<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
- --------------------------------------------------------------------------------
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
The Neiman Marcus Group, Inc.
(Name of Registrant as Specified In Its Charter)
Eric P. Geller
The Neiman Marcus Group, Inc.
27 Boylston Street
Chestnut Hill, MA 02467
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[Neiman Marcus LOGO]
The Neiman Marcus Group, Inc.
27 Boylston Street
Chestnut Hill, MA 02467
(617) 232-0760
December 8, 1998
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 15, 1999
The Annual Meeting of Stockholders of The Neiman Marcus Group, Inc. will be
held at 10:00 a.m., Eastern Standard Time, on Friday, January 15, 1999, AT THE
COMPANY'S CORPORATE HEADQUARTERS, 27 BOYLSTON STREET (ROUTE 9), CHESTNUT HILL,
MASSACHUSETTS, for the following purposes:
1. To elect three Class II directors in accordance with the By-Laws
of the Company.
2. To consider and act on a proposal to ratify the appointment by the
Board of Directors of Deloitte & Touche LLP as the Company's independent
auditors for the current fiscal year.
3. To consider and act on a proposal submitted by a stockholder of
the Company concerning cumulative voting.
4. To transact such other business as may properly come before the
meeting and any adjournments of the meeting.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors
ERIC P. GELLER
Secretary
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE> 3
[NEIMAN MARCUS LOGO]
The Neiman Marcus Group, Inc.
27 Boylston Street
Chestnut Hill, MA 02467
(617) 232-0760
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 15, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Neiman Marcus Group, Inc. (the
"Company") for use at the Annual Meeting of Stockholders to be held at 10:00
a.m. on Friday, January 15, 1999, at THE COMPANY'S CORPORATE HEADQUARTERS, 27
BOYLSTON STREET (ROUTE 9), CHESTNUT HILL, MASSACHUSETTS, and at any adjournments
thereof. All shares will be voted in accordance with the instructions contained
in the proxy, but if the proxies which are signed and returned do not specify a
vote on any proposal, the proxies will be voted FOR the election of the nominees
for director named herein, FOR the ratification of the appointment by the Board
of Directors of Deloitte & Touche LLP as the Company's independent auditors for
the current fiscal year and AGAINST the proposal submitted by a stockholder
concerning cumulative voting. Any proxy may be revoked by a stockholder at any
time before it is exercised by providing written notice of revocation to the
Secretary of the Company (at the address set forth above), by executing a proxy
bearing a later date, or by voting in person at the Annual Meeting. The mailing
of this proxy statement and accompanying form of proxy is expected to commence
on or about December 8, 1998.
In addition to solicitations of proxies by mail, the Company's officers,
directors or employees may solicit proxies by telephone or personal
communication. All costs of soliciting proxies, including reimbursement of fees
of certain brokers, fiduciaries and nominees in obtaining voting instructions
from beneficial owners, will be borne by the Company.
Although stock transfer books will remain open, the Board of Directors has
fixed the close of business on December 7, 1998 as the record date for
determining the stockholders having the right to vote at the Annual Meeting. At
the close of business on December 7, 1998 there were 49,003,455 shares of Common
Stock outstanding and entitled to vote at the meeting. At the meeting, each
share of Common Stock is entitled to one vote. AS OF THE RECORD DATE, HARCOURT
GENERAL, INC. ("HARCOURT GENERAL") OWNED 26,429,502 SHARES OF COMMON STOCK,
REPRESENTING APPROXIMATELY 54% OF THE ISSUED AND OUTSTANDING SHARES OF COMMON
STOCK OF THE COMPANY.
Shares of Common Stock represented in person or by proxy at the Annual
Meeting (including abstentions and broker non-votes) will be tabulated by the
inspectors of election appointed for the meeting and will be counted in
determining that a quorum is present. Votes are counted using written ballots.
<PAGE> 4
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of December 7, 1998, with
respect to the beneficial ownership of Common Stock by (i) each person known to
the Company to own beneficially more than 5% of the outstanding shares of Common
Stock; (ii) each executive officer named in the Summary Compensation Table;
(iii) each director of the Company; and (iv) all directors and current executive
officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER SHARES OWNED(1) COMMON STOCK
- ------------------------ --------------- ------------
<S> <C> <C>
Harcourt General, Inc.(2)..................... 26,429,502 53.9%
27 Boylston Street
Chestnut Hill, MA 02467
Gabelli Funds, Inc.(3)........................ 4,475,500 9.1%
One Corporate Center
Rye, NY 10580
PRIMECAP Management Company(4)................ 4,069,100 8.3%
225 South Lake Avenue
Pasadena, CA 91101
Neuberger & Berman, LLC(5).................... 3,050,850 6.2%
605 Third Avenue
New York, NY 10158
Burton M. Tansky(6)........................... 134,940 *
Gerald A. Sampson(7).......................... 65,038 *
Stephen Elkin(8).............................. 90,230 *
Dawn Mello(9)................................. 19,963 *
Bernie Feiwus(10)............................. 32,155 *
Matina S. Horner(11).......................... 2,151 *
Vincent M. O'Reilly(11)....................... 1,177 *
Walter J. Salmon(11).......................... 10,319 *
Jean Head Sisco(11)........................... 2,540 *
Richard A. Smith(2)(12)....................... -- *
Robert A. Smith(2)(12)........................ -- *
Brian J. Knez(2)(12).......................... -- *
John R. Cook.................................. -- *
All current executive officers and directors
as a group (19 persons)(13)................. 358,513 *
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated in the following footnotes, each stockholder
referred to above has sole voting and dispositive power with respect to the
shares listed.
(2) Richard A. Smith, Chairman of the Company and Chairman and Chief Executive
Officer of Harcourt General, his sister, Nancy L. Marks, and certain
members of their families (including Robert A. Smith, Chief Executive
Officer and a director of the Company and President and Co-Chief Operating
Officer of Harcourt General, and Brian J. Knez, a director of the Company
and President and Co-Chief Operating Officer of Harcourt General) may be
regarded as controlling persons of Harcourt General, and therefore of the
Company. The shares of Harcourt General Class B Stock and Harcourt General
Common Stock beneficially owned by the Smith family
2
<PAGE> 5
constitute approximately 28% of the aggregate number of outstanding equity
securities of Harcourt General. Each share of Harcourt General voting stock
entitles the holder thereof to one vote on all matters submitted to
Harcourt General's stockholders, except that each share of Harcourt General
Class B Stock (virtually all of which is beneficially owned by the Smith
family) entitles the holder thereof to ten votes on the election of
directors at any Harcourt General stockholders' meeting under certain
circumstances. Accordingly, as to any elections in which the Harcourt
General Class B Stock would carry ten votes per share at a Harcourt General
stockholders' meeting, the Smith family would have approximately 80% of the
combined voting power of the Harcourt General voting securities.
Under the definition of "beneficial ownership" in Rule 13d-3 of the Rules
and Regulations promulgated under the Securities Exchange Act of 1934, as
amended, the Smith family and the members of Harcourt General's Board of
Directors may be deemed to be the beneficial owners of the securities of
the Company beneficially owned by Harcourt General in that they may be
deemed to share with Harcourt General the power to direct the voting and/or
disposition of such securities. However, this information should not be
deemed to constitute an admission that any such person or group of persons
is the beneficial owner of such securities.
(3) The information reported is based on a Schedule 13D dated August 18, 1997
filed with the Securities and Exchange Commission (the "Commission") by the
Gabelli Funds, Inc. and its affiliates (collectively, the "Gabelli
Affiliates"). The Gabelli Affiliates have sole voting power with respect to
4,372,500 shares, and sole dispositive power with respect to all of the
shares, reported in the table.
(4) The information reported is based on a Schedule 13G dated August 31, 1998
filed with the Commission by PRIMECAP Management Company. PRIMECAP
Management Company has sole voting and sole dispositive power with respect
to 939,100 shares, and shared dispositive power with respect to 3,130,000
shares, reported in the table.
(5) The information reported is based on a Schedule 13G dated February 10, 1998
filed with the Commission by Neuberger & Berman, LLC. Neuberger & Berman,
LLC has sole voting power with respect to 880,450 shares reported in the
table, and does not have sole dispositive power over any of the shares
reported in the table.
