SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
__________________
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended July 31, 1999
Commission File Number 1-9659
_______________
THE NEIMAN MARCUS GROUP, INC.
(Exact name of registrant as specified in its charter)
27 Boylston Street, Chestnut Hill, Massachusetts 02467
(Address of principal executive offices) (Zip Code)
Delaware 95-4119509
(State or other jurisdiction of (IRS Employer
incorporation or organization) IdentificationNo.)
Registrant's telephone number and area code: 617-232-0760
_______________
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each Exchange on which Registered
Class A Common Stock, $.01 par value New York Stock Exchange
Class B Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
_______________
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 _____
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-
affiliates of the registrant as of October 25, 1999 was
$856,866,600.
There were 27,602,841 shares of Class A Common Stock and
21,440,960 shares of Class B Common Stock outstanding as of
October 25, 1999.
_________________________________________________
Documents Incorporated by Reference
Portions of the Company's 1999 Annual Report to Shareholders
are incorporated by reference in Parts I, II and IV of this
Report. Portions of the Proxy Statement for the Annual Meeting of
Shareholders to be held on January 21, 2000 are incorporated by
reference in Part III of this Report.
THE NEIMAN MARCUS GROUP, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JULY 31, 1999
TABLE OF CONTENTS
Page
No.
PART I
Item 1. Business 1
Item 2. Properties 4
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 5
Item 6. Selected Financial Data 5
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Item 7a. Quantitative and Qualitative Disclosures about Market
Risk 5
Item 8. Financial Statements and Supplementary Data 5
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 6
PART III
Item 10. Directors and Executive Officers of the Registrant 6
Item 11. Executive Compensation 8
Item 12. Security Ownership of Certain Beneficial 8
Owners and Management
Item 13. Certain Relationships and Related Transactions 8
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports 8
on Form 8-K
Signatures S-1
PART I
Item 1. Business
General
The Neiman Marcus Group, Inc. (together with its operating
divisions and subsidiaries, the "Company") is a Delaware
corporation which commenced operations in August 1987. Prior to
October 22, 1999, Harcourt General, Inc. ("Harcourt General"), a
Delaware corporation based in Chestnut Hill, Massachusetts, owned
approximately 54% of the outstanding common stock of the Company.
On October 22, 1999 Harcourt General distributed to its
stockholders approximately 21.4 million of the 26.4 million
shares of the Company's common stock held by Harcourt General
(the "Distribution"). For more information about the
relationship between the Company and Harcourt General and the
Distribution, see Notes 8 and 16 to the Consolidated Financial
Statements in Item 14 below.
Business Overview
The Company is a high-end specialty retailer operating through
specialty retail stores, consisting of Neiman Marcus Stores and
Bergdorf Goodman, and a direct marketing operation, NM Direct.
The 31 Neiman Marcus stores are in premier retail locations in
major markets nationwide, and the two Bergdorf Goodman stores,
the main store and the Bergdorf Goodman Men store, are located in
Manhattan at 58th Street and Fifth Avenue. Neiman Marcus Stores
and Bergdorf Goodman offer high-end fashion apparel and
accessories primarily from leading designers.
NM Direct, the Company's direct marketing operation, offers a mix
of apparel and home furnishings which is complementary to the
Neiman Marcus Stores merchandise. NM Direct also publishes the
Horchow catalogues, the world famous Neiman Marcus Christmas
Book, and Chef's Catalog, a leading direct marketer of gourmet
cookware and high-end kitchenware. For more information about
the Company's business segments, see Note 15 to the Consolidated
Financial Statements in Item 14 below.
Description of Operations
Specialty Retail Stores
Neiman Marcus Stores
Neiman Marcus Stores offer women's and men's apparel,
fashion accessories, shoes, cosmetics, furs, precious and
designer jewelry, decorative home accessories, fine china,
crystal and silver, gourmet food products, children's apparel and
gift items. A relatively small portion of Neiman Marcus Stores'
customers accounts for a significant percentage of its retail
sales.
The Company currently operates 31 Neiman Marcus stores,
located in Arizona (Scottsdale); California (five stores: Beverly
Hills, Newport Beach, Palo Alto, San Diego and San Francisco);
1
Colorado (Denver); the District of Columbia; Florida (two stores:
Fort Lauderdale and Bal Harbour); Georgia (Atlanta); Hawaii
(Honolulu); Illinois (three stores: Chicago, Northbrook and Oak
Brook); Missouri (St. Louis); Massachusetts (Boston); Minnesota
(Minneapolis); Michigan (Troy); Nevada (Las Vegas); New Jersey
(two stores: Short Hills and Paramus); New York (Westchester);
Pennsylvania (King of Prussia); Texas (six stores: three in
Dallas, one in Fort Worth and two in Houston); and Virginia
(McLean). The average size of these 31 stores is approximately
143,000 gross square feet, and they range in size from 90,000
gross square feet to 269,000 gross square feet.
The Company opened its Neiman Marcus store in Hawaii in
September 1998. The Company plans to open new Neiman Marcus
stores in Palm Beach, Florida in 2000, Plano, Texas in 2001,
Tampa, Florida in 2001, Coral Gables, Florida in 2002, and in
Houston, Texas and Long Island, New York in years subsequent to
2002 on a schedule not yet determined. The Plano store will
replace the existing store located in the Prestonwood Mall in
Dallas, and the Houston store will replace the existing Houston
Town & Country store.
The Company has opened three stores in order to test a new
concept, known as The Galleries of Neiman Marcus, which focuses
on 10,000-15,000 square foot stores featuring precious and fine
jewelry, gifts and decorative home accessories. These stores
allow the Company to further leverage its expertise in these
categories and to extend the Neiman Marcus brand into certain
markets that may not be large enough to support full-line stores.
The Galleries of Neiman Marcus stores opened in Cleveland, Ohio
in November 1998, in Phoenix, Arizona in December 1998 and in
Seattle, Washington in October 1999. The Company plans to
evaluate the concept based on the performance of these first
three stores.
Bergdorf Goodman
The Company operates two Bergdorf Goodman stores in
Manhattan at 58th Street and Fifth Avenue. The main Bergdorf
Goodman store consists of 250,000 gross square feet. The core of
Bergdorf Goodman's offerings includes high-end women's apparel
and unique fashion accessories from leading designers. Bergdorf
Goodman also features traditional and contemporary decorative
home accessories, precious and fashion jewelry, gifts, and
gourmet foods. Bergdorf Goodman Men consists of 66,000 gross
square feet and is dedicated to fine men's apparel and
accessories. During fiscal 1999, the Company began construction
on a remodeling project at the Bergdorf Goodman main store that
will add 25,000 square feet of selling space, including a new
12,000 square foot plaza level below the first floor scheduled to
open in November 1999.
Clearance Centers
The Company operates ten clearance centers which average
25,000 gross square feet each. These stores provide an efficient
and controlled outlet for the sale of marked down merchandise
from Neiman Marcus Stores, Bergdorf Goodman and NM Direct. The
Company expects to open one additional clearance center during
fiscal 2000.
2
Direct Marketing
The Company's direct marketing operation, NM Direct,
operates an upscale direct marketing business, which primarily
offers women's apparel under the Neiman Marcus name and, through
its Horchow catalogue, offers quality home furnishings, tabletop,
linens and decorative accessories. NM Direct also offers a broad
range of more modestly priced items through its Trifles and Grand
Finale catalogues and annually publishes the world famous Neiman
Marcus Christmas Book. The Company acquired Chef's Catalog, a
leading direct marketer of gourmet cookware and high-end
kitchenware, in January 1998, and has consolidated those
operations into NM Direct.
Other
Brand Development Initiative
In fiscal 1999 the Company launched its Brand Development
Initiative to invest in high-potential designer resources that
serve affluent customers. In November 1998, the Company acquired
a 51% interest in Gurwitch Bristow Products, which manufactures
and markets Laura Mercier cosmetic lines, for $6.7 million. In
February 1999, the Company acquired a 56% interest in Kate Spade
LLC, a manufacturer of high-end fabric and leather handbags and
accessories, for $33.6 million.
Competition
The specialty retail industry is highly competitive and
fragmented. The Company competes with large specialty retailers,
traditional and better department stores, national apparel
chains, designer boutiques, individual specialty apparel stores
and direct marketing firms.
The Company competes for customers principally on the basis of
quality, assortment and presentation of merchandise, customer
service, sales and marketing programs and value and, in the case
of Neiman Marcus Stores and Bergdorf Goodman, on the basis of
store ambience. In addition, the Company competes for quality
merchandise and assortment principally based on relationships
with designer resources and purchasing power. The Company's
apparel business is especially dependent upon its relationship
with these designer resources. Neiman Marcus Stores competes with
other retailers for real estate opportunities, principally on the
basis of its ability to attract customers. NM Direct competes
principally on the basis of quality, assortment and presentation
of merchandise, customer service, price and speed of delivery.
Employees
At July 31, 1999, Neiman Marcus Stores had approximately 12,000
employees, Bergdorf Goodman had approximately 1,100 employees,
and NM Direct had approximately 1,700 employees. The Company's
staffing requirements fluctuate during the year as a result of
the seasonality of the retail apparel industry and, accordingly,
3
the Company expects to add approximately 1,900 more seasonal
employees in the second quarter of fiscal 2000. None of the
employees of Neiman Marcus Stores or NM Direct are subject to
collective bargaining agreements. Approximately 18% of the
Bergdorf Goodman employees are subject to collective bargaining
agreements. The Company believes that its relations with its
employees are generally good.
Capital Expenditures; Seasonality; Liquidity
For information on capital expenditures, seasonality and
liquidity, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Item 7 below.
Executive Officers of the Registrant
The information set forth under the heading "Executive Officers"
in Item 10 below is incorporated herein by reference.
Item 2. Properties
The Company's corporate headquarters are located at Harcourt
General's leased facility in Chestnut Hill, Massachusetts. The
operating headquarters for Neiman Marcus Stores, Bergdorf Goodman
and NM Direct are located in Dallas, New York City and Las
Colinas, Texas, respectively. The aggregate gross square footage
used in the Company's operations is approximately as follows:
<TABLE>
<CAPTION>
Owned
Subject to
Owned Ground Lease Leased Total
<S> <C> <C> <C> <C>
Specialty Retail Stores..........348,000 2,112,000 2,555,000 5,015,000
Distribution, Support and
Office Facilities........... 1,169,000 0 554,000 1,723,000
</TABLE>
Leases for the Company's stores, including renewal options, range
from 30 to 99 years. The lease on the Bergdorf Goodman main
store expires in 2050, and the lease on the Bergdorf Goodman Men
store expires in 2010, with two 10-year renewal options. Leases
are generally at fixed rentals, and a majority of leases provide
for additional rentals based on sales in excess of predetermined
levels. The Company owns approximately 34 acres of land in
Longview, Texas, where its National Service Center, the principal
distribution facility for Neiman Marcus Stores, is located in a
464,000 square foot facility, and also owns approximately 50
acres of land in Las Colinas, Texas, where its 705,000 square
foot NM Direct warehouse and distribution facility is located.
For further information on the Company's properties, see
"Operating Leases" in Note 12 of the Notes to the Consolidated
Financial Statements in Item 14 below. For more information
about the Company's plans to open additional stores, see
"Description of Operations" in Item 1 above.
4
Item 3. Legal Proceedings
The Company presently is engaged in various legal actions which
are incidental to the ordinary conduct of its business. The
Company believes that any liability arising as a result of these
actions and proceedings will not have a material adverse effect
on the Company's financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
On September 15, 1999 the Company's stockholders approved a
recapitalization of the Company and certain related actions for
the purpose of facilitating the Distribution described in Item 1
above. For more information, see Note 16 to the Consolidated
Financial Statements in Item 14 below.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The information contained under the captions "Stock Information"
and "Shares Outstanding" on page 41 of the Company's Annual Report
to Shareholders for the fiscal year ended July 31, 1999 (the "1999
Annual Report") is incorporated herein by reference.
Beginning with the third quarter of fiscal 1995, the Company
eliminated the quarterly cash dividend on its Common Stock. The
Company currently does not intend to resume paying cash dividends
on its Common Stock.
Item 6. Selected Financial Data
The response to this Item is contained in the 1999 Annual Report
under the caption "Selected Financial Data" on page 40 and is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The response to this Item is contained in the 1999 Annual Report
under the caption "Management's Discussion and Analysis" on pages
16 through 21 and is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk.
The response to this Item is contained in the 1999 Annual Report
under the caption "Management's Discussion and Analysis -
Quantitative and Qualitative Disclosure About Market Risk" on
page 19 and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements and supplementary data
referred to in Item 14 are incorporated herein by reference.
5
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not Applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors
The response to this Item regarding the directors of the Company
and compliance with Section 16(a) of the Securities Exchange Act
of 1934 by the Company's officers and directors is contained in
the Proxy Statement for the 2000 Annual Meeting of Stockholders
under the captions "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" and is incorporated
herein by reference.
Executive Officers
Set forth below are the names, ages at October 22, 1999, and
principal occupations for the last five years of each executive
officer of the Company. All such persons have been elected to
serve until the next annual election of officers and their
successors are elected or until their earlier resignation or
removal.
Richard A. Smith - 74
Chairman of the Company and of Harcourt General; Chief
Executive Officer of the Company from January 1997 until
December 1998 and prior to December 1991; Chief Executive
Officer of Harcourt General from January 1997 until November
1, 1999 and prior to December 1991; Chairman, President
(until November 1995) and Chief Executive Officer of GC
Companies, Inc.; Director of the Company, Harcourt General
and GC Companies, Inc. Mr. Smith is the father of Robert A.
Smith and the father-in-law of Brian J. Knez.
Robert A. Smith - 40
Co-Chief Executive Officer of the Company since May 1999;
Chief Executive Officer of the Company from December 1998
until May 1999; President and Co-Chief Executive Officer of
Harcourt General effective November 1, 1999; President and
Chief Operating Officer of the Company from January 1997
until December 1998; President and Co-Chief Operating
Officer of Harcourt General from January 1997 until November
1, 1999; Group Vice President of the Company and of Harcourt
General prior to January 1997; President and Chief Operating
Officer of GC Companies, Inc. since November 1995; Director
of the Company and of Harcourt General. Mr. Smith is the
son of Richard A. Smith and the brother-in-law of Brian J.
Knez.
6
Brian J. Knez - 42
Co-Chief Executive Officer of the Company since May 1999;
President and Co-Chief Executive Officer of Harcourt General
effective November 1, 1999; President and Co-Chief Operating
Officer of Harcourt General from January 1997 until November
1, 1999; President (until November 1998) and Chief Executive
Officer of Harcourt, Inc. since May 1995; President of the
Scientific, Technical, Medical and Professional Group of
Harcourt, Inc. prior to May 1995; Director of the Company
and Harcourt General. Mr. Knez is the son-in-law of Richard
A. Smith and the brother-in-law of Robert A. Smith.
John R. Cook - 58
Senior Vice President and Chief Financial Officer and a
director of the Company; Senior Vice President and Chief
Financial Officer of Harcourt General.
