SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarter Ended October 30,1999
Commission File Number 1-9659
THE NEIMAN MARCUS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4119509
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27 Boylston Street, Chestnut Hill,MA 02467
(Address of principal executive offices (Zip Code)
(617) 232-0760
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
As of December 8, 1999, the number of outstanding shares of each of the
issuer's classes of common stock was:
Class Outstanding Shares
Class A Common Stock, $.01 Par Value 28,002,513
Class B Common Stock, $.01 Par Value 21,170,560
THE NEIMAN MARCUS GROUP, INC.
I N D E X
Part I. Financial Information Page Number
Item 1. Condensed Consolidated Balance Sheets as of October 30, 1999,
July 31, 1999 and October 31, 1998 1
Condensed Consolidated Statements of Earnings for the Thirteen
Weeks ended October 30, 1999 and October 31, 1998 2
Condensed Consolidated Statements of Cash Flows for the Thirteen
Weeks Ended October 30, 1999 and October 31, 1998 3
Notes to Condensed Consolidated Financial Statements 4-5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6-8
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 18.1
Exhibit 27.1
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
(In thousands)
October 30, July 31, October 31,
1999 1999 1998
----------- ----------- -----------
(Restated) (Restated)
Assets
Current assets:
<S> <C> <C> <C>
Cash and equivalents $ 37,222 $ 29,191 $ 24,661
Undivided interests in NMG
Credit Card Master Trust 177,497 133,151 180,504
Accounts receivable, net 74,564 59,317 59,592
Merchandise inventories 683,148 545,252 661,776
Deferred income taxes 15,255 15,255 24,058
Other current assets 49,313 53,102 53,733
----------- ----------- -----------
Total current assets 1,036,999 835,268 1,004,324
Property and equipment, net 526,255 513,439 494,974
Other assets 159,935 163,583 123,577
----------- ----------- -----------
Total assets $ 1,723,189 $ 1,512,290 $ 1,622,875
=========== =========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable and current maturities
of long-term liabilities $ 937 $ 921 $ 5,973
Accounts payable 268,209 203,071 211,826
Accrued liabilities 217,235 176,188 212,918
----------- ----------- -----------
Total current liabilities 486,381 380,180 430,717
Long-term liabilities:
Notes and debentures 339,646 274,640 409,622
Other long-term liabilities 75,813 74,664 69,477
Deferred income taxes 32,038 32,038 37,139
----------- ----------- -----------
Total long-term liabilities 447,497 381,342 516,238
----------- ----------- -----------
Minority interest 5,315 4,485 -
Shareholders' equity:
Common stock 490 490 490
Additional paid-in capital 467,553 467,283 466,200
Retained earnings 315,953 278,510 209,230
----------- ----------- -----------
Total shareholders' equity 783,996 746,283 675,920
----------- ----------- -----------
Total liabilities and shareholders'
equity $ 1,723,189 $ 1,512,290 $ 1,622,875
=========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<CAPTION>
(In thousands except for Thirteen Weeks Ended
per share data ---------------------------
October 30, October 31,
1999 1998
------------ ------------
(Restated)
<S> <C> <C>
Revenues $ 677,670 $ 587,113
Cost of goods sold including buying and
occupancy costs 425,718 383,888
Selling, general and administrative expenses 178,840 151,886
Corporate expenses 3,548 3,281
------------ ------------
Operating earnings 69,564 48,058
Interest expense (6,786) (6,136)
------------ ------------
Earnings before income taxes and minority interest 62,778 41,922
Income taxes (23,856) (16,350)
------------ ------------
Earnings before minority interest 38,922 25,572
Minority interest in net earnings of subsidiaries 1,479 -
------------ ------------
Net earnings $ 37,443 $ 25,572
=========== ============
Weighted average number
of common and common
equivalent shares
outstanding:
Basic 49,042 49,460
=========== ============
Diluted 49,122 49,574
=========== ============
Earnings per share:
Basic $ .76 $ .52
=========== ============
Diluted $ .76 $ .52
=========== ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
(In thousands) Thirteen Weeks Ended
--------------------------
October 30, October 31,
1999 1998
----------- -----------
(Restated)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 37,443 $ 25,572
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 17,463 16,136
Minority interest 1,479 -
Other 1,898 202
Changes in current assets and liabilities:
Accounts receivable (15,247) (6,021)
Merchandise inventories (137,896) (148,108)
Other current assets 3,789 7,455
Accounts payable and
accrued liabilities 108,262 35,013
----------- -----------
Net cash provided by (used for) operating
activities 17,191 (69,751)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (28,529) (30,492)
Purchases of held-to-maturity securities (174,358) (160,652)
Maturities of held-to-maturity securities 130,012 119,015
----------- -----------
Net cash used for investing activities (72,875) (72,129)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 65,000 125,000
Repurchase of common stock - (15,356)
Distributions paid (1,555) -
Other financing activities 270 253
----------- -----------
Net cash provided by financing activities 63,715 109,897
----------- -----------
CASH AND EQUIVALENTS
Increase (decrease) during the period 8,031 (31,983)
Beginning balance 29,191 56,644
----------- -----------
Ending balance $ 37,222 $ 24,661
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
THE NEIMAN MARCUS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of presentation
The Condensed Consolidated Financial Statements of The Neiman Marcus
Group, Inc. (the Company) are submitted in response to the requirements
of Form 10-Q and should be read in conjunction with the Consolidated
Financial Statements included in the Company's Annual Report on Form 10-
K. In the opinion of management, these statements contain all
adjustments, consisting only of normal recurring accruals, necessary for
a fair presentation of the results for the interim periods presented.
The retail industry is seasonal in nature, and the results of operations
for these periods historically have not been indicative of the results
for a full year.
Certain reclassifications and restatements have been made to the fiscal
1999 financial statements to conform to the fiscal 2000 presentation.
2. Merchandise inventories
During the thirteen weeks ended October 30, 1999, the Company changed
its method of determining the cost of inventories from the last-in,
first-out (LIFO) method to the first-in, first-out (FIFO) method.
Management believes that the FIFO method better measures the current
value of such inventories and provides a more appropriate matching of
revenues and expenses. Under the current low-inflationary environment,
the use of the FIFO method will more accurately reflect the Company's
financial position.
The change to the FIFO method has been applied by retroactively
restating the accompanying condensed consolidated financial statements.
The effect of this change was to increase merchandise inventories,
accrued liabilities and retained earnings by $15.6 million, $6.2 million
and $9.4 million, respectively, as of October 31, 1998, and to increase
merchandise inventories and retained earnings by $16.8 million and $10.1
million, respectively, and to decrease the deferred tax asset by $6.7
million as of July 31, 1999. For the thirteen weeks ended October 31,
1998 the effect of the change increased net earnings by $.6 million.
3. Earnings per share
Pursuant to the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings per Share," the weighted average shares
used in computing basic and diluted earnings per share (EPS) are as
presented in the table below. No adjustments were made to net earnings
for the computations of basic and diluted EPS during the periods
presented.
Options to purchase 784,440 and 430,850 shares of common stock were not
included in the computation of diluted EPS for the thirteen weeks ended
October 30, 1999 and October 31, 1998, respectively, because the
exercise price of those options was greater than the average market
price of the common shares.
<TABLE>
<CAPTION>
(In thousands of shares) Thirteen Weeks Ended
--------------------------
October 30, October 31,
1999 1998
----------- -----------
<S> <C> <C>
Shares for computation of basic EPS 49,042 49,460
Effect of assumed option exercises 80 114
----------- -----------
Shares for computation of diluted EPS 49,122 49,574
=========== ===========
</TABLE>
4. Authorized Capital
On September 15, 1999, shareholders of the Company approved a proposal
to amend the Company's Restated Certificate of Incorporation to increase
the Company's authorized capital to 250 million shares of common stock
(consisting of 100 million shares of Class A Common Stock, 100 million
shares of Class B Common Stock and 50 million shares of a new Class C
Common Stock having one-tenth (1/10) of one vote per share) and 50
million shares of preferred stock.
THE NEIMAN MARCUS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. Spin-off from Harcourt General, Inc.
On October 22, 1999, Harcourt General, Inc. (Harcourt General) completed
the spin-off of its controlling equity position in the Company in a tax-
free distribution to its shareholders. Harcourt General distributed
approximately 21.4 million of its approximately 26.4 million shares of
the Company. Harcourt General retained approximately 5.0 million
shares.
Each common shareholder of Harcourt General received .3013 of a share of
Class B Common Stock of the Company for every share of Harcourt General
Common Stock and Class B Stock held on October 12, 1999, which was the
record date for the distribution. In connection with the distribution,
the Company and Harcourt General entered into various agreements which
govern their ongoing relationship.
6. Operating Segments
The Company has two reportable business segments: specialty retail
stores and direct marketing. The specialty retail stores segment
includes all the operations of Neiman Marcus Stores and Bergdorf
Goodman. Direct marketing includes the operations of NM Direct, which
publishes NM by Mail, the Horchow catalogues, Chef's Catalog and the
Neiman Marcus Christmas Catalogue. Other includes unallocated corporate
expenses, costs incurred to launch the Company's e-commerce business and
operations which do not meet the quantitative thresholds of Statement of
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information."