(6) Includes 89,540 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of December 7, 1998. Also includes
21,900 shares of restricted stock over which Mr. Tansky has voting but not
dispositive power.
(7) Includes 21,720 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of December 7, 1998. Also includes 9,600
shares of restricted stock over which Mr. Sampson has voting but not
dispositive power.
(8) Includes 56,420 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of December 7, 1998. Also includes
11,600 shares of restricted stock over which Mr. Elkin has voting but not
dispositive power. Also includes 7,533 shares of Common Stock allocated to
Mr. Elkin under the Company's Employee Savings Plan ("ESP") as to which Mr.
Elkin shares voting power with the trustee of the ESP.
(9) Includes 5,540 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of December 7, 1998. Also includes 5,200
shares of restricted stock over which Ms. Mello has voting but not
dispositive power.
(10) Includes 22,820 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of December 7, 1998. Also includes 7,800
shares of restricted stock over which
3
<PAGE> 6
Mr. Feiwus has voting but not dispositive power. Also includes 535 shares
of Common Stock allocated to Mr. Feiwus under the ESP as to which Mr.
Feiwus shares voting power with the trustee of the ESP.
(11) Dr. Horner, Mr. O'Reilly, Mr. Salmon and Mrs. Sisco hold, respectively,
2,151, 377, 377, and 1,406 Common Stock based units which are included in
the table. These directors do not have voting or dispositive power with
respect to these Common Stock based units. For additional information
concerning these Common Stock based units, see "Directors' Compensation."
(12) The members of the Board of Directors of Harcourt General, including
Richard A. Smith, Robert A. Smith, and Brian J. Knez, may be deemed to be
the beneficial owners of the securities of the Company owned by Harcourt
General. However, this information should not be deemed to be an admission
that any such person or group is the beneficial owner of such securities.
(13) Excludes the beneficial ownership of securities of the Company which may be
deemed to be attributed to Richard A. Smith, Robert A. Smith, and Brian J.
Knez (see Notes 2 and 12 above). Includes (i) 196,040 shares of Common
Stock which are subject to outstanding options exercisable within 60 days
of December 7, 1998, (ii) 56,100 shares of restricted stock over which
individuals in the group have voting but not dispositive power, (iii) 8,068
shares of Common Stock allocated to individuals in the group under the ESP
as to which such individuals share voting power with the trustee of the
ESP, and (iv) the 4,311 Common Stock based units referred to in Note 11
above.
1. ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of three
classes. At each Annual Meeting, a class of directors is elected for a full term
of three years.
At the 1999 Annual Meeting, three Class II directors are to be elected for
three-year terms. The persons named in the accompanying proxy will vote each
proxy for the election of the nominees listed below, unless directed otherwise.
Each of the nominees is currently a member of the Board of Directors. The
Company has no reason to believe that any of the listed nominees will become
unavailable for election, but if for any reason that should be the case, the
proxies may be voted for substitute nominees. A plurality of the votes cast at
the Annual Meeting is required to elect each director. Proxies withholding
authority to vote for a nominee will be treated as votes cast against the
election of such nominee. Broker non-votes will not be treated as votes cast
and, therefore, will not be counted in calculating a plurality. HARCOURT GENERAL
WILL BE VOTING ITS COMMON STOCK, REPRESENTING APPROXIMATELY 54% OF THE VOTING
POWER OF THE COMPANY, FOR THE ELECTION OF THE NOMINEES SET FORTH BELOW. IF ALL
OF THE NOMINEES LISTED BELOW ARE ELECTED, THE BOARD OF DIRECTORS WILL CONSIST OF
FOUR INDEPENDENT DIRECTORS AND FOUR MEMBERS WHO ARE ALSO OFFICERS OF HARCOURT
GENERAL.
All of the nominees for director and the directors who will continue to
serve after the 1999 Annual Meeting are listed below with their principal
occupations for the last five years.
NOMINEES FOR TERMS EXPIRING IN 2002 (CLASS II DIRECTORS)
MATINA S. HORNER, PH.D., age 59, Director since 1993
Executive Vice President of the Teachers Insurance and Annuity
Association-College Retirement Equities Fund (TIAA-CREF) and President Emerita
of Radcliffe College since 1989; Director of Boston Edison Company.
4
<PAGE> 7
BRIAN J. KNEZ, age 41, Director since 1998
President and Co-Chief Operating Officer of Harcourt General since January
1997; President (until November 1998) and Chief Executive Officer of Harcourt
Brace & Company since May 1995; President of the Scientific, Technical, Medical
and Professional Group of Harcourt Brace prior thereto; Director of Harcourt
General and Open Market, Inc. Mr. Knez is the son-in-law of Richard A. Smith,
Chairman of the Company and Chairman and Chief Executive Officer of Harcourt
General, and the brother-in-law of Robert A. Smith, Chief Executive Officer and
a director of the Company and President and Co-Chief Operating Officer and a
director of Harcourt General.
WALTER J. SALMON, age 68, Director since 1987
Stanley Roth Sr. Professor of Retailing (Emeritus since 1997), Graduate
School of Business Administration, Harvard University; Director of Hannaford
Bros. Co., The Quaker Oats Company, Circuit City Stores, Inc., Luby's
Cafeterias, Inc., Harrah's Entertainment, Inc., Cole National Corporation and
PetsMart, Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 2000 (CLASS III DIRECTORS)
JOHN R. COOK, age 57, Director since 1998
Senior Vice President and Chief Financial Officer of the Company and of
Harcourt General.
VINCENT M. O'REILLY, age 61, Director since 1997
Distinguished Senior Lecturer, Carroll School of Management, Boston College
since October 1997; Executive Vice Chairman of Coopers & Lybrand from October
1994 until October 1997; Chief Operating Officer or Deputy Chairman of Coopers &
Lybrand from 1988 to October 1994; Director of Eaton Vance Corp. and Teradyne,
Inc.
JEAN HEAD SISCO, age 73, Director since 1987
Partner in Sisco Associates, international management consultants; Director
of Textron, Inc., Newmont Mining Corporation, Chiquita Brands International,
Inc., The American Funds Tax-Exempt Series I and K-Tron International, Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 2001 (CLASS I DIRECTORS)
RICHARD A. SMITH, age 74, Director since 1987
Chairman of the Company and of Harcourt General; Chief Executive Officer of
the Company (until December 2, 1998) and of Harcourt General since January 1997
and prior to December 1991; Chairman, President (until November 1995) and Chief
Executive Officer of GC Companies, Inc.; Director of Harcourt General and GC
Companies, Inc. Mr. Smith is the father of Robert A. Smith, Chief Executive
Officer and a director of the Company, and President and Co-Chief Operating
Officer and a director of Harcourt General, and is the father-in-law of Brian J.
Knez, a director of the Company and President and Co-Chief Operating Officer and
a director of Harcourt General.
ROBERT A. SMITH, age 39, Director since 1997
Chief Executive Officer of the Company since December 2, 1998; President
and Co-Chief Operating Officer of Harcourt General since January 1997; President
and Chief Operating Officer of the Company from January 1997 to December 2,
1998; Group Vice President of the Company and of Harcourt General prior thereto;
President and Chief Operating Officer of GC Companies, Inc. since November 1995;
Director of Harcourt General. Mr. Smith is the son of Richard A. Smith, Chairman
of the Company and Chairman and Chief Executive Officer of Harcourt General, and
is the brother-in-law of Brian J. Knez, a director of the Company and President
and Co-Chief Operating Officer and a director of Harcourt General.
5
<PAGE> 8
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended August 1, 1998, the Board of Directors held
four meetings and acted by unanimous written consent on five other occasions.
During fiscal 1998, each director of the Company attended at least 75% of the
aggregate number of Board meetings and meetings held by committees of which he
or she is a member. The Board of Directors has designated five principal
standing committees. Set forth below are descriptions of the functions of such
committees and the names of their current members.
Audit Committee. The members of the Audit Committee, which met four times
during fiscal 1998, are Mrs. Sisco (Chairman), Dr. Horner, Mr. O'Reilly and Mr.