Eric P. Geller - 52
Senior Vice President, General Counsel and Secretary of the
Company and of Harcourt General.
Burton M. Tansky - 61
President and Chief Operating Officer of the Company since
December 1998; Executive Vice President of the Company from
February 1998 until December 1998; Chairman and Chief
Executive Officer of Neiman Marcus Stores.
Gerald A. Sampson - 58
President and Chief Operating Officer of Neiman Marcus
Stores.
Hubert W. Mullins - 48
Vice Chairman of Neiman Marcus Stores since December 1998;
Executive Vice President of Neiman Marcus Stores from
February 1998 until December 1998; Executive Vice President
- Merchandise from February 1996 until February 1998; Senior
Vice President and General Merchandise Manager prior
thereto.
Stephen C. Elkin - 56
Chairman and Chief Executive Officer of Bergdorf Goodman.
Sharon Jester Turney - 43
President and Chief Executive Officer of NM Direct since
March 1999; Executive Vice President of NM Direct prior
thereto.
Peter Farwell - 56
Vice President - Corporate Relations of the Company and of
Harcourt General.
Paul F. Gibbons - 48
Vice President and Treasurer of the Company and of Harcourt
General.
Gerald T. Hughes - 42
Vice President - Human Resources of the Company and of
Harcourt General.
7
Catherine N. Janowski - 38
Vice President and Controller of the Company and of Harcourt
General since November 1997; Director, Corporate Accounting
of the Company and of Harcourt General prior thereto.
Gail S. Mann - 48
Vice President- Corporate Law of the Company and of Harcourt
General since August 1999; Vice President, Assistant General
Counsel, Secretary and Clerk, Digital Equipment Corporation
from 1994 until September 1998.
Michael F. Panutich - 51
Vice President - General Auditor of the Company and of
Harcourt General.
Paul J. Robershotte - 45
Vice President - Strategy and Business Development of the
Company and of Harcourt General since February 1999;
President and Chief Executive Officer of Age Wave
Communications from February 1996 until June 1998; Executive
Vice President and Chief Operating Officer of Age Wave, Inc.
from May 1995 until February 1996; Vice President and
Director of Bain & Co. prior thereto.
Item 11. Executive Compensation
The response to this Item is contained in the Proxy Statement for
the 2000 Annual Meeting of Stockholders under the captions
"Directors' Compensation", "Executive Compensation" and
"Transactions Involving Management" and is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The response to this Item is contained in the Proxy Statement for
the 2000 Annual Meeting of Stockholders under the caption "Stock
Ownership of Certain Beneficial Owners and Management" and is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The response to this Item is contained in the Proxy Statement for
the 2000 Annual Meeting of Stockholders under the captions
"Executive Compensation" and "Transactions Involving Management"
and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
14(a)(1) Consolidated Financial Statements
The documents listed below are incorporated herein by reference
8
to the 1999 Annual Report, and are incorporated herein by
reference into Item 8 hereof:
Consolidated Balance Sheets - July 31, 1999 and August 1, 1998
Consolidated Statements of Earnings for the fiscal years ended July
31, 1999, August 1, 1998 and August 2, 1997.
Consolidated Statements of Cash Flows for the fiscal years ended July
31, 1999, August 1, 1998 and August 2, 1997.
Consolidated Statements of Common Shareholders' Equity for the fiscal
years ended July 31, 1999, August 1, 1998 and August 2, 1997.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
14(a)(2) Consolidated Financial Statement Schedules
The document and schedule listed below are filed as part of this Form 10-K:
Page in
Document/Schedule Form 10-K
Independent Auditors' Report on F-1
Consolidated Financial
Statement Schedule
Schedule II - Valuation and F-2
Qualifying Accounts and
Reserves
All other schedules for which provision is made in the applicable
regulations of the Securities and Exchange Commission have been omitted
because the information is disclosed in the Consolidated Financial
Statements or because such schedules are not required or are not
applicable.
14(a)(3) Exhibits
The exhibits filed as part of this Annual Report are listed in the
Exhibit Index immediately preceding the exhibits. The Company has
identified with an asterisk in the Exhibit Index each management
contract and compensation plan filed as an exhibit to this Form 10-K in
response to Item 14(c) of Form 10-K.
14(b) Reports on Form 8-K
On May 27, 1999, the Company filed a report on Form 8-K describing a
proposed recapitalization of the Company (the "Recapitalization") intended
to facilitate the plan of Harcourt General, Inc. to spin off to its
stockholders most of its controlling equity position in the Company.
9
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.
10
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
The Neiman Marcus Group, Inc.
Chestnut Hill, MA
We have audited the consolidated financial statements of The Neiman
Marcus Group, Inc. and subsidiaries as of July 31, 1999 and August 1,
1998, and for each of the three fiscal years in the period ended July
31, 1999, and have issued our report thereon dated August 31, 1999
(September 22, 1999 as to Note 16); such financial statements and report
are included in your 1999 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the
financial statement schedule of The Neiman Marcus Group, Inc. and
subsidiaries, listed in Item 14. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is
to express an opinion based on our audits. In our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
August 31, 1999
(September 22, 1999 as to Note 16)
F-1
<TABLE>
THE NEIMAN MARCUS GROUP, INC. SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
THREE YEARS ENDED JULY 31, 1999
(In thousands)
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions
_____________________
Balance at Charged to Charged to Balance at
Beginning Costs and Other Deductions - End
Description of Period Expenses Accounts - (A) of Period
_________________________________________________________________________________________________________________
YEAR ENDED JULY 31, 1999
<S> <C> <C> <S> <C> <C>
Allowance for doubtful accounts $1,800 2,366 - 1,866 $2,300
(deducted from accounts receivable)
YEAR ENDED AUGUST 1, 1998
Allowance for doubtful accounts $1,700 2,771 - 2,671 $1,800
(deducted from accounts receivable)
YEAR ENDED AUGUST 2, 1997
Allowance for doubtful accounts
(deducted from accounts receivable) $1,300 2,815 - 2,415 $1,700
(A) Write-off of uncollectible accounts net of recoveries.
</TABLE>
F-2
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
THE NEIMAN MARCUS GROUP, INC.
By: /s/ Robert A. Smith
Robert A. Smith
Co-Chief Executive Officer
By: /s/ Brian J. Knez
Brian J. Knez
Co-Chief Executive Officer
Dated: October 27, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the following capacities and on the dates
indicated.
Signature Title Date
Principal Executive Officers:
/s/ Robert A. Smith Co-Chief Executive Officer October 27, 1999
Robert A. Smith
/s/ Brian J. Knez Co-Chief Executive Officer October 27, 1999
Brian J. Knez
Principal Financial Officer:
/s/ John R. Cook Senior Vice President and October 27, 1999
John R. Cook Chief Financial Officer
Principal Accounting Officer:
/s/ Catherine N. Janowski Vice President and October 27, 1999
Catherine N. Janowski Controller
S-1
Directors:
/s/ Richard A. Smith October 27, 1999
Richard A. Smith
/s/ John R. Cook October 27, 1999
John R. Cook
October ---,1999
Matina S. Horner
/s/ Brian J. Knez October 27, 1999
Brian J. Knez
/s/ Vincent M. O'Reilly October 27, 1999
Vincent M. O'Reilly
/s/ Walter J. Salmon October 27, 1999
Walter J. Salmon
/s/ Jean Head Sisco October 27, 1999
Jean Head Sisco
/s/ Robert A. Smith October 27, 1999
Robert A. Smith
S-2
EXHIBIT INDEX
3.1(a) Restated Certificate of Incorporation
of the Company.
3.1(b) Certificates of Designation with respect to Series
A Junior Participating Preferred Stock, Series B
Junior Participating Preferred Stock and Series C
Junior Participating Preferred Stock.
3.2 By-Laws of the Company.
4.1 Indenture, dated as of May 27, 1998, between the
Company and The Bank of New York, as trustee
(the "Indenture")incorporated herein by reference to
the Company's Annual Report on Form 10-K for the
fiscal year ended August 1, 1998.
4.2 Form of 6.65% Senior Note Due 2008, dated May 27,
1998, issued by the Company pursuant to the Indenture,
incorporated herein by reference to the Company's
Annual Report on Form 10-K for the fiscal year
ended August 1, 1998.
4.3 Form of 7.125% Senior Note Due, 2008, dated May 27,
1998, issued by the Company pursuant to the Indenture,
incorporated herein by reference to the Company's
Annual Report on Form 10-K for the fiscal year
ended August 1, 1998.
4.4 Rights Agreement, dated as of October 6, 1999,
between the Company and BankBoston, N.A., as
Rights Agent, incorporated herein by reference to
Exhibit 4 to the Company's Registration Statement
on Form 8-A dated October 15, 1999.
*10.1 Intercompany Services Agreement, dated as of July
24, 1987 between Harcourt General and the Company,
incorporated by reference herein to the Company's
Annual Report on Form 10-K for the twenty-six week
period ended August 1, 1987.
*10.2 1987 Stock Incentive Plan, incorporated herein by
reference to the Company's Annual Reporton Form 10-K
for the twenty-six week period ended August 1, 1987.
*10.3 The Neiman Marcus Group, Inc. 1997 Incentive Plan,
incorporated herein by reference to Exhibit A to the
Company's Definitive Schedule 14A dated December 10,
1996 and filed with the Securities and Exchange
Commission.
E-1
*10.4 Employment Agreement between the Company and
Burton M. Tansky effective February 1, 1997, incorporated
herein by reference to the Company's Annual Report on
10-K for the fiscal year ended August 3, 1996.
*10.5 Termination and Change of Control Agreement
between the Company and Gerald A. Sampson dated September
17, 1998, incorporated herein by reference to the Company's
Annual Report or Form 10-K for the fiscal year
ended August 1, 1998.
*10.6 Termination Agreement between Bergdorf Goodman,
Inc. and Stephen C. Elkin, effective September 1993,
incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended
July 31, 1993.
*10.7 Key Executive Stock Purchase Loan Plan, as
amended, incorporated herein by reference to the
Company's Annual Report on Form 10-K for
the fiscal year ended August 2, 1997.
*10.8 Supplemental Executive Retirement Plan,
incorporated herein by reference to the Company's
Annual Report on Form 10-K for the fiscal
year ended July 30, 1988.
*10.9 Description of the Company's Executive Life
Insurance Plan, incorporated herein by reference
to the Company's Annual Report on Form 10-K for
the fiscal year ended August 1, 1992.
*10.10 Supplementary Executive Medical Plan, incorporated
herein by reference to the Company's Annual Report
on Form 10-K for the fiscal year ended July 31, 1993.
*10.11 Key Employee Deferred Compensation Plan, as
amended, incorporated herein by reference to the
Company's Annual Report on Form 10-K for
the fiscal year ended July 30, 1994.
*10.12 Deferred Compensation Plan For Non-Employee
Directors, as amended, incorporated herein by
reference to the Company's Annual Report on Form
10-K for the fiscal year ended August 1, 1998.
E-2
10.13(a) Credit Agreement dated as of October 29, 1997
among the Company, the Banks parties thereto, Bank
of America National Trust and Savings Association,
as Syndication Agent, The Chase Manhattan Bank,
as Documentation Agent, and Morgan Guaranty Trust
Company of New York, as Administrative Agent, (the
"Credit Agreement") incorporated herein by
reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended November 1, 1997.
10.13(b) Amendment to the Credit Agreement dated August 27,
1999.
10.14 Receivables Purchase Agreement, dated as of March
1, 1995, between the Company and Neiman Marcus Funding
Corporation, incorporated herein by reference to Exhibit
10.1 to Registration Statement on Form S-3 of Neiman
Marcus Group Credit Card Master Trust dated March 3,
1995 (Registration No. 33-88098).
10.15 Pooling and Servicing Agreement, dated as of March
1, 1995, between Neiman Marcus Funding Corporation,
the Company and The Chase Manhattan Bank, N.A.,
incorporated herein by reference to Exhibit 4.1
to Registration Statement on Form S-3 of Neiman
Marcus Group Credit Card Master Trust dated March 3,
1995(Registration No. 33-88098).
10.16 Series 1995-1 Supplement to the Pooling and
Servicing Agreement, dated as of March 1, 1995,
among Neiman Marcus Funding Corporation,
the Company and The Chase Manhattan Bank, N.A.,
incorporated herein by reference to Exhibit 4.2
to Registration Statement on Form S-3 of
Neiman Marcus Group Credit Card Master Trust dated
March 3, 1995 (Registration No. 33-88098).
10.17 Exchange and Repurchase Agreement between The
Neiman Marcus Group, Inc. and Harcourt General, Inc.,
incorporated herein by Reference to Exhibit 10.1 to
Registration Statement on Form S-3 of The
Neiman Marcus Group, Inc. dated October 10, 1996
(Registration No. 333-11721).
10.18 Amended and Restated Agreement and Plan of Merger,
dated as of July 1, 1999, among The Neiman Marcus
Group, Inc., Harcourt General, Inc. and Spring
Merger Corporation, incorporated herein by
reference to the Company's Definitive Schedule
14A dated August 10, 1999.
10.19 Amended and Restated Distribution Agreement, dated
as of July 1, 1999, between Harcourt General, Inc.
and The Neiman Marcus Group, Inc., incorporated
herein by reference to the Company's Definitive
Schedule 14A dated August 10, 1999.
E-3
10.20 Agreement, dated as of September 1, 1999, among
the Company and certain holders of the Company's
Class B Common Stock.
13.1 The following sections of the 1999 Annual Report
to Shareholders ("1999 Annual Report") which are
expressly incorporated by reference into this
Annual Report on Form 10-K:
Management's Discussion and Analysis at pages
16 through 21 of the 1999 Annual Report.
Consolidated Financial Statements and the Notes
thereto at pages 22 through 38 of the 1999
Annual Report.
Independent Auditors' Report at page 39 of the
1999 Annual Report.
The information appearing under the caption
"Selected Financial Data" on page 40 of the
1999 Annual Report.
The information appearing under the captions
"Stock Information" and "Shares Outstanding" on
page 41 of the 1999 Annual Report.
21.1 Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule.
99.1 Dividend Reinvestment and Common Stock Purchase
Plan, incorporated herein by reference to the Company's
Registration Statement on Form S-3 dated September 17,
1990 (Registration No. 33-36419).
___________________________________________
* Exhibits filed pursuant to Item 14(c) of Form 10-K.
E-4
EXHIBIT 3.1(a)
RESTATED CERTIFICATE OF INCORPORATION
of
THE NEIMAN MARCUS GROUP, INC.