The Company's senior management evaluates the performance of the
Company's assets on a consolidated basis. Therefore, separate financial
information for the Company's assets on a segment basis is not
presented.
The following tables set forth the information for the Company's
reportable segments:
<TABLE>
<CAPTION>
(In Thousands) Thirteen Weeks Thirteen Weeks
Ended October 30, 1999 Ended October 31, 1998
---------------------- ----------------------
REVENUES
<S> <C> <C>
Specialty Retail Stores $ 575,812 $ 510,734
Direct Marketing 86,141 76,379
Other 15,717 -
------------ ----------
Total $ 677,670 $ 587,113
============ ==========
OPERATING EARNINGS
Specialty Retail Stores $ 67,784 $ 48,398
Direct Marketing 4,999 2,941
Other (3,219) (3,281)
------------ ----------
Total $ 69,564 $ 48,058
============ ==========
</TABLE>
7. Stockholder Rights Plan
On October 6, 1999, the Company's Board of Directors adopted a
stockholder rights plan. The rights plan is designed to improve the
ability of the Company's board to protect and advance the interests of
the Company's stockholders in the event of an unsolicited proposal to
acquire a significant interest in the Company.
8. Stock Repurchase Program
In October 1999, the Company's Board of Directors authorized an increase
in the stock repurchase program to two million shares. During November
1999, the Company repurchased 270,400 shares at an average price of
$22.53 per share; 1,729,600 shares were remaining under the stock
repurchase program.
THE NEIMAN MARCUS GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Thirteen Weeks Ended October 30, 1999 compared
with the Thirteen Weeks Ended October 31, 1998
Revenues in the thirteen weeks ended October 30, 1999 increased $90.6 million
or 15.4% over revenues in the thirteen weeks ended October 31, 1998. The
increase in revenues was primarily attributable to comparable sales growth,
sales from the Kate Spade LLC and Kusin Gurwitch Products subsidiaries,
majority interests in which were acquired in fiscal 1999 as part of the
Company's brand development initiative and sales from the Neiman Marcus store
in Hawaii opened in September 1998. Specialty retail stores revenues in the
thirteen weeks ended October 30, 1999 increased $65.1 million or 12.7% over
the prior year. Direct marketing revenues in the thirteen weeks ended October
30, 1999 increased $9.8 million or 12.8% over the prior year. Total
comparable sales for the Company increased 10.8%. Comparable sales increased
10.6% at Neiman Marcus Stores, 10.5% at Bergdorf Goodman and 12.8% at NM
Direct.
Cost of goods sold including buying and occupancy costs increased $41.8
million or 10.9% to $425.7 million compared to the same period last year,
primarily due to increased sales. As a percentage of revenues, cost of goods
sold decreased to 62.8% from 65.4% in the prior year, due primarily to higher
comparable sales, lower markdowns, higher markups on goods sold and, to a
lesser extent, proportionately lower buying and occupancy costs.
Selling, general and administrative expenses increased $27.0 million or 17.8%
to $178.8 million. As a percentage of revenues, selling, general and
administrative expenses increased to 26.4% from 25.9% in the prior year. The
increase is primarily attributable to expenses incurred to launch the
Company's new e-commerce business and higher selling and sales promotion
expenses.
Interest expense increased 10.6% to $6.8 million in the thirteen weeks ended
October 30, 1999 from $6.1 million in the prior year. The increase resulted
from a higher effective interest rate on borrowings.
The Company's effective income tax rate was 38% in the thirteen weeks ended
October 30, 1999, as compared to 39% in the thirteen weeks ended October 31,
1998.
Changes in Financial Condition and Liquidity Since July 31, 1999
During the thirteen weeks ended October 30, 1999, the Company financed its
working capital needs and capital expenditures primarily with cash from
operations and borrowings under its revolving credit facility. The following
discussion analyzes liquidity and capital resources by operating, investing
and financing activities as presented in the Company's Condensed Consolidated
Statements of Cash Flows.
Net cash provided by operating activities was $17.2 million during the first
thirteen weeks of fiscal 2000. The primary items affecting working capital
were increases in merchandise inventories of $137.9 million and accounts
payable and accrued liabilities of $108.3 million. The seasonal increases in
inventories and accounts payable are primarily due to the holiday selling
season.
Capital expenditures were $28.5 million during the thirteen week period ended
October 30, 1999 as compared to $30.5 million in the prior year period.
Capital expenditures were primarily related to existing store renovations,
including remodeling at Bergdorf Goodman's main store. Capital expenditures
are expected to approximate $130.0 million during fiscal 2000.
The Company increased its bank borrowings by $65.0 million since July 31,
1999. At October 30, 1999 the Company had $360.0 million available under its
revolving credit facility. In September 1999 the Company reduced the revolving
credit facility to $450 million to reflect its current and anticipated cash
flow requirements.
THE NEIMAN MARCUS GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Changes in Financial Condition and Liquidity Since July 31, 1999 (cont'd)
In October 1999, the Company's Board of Directors authorized an increase in
the stock repurchase program to two million shares. During November 1999, the
Company repurchased 270,400 shares at an average price of $22.53 per share;
1,729,600 shares were remaining under the stock repurchase program.
Kate Spade LLC, a majority owned subsidiary of the Company, distributed $1.6
million to its minority shareholders.
The Company's five year revolving securitization of its accounts receivable
matures in fiscal 2000. The Company expects to finance with similar securities
the repayment of the Class A and B certificates, which were sold to third
parties under the securitization and which have an aggregate principal value
of $246 million. The Company believes that it will have sufficient resources
to fund its planned capital growth, operating requirements and the maturities
of the Class A and B certificates.
Year 2000 Date Conversion
The Company has completed its assessment of its hardware and software systems,
including the embedded systems in the Company's buildings, property and
equipment, and is implementing plans to ensure that the operations of such
systems will not be adversely affected by the Year 2000 date change.
The Company is presently in the process of renovating non-compliant systems
and implementing converted and replaced systems for substantially all of its
hardware and software systems. The Company estimates that its efforts to make
these systems Year 2000 compliant are substantially complete.
The Company has established an ongoing program to communicate with its
significant suppliers and vendors to determine the extent to which the
Company's systems and operations are vulnerable to those third parties'
failure to rectify their own Year 2000 issues. Based on response to the
Company's inquiries, the Company has identified those suppliers and vendors
most at risk for failing to achieve Year 2000 compliance on a timely basis and
is monitoring their continuing progress. The Company is not presently aware
of any significant exposure arising from potential third party failures.
However, there can be no assurance that the systems of other companies on
which the Company's systems or operations rely will be timely converted or
that any failure of such parties to achieve Year 2000 compliance would not
have an adverse effect on the Company's results of operations.
The Company has engaged both internal and external resources to assess,
reprogram, test and implement its systems for Year 2000 compliance. Based on
management's current estimates, the costs of Year 2000 remediation, including
system renovation, modifications and enhancements, which have been and will be
expensed as incurred, are not expected to be material to the results of
operations or the financial position of the Company. Additionally, such
expenditures have not adversely affected the Company's ability to continue its
investment in new technology in connection with its ongoing systems
development plans.
Management presently believes the Company's most reasonably likely worst case
Year 2000 scenario could arise from a business interruption caused by
governmental agencies, utility companies, telecommunication service companies,
shipping companies or other service providers outside the Company's control.
There can be no assurance that such providers will not suffer business
interruption caused by a Year 2000 issue. Such an interruption could have a
material adverse effect on the Company's results of operations. The Company
is in the process of developing a contingency plan for continuing operations
in the event of Year 2000 failures, and the current target for completing that
plan is December 1999.
THE NEIMAN MARCUS GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-looking Statements
Statements in this report referring to the expected future plans and
performance of the Company are forward-looking statements. Actual future
results may differ materially from such statements. Factors that could affect
future performance include, but are not limited to: changes in economic
conditions or consumer confidence; changes in consumer preferences or fashion
trends; delays in anticipated store openings; adverse weather conditions,
particularly during peak selling seasons; changes in demographic or retail
environments; competitive influences; failure of the Company or third parties
to be Year 2000 compliant; significant increases in paper, printing and
postage costs; and changes in the Company's relationships with designers and
other resources.
THE NEIMAN MARCUS GROUP, INC.
PART II
Item 4. Submission of Matters to a Vote of Security Holders.
A special meeting of stockholders was held on September 15, 1999.
The following matters were voted upon at the meeting:
1. Adoption of the Amended and Restated Plan of Merger dated
July 1, 1999 among the Company, Harcourt General and Spring
Merger Corporation, a wholly owned subsidiary of Harcourt
General.
For 41,839,682
Against 2,931,507
Abstain 26,690
2. Approval of an amendment to the Company's Restated
Certificate of Incorporation to increase the minimum number
of directors on the Company's Board of Directors from three
to six, and to include a provision establishing the range of
directors from six to nine.
For 39,229,722
Against 5,530,543
Abstain 37,613
3. Approval of an amendment to the Company's Restated
Certificate of Incorporation to include a provision
requiring the approval of 66-2/3% of the total voting power
of the outstanding shares of the Company's common stock to
approve any merger or consolidation, any sale, lease
exchange or other disposition of all or substantially all of
the Company's assets and; unless approved by two-thirds of
the Company's Board, any issuance of voting securities of
The Neiman Marcus Group that would require shareholder
approval.