Salmon. The functions of the Audit Committee include the review of the scope of
the services of the Company's independent auditors and the responsibilities of
the Company's internal audit department and a continuing review of the Company's
internal procedures and controls. The Audit Committee annually reviews the
Company's audited financial statements, considers the qualifications and fees of
the independent auditors of the Company and makes recommendations to the Board
of Directors as to the selection of the auditors and the scope of their audit
services.
Special Review Committee. The members of the Special Review Committee are
Mr. Salmon (Chairman), Dr. Horner, Mr. O'Reilly and Mrs. Sisco. The Special
Review Committee met once during fiscal 1998. A continuing function of the
Special Review Committee is to give consideration to those matters requiring the
approval of an "Independent Committee" under the terms of the Intercompany
Services Agreement between the Company and Harcourt General, including the
consideration of the fees charged to the Company by Harcourt General pursuant to
the Intercompany Services Agreement. For information regarding the Intercompany
Services Agreement, see Note 1 to the Summary Compensation Table.
Compensation Committee. The members of the Compensation Committee, which
met once during fiscal 1998 and acted by unanimous written consent on one other
occasion, are Mr. Salmon (Chairman), Dr. Horner, Mr. O'Reilly and Mrs. Sisco.
The functions of the Compensation Committee are to review or determine salaries,
benefits and other compensation for officers and key employees of the Company
and its subsidiaries and to administer the Company's stock incentive plans.
Nominating Committee. All of the directors of the Company serve on the
Nominating Committee, which held one meeting and acted by unanimous written
consent on one other occasion during fiscal 1998. Mrs. Sisco is the Chairman of
the Nominating Committee. The functions of the Nominating Committee are to
nominate directors, make recommendations concerning the structure and membership
of the various committees of the Board of Directors, consider questions of
management, organization and succession and to act on such other matters as from
time to time may be requested by the Board of Directors. In carrying out its
responsibilities to nominate directors, the Nominating Committee will consider
candidates recommended by the Board of Directors and by stockholders of the
Company. All suggestions by stockholders for nominees for director must be made
in writing and received by the Secretary of the Company, 27 Boylston Street,
Chestnut Hill, Massachusetts 02467 no later than October 18, 1999 (see "Deadline
for Submission of Stockholder Proposals and Nominations for Director for Annual
Meeting of Stockholders to be held in January 2000"). Such writing must set
forth (i) the name and address of the stockholder who intends to make the
nomination and of each person to be nominated, (ii) a representation that the
stockholder is a holder of record of the Company's stock entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
nominate the person named, (iii) a description of all arrangements or
understandings between the stockholder and each nominee and any other person
pursuant to which the nomination is to be made by the stockholder, (iv) the
consent of each proposed nominee to serve as a director of the
6
<PAGE> 9
Company if so elected and (v) such other information regarding each proposed
nominee as would be required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission.
Executive Committee. The members of the Executive Committee, which acted
by unanimous written consent on two occasions during fiscal 1998, are Richard A.
Smith (Chairman), Walter J. Salmon and Robert A. Smith. The By-Laws confer upon
the Executive Committee the authority to manage the affairs of the Company in
the intervals between meetings of the Board of Directors, except that the
Committee may not effect certain fundamental corporate actions such as (a)
declaring a dividend, (b) amending the Restated Certificate of Incorporation or
the By-Laws, (c) adopting an agreement of merger or consolidation or (d)
imposing a lien on substantially all the assets of the Company. In practice, the
Executive Committee meets infrequently and does not act except on matters which
must be dealt with prior to the next scheduled Board of Directors meeting and
which are not sufficiently important to require action by the full Board of
Directors.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company or Harcourt General
("Non-Employee Directors") each receive (i) an annual cash retainer of $20,000,
(ii) a fee of $2,000 per Board of Directors meeting attended, (iii) a fee of
$750 (the Chairperson receives $1,500) for each committee meeting attended, and
(iv) reimbursement for travel and incidental expenses (an aggregate of $4,440 in
fiscal 1998) incurred in attending meetings and carrying out their duties as
directors. If a Non-Employee Director is unable to attend a meeting in person
but participates by telephone, he or she receives one-half of the fee that would
otherwise be payable.
In June 1998, the Board of Directors increased the annual retainer payable
to its Non-Employee Directors by authorizing grants of stock-based units in an
aggregate amount equal to the value of the annual cash retainer. Grants are made
quarterly, with the number of stock-based units in each grant calculated by
dividing $5,000 (the amount of the quarterly cash retainer) by the trailing five
day average of the closing price of the Company's Common Stock at the end of
each fiscal quarter. The value of each Non-Employee Director's stock-based units
will be payable only in cash when the Non-Employee Director ceases to serve as a
member of the Board of Directors of the Company. These stock-based units are
accounting entries only, and do not carry voting or dispositive rights.
The Company offers Non-Employee Directors the right to elect to receive all
or part of the cash portion of their fees on a deferred basis (i) in the form of
cash with interest at a rate equal to the average of the top rates paid by major
New York banks on three-month negotiable certificates of deposit as quoted on
the last business day of the fiscal quarter, or (ii) in the form of stock-based
units, calculated on the basis of the trailing five day average of the closing
price of the Company's Common Stock at the end of each fiscal quarter. For
fiscal 1998, Dr. Horner elected to receive all of her fees on a deferred basis
using the stock based method and Mrs. Sisco elected to receive fifty percent of
her fees on a deferred basis using the stock based method.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than 10%
of the Company's Common Stock to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. The Company believes that all filing requirements
applicable to its insiders were complied with during fiscal 1998.
7
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE (1)
The following table provides information on the compensation provided by
the Company during fiscal 1998, 1997 and 1996 to the Company's Chief Executive
Officer and the five most highly paid executive officers of the Company during
fiscal 1998.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION(2)
-----------------------
AWARDS
ANNUAL COMPENSATION -----------------------
NAME AND ----------------------------------- RESTRICTED SECURITIES
PRINCIPAL POSITION OTHER ANNUAL STOCK UNDERLYING ALL OTHER
DURING AND AT THE FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
END OF FISCAL 1998 YEAR ($) ($)(3) ($)(4) ($)(5) (#) ($)(6)
- ------------------ ------ -------- -------- ------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard A. Smith(1) 1998 -- -- -- -- -- --
Chairman and Chief 1997 -- -- -- -- -- --
Executive Officer 1996 -- -- -- -- -- --
of the Company
Burton M. Tansky 1998 $807,968 $470,000 -- $260,206 20,200 $20,227
Executive Vice 1997 $750,000 $292,500 -- -- 10,000 $19,357
President of the 1996 $650,000 $292,500 -- $153,750 -- $16,866
Company and Chairman
and Chief Executive
Officer of Neiman
Marcus Stores
Gerald A. Sampson 1998 $520,000 $220,000 -- $125,163 9,600 $14,126
President and Chief 1997 $500,000 $174,000 -- -- 6,500 $14,070
Operating Officer of 1996 $475,000 $190,000 -- -- 12,000 $12,854
Neiman Marcus Stores
Stephen C. Elkin 1998 $495,000 $210,000 -- $125,163 9,600 $13,883
Chairman and Chief 1997 $480,000 $185,000 -- -- -- $10,771
Executive Officer of 1996 $480,000 -- -- $115,313 -- $17,170
Bergdorf Goodman
Dawn Mello 1998 $385,000 $140,000 -- $ 59,288 4,700 $10,289
President of Bergdorf 1997 $365,000 $110,000 -- -- 4,000 $ 9,210
Goodman 1996 $350,000 $ 67,900 -- $ 53,813 -- $ 8,496
Bernie Feiwus 1998 $375,000 $ 35,000 -- $125,163 9,600 $10,899
President and Chief 1997 $345,000 $115,000 -- -- 6,000 $10,697
Executive Officer of 1996 $325,000 $135,000 -- $ 76,875 10,000 $10,026
NM Direct
</TABLE>
- ---------------
(1) Under the terms of an Intercompany Services Agreement, Harcourt General
provides certain management, accounting, financial, legal, tax, human
resources and other corporate services to the Company, including the
services of certain senior officers of Harcourt General who are also senior
officers of the Company, in consideration of a fee based on Harcourt
General's direct and indirect costs of providing the corporate services. The
level of Harcourt General services and fees are subject to the approval of
the Special Review Committee of the Board of Directors of the Company, which
consists entirely of directors who are independent of Harcourt General.
