice or hire, any person who is then employed by or otherwise engaged to perform

 

Page 10 of 20

 

services for NMG or any of its Affiliates to leave that employment or cease performing those services;

 

(c)                               He will not, whether on his own behalf or on behalf of any other Person, 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 NMG or any of its Affiliates to cease being a customer, supplier, or vendor of NMG or any of its Affiliates or to divert all or any part of such Person’s business from NMG or any of its Affiliates; and

 

(d)                             He will not directly or indirectly, as an employee, officer, director, agent, partner, stockholder, owner, member, representative, consultant or otherwise, associate with, or provide services to any Competitor of NMG or any of its Affiliates.  This restriction (i) extends to the performance by the Executive, directly or indirectly, of the same or similar activities the Executive has performed for NMG or any of its Affiliates or such other activities that by their nature are likely to lead to the disclosure of Confidential Information, and (ii) with respect to the post-employment restriction, applies to any Competitor that has a retail store within 50 miles of, or in the same Metropolitan Statistical Area as, any retail store of NMG or any of its Affiliates.  The Executive shall not be in violation of this Paragraph 9(d) solely as a result of his 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 he and the members of his immediate family do not, directly or indirectly, hold in the aggregate more than a total of one percent of all such shares of stock or other securities issued and outstanding.  The Executive acknowledges and agrees that engaging in the activities restricted by this Paragraph 9(d) would result in the inevitable disclosure or use of Confidential Information for the Competitor’s benefit or to the detriment of NMG or its Affiliates.

 

The Executive acknowledges and agrees that the restrictions contained in this Paragraph 9 are ancillary to an otherwise enforceable agreement, including without limitation the mutual promises and undertakings set forth in Paragraph 8; that NMG’s promises and undertakings set forth in Paragraph 8, the Executive’s position and responsibilities with NMG, and NMG granting to the Executive ownership in NMG in the form of NMG stock, give rise to NMG’s interest in restricting the Executive’s post-employment activities; that such restrictions are designed to enforce the Executive’s promises and undertakings set forth in this Paragraph 9 and his common-law obligations and duties owed to NMG and its Affiliates; 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 NMG’s and its Affiliates’ goodwill, Confidential Information, and other legitimate business interests; that he will immediately notify NMG in writing should he believe or be advised that the restrictions are not, or likely are not, valid or enforceable under Texas law or the law of any other state that he contends or is advised is applicable (the “Enforceability Notification”); and that absent the promises and representations made by the Executive in this Paragraph 9 and in Paragraph 8, NMG would require him to return any Confidential Information in his possession, would not provide the Executive with new and additional Confidential Information, would not authorize the Executive to engage in activities that will create new and additional Confidential Information, and would not enter or have entered into this Agreement.  Notwithstanding the foregoing, NMG agrees that the Executive’s conduct in providing the Enforceability Notification under this Paragraph 9(d) shall not constitute a waiver of any attorney-client privilege between the Executive and his attorney(s).

 

Page 11 of 20

 

10.                            Intellectual Property.

 

(a)                               In consideration of NMG’s promises and undertakings in this Agreement, the Executive agrees that all Work Product will be disclosed promptly by the Executive to NMG, shall be the sole and exclusive property of NMG, and is hereby assigned to NMG, regardless of whether (i) such Work Product was conceived, made, developed or worked on during regular hours of his employment or his time away from his employment, (ii) the Work Product was made at the suggestion of NMG; or (iii) the Work Product was reduced to drawing, written description, documentation, models or other tangible form.  Without limiting the foregoing, the Executive acknowledges that all original works of authorship that are made by the Executive, solely or jointly with others, within the scope of his employment and that are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act (17 U.S.C., Section 101), and are therefore owned by NMG from the time of creation.

 

(b)                              The Executive agrees to assign, transfer, and set over, and the Executive does hereby assign, transfer, and set over to NMG, all of his right, title and interest in and to all Work Product, without the necessity of any further compensation, and agrees that NMG is entitled to obtain and hold in its own name all patents, copyrights, and other rights in respect of all Work Product.  The Executive agrees to (i) cooperate with NMG during and after his employment with NMG in obtaining patents or copyrights or other intellectual-property protection for all Work Product; (ii) execute, acknowledge, seal and deliver all documents tendered by NMG to evidence its ownership thereof throughout the world; and (iii) cooperate with NMG in obtaining, defending and enforcing its rights therein.