For 39,108,543
Against 5,643,246
Abstain 46,090
4. Approval to amend the Company's Restated Certificate of
Incorporation to increase the Company's authorized capital
to 250 million shares of common stock consisting of 100
million shares of Class A Common Stock, 100 million shares
of Class B Common Stock and 50 million shares of a new Class
C Common Stock having one-tenth (1/10) of one vote per share
and 50 million shares of preferred stock.
For 39,911,247
Against 4,843,606
Abstain 43,036
THE NEIMAN MARCUS GROUP, INC.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Amended and Restated Intercompany Services Agreement dated
as of November 1, 1999 between the Company and Harcourt
General, Inc.
10.2 The Neiman Marcus Group, Inc. 1997 Incentive Plan, as
amended.
10.3 Termination and Change of Control Agreement
between the Company and Burton M. Tansky dated October 6, 1999
as supplemented by Letter Agreement dated November 11, 1999
10.4 Termination and Change of Control Agreement between the
Company and Gerald A. Sampson dated October 6, 1999, as
supplemented by Letter Agreement dated November 17, 1999.
18.1 Letter regarding Change in Accounting
Principle
27.1 Financial data schedules.
(b) Reports on Form 8-K.
On October 1, 1999, the Company filed a report on Form 8-K
reporting the completion of the Recapitalization. On
October 15, 1999 the Company filed a report on Form 8-K
reporting the adoption by the Board of Directors of the
Company of a stockholder rights plan.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
THE NEIMAN MARCUS GROUP, INC.
Signature Title Date
Principal Financial Senior Vice President and December 10, 1999
Officer: Chief Financial Officer
S/ John R. Cook
John R. Cook
Principal Accounting Vice President and Controller December 10, 1999
Officer:
S/ Catherine N. Janowski
Catherine N. Janowski
EXHIBIT 10.1
AMENDED AND RESTATED
INTERCOMPANY SERVICES AGREEMENT
This Amended and Restated Intercompany Services Agreement ("Agreement"),
dated as of November 1, 1999, between Harcourt General, Inc., a Delaware
corporation ("Harcourt General"), and The Neiman Marcus Group, Inc., a
Delaware corporation (the "Company").
WHEREAS, Harcourt General has provided corporate services to the Company
pursuant to the Intercompany Services Agreement between Harcourt General
(formerly known as General Cinema Corporation) and the Company dated July 24,
1987 (the "Original Agreement");
WHEREAS, as of the date hereof and, in connection with a
recapitalization of the Company, Harcourt General has distributed all of the
Company's Class B Common Stock to the holders of record of Harcourt General's
Common Stock and Class B Stock;
WHEREAS, the Company wishes to continue to achieve cost-savings where
possible through centralized purchasing of certain corporate services;
WHEREAS, to achieve such cost-savings, Harcourt General and the Company
wish to amend and restate the Original Agreement and provide for the ongoing
provision of Corporate Services (as defined in paragraph 1 below) by Harcourt
General to the Company; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained in this Agreement, Harcourt General and the Company
hereby agree as follows:
1. Corporate Services To Be Made Available.
(a) For the period provided for under paragraph 6 hereof, Harcourt
General agrees to make available to the Company such services (collectively,
the "Corporate Services") as to which the respective Chief Executive Officers
of Harcourt General and the Company may from time to time agree, on the terms
provided herein. If either or both parties have co-Chief Executive Officers,
any one co-Chief Executive Officer of a party may act singly hereunder on
behalf of that party.
(b) Without limiting the generality or flexibility of paragraph 1(a),
the Corporate Services shall initially consist of the following services (the
"Initial Services"):
(i) the management advice and services of Harcourt General's
Chairman, President and Co-Chief Executive Officers, Chief Financial Officer,
General Counsel, and their respective staffs, it being understood that any
such officer may hold corresponding offices with both Harcourt General and the
Company;
(ii) strategic planning advice and services, to be provided
by Harcourt General's strategy and business planning staff;
(iii) financial advice and services, including, without
limitation, assistance with respect to the raising of capital, investment
analysis, cash and treasury management, and risk management services, to be
provided by Harcourt General's treasury staff;
(iv) corporate investor and public relations advice and
services, to be provided by Harcourt General's corporate relations staff;
(v) accounting advice and services, including, without
limitation, financial reporting and the preparation of financial statements
and disclosure documents required under the federal securities laws, to be
provided by Harcourt General's controller's staff;
(vi) accounting, payroll, and bookkeeping advice and
services, to be provided by Harcourt General's accounting staff;
(vii) internal auditing advice and services, to be provided
by Harcourt General's internal auditing staff;
(viii) personnel advice and services, including, without
limitation, the administration of employee insurance plans, pension plans,
supplemental executive retirement plan, and other employee benefits plans, to
be provided by Harcourt General's human resources staff;
(ix) legal advice and services, including, without
limitation, assistance with respect to claims which may be or have been
asserted or are the subject of litigation, the preparation and review of
documents involving loans, financing transactions, real estate matters,
contractual documents and disclosure documents relating to reporting
requirements under the federal securities laws, consultation related to legal
and administrative proceedings, and compliance with applicable laws and
regulations, to be provided by Harcourt General's internal legal staff;
(x) tax advice and services, including, without limitation, the
preparation of federal, state and local tax returns, to be provided by
Harcourt General's internal tax staff;
(xi) assistance in organizational matters associated with
shareholders meetings and meetings of the board of directors and the
committees of the board, assistance in preparation of certain public
documents, including, without limitation, preparation of annual and quarterly
reports and proxy statements, and in the administration of the Company's cash
and equity incentive plans, to be provided by Harcourt General's corporate
staff;
(xii) real estate advice and services, including, without
limitation, evaluation, development and negotiation activities, and lease
administration, to be provided by Harcourt General's corporate staff;
(xiii) purchasing advice and services, including, without
limitation, assistance in the preparation and evaluation of supply contracts
and communications contracts, to be provided by Harcourt General's corporate
staff; and
(xiv) such other services, not specified above, which are of the
type normally performed by the corporate staffs of public corporations, to be
provided by Harcourt General's corporate staff.
(c) For purposes of the avoidance of doubt, the Initial Services shall
constitute the Corporate Services unless and until modified in accordance with
the provisions of paragraph 1(a) or 6(a) of this Agreement.
2. Standard of Conduct.
(a) In providing Corporate Services to the Company, Harcourt General's
officers and employees shall conduct themselves in accordance with the
Company's written policies and procedures and, shall provide the Corporate
Services with the same degree of care, skill and prudence customarily
exercised by such officers and employees for the benefit of Harcourt General
in connection with Harcourt General's operations. Notwithstanding the
foregoing, in providing the Corporate Services, Harcourt General and its
directors, officers and employees will not be responsible for, and shall have
no liability for, any Losses arising out of the performance by Harcourt
General of the Corporate Services, except to the extent arising out of the
gross negligence or willful misconduct of Harcourt General or its directors,
officers or employees. Harcourt General shall indemnify, defend and hold
harmless the Company, its affiliates, and their respective directors, officers
and employees from and against any and all Losses incurred by the Company
arising as a result of the gross negligence or willful misconduct of Harcourt
General or its directors, officers or employees in connection with the
performance of the Corporate Services hereunder, except in circumstances where
the party that would otherwise be indemnified hereunder is found by a court of
competent jurisdiction to have acted with gross negligence or to have engaged
in willful misconduct.
(b) The Company shall indemnify, defend and hold harmless Harcourt
General, its affiliates, and their respective directors, officers and
employees from and against any and all Losses incurred by Harcourt General
arising as a result of Harcourt General having provided Corporate Services,
except in circumstances where the party that would otherwise be indemnified
hereunder is found by a court of competent jurisdiction to have acted with
gross negligence or to have engaged in willful misconduct.
(c) In no event shall Harcourt General, the Company, their respective
affiliates, or their respective directors, officers or employees be liable for
any indirect, special or consequential damages in connection with or arising
out of this Agreement.
(d) For purposes of this paragraph, the term "Losses" shall mean any
and all losses, liabilities, demands, claims, actions or causes of action,
assessments, losses, fines, penalties, costs, damages and/or expenses
(including, without limitation, the reasonable fees and expenses of attorneys
and other professionals).
3. Cost of Services.
(a) The parties hereby ratify the previously made determination of the
probable level of corporate services to be provided by Harcourt General under
the Original Agreement for the Company's current fiscal year, and the
estimated fee and payment schedule therefor. The parties agree that such
estimated fee shall be subject to adjustment in accordance with paragraph 3(b)
of this Agreement.