During fiscal 1998, 1997 and 1996, the Company paid or accrued approximately
$5.4 million, $5.7 million and $6.9 million, respectively, to Harcourt
General for all of its services under the Intercompany Services Agreement.
With the exception of Mr. Smith, the senior officers of Harcourt General
(all of whom, including Mr. Smith, derive all of their compensation directly
from Harcourt General)
8
<PAGE> 11
are not included in this table. Of the amounts payable under the
Intercompany Services Agreement for fiscal 1998 and 1997, approximately
$448,000 and $365,000, respectively, were attributable to Mr. Smith's
services. These amounts include costs related to base compensation, bonuses,
benefits and amounts necessary to fund retirement benefits, all of which are
direct obligations of Harcourt General.
(2) Other than restricted stock, stock options and stock appreciation rights
which may be granted under the Company's 1997 Incentive Plan, the Company
does not have a long-term compensation program for its executive officers
that includes long-term incentive payouts.
(3) Bonus payments are reported with respect to the year in which the related
services were performed.
(4) No disclosure regarding items included in this category is required since no
amounts in any of the fiscal years reported for any of the named executive
officers exceed the lesser of $50,000 or 10% of the annual salary and bonus
for the named executive officer.
(5) Calculated by multiplying the closing price of the Company's Common Stock on
the New York Stock Exchange on the date of grant by the number of shares
awarded. For restricted Common Stock granted in fiscal 1998, the
restrictions lapse upon the achievement of specified performance targets or,
if the specified targets are not reached within five years of the date of
grant, then on the eighth anniversary of the date of grant. The specified
performance targets have not yet been attained. For restricted Common Stock
granted in all prior fiscal years, twenty percent of an award of restricted
Common Stock are freed from the restrictions each year, commencing one year
after the date of grant, provided that the recipient continues to be
employed by the Company on the anniversary date of the grant. Holders of
restricted stock are entitled to vote their restricted shares. In general,
in the event of termination of employment, restricted shares are forfeited
by the holders and revert to the Company. At the end of fiscal 1998, the
named executive officers' restricted stock holdings and market values (based
on the New York Stock Exchange closing price of $33.00 for the Company's
Common Stock at fiscal year end) were as follows: Mr. Tansky -- 13,900
shares ($458,700); Mr. Sampson -- 5,800 shares ($191,400); Mr.
Elkin -- 8,300 shares ($273,900); Ms. Mello -- 3,900 shares ($128,700) and
Mr. Feiwus -- 6,800 shares ($224,400). The closing price of the Company's
Common Stock on the New York Stock Exchange on December 7, 1998 was $24.875.
(6) The items accounted for in this column include the cost to the Company of
matching contributions under (a) the Company's Key Employee Deferred
Compensation Plan and (b) group life insurance premiums. For fiscal 1998,
such amounts for each of the named executive officers were, respectively, as
follows: Mr. Tansky -- $16,507 and $3,720; Mr. Sampson -- $10,406 and
$3,720; Mr. Elkin -- $10,200 and $3,683; Ms. Mello -- $7,425 and $2,864; and
Mr. Feiwus -- $7,350 and $3,549.
9
<PAGE> 12
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding options granted under
the Company's 1997 Incentive Plan during the fiscal year ended August 1, 1998 to
the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
----------------------------------------------- POTENTIAL REALIZABLE
% OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS EMPLOYEES OR BASE OPTION TERM(2)
GRANTED IN FISCAL PRICE EXPIRATION ---------------------
NAME (#) YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
R. Smith(3)..................... -- -- -- -- -- --
B. Tansky....................... 20,200 6.20% $32.9375 9/10/07 $418,427 $1,060,377
G. Sampson...................... 9,600 2.95% $32.9375 9/10/07 $198,856 $ 503,941
S. Elkin........................ 9,600 2.95% $32.9375 9/10/07 $198,856 $ 503,941
D. Mello........................ 4,700 1.44% $32.9375 9/10/07 $ 97,357 $ 246,721
B. Feiwus....................... 9,600 2.95% $32.9375 9/10/07 $198,856 $ 503,941
</TABLE>
- ---------------
(1) No stock appreciation rights were granted to any named executive officer
during fiscal 1998. All option grants are non-qualified stock options having
a term of 10 years and one day. They become exercisable at the rate of 20%
on each of the first five anniversary dates of the grant. All options were
granted at fair market value measured by the closing price of the Common
Stock on the New York Stock Exchange on the date of grant.
(2) These potential realizable values are based on assumed rates of appreciation
required by applicable regulations of the Securities and Exchange
Commission. The closing price of the Company's Common Stock on the New York
Stock Exchange on December 7, 1998 was $24.875.
(3) None of the executive officers of Harcourt General who are also officers of
the Company, including Mr. Smith, participate in the Company's 1997
Incentive Plan.
10
<PAGE> 13
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information regarding stock options/SARs
exercised during fiscal 1998 and the number and value of stock options held at
August 1, 1998 by the executive officers named in the Summary Compensation
Table.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
AUGUST 1, 1998(#) AUGUST 1, 1998($)
--------------------- -------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
- ---- --------------- ----------- --------------------- -------------------
<S> <C> <C> <C> <C>
R. Smith(2)................... -- -- -- --
B. Tansky..................... -- -- 74,200/42,500 $1,381,325/$267,063
G. Sampson.................... -- -- 14,100/24,000 $ 232,600/$164,500
S. Elkin(3)................... 11,850 $230,412 50,500/19,600 $ 952,000/$186,600
D. Mello...................... -- -- 8,300/13,900 $ 139,688/$112,044
B. Feiwus..................... -- -- 14,200/25,900 $ 242,500/$208,600
</TABLE>
- ---------------
(1) The value of unexercised in-the-money options is calculated by multiplying
the number of underlying shares by the difference between the closing price
of the Company's Common Stock on the New York Stock Exchange at fiscal year
end ($33.00) and the option exercise price for those shares. These values
have not been realized. The closing price of the Company's Common Stock on
the New York Stock Exchange on December 7, 1998 was $24.875.
(2) None of the executive officers of Harcourt General who are also officers of
the Company, including Mr. Smith, participate in the Company's 1997
Incentive Plan.
(3) The Company paid Mr. Elkin $230,412 with respect to the surrender of vested
options to purchase 11,850 shares of Common Stock at a weighted average
exercise price of $17.25. That amount was calculated based on the difference
between the closing price of the Common Stock on the New York Stock Exchange
on the respective dates Mr. Elkin surrendered the options, and the various
option exercise prices.
PENSION PLANS
The Company maintains a funded, qualified pension plan known as The Neiman
Marcus Group, Inc. Retirement Plan (the "Retirement Plan"). Most non-union
employees over age 21 who have completed one year of service with 1,000 or more
hours participate in the Retirement Plan, which pays benefits upon retirement or
termination of employment. The Retirement Plan is a "career-average" plan, under
which a participant earns each year a retirement annuity equal to 1% of his or
her compensation for the year up to the Social Security wage base and 1.5% of
his or her compensation for the year in excess of such wage base. Benefits under
the Retirement Plan become fully vested after five years of service with the
Company.
The Company also maintains a Supplemental Executive Retirement Plan (the
"SERP"). The SERP is an unfunded, nonqualified plan under which benefits are
paid from the Company's general assets to supplement Retirement Plan benefits
and Social Security. Executive, administrative and professional employees (other
than those employed as salespersons) with an annual base salary at least equal
to a
11
<PAGE> 14
minimum established by the Company ($160,000 as of August 1, 1998) are eligible
to participate. At normal retirement age (age 65), a participant with 25 or more
years of service is entitled to payments under the SERP sufficient to bring his
or her combined annual benefit from the Retirement Plan and SERP, computed as a
straight life annuity, up to 50% of the participant's highest consecutive 60
month average of annual pensionable earnings, less 60% of his or her estimated
annual primary Social Security benefit. If the participant has fewer than 25
years of service, the combined benefit is proportionately reduced. Benefits
under the SERP become fully vested after five years of service with the Company.