First: The name of the Corporation is The Neiman
Marcus Group, Inc. (hereinafter the "Corporation").
Second: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in
the City of Wilmington, County of New Castle. The name of its
registered agent at that address is The Corporation Trust
Company.
Third: The purpose of the Corporation is to engage in
any lawful act or activity for which a corporation may be
organized under the General Corporation Law of the State of
Delaware (the "GCL").
Fourth:
1. Authorized Stock. The total number of shares
which the Corporation is authorized to issue is three hundred
million (300,000,000) shares. Two hundred fifty million
(250,000,000) shares shall be designated common stock (the
"Common Stock"), of which one hundred million (100,000,000)
shares shall be designated Class A Common Stock (the "Class A
Common Stock"), one hundred million (100,000,000) shares shall be
designated Class B Common Stock (the "Class B Common Stock") and
fifty million (50,000,000) shares shall be designated Class C
Common Stock (the "Class C Common Stock"). Fifty million
(50,000,000) shares shall be designated preferred stock (the
"Preferred Stock"), all of which are presently undesignated as to
series. Each share of Preferred Stock shall have a par value of
$0.01 and each share of Common Stock shall have a par value of
$0.01.
2. Common Stock. The Class A Common Stock, the Class
B Common Stock and the Class C Common Stock shall be identical in
all respects, except as otherwise expressly provided herein. The
relative powers, preferences, rights, qualifications, limitations
and restrictions of the shares of Class A Common Stock, Class B
Common Stock and Class C Common Stock shall be as follows:
(a) Cash Dividends. Subject to the rights and
preferences of the Preferred Stock as set forth in any resolution
or resolutions of the Board of Directors providing for the
issuance of such stock pursuant to this Article Fourth, and
except as otherwise provided for herein, the holders of Class A
Common Stock, Class B Common Stock and Class C Common Stock are
entitled to receive dividends out of assets legally available
therefor at such times and in such per share amounts as the Board
of Directors may from time to time determine; provided that
whenever a cash dividend is paid, the same amount shall be paid
in respect of each outstanding share of Class A Common Stock,
Class B Common Stock and Class C Common Stock.
(b) Stock Dividends. If at any time a dividend is to
be paid in shares of Class A Common Stock, shares of Class B
Common Stock or shares of Class C Common Stock (a "stock
dividend"), such stock dividend may be declared and paid only as
follows: only Class A Common Stock may be paid to holders of
Class A Common Stock, only Class B Common Stock may be paid to
holders of Class B Common Stock and only Class C Common Stock may
be paid to holders of Class C Common Stock. Whenever a stock
dividend is paid, the same rate or ratio of shares shall be paid
in respect of each outstanding share of Class A Common Stock,
Class B Common Stock and Class C Common Stock.
(c) Property Dividends. If at any time a dividend is
to be paid in rights to purchase shares of Series A Preferred
Stock, shares of Series B Preferred Stock or shares of Series C
Preferred Stock (a "rights dividend") (including in each case
with adjustments that will, under certain circumstances,
constitute rights to purchase Class A Common Stock, Class B
Common Stock and Class C Common Stock, respectively), such rights
dividend may be declared and paid only as follows: only rights
to purchase Series A Preferred Stock may be paid to holders of
Class A Common Stock, only rights to purchase Series B Preferred
Stock may be paid to holders of Class B Common Stock and only
rights to purchase Series C Preferred Stock may be paid to
holders of Class C Common Stock. Whenever any other property
dividend is paid, the same rate or ratio of shares or other
property shall be paid in respect of each outstanding share of
Class A Common Stock, Class B Common Stock and Class C Common
Stock. The references in this paragraph to any series of
preferred stock contemplate the issuance of such preferred stock
pursuant to a stockholders rights plan adopted by the
Corporation.
(d) Stock Subdivisions and Combinations. The
Corporation shall not subdivide, reclassify or combine stock of
any class of Common Stock without at the same time making a
proportionate subdivision, reclassification or combination of
shares of the other classes.
(e) Voting. Voting power shall be divided between the
classes of stock as follows:
(i) Subject to Sections (2)(e)(ii) and (2)(e)(iv)
of this Article Fourth, with respect to the election of
directors, holders of Class A Common Stock and holders of Class C
Common Stock, voting together as a class, shall be entitled to
elect that number of directors which constitutes 18% of the
authorized number of members of the Board of Directors (or, if
such 18% is not a whole number, then the nearest lower whole
number) (the "Class A Directors"). Each share of Class A Common
Stock shall have one vote in the election of the Class A
Directors and each share of Class C Common Stock shall have one-
tenth (1/10th) of one vote in the election of the Class A
Directors. Subject to Section (2)(e)(ii) of this Article Fourth,
holders of Class B Common Stock shall be entitled to elect the
remaining directors (the "Class B Directors"). The initial Class
A Director shall be designated by a majority of the directors of
the Corporation as of the effectiveness of this Amendment, and
the holders of Class A Common Stock and Class C Common Stock,
voting together as a class, shall be entitled to vote for the
election or replacement of such Class A Director in satisfaction
of their "Special Voting Rights" as defined in clause (ii) below,
at the next election of directors of the Class (e.g. Class I,
Class II or Class III) in which such director serves are elected.
Each share of Class B Common Stock shall have one vote in the
election of Class B Directors. For purposes of this Section
(2)(e)(i), references to the authorized number of members of the
Board of Directors shall not include any directors which the
holders of any shares of any series of Preferred Stock have the
right to elect.
(ii) For purposes of this Section (2)(e)(ii),
"Special Voting Rights" means the different voting rights of the
holders of Class A Common Stock and Class C Common Stock, on the
one hand, and holders of Class B Common Stock, on the other hand,
with respect to the election of the applicable percentage of the
authorized number of members of the Board of Directors as
described in Section (2)(e)(i). If approved by the Board of
Directors, at any annual or special meeting of stockholders of
the Corporation held at any time after the fifth anniversary of
the distribution by Harcourt General, Inc. to its stockholders of
all of the Class B Common Stock owned by it (the "Fifth Year
Anniversary"), a majority of the outstanding shares of the Class
A Common Stock and Class C Common Stock, voting together as a
class, and a majority of the outstanding shares of the Class B
Common Stock, voting separately as a class, may vote to eliminate
the Special Voting Rights, in which case Section (2)(e)(i) of
this Article Fourth shall have no further force or effect, and
thereafter holders of Common Stock shall have voting rights as
are specified in Section (2)(e)(iv) of this Article Fourth and
shall be entitled to elect all members of the Board of Directors.
This Section (2)(e)(ii) shall not be amended prior to the Fifth
Year Anniversary without the affirmative vote of the holders of
at least 66-2/3% of the combined voting power of all of the
Voting Stock, voting together as a single class, together with
any vote of the holders of any class of stock required by law.
(iii) Unless the Special Voting Rights have
been eliminated in accordance with Section (2)(e)(ii) of Article
Fourth, all newly-created directorships resulting from an
increase in the authorized number of directors shall be allocated
between Class A Directors and Class B Directors such that at all
times the number of Class A directorships shall be 18% of the
authorized number of members of the Board of Directors (or, if
such 18% is not a whole number, then the nearest lower whole
number) and the remaining directorships shall be Class B
directorships.
(iv) Except as otherwise specified herein or
required by law, the holders of Class A Common Stock, Class B
Common Stock and Class C Common Stock shall in all matters not
otherwise specified in this Section (2)(e) of this Article Fourth
vote together as one class (including, without limitation, with
respect to increases or decreases in the authorized number of
shares of any class of stock of the Corporation and without the
vote of any class voting separately as a class), with each share
of Class A Common Stock and Class B Common Stock having one vote
and each share of Class C Common Stock having one-tenth (1/10th)
vote.
(v) Every reference in this Restated Certificate
of Incorporation or the Corporation's Amended and Restated By-
laws to a majority or other proportion of shares of stock shall
refer to such majority or other proportion of the votes of such
shares of stock.
(f) Merger or Consolidation. The Corporation shall
not enter into any consolidation of the Corporation with one or
more other corporations, a merger of the Corporation with
another corporation, a reorganization of the Corporation or other
similar combination of the Corporation with one or more third
parties, in which each holder of a share of Class A Common Stock,
Class B Common Stock and Class C Common Stock is not entitled to
receive with respect to such share the same kind and amount of
shares of stock and other securities and property (including
cash) receivable upon such consolidation, merger, reorganization
or other combination as each other holder of a share of Class A
Common Stock, Class B Common Stock and Class C Common Stock;
provided that, in any such transaction, the holders of shares of
Class A Common Stock, Class B Common Stock and Class C Common
Stock may each receive different kinds of shares of stock that
differ to the extent and only to the extent that the Board of
Directors determines in good faith that such shares differ with
respect to the rights of holders of such shares as the Class A
Common Stock, Class B Common Stock and Class C Common Stock
differ as provided herein.
(g) Liquidation. In the event of any liquidation,
dissolution or winding up of the Corporation, the holders of the
Class A Common Stock, Class B Common Stock and Class C Common
Stock shall participate equally per share in any distribution to
stockholders, without distinction between classes.
The Board of Directors is hereby authorized from time
to time to provide by resolution for the issuance of shares of
Preferred Stock in one or more series not exceeding the aggregate
number of shares of Preferred Stock authorized by this Restated
Certificate of Incorporation, as amended from time to time; and
to determine with respect to each such series the voting powers,
if any (which voting powers if granted may be full or limited),
designations, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations or
restrictions relating thereto; including without limiting the
generality of the foregoing, the voting rights relating to shares
of Preferred Stock of any series (which may be one or more votes
per share or a fraction of a vote per share, which may vary over
time and which may be applicable generally or only upon the
happening and continuance of stated events or conditions), the
rate of dividend to which holders of Preferred Stock of any
series may be entitled (which may be cumulative or
noncumulative), the rights of holders of Preferred Stock of any
series in the event of liquidation, dissolution or winding up of
the affairs of the Corporation, the rights, if any, of holders of
Preferred Stock of any series to convert or exchange such shares
of Preferred Stock of such series for shares of any other class
or series of capital stock or for any other securities, property
or assets of the Corporation or any subsidiary (including the
determination of the price or prices or the rate or rates
applicable to such rights to convert or exchange and the
adjustment thereof, the time or times during which the right to
convert or exchange shall be applicable and the time or times
during which a particular price or rate shall be applicable),
whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and
at different redemption dates, and whether any shares of that
series shall be redeemed pursuant to a retirement or sinking fund
or otherwise and the terms and conditions of such obligation.
Before the Corporation shall issue any shares of
Preferred Stock of any series, a certificate setting forth a copy
of the resolution or resolutions of the Board of Directors,
fixing the voting powers, designations, preferences, the
relative, participating, optional or other rights, if any, and
the qualifications, limitations and restrictions, if any,
relating to the shares of Preferred Stock of such series, and the
number of shares of Preferred Stock of such series authorized by
the Board of Directors to be issued shall be made under seal of
the Corporation and signed by and shall be filed and a copy
thereof recorded in the manner prescribed by the GCL. The Board
of Directors is further authorized to increase or decrease (but
not below the number of such shares of such series then
outstanding) the number of shares of any series subsequent to the
issuance of shares of that series.
Fifth: The directors shall have concurrent power with
the stockholders to make, alter, amend, change, add to or repeal
the By-Laws of the Corporation.
Sixth: Whenever a compromise or arrangement is
proposed between the Corporation and its creditors or any class
of them and/or between the Corporation and its stockholders or
any class of them, any court of equitable jurisdiction within the
State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the
Corporation under the provisions of Section 291 of the GCL or on
the application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the provisions of
Section 279 of the GCL, order a meeting of the creditors or class
of creditors, and/or of the stockholders or class of stockholders
of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of
the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as a
consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if
sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors,
and/or on all the stockholders or class of stockholders, of the
Corporation, as the case may be, and also on the Corporation.
Seventh: Except as otherwise fixed pursuant to the
provisions of Article Fourth of this Restated Certificate of
Incorporation relating to the rights of the holders of any one or
more classes or series of Preferred Stock issued by the
Corporation to call an annual or special meeting of stockholders,
special meetings of the stockholders of the Corporation may not
be called by the stockholders of the Corporation.
Eighth: Notwithstanding the GCL, any action required
to be taken or which may be taken by the holders of the Common
Stock must be effected at a duly called annual or special meeting
of such holders and may not be taken by any consent in writing by
such holders.
Ninth: The directors shall be divided into three
classes, designated Class I, Class II and Class III. Each class
shall consist, as nearly as may be possible, of one third of the
total number of directors constituting the entire Board of
Directors. Initially, Class I directors shall be elected for a
one-year term, Class II directors for a two-year term and
Class III directors for a three-year term. At the annual meeting
of stockholders beginning in 1988, successors to the class of
directors whose term expires at that annual meeting shall be
elected for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class
as nearly equal as possible, and any additional director of any
class elected to fill a vacancy resulting from an increase in
such class shall hold office for a term that shall coincide with
the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting
for the year in which his term expires and until his successor
shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from
office. Any vacancy in the office of a director created by the
death, resignation, retirement, disqualification, removal from
office of a director or other cause, elected by (or appointed on
behalf of) the holders of the Class B Common Stock, on the one
hand, or the holders of the Class A Common Stock and any other
class of stock entitled to vote for the class of directors
elected by the holders of the Class A Common Stock, on the other
hand, as the case may be, shall be filled by the vote of the
majority of the directors (or the sole remaining director)
elected by (or appointed on behalf of) such holders of Class B
Common Stock, on the one hand, or Class A Common Stock and any
other class of stock entitled to vote for the class of directors
elected by the holders of the Class A Common Stock, on the other
hand (or on behalf of whom that director was appointed), as the
case may be, unless there are no such directors in such Class, in
which case such vacancy shall be filled by the stockholders of
such Class, or the Special Voting Rights have been eliminated in
accordance with Section (2)(e)(ii) of Article Fourth, in which
case such vacancy shall be filled by the vote of the majority of
the directors (or the sole remaining director), regardless of any
quorum requirements set out in the By-laws. Any director elected
to fill a vacancy not resulting from an increase in the number of
directors shall have the same remaining term as that of his
predecessor.
Unless the Special Voting Rights have been eliminated
in accordance with Section (2)(e)(ii) of Article Fourth, all
newly-created directorships resulting from an increase in the
authorized number of directors shall be allocated pursuant to
Section (2)(e)(iii) of Article Fourth. Once such newly-created
directorships have been allocated as Class A Directors or Class B
Directors, such newly-created directorships shall be filled by
the vote of the majority of the directors in such Class (or the
sole remaining director in such Class), as the case shall be,
unless there are no such directors in such Class, in which case
such vacancy shall be filled by the stockholders of such Class,
or the Special Voting Rights have been eliminated in accordance
with Section (2)(e)(ii) of Article Fourth, in which case such
vacancy shall be filled by the vote of the majority of the
directors (or the sole remaining director), regardless of any
quorum requirements set out in the By-laws.