(b) Not less than thirty (30) days prior to each successive fiscal
year of the Company, Harcourt General and the Company shall estimate the
probable level of Corporate Services to be provided under this Agreement for
the fiscal year in question, and shall budget the estimated amount of the fee
to be paid by the Company to Harcourt General therefor on the assumption that
such estimated level of Corporate Services will actually be provided. In
determining each such estimate and subsequent adjustment, Harcourt General and
the Company shall value Corporate Services based on Harcourt General's direct
and indirect costs allocable thereto, calculated in accordance with Harcourt
General's usual accounting practices. As soon as practicable after the end of
each of the Company's fiscal quarters (including the Company's current fiscal
quarter), Harcourt General and the Company shall, based on a detailed review,
determine the actual level of Corporate Services rendered by Harcourt General
during such fiscal quarter, and the Company shall pay Harcourt General the
applicable adjusted fee within 15 business days of presentation of a statement
therefor. Harcourt General shall cause its employees to record or otherwise
apportion the time they devote in providing Corporate Services to the Company,
in order to facilitate such review and determination and to permit a proper
adjustment to be made.
(c) The Company also agrees to reimburse Harcourt General, within 15
business days of presentation of invoices therefor, for all reasonable out-of-
pocket expenses incurred by Harcourt General in providing Corporate Services,
including reasonable expenses for outside professional services incurred by
Harcourt General for the benefit of the Company.
(d) The failure of the Company to make any payment to Harcourt General
hereunder within 30 days of the date such payment is due shall result in the
Company owing Harcourt General interest at the rate of 10% per annum on the
amount due from the date payable to the actual payment date.
4. Requirement of Approval By Independent Directors of the Company. All
determinations on behalf of the Company made pursuant to paragraphs 3 and 6
hereof must be approved by a committee consisting solely of directors of the
Company who are not employed by or otherwise affiliated with Harcourt General
(the "Independent Committee"). In carrying out its duties pursuant to this
Agreement, the Independent Committee may retain such independent accountants,
lawyers and other experts as it deems necessary or prudent to retain, and the
expenses of all such professionals shall be reimbursed by the Company.
5. Information and Witnesses. Harcourt General shall provide to the
Company and the Company shall provide to Harcourt General, upon the other's
written request, at reasonable times, full and complete access to, and
duplication rights with respect to, any and all Information, as defined below,
as the other may reasonably request and require, and Harcourt General shall
use its best efforts to make available to the Company, and the Company shall
use its best efforts to make available to Harcourt General, upon the other's
written request, the officers, directors, employees and agents of Harcourt
General and of the Company, respectively, as witnesses to the extent that such
persons may reasonably be required in connection with any legal,
administrative or other proceedings in which the Company or Harcourt General,
as the case may be, may from time to time be a party; provided, however, that
neither Harcourt General nor the Company need provide any Information or make
available witnesses to the other to the extent that doing so would (i)
unreasonably interfere with the performance by any person of such person's
duties to the party to which a request under this paragraph 5 is made or
otherwise cause unreasonable burden to such party, (ii) result in a waiver of
any attorney-client or work product privilege of such party or its legal
counsel, (iii) require either Harcourt General or the Company to provide any
Information which relates to the subject matter of any legal, administrative
or other proceeding in which Harcourt General and the Company are adverse
parties, or (iv) result in any breach of any agreement with a third party; and
provided, further, that the party providing Information or making available
witnesses pursuant to this paragraph 5 shall be entitled to receive from the
other party, upon presentation of reasonably detailed invoices therefor,
payment of its reasonable out-of-pocket costs (including, without limitation,
the reasonable fees and expenses of attorneys and other professionals)
incurred in connection with providing Information or making witnesses
available. The term Information as used in this paragraph 5 means any books,
records, contracts, instruments, data, facts and other information in the
possession or under the control of either Harcourt General or the Company and
necessary or desirable for use in legal, administrative or other proceedings
or for auditing, accounting or tax purposes.
6. Term of Agreement.
(a) This Agreement shall become effective as of the date hereof, and
shall continue in effect thereafter unless terminated with respect to the
performance of Corporate Services in whole or in part by either party upon not
less than 180 days written notice. Termination of Corporate Services in part
shall not result in the termination of this Agreement. Termination of
Corporate Services in whole shall result in the termination of this Agreement
except that the obligations of the parties under paragraphs 2, 3, 4, 5, 6, 8
and 9 shall continue after such termination.
(b) Notwithstanding the foregoing, Harcourt General shall have the
right (but not the obligation) to terminate this Agreement immediately and
without the requirement of notice at any time upon the first to occur of the
date on which (i) the Company sells, or enters into a definitive agreement to
sell, all or substantially all of its assets to any one or more persons (other
than Harcourt General), (ii) the Company merges, or enters into a definitive
agreement to merge, with any person other than Harcourt General, or (iii) any
person or group of persons acquires the right (as a consequence of share
ownership, contractual right or otherwise) to elect or designate a majority of
the board of directors of the Company.
(c) Upon termination of this Agreement in part, an appropriate
revision of fees shall be made.
(d) Upon termination of this Agreement in whole, a final fee
adjustment on the basis described in paragraph 3(b) shall be made within 90
days.
(e) Notwithstanding the fact that this Agreement amends and restates
the Original Agreement, (i) the obligations of Harcourt General and the
Company in paragraph 2 of the Original Agreement shall continue to the extent
relating to periods prior to the date hereof, and (ii) the obligations of
Harcourt General and the Company in paragraph 4 of the Original Agreement
shall continue and shall be subsumed into the obligations under paragraph 5 of
this Agreement.
7. Independence. All employees and representatives of Harcourt General
providing the Corporate Services to the Company will be deemed for purposes of
all compensation and employee benefits to be employees or representatives of
Harcourt General and not employees or representatives of the Company. Except
to the extent such employees and representatives are elected officers of the
Company, in performing such services such employees and representatives will
be under the direction, control and supervision of Harcourt General (and not
of the Company) and Harcourt General will have the sole right to exercise all
authority with respect to the employment (including termination of
employment), assignment and compensation of such employees and
representatives.
8. Independent Contractor. The relationship of Harcourt General to the
Company which is created hereunder is that of an independent contractor. This
Agreement is not intended to create and shall not be construed as creating
between the Company and Harcourt General the relationship of affiliate,
principal and agent, joint venture, partnership, or any other similar
relationship, the existence of which is hereby expressly denied.
9. Confidentiality. Any and all information which is not generally known
to the public which is exchanged between the parties in connection with the
performance of this Agreement, whether of a technical or business nature,
shall be considered to be confidential. The parties agree that confidential
information shall not be disclosed to any third party or parties without the
written consent of the other party, except as permitted below. Each party
shall take reasonable measures to protect against disclosure of confidential
information by its officers, employees and agents. Confidential information
shall not include any information (i) which is or becomes part of the public
domain other than as a result of the breach of a party's obligation hereunder,
(ii) which is obtained from third parties who are not bound by confidentiality
obligations or (iii) which is required to be disclosed by law, under
compulsion of legal process, or by the rules of any state or Federal
regulatory agency or any securities exchange (including NASDAQ) on which the
Company's or Harcourt General's securities might be listed for trading. The
provisions of this paragraph shall survive the termination of this Agreement.
10. Miscellaneous.
(a) Nonassignability of Agreement. This Agreement shall not be
assignable, in whole or in part, directly or indirectly, whether by operation
of law or otherwise, by either party hereto without the prior written consent
of the other (which consent may be withheld in the sole discretion of the
party whose consent is required), and any attempt to assign any rights or
obligations arising under this Agreement without such consent shall be void;
provided, however, that the provisions of this Agreement shall be binding
upon, inure to the benefit of and be enforceable by Harcourt General and the
Company and their respective successors and permitted assigns.
(b) Further Assurances. Subject to the provisions hereof, each of the
parties hereto shall make, execute, acknowledge and deliver such other actions
and documents as may be reasonably required in order to effectuate the
purposes of this Agreement, and to comply with all applicable laws,
regulations, orders and decrees, and obtain all required consents and
approvals and make all required filings with any governmental agency, other
regulatory or administrative agency, commission or similar authority, as may
be reasonably necessary or desirable in this connection.
(c) Waivers. No failure or delay on the part of Harcourt General or
the Company in exercising any right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, or any
abandonment or discontinuance of steps to enforce such a right, preclude any
other or further exercise thereof or the exercise of any other right. No
modification or waiver of any provision of this Agreement nor consent to any
departure by Harcourt General or the Company therefrom shall in any event be
effective unless the same shall be in writing, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. Any consent or waiver by the Company under this paragraph 10(c) must
be approved by the Independent Committee.
(d) Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the transactions contemplated
hereby.
(e) Amendments. Except as provided in paragraph 1 with respect to
changes in the level of Corporate Services which may be agreed by the
respective Chief Executive Officers of Harcourt General and the Company
without approval of or authorization by their respective Boards of Directors
and Section 6(a) with respect to the termination of the provision of Corporate
Services in whole or in part by the Company, this Agreement may be amended or
supplemented only in writing executed by the parties hereto under
authorization by their respective Boards of Directors (including, in the case
of the Company, the approval of the Independent Committee).
(f) Notices. All notices, approvals and other communications provided
for herein shall be validly given, made or served, if in writing and delivered
personally, by telegram or be telephonic facsimile transmission, or sent by
registered mail, postage prepaid, to:
The Company at:
27 Boylston Street
Chestnut Hill, MA 02467
Attention: Chief Executive Officer
and to:
The Independent Directors of the Company
c/o The Secretary of the Company
27 Boylston Street
Chestnut Hill, MA 02467
Harcourt General at:
27 Boylston Street
Chestnut Hill, MA 02467
Attention: Chief Executive Officer
and shall become effective upon receipt.