 

(c)                               The Executive represents that there are no other contracts to assign inventions or other intellectual property that are now in existence between the Executive and any other Person.  The Executive further represents that he has no other employment or undertakings that might restrict or impair his performance of this Agreement.  The Executive will not in connection with his employment by NMG, use or disclose to NMG any confidential, trade secret, or other proprietary information of any previous employer or other Person that the Executive is not lawfully entitled to disclose.

 

11.                            Reformation.  If the provisions of Paragraph 8, 9, or 10 are ever deemed by a court to exceed the limitations permitted by applicable law, the Executive and NMG agree that such provisions shall be, and are, automatically reformed to the maximum limitations permitted by such law.

 

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, including travel expenses, meals and lodging, incurred by the Executive in rendering such assistance, but shall have no obligation to compensate the Executive for his 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 30 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

 

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30 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, and the right to reimbursement shall not be subject to liquidation or exchanged for another benefit.

 

13.                            No Obligation to Pay; Section 409A of the Code; Section 280G of the Code.

 

(a)                               With regard to any payment due to the Executive under this Agreement, it shall not be a breach of any provision of this Agreement for NMG to fail to make such payment to the Executive if (i) NMG is legally prohibited from making the payment; (ii) NMG would be legally obligated to recover the payment if it was made; or (iii) the Executive would be legally obligated to repay the payment if it was made.

 

(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 Parent 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 Parent Board in accordance with the provisions of Code Section 409A and the regulations issued thereunder.

 

(c)                               Notwithstanding anything to the contrary contained herein, this Agreement is intended to satisfy the requirements of Code Section 409A and all provisions herein, or incorporated by reference, shall be construed and interpreted to satisfy the requirements of Code Section 409A, and in the event of future legislative or regulatory changes to, or official guidance regarding, the requirements imposed by Code Section 409A, NMG and the Executive agree to cooperate by negotiating in good faith regarding possible future revisions to this Agreement (without obligation on the part of any party to agree to any such revisions) that they may determine are necessary in order that this Agreement will continue to satisfy the requirements of, and the compensation payable hereunder will thereby not be subject to the taxes imposed by, Code Section 409A; provided, however, that no Person connected with NMG in any capacity, including but not limited to any Affiliate of NMG, and their respective directors, officers, agents and employees, makes any representation, commitment or guarantee that any particular tax treatment, including, but not limited to, federal, state and local income, estate and gift tax treatment, will be applicable with respect to any amounts payable under the Agreement or that such tax treatment will apply to or be available to the Executive.  Further, for purposes of Code Section 409A, the Executive’s right to receive any installment payment under this Agreement shall be treated as a right to receive a series of separate and distinct payments.  Any reimbursements or in-kind benefits provided under this Agreement shall be made or provided in

 

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accordance with the requirements of Code Section 409A, including, where applicable, the 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.  Notwithstanding anything to the contrary herein, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” (as determined in accordance with Treasury Regulation Section 1.409A-1(h)) and, for purposes of any such provision of this Agreement, references to a “resignation,” “termination,” “termination of employment” or like terms shall mean separation from service. In no event whatsoever shall NMG or any of its Affiliates be liable for any additional tax, interest or penalty that may be imposed on the Executive by Code Section 409A or any damages for failing to comply with Code Section 409A.

 

(d)                             So long as NMG satisfies the description in Section 280G(b)(5)(A)(ii)(I) of the Code, if any payment or benefit (within the meaning of Section 280G(b)(2) of the Code), to the Executive or for the Executive’s benefit paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, the Executive’s employment with NMG or a change in ownership or effective control of NMG or of a substantial portion of its assets (the “Payments”), would be subject to the excise tax imposed by Section 4999 of the Code, then, to the extent, if any, the Executive elects to waive the right to receive such payments or benefits unless shareholder approval is obtained in accordance with Section 280G(b)(5)(B) of the Code, NMG shall use its commercially reasonable efforts to prepare and deliver to its stockholders the disclosure required by Section 280G(b)(5)(B) of the Code with respect to the Payments and to submit the Payments to NMG’s stockholders for approval in accordance with Section 280G(b)(5)(B) of the Code and the regulation codified at 26 C.F.R. § 1.280G-1.  The Executive understands that NMG does not guarantee that such stockholder approval will be obtained.  The determinations to be made with respect to this Paragraph 13(d) shall be made by a certified public accounting firm designated by NMG and reasonably acceptable to the Executive. NMG shall be responsible for all charges of the accountant.