The following table, which includes benefits under the Retirement Plan and
the SERP, shows the estimated annual pension benefits payable to employees in
various compensation and years of service categories. The estimated benefits
apply to an employee retiring at age 65 in 1998 who elects to receive his or her
benefit in the form of a straight life annuity. The amounts actually payable
will be lower than the amounts shown below, since such amounts will be reduced
by 60% of the participant's estimated primary Social Security benefit.
ESTIMATED ANNUAL RETIREMENT BENEFITS
UNDER RETIREMENT PLAN AND SERP
<TABLE>
<CAPTION>
AVERAGE TOTAL YEARS OF SERVICE
PENSIONABLE --------------------------------------------------------
EARNINGS 5 10 15 20 25
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$300,000 $30,000 $ 60,000 $ 90,000 $120,000 $150,000
400,000 40,000 80,000 120,000 160,000 200,000
500,000 50,000 100,000 150,000 200,000 250,000
600,000 60,000 120,000 180,000 240,000 300,000
700,000 70,000 140,000 210,000 280,000 350,000
800,000 80,000 160,000 240,000 320,000 400,000
900,000 90,000 180,000 270,000 360,000 450,000
</TABLE>
The following table shows the pensionable earnings and credited years of
service for the executive officers named in the Summary Compensation Table as of
August 1, 1998 and years of service creditable at age 65.
<TABLE>
<CAPTION>
PENSIONABLE EARNINGS YEARS OF SERVICE(2)
FOR YEAR ENDED ------------------------------
NAME AUGUST 1, 1998(1) AT AUGUST 1,1998 AT AGE 65
- ---- -------------------- ----------------- ---------
<S> <C> <C> <C>
R. Smith(3).......................... -- --
B. Tansky............................ $808,000 --(4) 20(4)
G. Sampson........................... 520,000 --(5) 20(5)
S. Elkin............................. 495,000 20 29
D. Mello............................. 385,000 17 15
B. Feiwus............................ 375,000 18 33
</TABLE>
- ---------------
(1) In computing the combined benefit under the Retirement Plan and SERP,
"pensionable earnings" means, with respect to the Retirement Plan, base
salary and any bonus and, with respect to the SERP, base salary only. The
amounts shown above include base salary only. For the amount of bonus
included in pensionable earnings under the Retirement Plan, see the Summary
Compensation Table above. With respect to both the Retirement Plan and the
SERP, deferred base salary and/or deferred bonus amounts are included in
benefit calculations.
12
<PAGE> 15
(2) The years of credited service set forth in the table reflect years of
credited service under the Retirement Plan, which is a "career average plan"
with no limitation on years of credited service. However, credited service
under the SERP may not exceed 25 years.
(3) Mr. Smith does not participate in the Company's Retirement Plan or SERP.
(4) Under Mr. Tansky's employment agreement with the Company, for purposes of
determining his retirement benefits under the SERP, Mr. Tansky will be
credited with 5/3 times his years of service with the Company provided (i)
he remains continuously employed by the Company until his 65th birthday or
(ii) the Company fails to extend his employment beyond January 31, 2000;
otherwise, Mr. Tansky's accrued service under the SERP will be calculated in
the normal manner. Mr. Tansky is 60 years old.
(5) For purposes of determining Mr. Sampson's retirement benefits under the
SERP, Mr. Sampson will be credited with 20/13 times his years of service
with the Company provided he remains continuously employed by the Company
until his 65th birthday; otherwise, Mr. Sampson's accrued service under the
SERP will be calculated in the normal manner. Mr. Sampson is 57 years old.
EMPLOYMENT AND SEVERANCE AGREEMENTS
Burton Tansky
Pursuant to an agreement between Mr. Tansky and the Company, effective
February 1997, Mr. Tansky is employed as Chairman and Chief Executive Officer of
Neiman Marcus Stores through January 31, 2000 (Mr. Tansky was also named
President and Chief Operating Officer of the Company on December 2, 1998). In
the event Mr. Tansky is terminated without cause within 24 months of a change of
control of the Company, or if within 24 months of such a change of control Mr.
Tansky resigns because he is not permitted to continue in a position comparable
in duties and responsibilities to that which he held prior to the change of
control, Mr. Tansky will be entitled to receive his then-current base
compensation for 18 months. If the Company terminates Mr. Tansky's employment
during the term of the Employment Agreement for any reason other than for cause
or other than because of his total disability or death, Mr. Tansky will continue
to receive his base compensation and benefits until January 31, 2001 or for 18
months following termination, whichever is greater. If the Company determines
not to extend Mr. Tansky's employment beyond January 31, 2000, the Company will
pay to Mr. Tansky his then-current base compensation through January 31, 2001,
which amount will be reduced by any amounts earned by him from other employment
between August 1, 2000 and January 31, 2001, and the Company will credit Mr.
Tansky with service pursuant to the SERP as if he had remained employed by the
Company until age 65.
Gerald A. Sampson
Pursuant to an agreement between Mr. Sampson and the Company effective
September 1998, which replaced a similar agreement dated September 1996, Mr.
Sampson is entitled to receive severance payments in the event his employment
with the Company is terminated in certain situations. If the Company terminates
Mr. Sampson's employment other than for cause or other than due to his total
disability or death, Mr. Sampson shall have the right to receive an amount
equivalent to one and one-half times his then-current base compensation, payable
in 18 monthly installments. Mr. Sampson will also be entitled to receive such
payments if his employment is terminated by a successor to the Company within 24
months of a change of control of the Company without cause or other than due to
his total disability or death, or if within 24 months of such a change of
control Mr. Sampson resigns because he is not permitted to continue in a
position comparable in duties and responsibilities to that which he held prior
to the change of control. Beginning six months following the date of a covered
13
<PAGE> 16
termination or resignation, all amounts to be paid under such agreement shall be
reduced by the amount Mr. Sampson receives as compensation or severance related
to other employment. Mr. Sampson has agreed to provide the Company with 3 months
advance notice of his intent to resign from the Company provided that such
resignation does not follow a change of control of the Company.
Stephen C. Elkin
Pursuant to an agreement between Mr. Elkin and Bergdorf Goodman, effective
September 1993, Mr. Elkin is entitled to receive severance payments in the event
his employment with Bergdorf Goodman is terminated in certain situations. If the
Company terminates Mr. Elkin's employment other than for cause or other than due
to his total disability or death, he will receive an amount equal to one and one
half times his then-current base salary, which amount will be paid to him in 18
monthly installments following such termination but will be reduced by any
amounts received by him from other employment during the period beginning six
months following his termination and ending at the end of the 18 month period.
Mr. Elkin will also be entitled to receive such payments in the event his
employment is terminated without cause within 24 months of a change of control
of either Bergdorf Goodman or the Company, or in the event he resigns within 24
months of a change of control because he is not permitted to continue in a
position comparable in duties and responsibilities to that which he held before
the change of control.
Dawn Mello
Pursuant to an agreement between Ms. Mello and Bergdorf Goodman, effective
May 1994, Ms. Mello is entitled to receive severance payments in the event her
employment with Bergdorf Goodman is terminated in certain situations. If the
Company terminates Ms. Mello's employment other than for cause or other than due
to her total disability or death, Ms. Mello will receive an amount equal to her
then-current annual salary, which amount will be paid in 12 monthly installments
following such termination but will be reduced by any amounts received by her
from other employment during the period beginning six months and ending 12
months following such termination.