(g) Governing Law. Despite any different result required by any
conflicts of law provisions, this Agreement shall be governed by the laws of
the Commonwealth of Massachusetts.
(h) Force Majeure. Anything else in this Agreement notwithstanding,
Harcourt General shall be excused from performance hereunder while, and to the
extent that, its performance is prevented by fire, drought, explosion, flood,
invasion, rebellion, earthquake, civil commotion, strike or labor disturbance,
governmental or military authority, act of God, mechanical failure or any
other event or casualty beyond the reasonable control of Harcourt General,
whether similar or dissimilar to those enumerated in this paragraph. In the
event of any of the foregoing occurrences, the Company shall be responsible
for making its own alternative arrangements with respect to the interrupted
services.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
HARCOURT GENERAL, INC. THE NEIMAN MARCUS GROUP, INC.
By: s/ John R. Cook By: s/ Eric P. Geller
John R. Cook, Senior Vice President Eric P. Geller, Senior Vice President,
and Chief Financial Officer General Counsel and
Secretary
EXHIBIT 10.2
THE NEIMAN MARCUS GROUP, INC.
1997 INCENTIVE PLAN
1. DEFINED TERMS
Appendix A, which is incorporated by reference, defines the terms used in
the Plan.
2. IN GENERAL
The Plan has been established to advance the interests of the Company by
giving selected Employees, directors and other persons (including both
individuals and entities) who provide services to the Company or its
Affiliates equity-based or cash incentives through the grant of Awards. No
Award may be granted under the Plan after September 1, 2006, but Awards
previously granted may extend beyond that date.
3. ADMINISTRATION
The Administrator has discretionary authority, subject only to the
express provisions of the Plan, to interpret the Plan; determine eligibility
for and grant Awards; determine, modify or waive the terms and conditions of
any Award; prescribe forms, rules and procedures (which it may modify or
waive); and otherwise do all things necessary to carry out the purposes of the
Plan. Once an Award has been communicated in writing to a Participant, the
Administrator may not, without the Participant's consent, alter the terms of
the Award so as to affect adversely the Participant's rights under the Award,
unless the Administrator expressly reserved the right to do so. In the case of
any Award intended to be eligible for the performance-based compensation
exception under Section 162(m)(4)(C) of the Code, the Committee shall exercise
its discretion consistent with qualifying the Award for such exception.
4. SHARES SUBJECT TO THE PLAN
A. A total of 2,500,000 shares of Stock have been reserved for issuance
under the Plan. The following shares of Stock will also be available for
future grants:
(i) shares remaining under an Award that terminates without having
been exercised in full (in the case of an Award requiring exercise
by a Participant for delivery of Stock);
(ii) shares subject to an Award, where cash is delivered to a
Participant in lieu of such shares;
(iii) shares of Restricted Stock that are forfeited to the Company;
(iv) shares of Stock tendered by a Participant as payment upon
exercise of an Award; and
(v) shares of Stock held back by the Administrator, or tendered by a
Participant, in satisfaction of tax withholding requirements.
Stock delivered under the Plan may be authorized but unissued Stock or
previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
B. The maximum number of shares for which Stock Options may be granted
to any person over the life of the Plan shall be 1,000,000. The maximum number
of shares subject to SARs granted to any person over the life of the Plan
shall likewise be 1,000,000. For purposes of the preceding two sentences, the
repricing of a Stock Option or SAR shall be treated as a new grant to the
extent required under Section 162(m) of the Code. The aggregate maximum number
of shares of Stock delivered to any person over the life of the Plan pursuant
to Awards that are not Stock Options or SARs shall also be 1,000,000. Subject
to these limitations, each person eligible to participate in the Plan shall be
eligible in any year to receive Awards covering up to the full number of
shares then available for Awards under the Plan.
5. ELIGIBILITY AND PARTICIPATION
The Administrator will select Participants from among those key
Employees, directors and other individuals or entities providing services to
the Company or its Affiliates who, in the opinion of the Administrator, are in
a position to make a significant contribution to the success of the Company
and its Affiliates. Eligibility for ISOs is further limited to those
individuals whose employment status would qualify them for the tax treatment
described in Sections 421 and 422 of the Code.
6. RULES APPLICABLE TO AWARDS
a. ALL AWARDS
(1) PERFORMANCE OBJECTIVES. Where rights under an Award depend in
whole or in part on attainment of performance objectives, actions by the
Company that have an effect, however material, on such performance objectives
or on the likelihood that they will be achieved will not be deemed an
amendment or alteration of the Award unless accomplished by a change in the
express terms of the Award or other action that is without substantial
consequence except as it affects the Award.
(2) ALTERNATIVE SETTLEMENT. The Company retains the right at any
time to extinguish rights under an Award in exchange for payment in cash,
Stock (subject to the limitations of Section 4) or other property on such
terms as theAdministrator determines, provided the holder of the Award
consents to such exchange.
(3) TRANSFERABILITY OF AWARDS. Except as the Administrator otherwise
expressly provides, Awards (other than an Award in the form of an outright
transfer of cash or Unrestricted Stock) may not be transferred other than by
will or by the laws of descent and distribution and, during a Participant's
lifetime an Award requiring exercise may be exercised only by the Participant
(or in the event of the Participant's incapacity, the person or persons
legally appointed to act on the Participant's behalf).
(4) VESTING, ETC. The Administrator may determine the time or times
at which an Award will vest (i.e., become free of restrictions) or become
exercisable. Unless the Administrator expressly provides otherwise, an Award
requiring exercise will cease to be exercisable, and all other Awards to the
extent not already fully vested will be forfeited, immediately upon the
cessation (for any reason, including death) of the Participant's employment or
other service relationship with the Company and its Affiliates.
(5) TAXES. The Administrator will make such provision for the
withholding of taxes as it deems necessary. The Administrator may, but need
not, hold back shares from an Award or permit a Participant to tender
previously owned shares in satisfaction of tax withholding requirements.
(6) DIVIDEND EQUIVALENTS, ETC. The Administrator may provide for the
payment of amounts in lieu of dividends or other distributions with respect to
Stock subject to an Award.
(7) RIGHTS LIMITED. Nothing in the Plan shall be construed as giving
any person the right to continued employment or service with the Company or
its Affiliates, nor any rights as a shareholder except as to shares actually
issued under the Plan. The loss of existing or potential profit in Awards will
not constitute an element of damages in the event of termination of employment
or service for any
reason, even if the termination is in violation of an obligation of the
Company or Affiliate to the Participant.
(8) SECTION 162(m). In the case of an Award intended to be eligible
for the performance-based compensation exception under Section 162(m)(4)(C) of
the Code, the Plan and such Award shall be construed in a manner consistent
with qualifying the Award for such exception.
b. AWARDS REQUIRING EXERCISE
(1) TIME AND MANNER OF EXERCISE. Unless the Administrator expressly
provides otherwise, (a) an Award requiring exercise by the holder will not be
deemed to have been exercised until the Administrator receives a written
notice of exercise (in form acceptable to the Administrator) signed by the
appropriate person and accompanied by any payment required under the Award;
and (b) if the Award is exercised by any person other than the Participant,
the Administrator may require satisfactory evidence that the person exercising
the Award has the right to do so.
(2) PAYMENT OF EXERCISE PRICE, IF ANY. Where the exercise of an
Award is to be accompanied by payment, the Administrator may determine the
required or permitted forms of payment either at or after the time of the
Award, subject to the following: (a) unless the Administrator expressly
provides otherwise, all payments will be by cash or check acceptable to the
Administrator; and (b) where shares issued under an Award are part of an
original issue of shares, the Award shall require an exercise price equal to
at least the par value of such shares.
(3) RELOAD AWARDS. The Administrator may provide that upon the
exercise of an Award through the tender of previously owned shares of Stock,
the Participant or other person exercising the Award will automatically
receive a new Award of like kind covering a number of shares determined by
reference to the number of shares tendered in payment of the exercise price of
the first Award.
c. AWARDS NOT REQUIRING EXERCISE
Awards of Restricted Stock and Unrestricted Stock may be made in return
for either (i) services determined by the Administrator to have a value not
less than the par value of the awarded shares, or (ii) cash or other property
having a value not less than the par value of the awarded shares plus such
additional amounts (if any) as the Administrator may determine payable in such
combination of cash, other property (of any kind) or services as the
Administrator may determine.
7. EFFECT OF CERTAIN TRANSACTIONS
a. MERGERS, ETC.
In the event of a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
the Company's outstanding Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets or a dissolution or
liquidation of the Company (a "covered transaction"), all outstanding Awards
requiring exercise will cease to be exercisable, and all other Awards to the
extent not fully vested (including Awards subject to performance conditions
not yet satisfied or determined) will be forfeited, as of the effective time
of the covered transaction. Prior to such time the Administrator may (but need
not) accelerate the vesting or exercisability of any Award or provide for
substitute or replacement awards from the acquiring entity (if any).
b. CHANGES IN AND DISTRIBUTIONS WITH RESPECT TO THE STOCK
(1) BASIC ANTIDILUTION PROVISIONS. In the event of a stock dividend,
stock split or combination of shares, recapitalization or other change in the
Company's capital structure, the Administrator will make appropriate
adjustments to the maximum number of shares that may be delivered under the
Plan under Section 4.a. and to the maximum share limits described in Section
4.b., and will also make appropriate adjustments to the number and kind of
shares of stock or securities subject to Awards then outstanding or
subsequently granted, any exercise prices relating to Awards and any other
provision of Awards affected by such change.