In the event that there are no remaining directors, any
vacancy in the office of a director shall be filled by the vote
of the majority of stockholders who elected such director (or on
whose behalf such director was appointed.
Notwithstanding the foregoing, whenever pursuant to the
provisions of Article Fourth of this Restated Certificate of
Incorporation, the holders of any one or more classes or series
of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors
at an annual or special meeting of stockholders, the election,
term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Restated
Certificate of Incorporation applicable thereto, and such
directors so elected shall not be divided into classes pursuant
to this Article Ninth unless expressly provided by such terms.
Tenth: No director shall be personally liable to the
Corporation or any of its stockholders for monetary damages for
breach of fiduciary duty as a director except for liability
(i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the
GCL or (iv) for any transaction from which the director derived
an improper personal benefit. Any repeal or modification of this
Article Tenth by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification
with respect to acts or omissions for or with respect to any acts
or omissions of such director occurring prior to such repeal or
modification.
Eleventh: Subject to Article Fifth and notwithstanding
anything else contained in this Restated Certificate of
Incorporation to the contrary, the affirmative vote of the
holders of at least 66 2/3% of the combined voting power of all
of the Voting Stock, voting together as a single class, shall be
required to alter, amend, rescind or repeal (A) Article Seventh,
Article Eighth, Article Ninth or this Article Eleventh or to
adopt any provision inconsistent therewith or (B) Section 3 of
Article II, Sections 1, 2 and 10 of Article III, Article VIII or
Article IX of the By-Laws of the Corporation or to adopt any
provision inconsistent therewith.
"Voting Stock" shall mean the securities of the
Corporation which are entitled to vote generally for the election
of directors of the Corporation.
Twelfth: Except as otherwise fixed pursuant to Article
Fourth of this Restated Certificate of Incorporation relating to
the rights of the holders of any one or more classes or series of
Preferred Stock issued by the Corporation acting separately by
class or series, to elect, under specified circumstances,
directors at an annual or special meeting of stockholders, the
Board of Directors shall consist of not less than six nor more
than nine persons, the exact number to be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution
adopted by a majority of the Board of Directors. The affirmative
vote of the holders of at least 66-2/3% of the combined voting
power of all of the Voting Stock, voting together as a single
class, shall be required to alter, amend, rescind or repeal this
Article or to adopt any provision inconsistent therewith.
Thirteenth: Notwithstanding anything else contained in
this Restated Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least 66-2/3% of the
combined voting power of the Voting Stock, voting together as a
single class, shall be required for the Corporation to effect or
consummate:
(1) any merger or consolidation of the Corporation
with or into any other corporation;
(2) any sale, lease, exchange or other disposition of
all or substantially all of the assets of the Corporation to
or with any other person; or
(3) any issuance by the Corporation of any voting
securities of the Corporation which issuance would require
approval by the stockholders of the Corporation pursuant to
the GCL or the rules of any exchange on which the voting
securities of the Corporation are listed, other than an
issuance by the Corporation of voting securities as required
by any stockholder rights plan adopted by the Corporation,
unless such issuance has been approved by a resolution
adopted by not less than two-thirds of all the directors
then in office;
provided, however, that the foregoing requirement shall not
apply, and the provisions of the GCL relating to the
percentage of stockholder approval, if any, shall apply to
any merger or other transaction described in the preceding
subparagraphs (1), (2) or (3) if the other party to the
merger or other transaction is a Subsidiary of the
corporation.
For purposes of this Article Thirteenth a "Subsidiary" is
any corporation more than 50% of the voting securities of
which are owned directly or indirectly by the Corporation;
and a "person" is any individual, partnership, corporation
or entity.
The affirmative vote of the holders of at least 66-2/3% of
the combined voting power of all of the Voting Stock, voting
together as a single class, shall be required to alter,
amend, rescind or repeal this Article or to adopt any
provision inconsistent therewith.
This Article Thirteenth shall be of no further force and
effect from and after the Fifth Year Anniversary.
EXHIBIT 3.1(b)
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
THE NEIMAN MARCUS GROUP, INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
___________________
The Neiman Marcus Group, Inc., a corporation organized
and existing under the General Corporation Law of the State of
Delaware (hereinafter called the "Company"), hereby certifies
that the following resolution was duly adopted by the Board of
Directors of the Company as required by Section 151 of the
General Corporation Law of the State of Delaware at a meeting
duly called and held on October 6, 1999:
RESOLVED, that pursuant to the authority granted to and
vested in the Board of Directors of the Company (hereinafter
called the "Board of Directors" or the "Board") in accordance
with the provisions of the Company's Restated Certificate of
Incorporation, as amended to date (hereinafter called the
"Certificate of Incorporation"), the Board of Directors hereby
creates a series of Preferred Stock, par value $.01 per share
(the "Preferred Stock"), of the Company and hereby adopts the
resolution establishing the designation, number of shares,
preferences, voting powers and other rights, and the restrictions
and limitations thereof, as follows:
Section 1. Designation and Amount. The shares of such
series shall be designated as "Series A Junior Participating
Preferred Stock" (the "Series A Preferred Stock") and the number
of shares constituting the Series A Preferred Stock shall be
100,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series A Preferred Stock to
a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Company convertible into
Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares
of any series of Preferred Stock (or any similar stock) ranking
prior and superior to the Series A Preferred Stock with respect
to dividends, the holders of shares of Series A Preferred Stock,
in preference to the holders of Class A Common Stock, par value
$.01 per share, of the Company ("Class A Common Stock"), Class B
Common Stock, par value $.01 per share, of the Company ("Class B
Common Stock") and Class C Common Stock, par value $.01 per
share, of the Company ("Class C Common Stock" and, together with
the Class A Common Stock and Class B Common Stock, the "Common
Stock") and of any other stock of the Company ranking junior to
the Series A Preferred Stock, and on a pari passu basis with the
Series B Preferred Stock and the Series C Preferred Stock, shall
be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for such purpose,
quarterly dividends payable in cash on the last day of March,
June, September and December in each year (each such date being
referred to herein as a "Dividend Payment Date"), commencing on
the first Dividend Payment Date after the first issuance of a
share or fraction of a share of Series A Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the
greater of (a) $1 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount
of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Class A
Common Stock, declared on the Class A Common Stock since the im-
mediately preceding Dividend Payment Date or, with respect to the
first Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the
event the Company shall at any time after October 18, 1999
declare or pay any dividend on the Class A Common Stock payable
in shares of Class A Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Class A
Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Class A Common Stock) into a greater or
lesser number of shares of Class A Common Stock, then in each
such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is
the number of shares of Class A Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Class A Common Stock that were outstanding
immediately prior to such event.
(B) The Company shall declare a dividend or
distribution on the Series A Preferred Stock as provided in
paragraph (A) of this Section immediately after it declares a
dividend or distribution on the Class A Common Stock (other than
a dividend payable in shares of Class A Common Stock); provided,
that, in the event no dividend or distribution shall have been
declared on the Class A Common Stock during the period between
any Dividend Payment Date and the next subsequent Dividend
Payment Date, a dividend of $1 per share on the Series A Prefer-
red Stock shall nevertheless be payable, when, as and if
declared, on such subsequent Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative,
whether or not earned or declared, on outstanding shares of
Series A Preferred Stock from the Dividend Payment Date next
preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first
Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Dividend Payment Date or is a date
after the record date for the determination of holders of shares
of Series A Preferred Stock entitled to receive a quarterly
dividend and before such Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be
cumulative from such Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares
of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date
shall be not more than 60 days prior to the date fixed for the
payment thereof.
Section 3. Voting Rights. The holders of shares of
Series A Preferred Stock shall have the following voting rights;
(A) Subject to the provision for adjustment
hereinafter set forth and except as otherwise provided in the
Certificate of Incorporation or required by law, each share of
Series A Preferred Stock shall entitle the holder thereof to a
number of votes equal to 1,000 times the number of votes which
each share of Class A Common Stock is entitled to vote, on all
matters upon which the holders of the Class A Common Stock of the
Company are entitled to vote. In the event the Company shall at
any time after October 18, 1999 declare or pay any dividend on
the Class A Common Stock payable in shares of Class A Common
Stock, or effect a subdivision or combination or consolidation of
the outstanding shares of Class A Common Stock (by
reclassification or otherwise than by payment of a dividend in
shares of Class A Common Stock) into a greater or lesser number
of shares of Class A Common Stock, then in each such case the
number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Class A Common
Stock outstanding immediately after such event and the
denominator of which is the number of shares of Class A Common
Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the
Certificate of Incorporation or in any other Certificate of
Designations creating a series of Preferred Stock or any similar
stock, and except as otherwise required by law, the holders of
shares of Series A Preferred Stock and the holders of shares of
Class A Common Stock and any other capital stock of the Company
having general voting rights shall vote together as one class on
all matters submitted to a vote of stockholders of the Company.
(C) Except as set forth herein, or as otherwise
provided by law, holders of Series A Preferred Stock shall have
no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of
Class A Common Stock as set forth herein) for taking any
corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not earned or
declared, on shares of Series A Preferred Stock outstanding shall
have been paid in full, the Company shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking
junior (as to dividends) to the Series A Preferred
Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a
parity (as to dividends) with the Series A Preferred
Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred
Stock, provided that the Company may at any time
redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock
of the Company ranking junior (as to dividends and upon
dissolution, liquidation or winding up) to the Series A
Preferred Stock or rights, warrants or options to
acquire such junior stock;
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock,
or any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except
in accordance with a purchase offer made in writing or
by publication (as determined by the Board of
Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of
the respective annual dividend rates and other relative
rights and preferences of the respective series and
classes, shall determine in good faith will result in
fair and equitable treatment among the respective
series or classes.
(B) The Company shall not permit any subsidiary of the
Company to purchase or otherwise acquire for consideration any
shares of stock of the Company unless the Company could, under
paragraph (A) of this Section 4, purchase or otherwise acquire
such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A
Preferred Stock purchased or otherwise acquired by the Company in
any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof.
Section 6. Liquidation, Dissolution or Winding Up.
Upon any liquidation, dissolution or winding up of the Company,
no distribution shall be made (A) to the holders of the Common
Stock or of shares of any other stock of the Company ranking
junior, upon liquidation, dissolution or winding up, to the
Series A Preferred Stock unless, prior thereto, the holders of
shares of Series A Preferred Stock shall have received $1,000 per
share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not earned or declared, to the
date of such payment, provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for ad-
justment hereinafter set forth, equal to 1,000 times the
aggregate amount to be distributed per share to holders of shares
of Class A Common Stock, or (B) to the holders of shares of stock
ranking on a parity upon liquidation, dissolution or winding up
with the Series A Preferred Stock, except distributions made
ratably on the Series A Preferred Stock and all such parity stock
in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Company shall at any time after
October 18, 1999 declare or pay any dividend on the Class A
Common Stock payable in shares of Class A Common Stock, or effect
a subdivision or combination or consolidation of the outstanding
shares of Class A Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Class A Common Stock)
into a greater or lesser number of shares of Class A Common
Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (A)
of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of
shares of Class A Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Class A Common Stock that were outstanding immediately prior to
such event.
Section 7. Consolidation, Merger, etc. In case the
Company shall enter into any consolidation, merger, combination
or other transaction in which the shares of Class A Common Stock
are converted into, exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case
each share of Series A Preferred Stock shall at the same time be
similarly converted into, exchanged for or changed into an amount
per share (subject to the provision for adjustment hereinafter
set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as
the case may be, into which or for which each share of Class A
Common Stock is converted, exchanged or converted. In the event
the Company shall at any time after October 18, 1999 declare or
pay any dividend on the Class A Common Stock payable in shares of
Class A Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in
shares of Class A Common Stock) into a greater or lesser number
of shares of Class A Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the
conversion, exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Class A Common
Stock outstanding immediately after such event and the
denominator of which is the number of shares of Class A Common
Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A
Preferred Stock shall not be redeemable from any holder.
Section 9. Rank. The Series A Preferred Stock shall
rank, with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding
up of the Company, pari passu with the Series B and the Series C
Preferred Stock, junior to all other series of Preferred Stock
and senior to all classes of Common Stock.
Section 10. Amendment. If any proposed amendment to
the Certificate of Incorporation (including this Certificate of
Designations) would alter, change or repeal any of the
preferences, powers or special rights given to the Series A
Preferred Stock so as to affect the Series A Preferred Stock
adversely, then the holders of the Series A Preferred Stock shall
be entitled to vote separately as a class upon such amendment,
and the affirmative vote of two-thirds of the outstanding shares
of the Series A Preferred Stock, voting separately as a class,
shall be necessary for the adoption thereof, in addition to such
other vote as may be required by the General Corporation Law of
the State of Delaware.
Section 11. Fractional Shares. The Series A Preferred
Stock may be issued in fractions of a share that shall entitle
the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of
holders of Series A Stock.
IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Company by its Secretary this 15th day
of October, 1999.
________________________________________
Name:
Title:
CERTIFICATE OF DESIGNATIONS
OF
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
OF
THE NEIMAN MARCUS GROUP, INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
___________________
The Neiman Marcus Group, Inc., a corporation organized
and existing under the General Corporation Law of the State of
Delaware (hereinafter called the "Company"), hereby certifies
that the following resolution was duly adopted by the Board of
Directors of the Company as required by Section 151 of the
General Corporation Law of the State of Delaware at a meeting
duly called and held on October 6, 1999:
RESOLVED, that pursuant to the authority granted to and
vested in the Board of Directors of the Company (hereinafter
called the "Board of Directors" or the "Board") in accordance
with the provisions of the Company's Restated Certificate of
Incorporation, as amended to date (hereinafter called the
"Certificate of Incorporation"), the Board of Directors hereby
creates a series of Preferred Stock, par value $.01 per share
(the "Preferred Stock"), of the Company and hereby adopts the
resolution establishing the designation, number of shares,
preferences, voting powers and other rights, and the restrictions
and limitations thereof, as follows:
Section 1. Designation and Amount. The shares of such
series shall be designated as "Series B Junior Participating
Preferred Stock" (the "Series B Preferred Stock") and the number
of shares constituting the Series B Preferred Stock shall be
100,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series B Preferred Stock to
a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Company convertible into
Series B Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares
of any series of Preferred Stock (or any similar stock) ranking
prior and superior to the Series B Preferred Stock with respect
to dividends, the holders of shares of Series B Preferred Stock,
in preference to the holders of Class A Common Stock, par value
$.01 per share, of the Company ("Class A Common Stock"), Class B
Common Stock, par value $.01 per share, of the Company ("Class B
Common Stock") and Class C Common Stock, par value $.01 per
share, of the Company ("Class C Common Stock" and, together with
the Class A Common Stock and Class B Common Stock, the "Common
Stock") and of any other stock of the Company ranking junior to
the Series B Preferred Stock, and on a pari passu basis with the
Series C Preferred Stock and the Series A Preferred Stock, shall
be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for such purpose,
quarterly dividends payable in cash on the last day of March,
June, September and December in each year (each such date being
referred to herein as a "Dividend Payment Date"), commencing on
the first Dividend Payment Date after the first issuance of a
share or fraction of a share of Series B Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the
greater of (a) $1 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount
of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Class B
Common Stock, declared on the Class B Common Stock since the im-
mediately preceding Dividend Payment Date or, with respect to the
first Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series B Preferred Stock. In the
event the Company shall at any time after October 18, 1999
declare or pay any dividend on the Class B Common Stock payable
in shares of Class B Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Class B
Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Class B Common Stock) into a greater or
lesser number of shares of Class B Common Stock, then in each
such case the amount to which holders of shares of Series B
Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is
the number of shares of Class B Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Class B Common Stock that were outstanding
immediately prior to such event.