Bernie Feiwus
Pursuant to an agreement between Mr. Feiwus and NM Direct, effective
October 1995, Mr. Feiwus is entitled to receive severance payments in the event
his employment with NM Direct is terminated in certain situations. If the
Company terminates Mr. Feiwus' employment without cause within 24 months of a
change of control of the Company or of NM Direct, or if within 24 months after
such a change of control Mr. Feiwus resigns his employment because he is not
permitted to continue in a position comparable in duties and responsibilities to
that which he held before the change of control, he will receive an amount equal
to one and one half times his then-current annual base salary, which amount will
be paid in 18 monthly installments following such termination but will be
reduced by any amounts received by him from other employment during the period
beginning six months and ending 18 months following such termination.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During fiscal 1998 and through December 7, 1998, Messrs. Tansky, Sampson,
Elkin and Feiwus had outstanding loans under the Company's Key Executive Stock
Purchase Loan Plan (the "Loan Plan") in the respective maximum aggregate
principal amounts of $367,595, $536,589, $178,306, and $193,315. At August 1,
1998, the outstanding amounts of such loans were as follows: Mr. Tansky -- $0;
Mr. Sampson -- $457,894; Mr. Elkin -- $116,487; and Mr. Feiwus -- $0. In
accordance with the provi-
14
<PAGE> 17
sions of the Loan Plan, these loans were used to acquire shares of Common Stock
either in the open market or pursuant to stock option exercises and to discharge
certain tax liabilities incurred in connection with the release of restrictions
on previous grants of restricted Common Stock. The loans are secured by a pledge
of the purchased shares and bear interest at an annual rate of 5%, payable
quarterly. Pursuant to the terms of the Loan Plan, each executive officer's loan
will become due and payable seven months after his employment with the Company
terminates. No other officer of the Company had outstanding loans under the Loan
Plan in excess of $60,000 during fiscal 1998 or subsequent thereto.
------------------------
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT
OF 1934, EACH AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS
PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION AND STOCK PERFORMANCE GRAPH SHALL NOT BE DEEMED
TO BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS, NOR SHALL SUCH SECTIONS
OF THIS PROXY STATEMENT BE DEEMED TO BE INCORPORATED INTO ANY FUTURE FILINGS
MADE BY THE COMPANY UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE
ACT OF 1934.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Introduction
The Compensation Committee is composed of Walter J. Salmon (Chairman),
Matina S. Horner, Vincent M. O'Reilly and Jean Head Sisco. The members of the
Compensation Committee are all independent directors.
The principal responsibility of the Committee is to review the performance
of, and determine the compensation for, the executive officers of the Company
who are not also executive officers of Harcourt General. The individuals in this
group include Messrs. Tansky, Sampson, Elkin, Feiwus and Ms. Mello, all of whom
are named executive officers in the Summary Compensation Table. The compensation
of Harcourt General's executive officers, most of whom are also executive
officers of the Company, is determined by Harcourt General's Compensation
Committee.
Compensation Policies
The principal objectives of the Company's executive compensation program
are to (i) reward competitively its executive officers, (ii) attract and retain
individuals important to the success of the Company, (iii) provide incentives
that will motivate those executives, and (iv) reward the Company's executives
for achieving the business objectives of the Company and its operating divisions
over both the short and long terms.
The Committee makes annual and long term incentives a significant component
of the Company's executive officers' total compensation. The Committee also
increases the variable risk and reward of such incentive compensation in
proportion to an executive's level of responsibility in the Company.
Early in each fiscal year, the Committee considers the recommendations of
the Chief Executive Officer, which are supported by data generated by the
Company's Human Resources Department and/or outside compensation consultants,
for each component of compensation of the Company's executive officers. The
Committee reviews those recommendations and then approves them or makes such
modifications as it deems appropriate.
15
<PAGE> 18
The principal components of the Company's compensation program are (i) base
salary, (ii) annual incentive bonus, and (iii) stock incentives.
Base Salary
For fiscal 1998, base salary was determined with reference both to
salary survey information from recognized compensation consulting firms
and to each executive officer's level of responsibility, experience and
performance. The salary survey data was used to establish benchmark
amounts for both base salary and total cash compensation for each
executive position. Comparisons were made to a broad range of domestic
publicly held retailing companies, including "upscale" specialty retailing
companies. Because the Company competes for executive talent with a broad
range of companies, the Committee did not limit its comparison information
for compensation purposes to the companies included in the peer group in
the Stock Performance Graph. For fiscal 1998, the Committee generally set
its salary and total cash compensation benchmarks (assuming that maximum
bonuses would be achieved) for executive officers at the middle range of
the comparison group of companies.
The Committee reviewed in detail the base salary levels for each of the
named executive officers of the Company. While the Committee used the
benchmarks described above as a reference point, a particular individual's
base salary may vary from the benchmark depending upon his or her salary
history, experience, individual performance, guidelines established by the
Chief Executive Officer with respect to salary increases for the entire
Company, and the subjective judgment of the Committee.
Annual Incentive Bonus
The annual incentive bonus program is intended to put substantial
amounts of total cash compensation at risk with the intent of focusing the
attention of the executives on achieving both the Company's and their
division's performance goals and their individual goals, thereby
contributing to profitability and building shareholder value. For fiscal
1998 the named executive officers' cash bonus opportunity for performance
at the level of meeting the fiscal 1998 budget ranged from 7 1/2% to
11 3/4% of base salary, and increased to a range of 30% to 47% of base
salary for performance above the fiscal 1998 budget. For performance in
fiscal 1998 which represented a significant improvement over the Company's
fiscal 1998 budget, cash bonus opportunities ranged from 60% to 94% of
base salary. The determination of annual bonuses for the named executive
officers for fiscal 1998 was based principally on (i) the achievement of
performance objectives by the operating division for which the executive
was responsible, (ii) the individual executive's own performance, and
(iii) the Company's overall performance. The divisional performance
component of the bonus was determined based on a weighting of several
factors, the most important of which was operating earnings before
corporate expenses. Other factors included return on net assets for Neiman
Marcus Stores and Bergdorf Goodman, and growth in the number of customer
accounts for NM Direct. The individual performance goals for each of the
Company's named executive officers included the achievement of certain
specified tasks.
Although the bonuses actually awarded to the named executive officers
for fiscal 1998 were determined by an assessment of all of these factors,
as well as certain subjective factors, had the Company and/or the relevant
division fallen sufficiently short of its performance target, there was a
presumption that bonuses would not be paid absent special circumstances.
Moreover, even if the Company and/or the relevant divisions achieved their
respective performance
16
<PAGE> 19
targets, the Committee had the discretion to reduce or eliminate an
individual's bonus had an individual fallen short of his or her
performance goals.
In September 1998 the Compensation Committee established the Company's
and each division's performance goals for fiscal 1999 and determined the
executive officers who should participate in the annual incentive plan for
that year and their respective bonus award opportunities. For fiscal 1999
the named executive officers' cash bonus opportunity for performance at
the level of meeting the fiscal 1999 budget will range from 7 1/2% to
12 1/2% of base salary, and will increase to a range of 30% to 50% of base
salary for performance above the fiscal 1999 budget which would represent
an improvement over the Company's fiscal 1998 results. For performance in
fiscal 1999 which would represent a significant improvement over the
Company's fiscal 1999 budget, cash bonus opportunities will range from 60%
to 100% of base salary. If performance is below the fiscal 1999 budget,
the Committee may reduce cash bonus awards or not grant them at all.
Stock Incentives
In 1997 the Committee restructured the Company's long term stock
incentive program to provide for increased capital accumulation
opportunities for executive officers. The Committee's purpose in awarding
equity based incentives is to achieve as much as possible an identity of
interest between the Company's executives and the long term interest of
the stockholders. For fiscal 1998, the principal factors considered in
determining which executives (including the named executive officers) were
awarded equity based compensation, and in determining the types and
amounts of such awards, included salary levels, equity awards granted to
executives at competing retail companies, and the performance, experience,
and level of responsibility of each executive.
The Company granted two kinds of equity based incentives in fiscal 1998
(i) non-qualified stock options, and (ii) performance accelerated
restricted stock. Non-qualified stock options vest over a five year period
and terminate ten years from the date of grant. The restrictions on
performance accelerated restricted stock lapse upon the earlier of (i) the
achievement of specified business objectives (including without limitation
improvements in operating earnings and return on net assets) within five
years of the date of grant, or (ii) the eighth anniversary of the date of
grant.