(2) CERTAIN OTHER ADJUSTMENTS. The Administrator may also make
adjustments of the type described in paragraph (1) above to take into account
distributions to common stockholders other than stock dividends or normal cash
dividends, mergers, consolidations, acquisitions, dispositions or similar
corporate transactions, or any other event, if the Administrator determines
that adjustments are appropriate to avoid distortion in the operation of the
Plan and to preserve the value of Awards made hereunder; provided, that no
such adjustment shall be made to the maximum share limits described in Section
4.b., or otherwise to an Award intended to be eligible for the performance-
based exception under Section 162(m)(4)(C) of the Code, except to the extent
consistent with that exception.
c. CHANGE IN CONTROL
Notwithstanding anything to the contrary in this Plan and unless specifically
provided otherwise in the Award Agreement at the time an Award is granted,
upon any Change of Control of the Company, any time periods, conditions or
contingencies relating to the exercise or realization of, or lapse of
restrictions under, any Award shall be automatically accelerated or waived so
that the Award may be exercised or realized in full; provided that, in the
event of a Change of Control that is intended to qualify for pooling of
interests accounting, the foregoing provisions of this paragraph shall be of
no force and effect if implementation of such provisions would preclude the
Change of Control from so qualifying and, in such event, the Committee shall
take whatever action it deems appropriate to enable holders of Awards to
realize a substantially similar economic result as would have been realized by
acceleration of Awards but without precluding the Change of Control from
qualifying as a pooling of interests.
A Change of Control will occur for purposes of this Plan:
(i) upon the consummation of any transaction or series of
transactions under which the Company is merged or consolidated with any
other company, other than a merger or consolidation which would result
in the shareholders of the Company immediately prior thereto continuing
to own (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Company, the acquiring
entity or such surviving entity outstanding immediately after such
merger or consolidation in substantially the same proportion such
shareholders held the voting securities of the company immediately prior
to the merger or consolidation;
(ii) if any person or group (as used in section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other
than the Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or any company owned,
directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the
Company) becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of securities of the Company representing more than
40% of (a) the shares of the Company's Class B Common Stock then
outstanding or (b) the total voting power (other than in the election of
directors) of all securities of the Company then outstanding; or
(iii) if, during any period of twenty-four consecutive months,
individuals who at the beginning of such period constitute the Board of
Directors, and any new director whose election or nomination for
election by the Company's shareholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason
(other than death or disability) to constitute at least a majority
thereof; or
(iv) the complete liquidation of the Company or the sale or
disposition by the Company of all or substantially all of the Company's
assets, other than a liquidation of the Company into a wholly-owned
subsidiary.
8. CONDITIONS ON DELIVERY OF STOCK
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove any restriction from shares previously delivered
under the Plan until: the Company's counsel has approved all legal matters in
connection with the issuance and delivery of such shares; if the outstanding
Stock is at the time listed on any stock exchange or national market system,
the shares to be delivered have been listed or authorized to be listed on such
exchange or system upon official notice of notice of issuance; and all
conditions of the Award have been satisfied or waived. If the sale of Stock
has not been registered under the Securities Act of 1933, as amended, the
Company may require, as a condition to exercise of the Award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act. The Company may require that
certificates evidencing Stock issued under the Plan bear an appropriate legend
reflecting any restriction on transfer applicable to such Stock.
9. AMENDMENT AND TERMINATION
Subject to the last sentence of Section 3, the Administrator may at any
time or times amend the Plan or any outstanding Award for any purpose which
may at the time be permitted by law, or may at any time terminate the Plan as
to any further grants of Awards, provided that (except to the extent expressly
required or permitted by the Plan) no such amendment will, without the
approval of the stockholders of the Company, effectuate a change for which
stockholder approval is required in order for the Plan to continue to qualify
under Section 422 of the Code or for Awards to be eligible for the
performance-based exception under Section 162(m)(4)(C) of the Code.
10. NON-LIMITATION OF THE COMPANY'S RIGHTS
The existence of the Plan or the grant of any Award shall not in any way
affect the Company's right to award a person bonuses or other compensation in
addition to Awards under the Plan.
11. GOVERNING LAW
The Plan shall be construed in accordance with the laws of The
Commonwealth of Massachusetts.
APPENDIX A
DEFINITION OF TERMS
The following terms, when used in the Plan, shall have the meanings and
be subject to the provisions set forth below:
"ADMINISTRATOR": The Committee, if one has been appointed; otherwise the
Board.
"AFFILIATE": Any corporation or other entity owning, directly or
indirectly, 50% or more of the outstanding Stock of the Company, or in which
the Company or any such corporation or other entity owns, directly or
indirectly, 50% of the outstanding capital stock (determined by aggregate
voting rights) or other voting interests.
"AWARD": Any of the following:
(i) Options ("Stock Options") entitling the recipient to acquire
shares of Stock upon payment of the exercise price. Each Stock Option
(except as otherwise expressly provided by the Committee consistent with
continued qualification of the Stock Option as a performance-based award
for purposes of Section 162(m) of the Code, or unless the Committee
expressly determines that such Stock Option is not subject to Section
162(m) of the Code or that the Stock Option is not intended to qualify
or the performance-based exception under Section 162(m) of the Code),
will have an exercise price not less than the fair market value of the
Stock subject to the option, determined as of the date of grant, except
that an ISO granted to an Employee described in Section 422(b)(6) of the
Code will have an exercise price not less than 110% of such fair market
value. The Administrator will determine the medium in which the exercise
price is to be paid, the duration of the option, the time or times at
which an option will become exercisable, provisions for continuation (if
any) of option rights following termination of the Participant's
employment with the Company and its Affiliates, and all other terms of
the Option. No Stock Option awarded under the Plan will be an ISO unless
the Administrator expressly provides for ISO treatment.
(ii) Rights ("SARs") entitling the holder upon exercise to receive
cash or Stock, as the Administrator determines, equal to a function
(determined by the Administrator using such factors as it deems
appropriate) of the amount by which the Stock has appreciated in value
since the date of the Award.
(iii) Stock subject to restrictions ("Restricted Stock") under the
Plan requiring that the Stock be redelivered to the Company if specified
conditions are not satisfied. The conditions to be satisfied in
connection with any Award of Restricted Stock, the terms on which such
Stock must be redelivered to the Company, the purchase price of such Stock,
and all other terms shall be determined by the Administrator.
(iv) Stock not subject to any restrictions under the Plan
("Unrestricted Stock").
(v) A promise to deliver Stock or other securities in the future on
such terms and conditions as the Administrator determines.
(vi) Securities (other than Stock Options) that are convertible
into or exchangeable for Stock on such terms and conditions as the
Administrator determines.
(vii) Cash bonuses tied to performance criteria as described at
(viii) below ("Cash Performance Awards").
(viii) Awards described in any of (i) through (vii) above where the
right to exercisability, vesting or full enjoyment of the Award is
conditioned in whole or in part on the satisfaction of specified
performance criteria ("Performance Awards"). The Committee in its
discretion may grant Performance Awards that are intended to qualify for
the performance-based compensation exception under Section 162(m)(4)(C)
of the Code and Performance Awards that are not intended so to qualify.
No more than $2,000,000 may be paid to any individual with respect to
any Cash Performance Award. In applying the limitation of the preceding
sentence: (A) multiple Cash Performance Awards to the same
individual that are determined by reference to performance periods of
one year or less ending with or within the same fiscal year of the
Company shall be subject in the aggregate to one $2,000,000 limit, and
(B) multiple Cash Performance Awards to the same individual that are
determined by reference to one or more multi-year performance periods
ending in the same fiscal year of the Company shall be subject in the
aggregate to a separate limit of $2,000,000. With respect to any
Performance Award other than a Cash Performance Award, Stock Option or
SAR, the maximum award opportunity shall be 1,000,000 shares or their
equivalent value in cash, subject to the limitations of Section 4.b. For
the avoidance of doubt, any Performance Award of a type described in (i)
through (vi) above shall be treated for purposes of this paragraph as a
Performance Award that is not a Cash Performance Award, even if payment
is made in cash.
In the case of a Performance Award intended to qualify as
performance-based for the purposes of Section 162(m) of the Code, the
Committee shall in writing preestablish a specific performance goal (based
solely on one or more qualified performance criteria) no later than 90
days after the commencement of the period of service to which the
performance relates (or at such earlier time as is required to qualify the
award as performance-based under Code Section 162(m)(4)(C)). For purposes
of the Plan, a qualified performance criterion is any of the following: (1)
earnings or earnings per share (whether on a pre-tax, after-tax,
operational or other basis), (2) return on equity, (3) return on assets,
(4) revenues, (5) sales, (6) expenses, (7) one or more operating ratios,
(8) stock price, (9) stockholder return, (10) market share, (11) cash
flow,(12) inventory levels or inventory turn, (13) capital expenditures,
(14) net borrowing, debt leverage levels or credit quality, (15) the
accomplishment of mergers, acquisitions, dispositions, public offerings
or similar extraordinary business transactions or (16) any combination of
the foregoing. The performance goals selected in any case need not be
applicable across the Company, but may be particular to an individual's
function or business unit. Prior to payment of any Performance Award
intended to qualify as performance-based under Section 162(m)(4)(C) of
the Code, the Committee shall certify whether the performance goal has been
attained and such determination shall be final and conclusive. If the
performance goal is not attained, no other Award shall be provided in
substitution of the Performance Award.