(B) The Company shall declare a dividend or
distribution on the Series B Preferred Stock as provided in
paragraph (A) of this Section immediately after it declares a
dividend or distribution on the Class B Common Stock (other than
a dividend payable in shares of Class B Common Stock); provided,
that, in the event no dividend or distribution shall have been
declared on the Class B Common Stock during the period between
any Dividend Payment Date and the next subsequent Dividend
Payment Date, a dividend of $1 per share on the Series B Prefer-
red Stock shall nevertheless be payable, when, as and if
declared, on such subsequent Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative,
whether or not earned or declared, on outstanding shares of
Series B Preferred Stock from the Dividend Payment Date next
preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first
Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Dividend Payment Date or is a date
after the record date for the determination of holders of shares
of Series B Preferred Stock entitled to receive a quarterly
dividend and before such Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be
cumulative from such Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares
of Series B Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders
of shares of Series B Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date
shall be not more than 60 days prior to the date fixed for the
payment thereof.
Section 3. Voting Rights. The holders of shares of
Series B Preferred Stock shall have the following voting rights;
(A) Subject to the provision for adjustment
hereinafter set forth and except as otherwise provided in the
Certificate of Incorporation or required by law, each share of
Series B Preferred Stock shall entitle the holder thereof to a
number of votes equal to 1,000 times the number of votes which
each share of Class B Common Stock is entitled to vote, on all
matters upon which the holders of the Class B Common Stock of the
Company are entitled to vote. In the event the Company shall at
any time after October 18, 1999 declare or pay any dividend on
the Class B Common Stock payable in shares of Class B Common
Stock, or effect a subdivision or combination or consolidation of
the outstanding shares of Class B Common Stock (by
reclassification or otherwise than by payment of a dividend in
shares of Class B Common Stock) into a greater or lesser number
of shares of Class B Common Stock, then in each such case the
number of votes per share to which holders of shares of Series B
Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Class B Common
Stock outstanding immediately after such event and the
denominator of which is the number of shares of Class B Common
Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the
Certificate of Incorporation or in any other Certificate of
Designations creating a series of Preferred Stock or any similar
stock, and except as otherwise required by law, the holders of
shares of Series B Preferred Stock and the holders of shares of
Class B Common Stock and any other capital stock of the Company
having general voting rights shall vote together as one class on
all matters submitted to a vote of stockholders of the Company.
(C) Except as set forth herein, or as otherwise
provided by law, holders of Series B Preferred Stock shall have
no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of
Class B Common Stock as set forth herein) for taking any
corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series B Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not earned or
declared, on shares of Series B Preferred Stock outstanding shall
have been paid in full, the Company shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking
junior (as to dividends) to the Series B Preferred
Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a
parity (as to dividends) with the Series B Preferred
Stock, except dividends paid ratably on the Series B
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Preferred
Stock, provided that the Company may at any time
redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock
of the Company ranking junior (as to dividends and upon
dissolution, liquidation or winding up) to the Series B
Preferred Stock or rights, warrants or options to
acquire such junior stock;
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series B Preferred Stock,
or any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or
winding up) with the Series B Preferred Stock, except
in accordance with a purchase offer made in writing or
by publication (as determined by the Board of
Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of
the respective annual dividend rates and other relative
rights and preferences of the respective series and
classes, shall determine in good faith will result in
fair and equitable treatment among the respective
series or classes.
(B) The Company shall not permit any subsidiary of the
Company to purchase or otherwise acquire for consideration any
shares of stock of the Company unless the Company could, under
paragraph (A) of this Section 4, purchase or otherwise acquire
such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B
Preferred Stock purchased or otherwise acquired by the Company in
any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof.
Section 6. Liquidation, Dissolution or Winding Up.
Upon any liquidation, dissolution or winding up of the Company,
no distribution shall be made (A) to the holders of the Common
Stock or of shares of any other stock of the Company ranking
junior, upon liquidation, dissolution or winding up, to the
Series B Preferred Stock unless, prior thereto, the holders of
shares of Series B Preferred Stock shall have received $1,000 per
share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not earned or declared, to the
date of such payment, provided that the holders of shares of
Series B Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for ad-
justment hereinafter set forth, equal to 1,000 times the
aggregate amount to be distributed per share to holders of shares
of Class B Common Stock, or (B) to the holders of shares of stock
ranking on a parity upon liquidation, dissolution or winding up
with the Series B Preferred Stock, except distributions made
ratably on the Series B Preferred Stock and all such parity stock
in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Company shall at any time after
October 18, 1999 declare or pay any dividend on the Class B
Common Stock payable in shares of Class B Common Stock, or effect
a subdivision or combination or consolidation of the outstanding
shares of Class B Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Class B Common Stock)
into a greater or lesser number of shares of Class B Common
Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (A)
of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of
shares of Class B Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Class B Common Stock that were outstanding immediately prior to
such event.
Section 7. Consolidation, Merger, etc. In case the
Company shall enter into any consolidation, merger, combination
or other transaction in which the shares of Class B Common Stock
are converted into, exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case
each share of Series B Preferred Stock shall at the same time be
similarly converted into, exchanged for or changed into an amount
per share (subject to the provision for adjustment hereinafter
set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as
the case may be, into which or for which each share of Class B
Common Stock is converted, exchanged or converted. In the event
the Company shall at any time after October 18, 1999 declare or
pay any dividend on the Class B Common Stock payable in shares of
Class B Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in
shares of Class B Common Stock) into a greater or lesser number
of shares of Class B Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the
conversion, exchange or change of shares of Series B Preferred
Stock shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Class B Common
Stock outstanding immediately after such event and the
denominator of which is the number of shares of Class B Common
Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series B
Preferred Stock shall not be redeemable from any holder.
Section 9. Rank. The Series B Preferred Stock shall
rank, with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding
up of the Company, pari passu with the Series C and the Series A
Preferred Stock, junior to all other series of Preferred Stock
and senior to all classes of Common Stock.
Section 10. Amendment. If any proposed amendment to
the Certificate of Incorporation (including this Certificate of
Designations) would alter, change or repeal any of the
preferences, powers or special rights given to the Series B
Preferred Stock so as to affect the Series B Preferred Stock
adversely, then the holders of the Series B Preferred Stock shall
be entitled to vote separately as a class upon such amendment,
and the affirmative vote of two-thirds of the outstanding shares
of the Series B Preferred Stock, voting separately as a class,
shall be necessary for the adoption thereof, in addition to such
other vote as may be required by the General Corporation Law of
the State of Delaware.
Section 11. Fractional Shares. The Series B Preferred
Stock may be issued in fractions of a share that shall entitle
the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of
holders of Series B Stock.
IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Company by its Secretary this 15th day
of October, 1999.
________________________________________
Name:
Title:
CERTIFICATE OF DESIGNATIONS
OF
SERIES C JUNIOR PARTICIPATING PREFERRED STOCK
OF
THE NEIMAN MARCUS GROUP, INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
___________________
The Neiman Marcus Group, Inc., a corporation organized
and existing under the General Corporation Law of the State of
Delaware (hereinafter called the "Company"), hereby certifies
that the following resolution was duly adopted by the Board of
Directors of the Company as required by Section 151 of the
General Corporation Law of the State of Delaware at a meeting
duly called and held on October 6, 1999:
RESOLVED, that pursuant to the authority granted to and
vested in the Board of Directors of the Company (hereinafter
called the "Board of Directors" or the "Board") in accordance
with the provisions of the Company's Restated Certificate of
Incorporation, as amended to date (hereinafter called the
"Certificate of Incorporation"), the Board of Directors hereby
creates a series of Preferred Stock, par value $.01 per share
(the "Preferred Stock"), of the Company and hereby adopts the
resolution establishing the designation, number of shares,
preferences, voting powers and other rights, and the restrictions
and limitations thereof, as follows:
Section 1. Designation and Amount. The shares of such
series shall be designated as "Series C Junior Participating
Preferred Stock" (the "Series C Preferred Stock") and the number
of shares constituting the Series C Preferred Stock shall be
50,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series C Preferred Stock to
a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Company convertible into
Series C Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares
of any series of Preferred Stock (or any similar stock) ranking
prior and superior to the Series C Preferred Stock with respect
to dividends, the holders of shares of Series C Preferred Stock,
in preference to the holders of Class A Common Stock, par value
$.01 per share, of the Company ("Class A Common Stock"), Class B
Common Stock, par value $.01 per share, of the Company ("Class B
Common Stock") and Class C Common Stock, par value $.01 per
share, of the Company ("Class C Common Stock" and, together with
the Class A Common Stock and Class B Common Stock, the "Common
Stock") and of any other stock of the Company ranking junior to
the Series C Preferred Stock, and on a pari passu basis with the
Series A Preferred Stock and the Series B Preferred Stock, shall
be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for such purpose,
quarterly dividends payable in cash on the last day of March,
June, September and December in each year (each such date being
referred to herein as a "Dividend Payment Date"), commencing on
the first Dividend Payment Date after the first issuance of a
share or fraction of a share of Series C Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the
greater of (a) $1 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount
of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Class C
Common Stock, declared on the Class C Common Stock since the im-
mediately preceding Dividend Payment Date or, with respect to the
first Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series C Preferred Stock. In the
event the Company shall at any time after October 18, 1999
declare or pay any dividend on the Class C Common Stock payable
in shares of Class C Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Class C
Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Class C Common Stock) into a greater or
lesser number of shares of Class C Common Stock, then in each
such case the amount to which holders of shares of Series C
Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is
the number of shares of Class C Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Class C Common Stock that were outstanding
immediately prior to such event.
(B) The Company shall declare a dividend or
distribution on the Series C Preferred Stock as provided in
paragraph (A) of this Section immediately after it declares a
dividend or distribution on the Class C Common Stock (other than
a dividend payable in shares of Class C Common Stock); provided,
that, in the event no dividend or distribution shall have been
declared on the Class C Common Stock during the period between
any Dividend Payment Date and the next subsequent Dividend
Payment Date, a dividend of $1 per share on the Series C Prefer-
red Stock shall nevertheless be payable, when, as and if
declared, on such subsequent Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative,
whether or not earned or declared, on outstanding shares of
Series C Preferred Stock from the Dividend Payment Date next
preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first
Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Dividend Payment Date or is a date
after the record date for the determination of holders of shares
of Series C Preferred Stock entitled to receive a quarterly
dividend and before such Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be
cumulative from such Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares
of Series C Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders
of shares of Series C Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date
shall be not more than 60 days prior to the date fixed for the
payment thereof.
Section 3. Voting Rights. The holders of shares of
Series C Preferred Stock shall have the following voting rights;
(A) Subject to the provision for adjustment
hereinafter set forth and except as otherwise provided in the
Certificate of Incorporation or required by law, each share of
Series C Preferred Stock shall entitle the holder thereof to a
number of votes equal to 1,000 times the number of votes which
each share of Class C Common Stock is entitled to vote, on all
matters upon which the holders of the Class C Common Stock of the
Company are entitled to vote. In the event the Company shall at
any time after October 18, 1999 declare or pay any dividend on
the Class C Common Stock payable in shares of Class C Common
Stock, or effect a subdivision or combination or consolidation of
the outstanding shares of Class C Common Stock (by
reclassification or otherwise than by payment of a dividend in
shares of Class C Common Stock) into a greater or lesser number
of shares of Class C Common Stock, then in each such case the
number of votes per share to which holders of shares of Series C
Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Class C Common
Stock outstanding immediately after such event and the
denominator of which is the number of shares of Class C Common
Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the
Certificate of Incorporation or in any other Certificate of
Designations creating a series of Preferred Stock or any similar
stock, and except as otherwise required by law, the holders of
shares of Series C Preferred Stock and the holders of shares of
Class C Common Stock and any other capital stock of the Company
having general voting rights shall vote together as one class on
all matters submitted to a vote of stockholders of the Company.
(C) Except as set forth herein, or as otherwise
provided by law, holders of Series C Preferred Stock shall have
no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of
Class C Common Stock as set forth herein) for taking any
corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series C Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not earned or
declared, on shares of Series C Preferred Stock outstanding shall
have been paid in full, the Company shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking
junior (as to dividends) to the Series C Preferred
Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a
parity (as to dividends) with the Series C Preferred
Stock, except dividends paid ratably on the Series C
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Preferred
Stock, provided that the Company may at any time
redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock
of the Company ranking junior (as to dividends and upon
dissolution, liquidation or winding up) to the Series C
Preferred Stock or rights, warrants or options to
acquire such junior stock;
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series C Preferred Stock,
or any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or
winding up) with the Series C Preferred Stock, except
in accordance with a purchase offer made in writing or
by publication (as determined by the Board of
Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of
the respective annual dividend rates and other relative
rights and preferences of the respective series and
classes, shall determine in good faith will result in
fair and equitable treatment among the respective
series or classes.
(B) The Company shall not permit any subsidiary of the
Company to purchase or otherwise acquire for consideration any
shares of stock of the Company unless the Company could, under
paragraph (A) of this Section 4, purchase or otherwise acquire
such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series C
Preferred Stock purchased or otherwise acquired by the Company in
any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof.
Section 6. Liquidation, Dissolution or Winding Up.