Compensation of the Chief Executive Officer
During fiscal 1998, Richard A. Smith, who served as Chief Executive Officer
of the Company until December 2, 1998, also served as the Chief Executive
Officer of Harcourt General, which owns a majority of the outstanding Common
Stock of the Company. Mr. Smith received all of his cash and non-cash
compensation from Harcourt General and not from the Company. However, pursuant
to the Intercompany Services Agreement between the Company and Harcourt General,
Harcourt General provides certain management and other corporate services to the
Company, including the services of the Chief Executive Officer. During fiscal
1998, the Company paid or accrued approximately $5.4 million to Harcourt General
for all of its services under the Intercompany Services Agreement, of which
approximately $448,000 was attributable to Mr. Smith's services. While the
Special Review Committee of the Company reviews each year the appropriateness of
the charges by Harcourt General to the Company under the Intercompany Services
Agreement, neither this Committee nor the Special Review Committee plays any
role in determining the compensation that Mr. Smith or any other executive
officer of Harcourt General receives from Harcourt General. Robert A. Smith was
named Chief Executive Officer of the Company on December 2, 1998. Like Richard
A. Smith, Robert A. Smith
17
<PAGE> 20
will receive all of his cash and non-cash compensation from Harcourt General and
not from the Company.
Compliance with the Internal Revenue Code
The Internal Revenue Code (the "Code") generally disallows a tax deduction
to public companies for compensation in excess of $1 million per year which is
not "performance based" paid to each of the executive officers named in the
Summary Compensation Table. During fiscal 1997, the Committee, the Board of
Directors and the stockholders of the Company approved The Neiman Marcus Group
1997 Incentive Plan. This Plan allows the Committee to award stock incentives
and cash bonuses based on objective criteria. It is expected that the stock
incentives and cash bonuses awarded under the Plan will be characterized as
"performance based" compensation and therefore will be fully deductible by the
Company. The Company expects that the executive officers of the Company will
agree to defer income if and to the extent that their compensation is not
deductible by the Company under the Code. The Committee will continue to monitor
the requirements of the Code to determine what actions should be taken by the
Company in order to preserve the tax deduction for executive compensation to the
maximum extent, consistent with the Company's continuing goals of providing the
executives of the Company with appropriate incentives and rewards for their
performance.
COMPENSATION COMMITTEE
Walter J. Salmon, Chairman
Matina S. Horner
Vincent M. O'Reilly
Jean Head Sisco
18
<PAGE> 21
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Company's Common Stock against the cumulative total return during the five
fiscal years ended August 1, 1998 of (i) the Standard & Poor's 500 Index, and
(ii) a peer group index consisting of Tiffany & Co., Nordstrom, Inc., and Saks
Holdings, Inc. ("SHI"). The graph assumes that the value of the investment in
the Company's Common Stock and each index was $100 at July 31, 1993, and that
all dividends were reinvested. SHI, which began trading on the NYSE on May 22,
1996 and accordingly is included in the peer group index commencing as of the
end of the Company's 1996 fiscal year, ceased trading on September 17, 1998 upon
the completion of the merger of SHI and Proffitt's, Inc. (now known as Saks
Incorporated). For comparative purposes, the value of an investment in SHI as of
May 22, 1996 is set at an amount equal to the average of the cumulative total
returns of the other members of the peer group index as of that same date
($165.46). The common stocks of the companies in the peer group index have been
weighted annually at the beginning of each fiscal year to reflect relative stock
market capitalization. The comparisons provided in this graph are not intended
to be indicative of possible future performance of the Company's stock.
<TABLE>
<CAPTION>
The Neiman
Marcus Group
Inc. S&P 500 Index Peer Index
<S> <C> <C> <C>
31-Jul-93 100.00 100.00 100.00
30-Jul-94 106.51 104.73 154.07
29-Jul-95 108.16 107.39 146.83
3-Aug-96 189.06 129.28 165.46
2-Aug-97 196.54 194.31 199.35
1-Aug-98 232.15 233.36 226.81
</TABLE>
19
<PAGE> 22
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Although Delaware law does not require that the selection by the Board of
Directors of the Company's auditors be approved each year by the stockholders,
the Board of Directors believes it is appropriate to submit its selection to the
stockholders for their approval and to abide by the result of the stockholders'
vote. The Board of Directors recommends that the stockholders ratify the
appointment of Deloitte & Touche LLP as independent auditors to audit the
financial statements of the Company for the fiscal year ending July 31, 1999.
Representatives of Deloitte & Touche LLP will be present at the Annual
Meeting, will have an opportunity to make a statement if they wish, and will be
available to respond to appropriate questions from stockholders. The Company
paid, or accrued, approximately $980,000 on account of professional services
rendered by Deloitte & Touche LLP for the fiscal year ended August 1, 1998.
Deloitte & Touche LLP also serves as the independent auditors for Harcourt
General.
Approval of the proposal to ratify the selection of Deloitte & Touche LLP
as the Company's independent auditors for the current fiscal year requires a
favorable vote of a majority of the votes cast at the Annual Meeting.
Abstentions will be treated as votes cast. Broker non-votes will be treated as
present but not voting. On this proposal, abstentions will have the same effect
as votes against the proposal and broker non-votes will have no effect. HARCOURT
GENERAL WILL BE VOTING ITS COMMON STOCK, REPRESENTING APPROXIMATELY 54% OF THE
VOTING POWER OF THE COMPANY, FOR THE SELECTION OF DELOITTE & TOUCHE LLP.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL
TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING JULY 31, 1999.
3. STOCKHOLDER PROPOSAL
Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W.,
Suite 215, Washington, DC 20037, the record owner of 150 shares of the Company's
Common Stock, has submitted for consideration at the Annual Meeting the proposal
set forth below. Following the proposal is the stockholder's statement in
support thereof, in the form received by the Company, and the statement of the
Company's Board of Directors in opposition thereto.
"RESOLVED: That the stockholders of Neiman Marcus, assembled in Annual
Meeting in person and by proxy, hereby request the Board of Directors to take
the necessary steps to provide for cumulative voting in the election of
directors, which means each stockholder shall be entitled to as many votes as
shall equal the number of shares he or she owns multiplied by the number of
directors to be elected, and he or she may cast all of such votes for a single
candidate, or any two or more of them as he or she may see fit."
"REASONS: Many states have mandatory cumulative voting, so do National
Banks."
"In addition, many corporations have adopted cumulative voting."
"If you AGREE, please mark your proxy FOR this resolution."
Statement of the Board of Directors in Opposition
The Company's present system for election of directors, which is like that
of many major publicly traded corporations, allows all stockholders to vote on
the basis of their share ownership. The Board of Directors believes that the
current voting system is most likely to produce an effective Board of Directors
which will represent the interests of all of the Company's stockholders.
Cumulative voting, which permits relatively small groups of stockholders to
elect directors to represent their particular interests or points of view, could
result in the creation of an adversarial Board of Directors, where each director
advocates the positions of the group responsible for his or her election rather
than the
20
<PAGE> 23
positions which are in the best interest of the Company and all of the
stockholders. The Board of Directors believes there should never be any question
as to whether a Director is acting for the benefit of all of the stockholders,
rather than as a representative of any special group.
Section 214 of the General Corporation Law of the State of Delaware states
that a certificate of incorporation may provide for cumulative voting. In order
to effect cumulative voting, therefore, stockholders of the Company must vote to
amend the Company's Restated Certificate of Incorporation to so provide.
Accordingly, approval of this stockholder proposal requires the favorable vote
of the holders of shares representing at least a majority of the issued and
outstanding Common Stock. Abstentions will be treated as votes cast. Broker
non-votes will be treated as present but not voting. On this proposal,
abstentions and broker non-votes will have the same effect as votes cast against
the proposal. HARCOURT GENERAL WILL BE VOTING ITS COMMON STOCK, REPRESENTING
APPROXIMATELY 54% OF THE VOTING POWER OF THE COMPANY, AGAINST THIS STOCKHOLDER
PROPOSAL.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THIS
STOCKHOLDER PROPOSAL.
4. OTHER MATTERS
The Board of Directors knows of no other matters which are likely to be
brought before the meeting. If any other matters should be properly brought
before the meeting, it is the intention of the persons named in the enclosed
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
AND NOMINATIONS FOR DIRECTOR
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD IN JANUARY 2000
In order for stockholder proposals which are submitted pursuant to Rule
14a-8 of the Securities Exchange Act of 1934 (the "Exchange Act") to be
considered by the Company for inclusion in the proxy material for the Annual
Meeting of Stockholders to be held in January 2000, they must be received by the
Secretary of the Company by August 10, 1999.