 

14.                            Survival.  The expiration or termination of the Employment Term will not impair the rights or obligations of any party hereto that accrue hereunder prior to such expiration or termination, except to the extent specifically stated herein.  In addition to the foregoing, NMG’s obligations under Paragraphs 5(h), and 7, and the Executive’s obligations under Paragraphs 8, 9, 10 and 12, will survive the expiration or termination of the Executive’s employment.

 

15.                            Withholding Taxes.  NMG shall withhold from any payments to be made to the Executive pursuant to this Agreement such amounts (including social security contributions and federal income taxes) as shall be required by federal, state, and local withholding tax laws.

 

16.                            Notices.  All notices, requests, demands, and other communications required or permitted to be given or made by either party shall be in writing and shall be deemed to have been duly

 

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given or made (a) when delivered personally, or (b) when deposited in the United States mail, first class registered or certified mail, postage prepaid, return receipt requested, to the party for which intended at the following addresses (or at such other addresses as shall be specified by the parties by like notice, except that notices of change of address shall be effective only upon receipt):

 

(i)                                  If to NMG, at:

 

The Neiman Marcus Group LLC
 Attn: General Counsel
 1618 Main Street
 Dallas, TX 75201

 

With a copy (which shall not constitute notice) to:

 

Neiman Marcus Group, Inc.
 Attn: Adam Stein
 2000 Avenue of the Stars, 12th Floor
 Los Angeles, CA 90067

 

and

 

Proskauer Rose LLP
 Attn:  Michael A. Woronoff

2049 Century Park East, Suite 3200
 Los Angeles, CA  90067

 

(ii)                            If to the Executive, at the Executive’s then-current home address on file with NMG.

 

17.                            Injunctive Relief.  The Executive acknowledges and agrees that NMG would not have an adequate remedy at law and would be irreparably harmed in the event that any of the provisions of Paragraphs 8, 9, 10 and 12 were not performed in accordance with their specific terms or were otherwise breached.  Accordingly, the Executive agrees that NMG shall be entitled to equitable relief, including preliminary and permanent injunctions and specific performance, in the event the Executive breaches or threatens to breach any of the provisions of such Paragraphs, 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 this Agreement by the Executive, but shall be in addition to all other remedies available to NMG at law or equity.

 

18.                            Binding Effect; No Assignment by the Executive; No Third Party Benefit.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, legal representatives, successors, and assigns; provided, however, that the Executive shall not assign or otherwise transfer this Agreement or any of his rights or obligations herein.  NMG is authorized to assign or otherwise transfer this Agreement or any of its rights or obligations herein to an Affiliate of NMG.  The Executive shall not have any right to pledge, hypothecate, anticipate, or in any way create a lien upon any payments or other benefits provided under this

 

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Agreement; and no benefits payable under this Agreement shall be assignable in anticipation of payment either by voluntary or involuntary acts, or by operation of law, except by will or pursuant to the laws of descent and distribution.  Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the parties, and their respective heirs, legal representatives, successors, and permitted assigns, any rights, benefits, or remedies of any nature whatsoever under or by reason of this Agreement.

 

19.                            Assumption by Successor.  NMG shall require any successor or assignee (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all the business and/or assets of NMG, by agreement in writing in form and substance reasonably satisfactory to the Executive, expressly, absolutely, and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that NMG would be required to perform it if no such succession or assignment had taken place.  As used in this Agreement, “NMG” shall include any successor or assignee (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all the business and/or assets of NMG that executes and delivers the agreement provided for in this Paragraph 19 or that otherwise becomes obligated under this Agreement by operation of law.

 

20.                            Governing Law.  This Agreement and the employment of the Executive shall be governed by the laws of the State of Texas except for its laws with respect to conflict of laws.