Upon any liquidation, dissolution or winding up of the Company,
no distribution shall be made (A) to the holders of the Common
Stock or of shares of any other stock of the Company ranking
junior, upon liquidation, dissolution or winding up, to the
Series C Preferred Stock unless, prior thereto, the holders of
shares of Series C Preferred Stock shall have received $1,000 per
share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not earned or declared, to the
date of such payment, provided that the holders of shares of
Series C Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for ad-
justment hereinafter set forth, equal to 1,000 times the
aggregate amount to be distributed per share to holders of shares
of Class C Common Stock, or (B) to the holders of shares of stock
ranking on a parity upon liquidation, dissolution or winding up
with the Series C Preferred Stock, except distributions made
ratably on the Series C Preferred Stock and all such parity stock
in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Company shall at any time after
October 18, 1999 declare or pay any dividend on the Class C
Common Stock payable in shares of Class C Common Stock, or effect
a subdivision or combination or consolidation of the outstanding
shares of Class C Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Class C Common Stock)
into a greater or lesser number of shares of Class C Common
Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (A)
of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of
shares of Class C Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Class C Common Stock that were outstanding immediately prior to
such event.
Section 7. Consolidation, Merger, etc. In case the
Company shall enter into any consolidation, merger, combination
or other transaction in which the shares of Class C Common Stock
are converted into, exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case
each share of Series C Preferred Stock shall at the same time be
similarly converted into, exchanged for or changed into an amount
per share (subject to the provision for adjustment hereinafter
set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as
the case may be, into which or for which each share of Class C
Common Stock is converted, exchanged or converted. In the event
the Company shall at any time after October 18, 1999 declare or
pay any dividend on the Class C Common Stock payable in shares of
Class C Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in
shares of Class C Common Stock) into a greater or lesser number
of shares of Class C Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the
conversion, exchange or change of shares of Series C Preferred
Stock shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Class C Common
Stock outstanding immediately after such event and the
denominator of which is the number of shares of Class C Common
Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series C
Preferred Stock shall not be redeemable from any holder.
Section 9. Rank. The Series C Preferred Stock shall
rank, with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding
up of the Company, pari passu with the Series A and the Series B
Preferred Stock, junior to all other series of Preferred Stock
and senior to all classes of Common Stock.
Section 10. Amendment. If any proposed amendment to
the Certificate of Incorporation (including this Certificate of
Designations) would alter, change or repeal any of the
preferences, powers or special rights given to the Series C
Preferred Stock so as to affect the Series C Preferred Stock
adversely, then the holders of the Series C Preferred Stock shall
be entitled to vote separately as a class upon such amendment,
and the affirmative vote of two-thirds of the outstanding shares
of the Series C Preferred Stock, voting separately as a class,
shall be necessary for the adoption thereof, in addition to such
other vote as may be required by the General Corporation Law of
the State of Delaware.
Section 11. Fractional Shares. The Series C Preferred
Stock may be issued in fractions of a share that shall entitle
the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of
holders of Series C Stock.
IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Company by its Secretary this 15th day
of October, 1999.
________________________________________
Name:
Title:
EXHIBIT 3.2
BY-LAWS
OF
THE NEIMAN MARCUS GROUP, INC.
(hereinafter called the "Corporation")
(As amended through September 15, 1999)
Article I. PREAMBLE
These By-Laws shall be subject to all provisions of the
General Corporation Law of the State of Delaware ("GCL") and all
of the provisions of the Certificate of Incorporation.
Article II. MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders
for the election of directors or for any other purpose shall be
held at such time and place, either within or without the State
of Delaware, as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting or in
a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meeting of
Stockholders shall be held on such date and at such time as shall
be designated from to time by the Board of Directors and stated
in the notice of the meeting, at which meeting the stockholders
shall elect directors in the manner provided in the Certificate
of Incorporation and in these By-Laws, and transact such other
business as may properly be brought before the meeting. Written
notice of the Annual Meeting stating the place, date and hour of
the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten nor more than sixty days before
the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by
the Certificate of Incorporation, Special Meetings of
Stockholders, for any purpose or purposes, may be called by the
Chairman of the Board of Directors and shall be called by such
officer or the Secretary at the request in writing of a majority
of the Board of Directors. Such request shall state the purpose
or purposes of the proposed meeting. Written notice of a Special
Meeting stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called shall be
given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the
meeting.
Section 4. Quorum. Except as otherwise provided by the GCL
or by the Certificate of Incorporation or these By-Laws, the
holders of a majority of the capital stock issued and outstanding
and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such
quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present
in person or represented by proxy, shall have power to adjourn
the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed.
If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each
stockholder entitled to vote at the meeting. Any stock of the
Corporation belonging to the Corporation at the time of any
meeting or any adjourned session thereof shall neither be
entitled to vote nor counted for quorum purposes provided,
however, that this sentence shall not be construed as limiting
the right of the Corporation to vote its own stock held by it in
a fiduciary capacity.
Section 5. Voting. Unless otherwise required by law, the
Certificate of Incorporation or these By-Laws, (a) any question
brought before any meeting of stockholders shall be decided by
the vote of the holders of a majority of the stock represented
and entitled to vote thereat and (b) each stockholder represented
at a meeting of stockholders shall be entitled to cast one vote
for each share of the capital stock entitled to vote thereat held
by such stockholder. Such votes may be cast in person or by proxy
but no proxy shall be voted on or after three years from its
date, unless such proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders, in his
discretion, may require that any votes cast at such meeting shall
be cast by written ballot.
Section 6. Stock Ledger. The stock ledger of the
Corporation shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of
the stockholders entitled to vote at every meeting of
stockholders or the books of the Corporation, or to vote in
person or by proxy at any meeting of stockholders.
Section 7. Business Brought Before Meetings. At any Annual
Meeting of Stockholders, only such business shall be conducted as
shall have been brought before the meeting (a) pursuant to the
Corporation's notice of meeting, (b) by or at the direction of
the Board of Directors or (c) by a stockholder of the Corporation
who is a stockholder of record at the time of giving of the
notice provided for in this Section 2, who shall be entitled to
vote at such meeting and who complies with the notice procedures
set forth in this Section 2. For business to be properly brought
before an Annual Meeting of Stockholders pursuant to clause (c)
above, the stockholder must have given written notice thereof to,
either by personal delivery or by United States mail, postage
prepaid, and such notice must have been received by, the
Secretary of the Corporation, not later than ninety days prior to
the anniversary date of the immediately preceding Annual Meeting.
Such notice shall set forth: (a) the name and address, as they
appear on the Corporation's books, of the stockholder who is
proposing such business, and the name and address of the
beneficial owner, if any, on whose behalf the proposal is made;
(b) the number and class of shares of stock of the Corporation
that are beneficially owned on the date of such notice by the
stockholder, or the beneficial owner on whose behalf the proposal
is made; (c) a representation that the stockholder is a holder of
record of stock of the Corporation entitled to vote at such
meeting and intends to appear in person or by proxy at the
meeting to propose such business; (d) a description of the
business desired to be brought before the meeting and the reasons
for conducting such business at the meeting, (e) any material
interest of such stockholder of record and the beneficial owner,
if any, on whose behalf the proposal is made, in such business
and (f) a statement as to whether such stockholder of record, and
the beneficial owner, if any, intend to solicit proxies in
support of such proposal. The presiding officer of the meeting
shall determine and declare to the meeting whether or not such
business was properly brought before the meeting in accordance
with the procedures prescribed by these By-laws, and at such
officer's discretion, may declare such business not properly
brought before the meeting and shall not recognize the bringing
of such business.
At any Special Meeting of Stockholders, only such business
shall be conducted as shall have been brought before the meeting
pursuant to the Corporation's notice of Special Meeting.
Article III. DIRECTORS
Section 1. Number and Election of Directors. Except as
otherwise fixed pursuant to Article Fourth of the Certificate of
Incorporation relating to the rights of the holders of any one or
more classes or series of Preferred Stock issued by the
Corporation acting separately by class or series, to elect, under
specified circumstances, directors at an annual or special
meeting of stockholders, the Board of Directors shall consist of
not less than six nor more than nine persons, the exact number to
be fixed from time to time exclusively by the Board of Directors
pursuant to a resolution adopted by a majority of the Board of
Directors. Except as provided in the Certificate of Incorporation
or Section 2 of this Article, directors shall be elected by a
plurality of the votes cast at Annual Meetings of Stockholders by
the stockholders entitled to vote for the election of directors
(or for the election of directors of a given class, as
applicable), and each director so elected shall hold office until
the annual meeting for the year in which his term expires and
until a director of the same class succeeding such director is
duly elected and qualified, or until his earlier resignation or
removal. Any director may resign at any time upon notice to the
Corporation. Directors need not be stockholders.
Section 2. Vacancies. Except as otherwise fixed pursuant
to the provisions of Article Fourth of the Certificate of
Incorporation relating to the rights of the holders of any one or
more classes or series of Preferred Stock issued by the
Corporation, acting separately by class or series, to elect,
under specified circumstances, directors at an annual or special
meeting of stockholders, and except as otherwise provided
pursuant to the provisions of Article Ninth thereof, relating to
the power of the Board of Directors to fill newly created
directorships and vacancies in the Board of Directors, any
vacancy in the office of a director created by the death,
resignation, retirement, disqualification, removal from office of
a director or other cause, elected by (or appointed on behalf of)
the holders of the Class B Common Stock, par value $.01 per
share, of the Corporation (the "Class B Common Stock") on the one
hand, or the holders of the Class A Common Stock, par value $.01
per share, of the Corporation (the "Class A Common Stock"), and
the Class C Common Stock, par value $.01 per share, of the
Corporation (the "Class C Common Stock"), on the other hand, as
the case may be, shall be filled by the vote of the majority of
the directors (or the sole remaining director) elected by (or
appointed on behalf of) such holders of Class B Common Stock, on
the one hand, or Class A Common Stock and Class C Common Stock,
on the other hand (or on behalf of whom that director was
appointed), as the case may be, unless there are no such
directors in such Class, in which case such vacancy shall be
filled by the stockholders of such Class, or the Special Voting
Rights (as defined in Section 2(e)(ii) of Article Fourth of the
Certificate of Incorporation) have been eliminated in accordance
with Section (2)(e)(ii) of Article Fourth of the Certificate of
Incorporation, in which case such vacancy shall be filled by the
vote of the majority of the directors (or the sole remaining
director), regardless of any quorum requirements set out in these
By-laws. Any director elected to fill a vacancy not resulting
from an increase in the number of directors shall have the same
remaining term as that of his predecessor.
Unless the Special Voting Rights have been eliminated in
accordance with Section (2)(e)(ii) of Article Fourth of the
Certificate of Incorporation, all newly-created directorships
resulting from an increase in the authorized number of directors
shall be allocated pursuant to Section (2)(e)(iii) of Article
Fourth of the Certificate of Incorporation. Once such newly-
created directorships have been allocated as Class A Directors or
Class B Directors (as such terms are defined in Section
(2)(e)(ii) of Article Fourth of the Certificate of
Incorporation), such newly-created directorships shall be filled
by the vote of the majority of the directors in such Class (or
the sole remaining director in such Class), as the case shall be,
unless there are no such directors in such Class, in which case
such vacancy shall be filled by the stockholders of such Class,
or the Special Voting Rights have been eliminated in accordance
with Section (2)(e)(ii) of Article Fourth of the Certificate of
Incorporation, in which case such vacancy shall be filled by the
vote of the majority of the directors (or the sole remaining
director), regardless of any quorum requirements set out in these
By-laws. Any director elected in accordance with the preceding
sentence shall hold office until the annual meeting for the year
in which his term expires and until a director of the same Class
succeeding such director shall have been elected and qualified or
until his earlier resignation or removal. No decrease in the
number of authorized directors constituting the entire Board of
Directors shall shorten the term of any incumbent director.
Section 3. Duties and Powers. The business of the
Corporation shall be managed by or under the direction of the
Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation or by these By-
Laws directed or required to be exercised or done by the
stockholders.
Section 4. Meetings. The Board of Directors of the
Corporation may hold meetings, both regular and special, either
within or without the State of Delaware. Regular meetings of the
Board of Directors may be held without notice at such time and at
such place as may from time to time be determined by the Board of
Directors. Special meetings of the Board of Directors may be
called by the Chairman or a majority of the Board of Directors.
Notice thereof stating the place, date and hour of the meeting
shall be given to each director either by mail not less than 48
hours before the date of the meeting, by telephone or telegram on
24 hours' notice, or on such shorter notice as the person or
persons calling such meeting may deem necessary or appropriate in
the circumstances.
Section 5. Quorum. At all meetings of the Board of
Directors, a majority of the Board of Directors shall constitute
a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors. If a
quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 6. Actions of Board. Any action required or
permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting, if all
the members of the Board of Directors or committee, as the case
may be, consent thereto in writing, and the writing or writings
are filed with the minutes of proceedings of the Board of
Directors or committee.
Section 7. Meetings by Means of Conference Telephone.
Members of the Board of Directors of the Corporation, or any
committee designated by the Board of Directors, may participate
in a meeting of the Board of Directors or such committee by means
of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this
Section 7 shall constitute presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by
resolution passed by a majority of the entire Board of Directors,
designate one or more committees to exercise the power and
authority provided herein with respect to such committees, each
committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of any such
committee. In the absence or disqualification of a member of a
committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or
disqualified member, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. Any committee, to the extent
allowed by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the
business and affairs of the Corporation. Each committee shall
keep regular minutes and report to the Board of Directors when
required.
Section 9. Compensation. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director.
No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
Section 10. Nomination of Directors. Except as otherwise
fixed pursuant to Article Fourth of the Certificate of
Incorporation relating to the rights of the holders of any one or
more classes or series of Preferred Stock issued by the
Corporation acting separately by class or series, to elect, under
specified circumstances, directors at an annual or special
meeting of stockholders, nominations for the election of
directors may be made by the Board of Directors or a committee
appointed by the Board of Directors or by any stockholder
entitled to vote in the election of directors generally. However,
any stockholder entitled to vote in the election of directors
generally may nominate one or more persons for election as
directors at a meeting only if written notice of such
stockholder's intent to make such nomination or nominations has
been given, either by personal delivery or by United States mail,
postage prepaid, to the Secretary of the Corporation not later
than (i) with respect to an election to be held at an annual
meeting of stockholders, ninety days prior to the anniversary
date of the immediately preceding annual meeting (or, in the case
of the annual meeting to be held in 1988, on or before October 1,
1988); and (ii) with respect to an election to be held at a
special meeting of stockholders for the election of directors,
the close of business on the tenth day following the date on
which notice of such meeting is first given to stockholders. Each
such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person
or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the Corporation
entitled to vote at such meeting and intends to appear in person
or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee
proposed by such stockholder as would be required to be included
in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission; and (e) the consent of each
nominee to serve as a director of the Corporation if so elected.
The presiding officer of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with the
foregoing procedure.
Article IV. OFFICERS
Section 1. General. The officers of the Corporation shall
be chosen by the Board of Directors and shall be one or more
Presidents, a Secretary and a Treasurer. The Board of Directors,
in its discretion, may also choose one or more Chief Executive
Officers, Vice Presidents, Assistant Secretaries, Assistant
Treasurers and other officers. Any number of offices may be held
by the same person. The officers of the Corporation need not be
stockholders of the Corporation nor need such officers be
directors of the Corporation.