For proposals that stockholders intend to present at the Annual Meeting of
Stockholders to be held in January 2000 outside the processes of Rule 14a-8 of
the Exchange Act, unless the stockholder notifies the Secretary of the Company
of such intent by October 25, 1999, any proxy that management solicits for such
Annual Meeting will confer on the holder of the proxy discretionary authority to
vote on the proposal so long as such proposal is properly presented at the
meeting.
In order for suggestions by stockholders for nominees for director to be
considered by the Nominating Committee, they must be received by the Secretary
of the Company by October 18, 1999; see "Meetings and Committees of the Board of
Directors -- Nominating Committee."
All such communications to the Secretary of the Company must be in writing
and must be received by the Company at its principal executive offices (27
Boylston Street, Chestnut Hill, Massachusetts 02467) by the applicable date.
By Order of the Board of Directors
ERIC P. GELLER
Secretary
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, ALL STOCKHOLDERS ARE URGED TO
PROMPTLY COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
21
<PAGE> 24
714-PS-98
<PAGE> 25
PROXY
THE NEIMAN MARCUS GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS, JANUARY 15, 1999
Richard A. Smith, Robert A. Smith and Eric P. Geller, and each of them singly,
each with power of substitution, are hereby authorized to represent and vote all
shares of Common Stock of the undersigned at the Annual Meeting of Stockholders
of The Neiman Marcus Group, Inc. to be held at the Company's corporate
headquarters, 27 Boylston Street (Route 9), Chestnut Hill, Massachusetts on
Friday, January 15, 1999, at 10:00 a.m. and at any adjournments thereof. The
undersigned hereby revokes any Proxy previously given and acknowledges receipt
of the Notice of Annual Meeting and Proxy Statement, dated December 8, 1998, and
a copy of the Annual Report for the year ended August 1, 1998.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. THE BOARD OF DIRECTORS OF THE NEIMAN MARCUS GROUP, INC. RECOMMENDS
A VOTE FOR THE NOMINEES SET FORTH BELOW, FOR PROPOSAL 2 AND AGAINST PROPOSAL 3.
IF THIS PROXY IS SIGNED AND RETURNED AND DOES NOT SPECIFY A VOTE ON ANY
PROPOSAL, THE PROXY WILL BE SO VOTED.
ELECTION OF CLASS II DIRECTORS
NOMINEES: MATINA S. HORNER, Ph.D., BRIAN J. KNEZ, WALTER J. SALMON
- ----------- -----------
SEE REVERSE (SEE REVERSE SIDE TO CAST VOTE) SEE REVERSE
SIDE CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE SIDE
- ----------- -----------
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
- --------------------------------------------------------------------------------
2. Approval of the FOR AGAINST ABSTAIN
appointment of [ ] [ ] [ ]
Deloitte & Touche LLP
as independent auditors
of the Company for the
current fiscal year.
FOR WITHHELD
1. Election of [ ] [ ]
Directors
(See reverse).
[ ]_______________________________________
For all nominees except as noted above
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST PROPOSAL 3.
-------------------------------------------------
FOR AGAINST ABSTAIN
3. Approval of stockholder [ ] [ ] [ ]
proposal concerning
cumulative voting.
-------------------------------------------------
MARK HERE MARK HERE
FOR ADDRESS [ ] IF YOU PLAN [ ]
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
For joint accounts, each owner should sign.
Executors, Administrators, Trustees, etc.,
should give full title.
Signature:_______________ Date: ________ Signature: ______________ Date:________
<PAGE> 26
CONFIDENTIAL VOTING INSTRUCTIONS
TO: FIDELITY MANAGEMENT TRUST COMPANY
AS TRUSTEE UNDER
THE NEIMAN MARCUS GROUP, INC.
EMPLOYEE SAVINGS PLAN
WITH RESPECT TO THE ANNUAL MEETING OF STOCKHOLDERS OF
THE NEIMAN MARCUS GROUP, INC. -- JANUARY 15, 1999
I hereby instruct the Trustee to vote (in person or by proxy) all shares of
Common Stock of The Neiman Marcus Group, Inc. which are credited to my account
under the above-referenced Plan at the Annual Meeting of Stockholders of The
Neiman Marcus Group, Inc. to be held at the Company's corporate headquarters,
27 Boylston Street (Route 9), Chestnut Hill, Massachusetts on Friday, January
15, 1999, at 10:00 a.m. and at any adjournments thereof. The undersigned hereby
revokes any instruction previously given and acknowledges receipt of the Notice
of Annual Meeting and Proxy Statement dated December 8, 1998, and a copy of the
Annual Report for the year ended August 1, 1998.
The shares represented by this Instruction Card will be voted by the Trustee as
directed by the undersigned. Fidelity Management Trust Company makes no
recommendations concerning your instructions. The Board of Directors of The
Neiman Marcus Group, Inc. recommends a vote FOR the nominees set forth below,
FOR proposal 2 and AGAINST proposal 3. If this Instruction Card is signed and
returned and does not specify a vote on any proposal, the Instruction Card will
be voted in accordance with the recommendations of the Board of Directors. If
this Instruction Card is not received by January 14, 1999, the shares credited
to your account will not be voted.
ELECTION OF CLASS II DIRECTORS
NOMINEES: MATINA S. HORNER, Ph.D., BRIAN J. KNEZ, WALTER J. SALMON
- ----------- -----------
SEE REVERSE (SEE REVERSE SIDE TO CAST VOTE) SEE REVERSE
SIDE CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE SIDE
- ----------- -----------
<PAGE> 27
<TABLE>
<S> <C>
[X] Please mark
votes as in
this example.
THIS INSTRUCTION CARD IS SOLICITED BY THE PLAN TRUSTEE
- -----------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2
- -----------------------------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of the appointment of Deloitte & Touche LLP as [ ] [ ] [ ]
independent auditors of the Company for the current
fiscal year.
FOR WITHHELD
1. Election of [ ] [ ]
Directors
(See reverse)
[ ] ______________________________________
For all nominees except as noted above
- -----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------
The Board of Directors recommends a vote
AGAINST Proposal 3.
----------------------------------------------------------------
FOR AGAINST ABSTAIN
3. Approval of stockholder proposal [ ] [ ] [ ]
concerning cumulative voting.
----------------------------------------------------------------
MARK HERE [ ] MARK HERE [ ]
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
Please sign at left.
Signature: _________________________________ Date: _____________
</TABLE>
<PAGE> 28
FIDELITY MANAGEMENT TRUST COMPANY 82 Devonshire Street
Boston, Massachusetts 02109
To: Participants in The Neiman Marcus Group, Inc.
Employee Savings Plan
From: Fidelity Management Trust Company
Trustee of the Employee Savings Plan
Date: December 8, 1998
As a participant in The Neiman Marcus Group, Inc. Employee Savings Plan, which
owns shares of The Neiman Marcus Group, Inc., you are entitled to instruct the
Trustee on how to vote the shares of The Neiman Marcus Group, Inc. Common Stock
credited to your account on matters scheduled to come before the Annual Meeting
of Stockholders of The Neiman Marcus Group, Inc. to be held on Friday, January
15, 1999.
A proxy statement, voting instruction card and return envelope are enclosed.
Please complete, date and sign the voting instruction card and mail it in the
return envelope to exercise your right to direct the Trustee with respect to
shares of The Neiman Marcus Group, Inc. credited to your account. Your
directions to the Trustee will be tabulated confidentially, and will not be
revealed to The Neiman Marcus Group, Inc. The completed and signed voting
instruction card must be received by January 14, 1999. If your card is not
received by January 14, 1999, the shares credited to your account will not be
voted.
If you own shares of The Neiman Marcus Group, Inc. outside of the Employee
Savings Plan, you will receive similar materials for those shares in a
separate mailing. Please return both cards in their separate return envelopes if
you wish to fully participate in the matters being submitted to the
stockholders of The Neiman Marcus Group, Inc.
Enclosures