(ix) Grants of cash, or loans, made in connection with other Awards
in order to help defray in whole or in part the economic cost (including
tax cost) of the Award to the Participant. The terms of any such grant or
loan shall be determined by the Administrator.
Awards may be combined in the Administrator's discretion.
"BOARD": The Board of Directors of the Company.
"CODE": The U.S. Internal Revenue Code of 1986, as from time to time
amended and in effect.
"COMMITTEE": A committee of the Board comprised solely of two or more
outside directors within the meaning of Section 162(m) of the Code. The
Committee may delegate ministerial tasks to such persons (including Employees)
as it deems appropriate.
"COMPANY": The Neiman Marcus Group, Inc.
"EMPLOYEE": Any person who is employed by the Company or an Affiliate.
"ISO": A Stock Option intended to be an "incentive stock option" within
the meaning of Section 422 of the Code.
"PARTICIPANT": An Employee, director or other person providing services
to the Company or its Affiliates who is granted an Award under the Plan.
"PLAN": The Neiman Marcus Group, Inc. 1997 Incentive Plan as from time
to time amended and in effect.
"STOCK": Common Stock of the Company, par value $.01 per share.
EXHIBIT 10.3
TERMINATION AND CHANGE OF CONTROL AGREEMENT
1. This Termination and Change of Control Agreement ("Agreement")
is entered into as of October 6, 1999 between Burton Tansky ("Mr.
Tansky" or the "Executive") and The Neiman Marcus Group, Inc.
("NMG").
2. Mr. Tansky is employed "at-will" as President of NMG, Chairman
and Chief Executive Officer of NM Stores, and Mr. Tansky or NMG may
terminate Mr. Tansky's employment at any time, with or without
notice, for any reason. Notwithstanding this at-will employment,
NMG wishes to provide some protection to Mr. Tansky if the
Executive's employment ends under certain circumstances.
3. a. While Mr. Tansky is employed at-will, if NMG terminates
Mr. Tansky's employment other than "for cause" or other than
due to "total disability" or death, NMG agrees to provide Mr.
Tansky with a termination package consisting of (a) an amount
equivalent to 2 times his then-current annual base salary,
less required withholding, which amount would be paid over a
24-month period in regular, bi-weekly installments following
such termination; and (b) continuation of the medical and
dental insurance coverage in which he participates at the time
of such termination (or as such coverage may be changed from
time-to-time for employees generally) for 24 months or until
he starts full-time employment, whichever is sooner. Mr.
Tansky will be responsible for paying his portion of monthly
premiums for the medical and dental insurance coverage at the
same rate paid by active employees, and Mr. Tansky authorizes
NMG to deduct such amounts from the payments it makes to him.
For the purposes of determining whether or not NMG has
terminated the Executive's employment, any material, adverse
change in the terms and conditions of his employment, which
change causes the Executive to resign his employment, will be
deemed a termination.
b. If Mr. Tansky's services are terminated by a successor to
NMG other than "for cause" or other than due to "total
disability" or death within two years of a change of control
of NMG, as a change of control is defined in Appendix A, or if
the Executive resigns his employment within two years of such
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 such a change of control, Mr. Tansky
shall receive the termination package set forth in paragraph
3.a.
4. For the purposes of determining Mr. Tansky's eligibility for
the termination package set forth in this Agreement:
a. "For cause" means, in NMG's reasonable judgment, a breach
of duty by Mr. Tansky in the course of his employment
involving fraud, acts of dishonesty (other than inadvertent
acts or omissions), or moral turpitude, repeated
insubordination, failure to devote his full working time and
best efforts to the performance of his duties, or conviction
of a felony or other serious criminal offense. Provided that,
with respect to insubordination or devotion of his working
time, Mr. Tansky has been provided prior written notice of the
problem and afforded a reasonable opportunity to correct same.
b. "Total Disability" means that, in NMG's reasonable
judgment, Mr. Tansky is unable to perform his duties for (a)
80% or more of the normal working days during six consecutive
calendar months or (b) 50% or more of the normal working days
during twelve consecutive calendar months.
c. "Change of Control" has the meaning set forth in Appendix
A.
5. Payment by NMG of the termination package set forth in
paragraph 3 constitutes full satisfaction of NMG's obligations to
Mr. Tansky, if any, (including the right to any severance payments)
which arise from or relate in any way to the termination of Mr.
Tansky's employment. However, nothing in this Agreement is
intended to limit any earned, vested benefits (other than any
entitlement to severance pay) that Mr. Tansky may have under the
applicable provisions of any benefit plan in which Mr. Tansky is
participating at the time of his termination of employment or
resignation.
6. The unenforceability of any provision of this Agreement shall
not affect the enforceability of any other provision of this
Agreement.
7. This Agreement contains the entire agreement between the
parties and supersedes all prior agreements and understandings,
oral or written, with respect to the termination of Mr. Tansky's
at-will employment and the subject matter of the Agreement. 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.
8. The validity, performance and enforceability of this Agreement
will be determined and governed by the laws of the Massachusetts
without regard to its conflict of laws principles.
The Neiman Marcus Group, Inc.
s/ Burton Tansky By: s/ Gerald T. Hughes
Mr. Burton Tansky
Appendix A
A Change of Control will occur for purposes of this Agreement:
(i) upon the consummation of any transaction or series of
transactions under which the Company is merged or consolidated with
any other company, other than a merger or consolidation which would
result in the shareholders of the Company immediately prior thereto
continuing to own (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than
50% of the combined voting power of the voting securities of the
Company, the acquiring entity or such surviving entity outstanding
immediately after such merger or consolidation in substantially the
same proportion such shareholders held the voting securities of the
company immediately prior to the merger or consolidation;
(ii) if any person or group (as used in section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
company owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of
stock of the Company) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of securities of the Company
representing more than 40% of (a) the shares of the Company's Class
B Common Stock then outstanding or (b) the total voting power
(other than in the election of directors) of all securities of the
Company then outstanding; or
(iii) if, during any period of twenty-four consecutive months,
individuals who at the beginning of such period constitute the
Board of Directors, and any new director whose election or
nomination for election by the Company's shareholders was approved
by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so
approved, cease for any reason (other than death or disability) to
constitute at least a majority thereof; or
(iv) the complete liquidation of the Company or the sale or
disposition by the Company of all or substantially all of the
Company's assets, other than a liquidation of the Company into a
wholly-owned subsidiary.
November 11, 1999
Dear Burt:
As we discussed today, I have clarified two items in your
compensation and benefits package. This package and the
Termination and Change of Control Agreement supersede your current
employment agreement which was scheduled to expire on January 31,
2000 and the February 9, 1999 letter I sent to you.
FY2000 Base
Salary
$1,000,000
FY2000 Annual
Bonus
Threshold 15%; Target 60%; Maximum 120%
Long Term
Incentive
30,000 Non-qualified Stock Options (NQSO)
10,000 Performance Accelerated Restricted
Stock
[The annual incentive and PARS targets are
set out in the October 6 memo Rob and
Brian gave you.]
One-time Stock
Grant
110,000 NQSO
20,000 Time Lapse Restricted Stock
Special Stock
Vesting
Any stock options you have been (or will
be) granted will continue to vest and
restrictions on any of your restricted
stock will continue to lapse for up to
five years either after you retire or are
terminated other than "for cause." In
addition, the exercise period for your
options will extend to the lesser of ten
years from the date of the option grant or
five years either after retirement or
after termination other than "for cause."
SERP
Enhancement
You would be eligible for service credit
of two times your actual years of service
with NMG: (a) if you remain employed until
age 65 and agree not to compete with the
company for three years following your
retirement. (You and the company agree to
engage in good faith discussions at the
time of your retirement to define the
scope of the restrictions on competition.
If there is no agreement, on the
restrictions, your service credit would
revert to 5/3 times your actual years of
service); (b) if NMG terminates you other
than "for cause" or you resign your
employment at NMG under specified
circumstances (as set forth in your
Termination and Change of Control
Agreement) before you reach age 65; or (c)
you are terminated other than "for cause"
or resign under specified circumstances
within 24 months following a Change of
Control.
Termination
and Change of
Control
The new Agreement increases your severance
pay to 24 months; modifies the Change of
Control language to reflect NMG's new
ownership structure; removes the offset
provision; and standardizes disability and
"for cause" definitions.
Other Company
Benefits
Financial/Tax Planning - Increase from
$3,000 to $5,000
Sincerely,
s/ Gerald T. Hughes
Gerald T. Hughes
s/ Burton J. Tansky
Burton J. Tansky
EXHIBIT 10.3
TERMINATION AND CHANGE OF CONTROL AGREEMENT
1. This Termination and Change of Control Agreement ("Agreement")
is entered into as of 10/06/99 between Gerald Sampson ("Mr.