Section 2. Election. The Board of Directors at its first
meeting held after each Annual Meeting of Stockholders shall
elect the officers of the Corporation who shall hold their
offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board
of Directors; and all officers of the Corporation shall hold
office until their successors are chosen and qualified, or until
their earlier resignation or removal. Any vacancy occurring in
any office of the Corporation shall be filled by the Board of
Directors.
Section 3. Resignations and Removals. Any director or
officer may resign at any time by delivering his resignation in
writing to the Chairman of the Board of Directors, the President
or the Secretary or to a meeting of the Board of Directors. Such
resignation shall take effect at the time stated therein, or if
no time be so stated then upon its delivery, and without in
either case the necessity of its being accepted unless the
resignation shall so state. The Board of Directors may at any
time remove from office any officer either with or without cause.
Section 4. Chairman of the Board of Directors. The Chairman
of the Board of Directors shall preside at all meetings of the
stockholders and of the Board of Directors.
Section 5. President. The President shall, subject to the
control of the Board of Directors, have general supervision of
the business of the Corporation. The President shall also perform
such other duties and may exercise such other powers as from time
to time may be assigned to him by the Board of Directors.
Section 6. Vice-Presidents. Any Vice-President shall have
such duties and powers as shall be designated from time to time
by the Board of Directors or the President.
Section 7. Treasurer and Assistant Treasurer. The Treasurer
shall be in charge of the Corporation's funds and valuable
papers. He shall have such other duties and powers as may be
designated from time to time by the Board of Directors or the
President.
Any Assistant Treasurers shall have such duties and powers
as shall be designated from time to time by the President or the
Treasurer.
Section 8. Controller and Assistant Controllers. The
Controller shall be the chief accounting officer of the
Corporation and shall be in charge of its books of account and
accounting records and of its accounting procedures. He shall
have such other duties and powers as may be designated from time
to time by the Board of Directors or the President.
Any Assistant Controllers shall have such duties and powers
as shall be designated from time to time by the President or the
Controller.
Section 9. Secretary and Assistant Secretaries. The
Secretary shall record all the proceedings of the meetings of the
stockholders, of the Board of Directors and of committees of the
Board of Directors, in books kept for that purpose. In his
absence from any such meeting an Assistant Secretary or if there
be none or he is absent, a temporary Secretary chosen at the
meeting shall record the proceedings thereof.
Any Assistant Secretaries shall have such duties and powers
as shall be designated from time to time by the President or the
Secretary.
Section 10. Other Officers. Such other officers as the
Board of Directors may choose shall perform such duties and have
such powers as from time to time may be assigned to them by the
Board of Directors. The Board of Directors may delegate to any
other office of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
Section 11. Loans and Guaranties to Directors or Officers.
Upon resolution by vote of disinterested directors, the
Corporation may make a loan of money or property to, or guarantee
the obligation of, any director or officer of the Corporation or
a subsidiary if the Board determines that such transaction may
reasonably be expected to benefit the Corporation.
Article V. STOCK
Section 1. Form of Certificates. Every holder of stock in
the Corporation shall be entitled to have a certificate signed in
the name of the Corporation as required by the GCL.
Section 2. Signatures. Where a certificate is countersigned
by (i) a transfer agent other than the Corporation or its
employee, or (ii) a registrar other than the Corporation or its
employee, any other signature on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who
has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may
direct a new certificate to be issued in place of any certificate
theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit (in form and
substance satisfactory to the Corporation) of that fact by the
person claiming the certificate of stock to be lost, stolen or
destroyed. In the case of the alleged loss or destruction or the
mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms in conformity with
the law as the Board of Directors may prescribe.
Section 4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-
Laws. Transfers of stock shall be made on the books of the
Corporation only by the person named in the certificate or by his
attorney lawfully constituted in writing and upon the surrender
of the certificate therefor, which shall be cancelled before a
new certificate shall be issued.
Section 5. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for
the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than
sixty days nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. If
no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is
waiver, at the close of business on the day next preceding the
day on which the meeting is held. The record date for
determining stockholders for any other purpose shall be at the
close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a
new record date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be
entitled to recognize the exclusive right of a person registered
on its books as the owner of shares to receive dividends, and to
vote as such owner, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares
on the part of any other persons, whether or not it shall have
express or other notice thereof, except as otherwise provided by
law.
Section 7. Voting Securities Owned by the Corporation.
Powers of attorney, proxies, waivers of notice of meeting,
consents and other instruments relating to securities owned by
the Corporation may be executed in the name of and on behalf of
the Corporation by the Chairman, the Vice-Chairman of the Board
of Directors, the President or any Vice-President and any such
officer may, in the name of and on behalf of the Corporation,
take all such action as any such officer may deem advisable to
vote in person or by proxy at any meeting of security holders of
any corporation in which the Corporation may own securities and
at any such meeting shall possess and may exercise any and all
rights and powers incident to the ownership of such securities
and which, as the owner thereof, the Corporation might have
exercised and possessed if present. The Board of Directors may,
by resolution, from time to time confer like powers upon any
other person or persons.
Article VI. NOTICES
Section 1. Notices. Whenever written notice is required by
law, the Certificate of Incorporation or these By-Laws, to be
given to any stockholder, such notice may be given by mail,
addressed to such stockholder, at his address as it appears on
the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written notice may
also be given personally or by telegram, telex or cable and such
notice shall be deemed to be given upon receipt.
Section 2. Waivers of Notice. Whenever any notice is
required by law, the Certificate of Incorporation or these By-
Laws, to be given to any director, member of a committee or
stockholder, a waiver thereof in writing, signed, by the person
or persons entitled to said notice, whether before or after the
time stated therein, shall be deemed equivalent thereto. Neither
the business to be transacted at, nor the purpose of, any meeting
or such other event need be specified in any written waiver of
notice.
Article VII. GENERAL PROVISIONS
Section 1. Dividends. Subject to the provisions of the
Certificate of Incorporation, dividends, if any, upon the capital
stock of the Corporation may be declared by the Board of
Directors at any regular or special meeting, and may be paid in
cash, in property, or in shares of the capital stock.
Section 2. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
Section 3. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its
organization and the words "Corporate Seal, Delaware". The seal
may be used by causing it or a facsimile thereof to be impressed
or affixed or reproduced or otherwise.
Article VIII. INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or
Proceedings other Than Those by or in the Right of the
Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he is or
was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director or
officer of another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action,
suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits of
Proceedings by or in the Right of the Corporation. Subject to
Section 3 of this Article VIII, the Corporation shall indemnify
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by
or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that he is or was a director or
officer of the Corporation, or is or was serving at the request
of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation; except that no indemnification
shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for
such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Authorization of Indemnification. Any
indemnification under this Article VIII (unless ordered by a
court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the
director or officer is proper in the circumstances because he has
met the applicable standard of conduct set forth in Section 1 or
Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a
quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel
in a written opinion, or (iii) by the stockholders. To the
extent, however, that a director or officer of the Corporation
has been successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith, without the necessity of
authorization in the specific case. Notwithstanding anything
contained in this Section 3 to the contrary, the Corporation
shall not be required to indemnify any person against any
liability, cost or expense (including attorneys' fees) incurred
by such person in connection with any action, suit or proceeding
voluntarily initiated or prosecuted by such person unless the
initiation or prosecution of such action, suit, or proceeding by
such person was authorized by a majority of the entire Board of
Directors, provided, however, that a majority of the entire Board
of Directors may, after any such action, suit or proceeding has
been initiated or prosecuted, in its discretion, indemnify any
such person against any such liability, cost or expense.
Section 4. Good Faith Defined. For purposes of any
determination under Section 3 of the Article VIII, a person shall
be deemed to have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest
of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his
conduct was unlawful, if his action is based on the records or
books of account of the Corporation or another enterprise, or on
information supplied to him by the officers of the Corporation or
another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or other enterprise
or on information or records given or reports made to the
Corporation or another enterprise by an independent certified
public accountant or by an appraiser or other expert selected
with reasonable care by the Corporation or another enterprise.
The term "another enterprise" as used in this Section 4 shall
mean any other corporation or any partnership, joint venture,
trust or other enterprise of which such person is or was serving
at the request of the Corporation as a director, officer,
employee or agent. The provisions of this Section 4 shall not be
deemed to be exclusive or to limit in any way the circumstance in
which a person may be deemed to have met the applicable standard
of conduct set forth in Sections 1 or 2 or this Article VIII, as
the case may be.
Section 5. Indemnification by a Court. Notwithstanding any
contrary determination in the specific case under Section 3 of
this Article VIII, and notwithstanding the absence of any
determination thereunder, any director or officer may apply to
any court of competent jurisdiction in the State of Delaware for
indemnification to the extent otherwise permissible under
Sections 1 and 2 of this Article VIII. The basis of such
indemnification by a court shall be a determination by such court
that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standards of
conduct set forth in Sections 1 or 2 of this Article VIII, as the
case may be. Notice of any application for indemnification
pursuant to this Section 5 shall be given to the Corporation
promptly upon the filing of such application.
Section 6. Expenses Payable in Advance. Expenses incurred
in defending or investigating a threatened or pending action,
suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as
authorized in this Article VIII.
Section 7. Non-exclusivity of Indemnification and
Advancement of Expenses The indemnification and advancement of
expenses provided by or granted pursuant to this Article VIII
shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be
entitled under any By-Law, agreement, contract, vote of
stockholders or disinterested directors or pursuant to the
direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that
indemnification of the persons specified in Sections 1 and 2 of
this Article VIII shall be made to the fullest extent permitted
by law. The provisions of this Article VIII shall not be deemed
to preclude the indemnification of or advancement of expenses to
any person who is not specified in Sections 1 or 2 of this
Article VIII, including employees or agents of the Corporation,
but whom the Corporation has the power or obligation to indemnify
under the provisions of GCL, or otherwise.
Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation or is or
was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation
would have the power or the obligation to indemnify him against
such liability under the provisions of this Article VIII.
Section 9. Meaning of "Corporation" for Purposes of Article
VIII. For purposes of this Article VIII, references to "the
Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have
had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall
stand in the same position under the provisions of this Article
VIII with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its
separate existence had continued.
Section 10. Survival of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article VIII shall,
unless otherwise provided when authorized or ratified, continue
as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors
and administrators of such a person. Each person who is or
becomes a director, officer, employee or agent as aforesaid shall
be deemed to have served or to have continued to serve in such
capacity in reliance upon the indemnity provided for in this
Article VIII.
Article IX. AMENDMENTS
These By-Laws may be amended, altered, rescinded or repealed
at any meeting of the Board of Directors or of the stockholders,
provided, in the case of a meeting of stockholders, notice of the
proposed change was given in the notice of the meeting; provided,
however, that, notwithstanding any other provisions of the
Certificate of Incorporation, these By-Laws or any provision of
law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any Voting
Stock (as defined in the Certificate of Incorporation of the
Corporation) required by law, the Certificate of Incorporation,
or these By-Laws, the affirmative vote of the holders of at least
662/3 percent of the combined voting power of all the then-
outstanding shares of the Voting Stock, voting together as a
single class, shall be required to amend, alter, rescind or
repeal Section 3 of Article II and Sections 1, 2 and 10 of
Article III, Article VIII and this Article IX of these By-Laws.
EXHIBIT 10.13(b)
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated August 27, 1999 to the Credit Agreement
dated as of October 29, 1997 (the "Credit Agreement") among THE
NEIMAN MARCUS GROUP, INC. (the "Borrower"), the BANKS party
thereto (the "Banks"), BANK OF AMERICA, N.A., as Syndication
Agent (the "Syndication Agent"), THE CHASE MANHATTAN BANK, as
Documentation Agent (the "Documentation Agent") and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the
"Administrative Agent").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Credit
Agreement as set forth below to accommodate the Distribution (as
defined below);
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Defined Terms; References. Unless otherwise
specifically defined herein, each term used herein which is
defined in the Credit Agreement has the meaning assigned to such
term in the Credit Agreement. Each reference to "hereof,"
"hereunder," "herein" and "hereby" and each other similar
reference and each reference to "this Agreement" and each other
similar reference contained in the Credit Agreement shall, after
this Amendment becomes effective, refer to the Credit Agreement
as amended hereby.
SECTION 2. Reduction of Commitments. On the Amendment
Effective Date, the Commitments will be automatically and ratably
reduced to the aggregate amount of $450,000,000.
SECTION 3. Amendments. (a) The following new definitions
are added to Section 1.01 of the Credit Agreement:
"Distribution" means the recapitalization of the
Borrower and the distribution by HGI of most of its equity
interest in the Borrower and related transactions as described in
the Borrower's Proxy Statement dated August 10, 1999.
"Smith Family Group" means the group of persons party to the
Smith-Lurie/Marks Stockholder Agreement dated as of December
29, 1986, as amended (whether or not such agreement is
terminated) and the progeny of each such person.
(b) Section 6.01(k) is amended to read in its entirety as
follows:
(k) (i) any person or group of persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) other than a member of the
Smith Family Group shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Exchange Act) of more
voting stock or total equity capital of the Borrower than that
beneficially owned by the Smith Family Group, if such person or
group of persons is also the beneficial owner (within the meaning
of Rule 13d-3 of the Exchange Act) of at least 30% of either the
voting stock or total equity capital of the Borrower or (ii) more
than half of the members of the Board of Directors of the
Borrower shall be persons who are not Continuing Directors;
SECTION 4. Limited Waiver. The Banks hereby waive any
Default that may arise under Section 5.12 of the Credit Agreement
solely by reason of the consummation of the Distribution. The
foregoing waiver shall be limited precisely as written and shall
not constitute a waiver of any other Default.
SECTION 5. Representations of Borrower. The Borrower
represents and warrants that (i) the representations and
warranties of the Borrower set forth in Article 4 of the Credit
Agreement will be true on and as of the Amendment Effective Date
and (ii) giving effect to this Amendment, no Default will have
occurred and be continuing on such date.
SECTION 6. Governing Law. This Amendment shall be governed
by and construed in accordance with the laws of the State of New
York.
SECTION 7. Counterparts. This Amendment may be signed in
any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were
upon the same instrument.
SECTION 8. Effectiveness. This Amendment shall become
effective on the date when the following conditions are met (the
"Amendment Effective Date"):
(a) the Administrative Agent shall have received from
each of the Borrower and the Required Banks a counterpart hereof
signed by such party or facsimile or other written confirmation
(in form satisfactory to the Administrative Agent) that such
party has signed a counterpart hereof; and
(b) the Administrative Agent shall have received an
amendment fee for the account of each Bank in an amount equal to
0.05% of such Bank's Commitment (after giving effect to this
Amendment).