 

21.                            Dispute Resolution: Arbitration; Jury-Trial Waiver.

 

(a)                               All disputes arising under or in connection with this Agreement shall be settled by binding 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 in writing 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.  The parties acknowledge that this agreement evidences a transaction involving interstate commerce. The Federal Arbitration Act shall govern the interpretation, enforcement, and proceedings pursuant to the arbitration clause in this agreement.

 

(b)                              Notwithstanding the foregoing, NMG and its Affiliates may seek such injunctive or other legal or equitable relief to which they may be entitled in any state or federal court of competent jurisdiction to enforce its rights under Paragraphs 7(b), 8, 9, 10 or 12 of this Agreement.

 

(c)                               ALTERNATIVE WAIVER OF JURY TRIAL: THE PARTIES AGREE THAT IN THE EVENT THE AGREEMENT TO ARBITRATE CONTAINED IN THIS PARAGRAPH 21 IS DETERMINED TO BE UNENFORCEABLE, ANY DISPUTE BETWEEN THE PARTIES THAT OTHERWISE WOULD BE SUBJECT TO ARBITRATION SHALL BE HEARD BY A COURT SITTING WITHOUT A JURY, AND THE PARTIES MUTUALLY WAIVE ANY RIGHT THEY MAY HAVE TO A JURY DETERMINATION OF ANY ISSUE IN SUCH DISPUTE.

 

Page 16 of 20

 

22.                            Costs of Proceedings.  If the Executive is the prevailing party in any arbitration proceeding, as determined by the arbitrator, or in any enforcement or other court proceedings, he will be entitled, to the extent permitted by law, to reimbursement from the Parent, NMG or their Affiliates, as applicable, for all of the Executive’s costs (including the arbitrator’s compensation), expenses and attorneys’ fees.  If Parent, NMG or their Affiliates are prevailing party in any arbitration proceeding, as determined by the arbitrator, or in any enforcement or other court proceedings, each party shall be responsible for their own respective costs, expenses and attorneys’ fees.

 

23.                            Entire Agreement.  This Agreement contains the entire agreement between the parties concerning the subject matter hereof and as of the Effective Date supersedes all other prior agreements and understandings, written and oral, between the parties with respect to the subject matter of this Agreement (including, without limitation, the Prior Agreement).

 

24.                            Modification; Waiver.  No Person, other than pursuant to a resolution duly adopted by the members of the Parent Board, shall have authority on behalf of NMG to agree to modify or amend any provision of this Agreement, or waive any provision of this Agreement enforceable by it.  Further, this Agreement may not be changed, amended or modified orally, but only by a written agreement signed by the parties hereto and no provision thereof may be waived or discharged except by a written agreement signed by the party against whom any waiver or discharge is sought to be enforced.  Each party to this Agreement acknowledges and agrees that no breach of this Agreement by the other party or failure to enforce or insist on its or her rights under this Agreement shall constitute a waiver or abandonment of any such rights or defense to enforcement of such rights.

 

25.                            Construction.  The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

 

26.                            Severability.  If any provision of this Agreement shall be determined by a court to be invalid or unenforceable, the remaining provisions of this Agreement shall not be affected thereby, shall remain in full force and effect, and shall be enforceable to the fullest extent permitted by applicable law.

 

27.                            Counterparts.  This Agreement may be executed by the parties in any number of counterparts (including by facsimile or electronic transmission), each of which shall be deemed an original, but all of which shall constitute one and the same agreement.

 

28.                            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

 

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

 

[Remainder of Page Intentionally Left Blank]

 

Page 18 of 20

 

IN WITNESS WHEREOF, NMG has caused this Agreement to be executed on its behalf by its duly authorized officer, and the Executive has executed this Agreement, effective as of the Effective Date.

 

	
James   E. Skinner
    	
 
    
	
 
    	
 
    
	
/s/ James E. Skinner
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
The   Neiman Marcus Group LLC
    	
 
    
	
 
    	
 
    
	
/s/ Joe Weber
    	
 
    	
 
    
	
By:
    	
 
    
	
Title: Senior Vice   President and Chief Human Resources Officer
    

 

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