Sampson" or the "Executive") and The Neiman Marcus Group, Inc.
("NMG").
2. Mr. Sampson is employed "at-will" as President, Neiman Marcus
Stores, and Mr. Sampson or NMG may terminate Mr. Sampson's
employment at any time, with or without notice, for any reason.
Notwithstanding this at-will employment, NMG wishes to provide some
protection to Mr. Sampson if the Executive's employment ends under
certain circumstances.
3. a. While Mr. Sampson is employed at-will, if NMG terminates
Mr. Sampson's employment other than "for cause" or other than
due to "total disability" or death, NMG agrees to provide Mr.
Sampson with a termination package consisting of (a) an
amount equivalent to 1.5 times his then-current annual base
salary, less required withholding, which amount would be paid
over an 18-month period in regular, bi-weekly installments
following such termination; and (b) continuation of the
medical and dental insurance coverage in which he
participates at the time of such termination (or as such
coverage may be changed from time-to-time for employees
generally) for 18 months or until he starts full-time
employment, whichever is sooner. Mr. Sampson will be
responsible for paying his portion of monthly premiums for
the medical and dental insurance coverage at the same rate
paid by active employees, and Mr. Sampson authorizes NMG to
deduct such amounts from the payments it makes to him. For
the purposes of determining whether or not NMG has terminated
the Executive's employment, any material, adverse change in
the terms and conditions of his employment, which change
causes the Executive to resign his employment, will be deemed
a termination.
b. If Mr. Sampson's services are terminated by a successor
to NMG other than "for cause" or other than due to "total
disability" or death within two years of a change of control
of NMG, as a change of control is defined in Appendix A, or
if the Executive resigns his employment within two years of
such 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 such a change
of control, Mr. Sampson shall receive the termination package
set forth in paragraph 3.a.
4. For the purposes of determining Mr. Sampson's eligibility for
the termination package set forth in this Agreement:
a. "For cause" means, in NMG's reasonable judgment, a
breach of duty by Mr. Sampson in the course of his employment
involving fraud, acts of dishonesty (other than inadvertent
acts or omissions), or moral turpitude, repeated
insubordination, failure to devote his full working time and
best efforts to the performance of his duties, or conviction
of a felony or other serious criminal offense. Provided
that, with respect to insubordination or devotion of his
working time, Mr. Sampson has been provided prior written
notice of the problem and afforded a reasonable opportunity
to correct same.
b. "Total Disability" means that, in NMG's reasonable
judgment, Mr. Sampson is unable to perform his duties for (a)
80% or more of the normal working days during six consecutive
calendar months or (b) 50% or more of the normal working days
during twelve consecutive calendar months.
c. "Change of Control" has the meaning set forth in
Appendix A.
5. Payment by NMG of the termination package set forth in
paragraph 3 constitutes full satisfaction of NMG's obligations to
Mr. Sampson, if any, (including the right to any severance
payments) which arise from or relate in any way to the termination
of Mr. Sampson's employment. However, nothing in this Agreement
is intended to limit any earned, vested benefits (other than any
entitlement to severance pay) that Mr. Sampson may have under the
applicable provisions of any benefit plan in which Mr. Sampson is
participating at the time of his termination of employment or
resignation.
6. The unenforceability of any provision of this Agreement shall
not affect the enforceability of any other provision of this
Agreement.
7. This Agreement contains the entire agreement between the
parties and supersedes all prior agreements and understandings,
oral or written, with respect to the termination of Mr. Sampson's
at-will employment and the subject matter of the Agreement. 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.
8. The validity, performance and enforceability of this Agreement
will be determined and governed by the laws of the Massachusetts
without regard to its conflict of laws principles.
The Neiman Marcus Group, Inc.
By: s/ Gerald Sampson By: s/ Gerald T. Hughes
Mr. Gerald Sampson
Appendix A
A Change of Control will occur for purposes of this Agreement:
(i) upon the consummation of any transaction or series of
transactions under which the Company is merged or consolidated with
any other company, other than a merger or consolidation which would
result in the shareholders of the Company immediately prior thereto
continuing to own (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than
50% of the combined voting power of the voting securities of the
Company, the acquiring entity or such surviving entity outstanding
immediately after such merger or consolidation in substantially the
same proportion such shareholders held the voting securities of the
company immediately prior to the merger or consolidation;
(ii) if any person or group (as used in section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
company owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership
of stock of the Company) becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act) of securities of the Company
representing more than 40% of (a) the shares of the Company's Class
B Common Stock then outstanding or (b) the total voting power
(other than in the election of directors) of all securities of the
Company then outstanding; or
(iii) if, during any period of twenty-four consecutive months,
individuals who at the beginning of such period constitute the
Board of Directors, and any new director whose election or
nomination for election by the Company's shareholders was approved
by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so
approved, cease for any reason (other than death or disability) to
constitute at least a majority thereof; or
(iv) the complete liquidation of the Company or the sale or
disposition by the Company of all or substantially all of the
Company's assets, other than a liquidation of the Company into a
wholly-owned subsidiary.
Date: November 17, 1999
To: Gerald Sampson
From: Gerald T. Hughes
Subject: SERP Benefit
As we discussed today, the Compensation Committee of The Neiman
Marcus Group Board of Directors approved an enhanced SERP benefit
for you.
The Committee has agreed that if NMG terminates your employment
other than for cause or if you resign your employment under
circumstances entitling you to payments under your Termination and
Change of Control Agreement (e.g., material adverse change in
responsibilities) before you reach age 65, NMG will determine your
pension benefit using 20/13 x years of service with NMG as your
credited service.
Further, should your employment be terminated other than for cause
or you resign following a material adverse change in
responsibilities or you resign because you are not permitted to
continue in an position comparable in duties and responsibilities,
within 24 months of a Change of Control of NMG, NMG will determine
your pension benefit using 20/13 x years of service with NMG as
your credited service.
One other note related to a Change of Control: The Compensation
Committee approved accelerated vesting of unvested stock options
and accelerated lapsing of restrictions on restricted stock (both
time-lapse and performance accelerated) upon a Change of Control
of NMG. Eric Geller will provide the precise terms of the
acceleration to option/restricted stockholders.
Exhibit 18.1
December 1, 1999
The Neiman Marcus Group, Inc.
27 Boylston Street
Chestnut Hill, MA 02467
Dear Sirs/Madam:
At your request, we have read the description included in your
Quarterly Report on Form 10-Q to the Securities and Exchange
Commission for the quarter ended October 30, 1999, of the
facts relating to a change in accounting principle from last-
in-first-out retail to first-in-first-out retail. We believe,
on the basis of the facts so set forth and other information
furnished to us by appropriate officials of The Neiman Marcus
Group, Inc. (the "Company"), that the accounting change
described in your Form 10-Q is to an alternative accounting
principle that is preferable under the circumstances.
We have not audited any consolidated financial statements of
the Company and its consolidated subsidiaries as of any date
or for any period subsequent to July 31, 1999. Therefore, we
are unable to express, and we do not express, an opinion on
the facts set forth in the above-mentioned Form 10-Q, on the
related information furnished to us by officials of the
Company, or on the financial position, results of operations,
or cash flows of the Company and its consolidated subsidiaries
as of any date or for any period subsequent to July 31, 1999.
Yours truly,
S/ Deliotte & Touche LLP
Deloitte & Touche LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains a summary of financial information extracted
from the Condensed Consolidated Balance Sheets and Condensed Consolidated
Statements of Earnings and is qualified in its entirety by reference
to such statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS 3-MOS
<FISCAL-YEAR-END> JUL-29-2000 JUL-31-1999 JUL-31-1999
<PERIOD-END> OCT-30-1999 JUL-31-1999 OCT-31-1998
<CASH> 37,222 29,191 24,661
<SECURITIES> 177,497 133,151 180,504
<RECEIVABLES> 76,909 61,617 61,392
<ALLOWANCES> 2,345 2,300 1,800
<INVENTORY> 683,148 545,252 661,776
<CURRENT-ASSETS> 1,036,999 835,268 1,004,324
<PP&E> 927,804 899,275 842,797
<DEPRECIATION> 401,549 385,836 347,823
<TOTAL-ASSETS> 1,723,189 1,512,290 1,622,875
<CURRENT-LIABILITIES> 486,381 380,180 430,717
<BONDS> 339,646 274,640 409,622
0 0 0
0 0 0
<COMMON> 490 490 490
<OTHER-SE> 783,506 745,793 675,430
<TOTAL-LIABILITY-AND-EQUITY> 1,723,189 1,512,290 1,622,875
<SALES> 677,670 2,553,421 587,113
<TOTAL-REVENUES> 677,670 2,553,421 587,113
<CGS> 425,718 1,738,511 383,888
<TOTAL-COSTS> 608,106 2,370,807 539,055
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 502 2,366 520
<INTEREST-EXPENSE> 6,786 24,972 6,136
<INCOME-PRETAX> 62,778 157,642 41,922
<INCOME-TAX> 23,856 61,480 16,350
<INCOME-CONTINUING> 37,443 94,852 25,572
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
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<NET-INCOME> 37,443 94,852 25,572
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