The Administrative Agent shall promptly notify the Borrower and
each Bank of the Amendment Effective Date.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
THE NEIMAN MARCUS GROUP, INC.
By /s/ Paul F. Gibbons
Title: Vice President and Treasurer
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By /s/ Robert Bottamedi
Title: Vice President
BANK OF AMERICA, N.A.
By /s/ Thomas J. Kane
Title: Vice President
THE CHASE MANHATTAN BANK
By /s/ Barry K. Bergman
Title: Vice President
BANKBOSTON, N.A.
By /s/ Stephen J. Garvin
Title: Director
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By /s/ Thomas Fennessey
Title: Vice President
FLEET NATIONAL BANK
By /s/ Roger C. Boucher
Title: Senior Vice President
MELLON BANK, N.A.
By /s/ Richard J. Schaich
Title: Vice President
BANCA MONTE DEI PASCHI
DI SIENA S.P.A.
By /s/ G. Natalicchi
Title: S. V. P. & General Manager
By /s/ Brian R. Landy
Title: Vice President
CREDIT AGRICOLE INDOSUEZ
By /s/ Craig Welch
Title: First Vice President
By /s/ Sarah McClintock
Title: Vice President
CREDIT LYONNAIS
By /s/ Vladimir Labun
Title: First Vice President-Manager
FIRST HAWAIIAN BANK
By /s/ Charles L. Jenkins
Title: Vice President, Manager
FIRST UNION NATIONAL BANK
By /s/ Richard A. Clark
Title: Senior Vice President
THE BANK OF NEW YORK
By /s/ William A. Kerr
Title: Senior Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By /s/ David J. McCann
Title: Vice President
THE FUJI BANK, LTD.
By /s/ Raymond Ventura
Title: Vice President & Manager
THE SAKURA BANK, LTD.
By /s/ Tamihiro Kawauchi
Title: Senior Vice President
THE SANWA BANK LTD.
By /s/ Joseph E. Leo
Title: Vice President and Area Manager
WELLS FARGO BANK
By /s/ Tara H. Anderson
Title: Officer
WACHOVIA BANK, N.A.
By /s/ John P. Rafferty
Title: Senior Vice President
BANK HAPOALIM B. M.
By /s/ Dan Josefov
Title: Vice President
By /s/ Rami Lador
Title: First Vice President
EXHIBIT 10.20
THIS AGREEMENT, dated as of the 1st day of September,
1999, is among The Neiman Marcus Group, Inc., a Delaware
corporation (the " Company" ) and certain parties (herein
individually referred to as a " Stockholder" and collectively as
the " Stockholders" ) who are currently stockholders of Harcourt
General, Inc., a Delaware corporation (" HGI" ) and anticipate a
distribution of Class B Common Stock of the Company in accordance
with the Amended and Restated Distribution Agreement between HGI
and the Company dated July 1, 1999 (as amended, supplemented or
otherwise modified from time to time, the " Distribution
Agreement" ) and who, by executing this instrument, or a
supplemental instrument, elect to become parties hereto and to
subject the shares of Class B Common Stock identified herein (or
in such supplemental instrument) to the terms and provisions
hereof.
W I T N E S S E T H:
The following sets forth the background of this
Agreement:
A. The Company's authorized capital stock consists of
200,000,000 shares, 150,000,000 of which are common stock, par
value $.01 per share (the " Common Stock" ) and 50,000,000 of
which are preferred stock, par value $.01 per share (" Preferred
Stock" ). As of the date hereof, 49,039,068 shares of Common
Stock and no shares of Preferred Stock are issued and
outstanding.
B. The Company, subject to stockholder approval,
intends to, among other things, effect a recapitalization of its
common stock to create two classes of common stock, the Class A
Common Stock, par value $.01 per share (" Class A Common Stock" )
and the Class B Common Stock, par value $.01 per share (" Class B
Common Stock" ), while maintaining its Preferred Stock.
21,440,960 shares of Common Stock owned by HGI will be converted
into 21,440,960 fully paid shares of Class B Common Stock. HGI's
shares of Class B Common Stock will be distributed in a tax-free
spinoff transaction (the " Distribution" ) to HGI's common
stockholders, including the Stockholders. The date as of which
the distribution of Class B Common Stock is effective to vest
ownership thereof in distributees is the " Distribution Date"
for purposes of this Agreement.
C. By reason of the Distribution, the Stockholders
will on the Distribution Date be the holders of approximately 28%
of the Class B Common Stock which will generally have the same
rights and privileges as the Class A Common Stock except that the
Class B Common Stock will be entitled to elect at least 82% of
the members of the board of directors of the Company.
D. In the Distribution Agreement, HGI has agreed to
use its commercially reasonable best efforts to procure the
agreement of each of the Stockholders that, for a period of 180
days from the Distribution Date, each Stockholder shall not
transfer any of the shares of Class B Common Stock distributed to
such Stockholder on the Distribution Date (" Restricted Stock" )
-1-
other than, in accordance with the terms of this Agreement, to
any other Stockholder or any other person to whom such
Stockholder would be permitted to transfer shares of Class B
Stock of HGI in accordance with the HGI Restated Certificate of
Incorporation (including for bona fide estate planning or
charitable purposes); provided, however, that such Stockholder
shall be permitted to transfer shares of Restricted Stock
pursuant to a bona fide tender offer, exchange offer, merger,
consolidation or similar transaction in which the opportunity to
transfer shares is made available on the same basis to all
holders of Class B Common Stock. Annexed hereto, made a part
hereof and hereby incorporated herein by reference is a Schedule
of Stockholders (the " Schedule" ) which sets forth the
Restricted Stock which it is anticipated will be owned by each of
the Stockholders on the Distribution Date.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements herein contained, and for other good and
valuable consideration, the receipt and adequacy of which are
hereby severally acknowledged, the parties hereto agree as
follows:
1. Each Stockholder agrees that he, she or it shall
not sell, assign, encumber, hypothecate, pledge, transfer or
otherwise dispose of or alienate in any way (any such
disposition being herein referred to as a " Transfer" or,
collectively, the " Transfers" ) all or any part of the
Restricted Stock (or any interest therein) owned or
controlled by him, her or it except upon and subject to the
terms of this Agreement.
Nothing contained herein shall preclude a pledge of the
Restricted Stock so long as the pledgee shall hold such
pledge subject to the restrictions of this Agreement and
satisfies each of the terms and conditions set forth in this
Agreement.
2. Each Stockholder agrees that, except as otherwise
provided in Paragraph 3 herein, he, she or it will not,
directly or indirectly, sell, offer, contract to sell, grant
any option to purchase or otherwise transfer or dispose of
any Restricted Stock for a period of 180 days from the
Distribution Date. Notwithstanding the foregoing,
Restricted Stock which is transferred or distributed to a
Permitted Transferee (as defined in Paragraph 3 herein) by
reason of the death of a Stockholder (including Restricted
Stock which is held by a revocable trust which has become
irrevocable by reason of the death of a stockholder,
provided that such trust is a Permitted Transferee) may
thereafter be transferred free of the restrictions imposed
by the immediately preceding sentence.
3. Notwithstanding the restrictions contained in
Paragraph 2 of this Agreement, the following transfers
(" Permitted Transfers" ) may be consummated at any time,
provided that (except in the case of transfers described in
Subsections (i)(C), (vi) and (vii), below) the transferee in
such Permitted Transfer (the " Permitted Transferee" ) shall
execute such instruments as may be necessary or appropriate
(a) to extend the terms, conditions and provisions of this
Agreement to such Permitted Transferee while the owner of
such Restricted Stock, (b) to agree to comply with and not
to suffer any violation of this Agreement and (c) to agree
that such Permitted Transferee shall not make or suffer to
be made any Transfer of such Restricted Stock except upon
compliance with the provisions of this Agreement:
(i) In the case of a Stockholder who is a natural
person,
-2-
(A) To the spouse of such Stockholder, any
lineal descendant of a grandparent of such
Stockholder, and any spouse of such lineal
descendant (which lineal descendants, their
spouses, the Stockholder, and his or her spouse
are herein collectively referred to as the
" Stockholder's Family Members" );
(B) To the trustee of a trust (including a
voting trust) principally for the benefit of such
Stockholder and/or one or more of his or her
Permitted Transferees described in each subclause
of this clause (i) other than this subclause (B),
provided that such trust may also grant a general
or special power of appointment to one or more of
such Stockholder's Family Members and may permit
trust assets to be used to pay taxes, legacies and
other obligations of the trust or of the estates
of one or more of such Stockholder's Family
Members payable by reason of the death of any such
Family Members;
(C) To an organization a contribution to
which is deductible for federal income, estate or
gift tax purposes or any split-interest trust
described in Section 4947 of the Internal Revenue
Code, as it may from time to time be amended (such
organization or trust hereinafter called a
" Charitable Organization" );
(D) To a corporation, a partnership or
limited liability company if, in the case of a
corporation, a majority of its outstanding capital
stock entitled to vote for the election of
directors is owned by, or in the case of a
partnership, a majority of its partnership
interests entitled to participate in the
management of the partnership are held by, or in
the case of a limited liability company, a
majority of the membership interests in the
limited liability company controlling management
of the limited liability company are held by, the
Stockholder or his or her Permitted Transferees
determined under this clause (i); and
(E) To the estate of such Stockholder.
(ii) In the case of a Stockholder holding the
shares of Restricted Stock in question as trustee
pursuant to a trust (other than a trust which is a
Charitable Organization or a trust described in clause
(iii) below), " Permitted Transferee" means (A) any
person transferring Restricted Stock to such trust and
(B) any Permitted Transferee of any such person
determined pursuant to clause (i) above.
(iii) In the case of a Stockholder holding the
shares of Restricted Stock in question as trustee
pursuant to a trust (other than a Charitable
Organization) which is irrevocable on the date hereof,
" Permitted Transferee" means (A) any person to whom
or for whose benefit principal may be distributed
either during or at the end of the term of such trust
whether by power of appointment or otherwise and (B)
any Permitted Transferee of any such person determined
pursuant to clause (i) above.
-3-
(iv) In the case of a Stockholder which is a
corporation, partnership or limited liability company
(other than a Charitable Organization), " Permitted
Transferee" means (A) any person (a " Prior
Transferor" ) who theretofore transferred such shares
of Restricted Stock to such corporation, partnership or
limited liability company, (B) any Permitted Transferee
of the Prior Transferor and (C) the stockholders,
partners or members, as the case may be, of the
Stockholder in connection with a distribution by the
Stockholder, so long as such stockholders, partners or
members (x) are stockholders, partners or members of
such corporation, partnership or limited liability
company on the date hereof or (y) would be Permitted
Transferees of such stockholders, partners or members
on the date hereof pursuant to one of the other
subsections of this Paragraph 3.
(v) In the case of a Stockholder which is the
estate of a deceased Stockholder, or which is the
estate of a bankrupt or insolvent Stockholder, which
holds record and beneficial ownership of the shares of
Restricted Stock in question, " Permitted Transferee"
means a Permitted Transferee of such deceased, bankrupt
or insolvent Stockholder as determined pursuant to
clause (i), (ii), (iii), (iv) or (v), above, as the
case may be.
(vi) Transfers of shares of Restricted Stock
pursuant to a bona fide tender offer, exchange offer,
merger, consolidation or similar transaction in which
the opportunity to transfer shares is made available on
the same basis to all holders of Class B Common Stock.
(vii) Transfers of shares of Restricted Stock in
connection with the redemption by the Company of all or
any portion of the Company's Class B Common Stock,
provided that if, at the time of such redemption, the
Stockholder holds Class B Common Stock which is not
Restricted Stock, the number of shares of Restricted
Stock which may be transferred in connection with such
redemption shall not exceed that number of shares
determined by multiplying the total number of shares to
be transferred by the Stockholder in connection with
such redemption by a fraction, the numerator of which
is the total number of shares of Restricted Stock owned
by the Stockholder and the denominator of which is the
total number of shares of Class B Common Stock owned by
such Stockholder.
All Permitted Transferees (other than Permitted
Transferees who acquire Restricted Stock pursuant to
Paragraph 3(i)(C), 3(vi) or 3(vii) herein) shall be
deemed to be Stockholders for purposes of this
Agreement.
4. In the event that all Restricted Stock shall cease
to be outstanding, this Agreement shall automatically terminate
and be of no further force and effect. In any event, this
Agreement shall terminate 181 days after the Distribution Date.
5. Whenever by the terms of this Agreement notice or
demand shall or may be given to the Company or to any
Stockholder, the same shall be in writing and shall be sent,
postage prepaid, Express Mail or registered or certified mail
return receipt requested, or by reputable expedited commercial
delivery service such as Federal Express, or by hand, addressed
to the party for whom it is intended at the addresses set forth
in the Schedule.
-4-
Whenever by the terms hereof notice is, or is required
to be, given to a party hereto, a copy shall also be sent,
postage prepaid, Express Mail or registered or certified mail
return receipt requested, or by expedited commercial delivery
service to Goulston & Storrs, Attention: Mark D. Balk, Esquire,
400 Atlantic Avenue, Boston, Massachusetts 02110-3333.
Any address for the giving of notice may be changed
from time to time by written notice given to all parties to this
Agreement.
Whenever by the terms hereof, notice may, or is
required to be, given on or before a specified date, notice shall
be properly given only if deposited in the United States mail (or
with such commercial delivery service) in conformity with the
provisions of this Paragraph 5 on or before such date. All
notices sent via Express Mail or expedited commercial delivery
service shall be deemed to hove been received on the date on
which delivery is guaranteed by such Express Mail or commercial
delivery service. All notices sent by registered or certified
mail shall be deemed to have been received three (3) days from
the date on which such notices are mailed.
6. All of the parties hereto acknowledge that the
Stockholders' relationship to and with the Company is of a unique
and special character, and that in the event of a breach or
threatened breach of the covenants of this Agreement by any party
hereto (other than the payments of monetary obligations), any
remedy at law would be inadequate. It is, therefore, agreed that
in the event of such a breach or threatened breach by any party,
the party against whom such relief is sought shall not raise the
defense that there exists an adequate remedy at law. Any party
shall have said remedies in addition to any other rights or
remedies which may exist at law or in equity or under the
provisions of this Agreement.
7. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall to any
extent be invalid or unenforceable, the remainder of this
Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and be
enforced to the fullest extent permitted by law, but only to the
extent the same continues to reflect fairly the intent and
understanding of the parties expressed by this Agreement taken as
a whole.
8. Unless the context otherwise requires, the terms
" Company" , "Stockholder" and " Stockholders" , as used herein,
shall be construed to refer to such parties, their respective
legal representatives, successors and assigns, and all of the
terms, provisions and conditions hereunder shall be binding upon
and inure to the benefit of each Stockholder, but the foregoing
reference to the assigns of a Stockholder shall not be construed
as permitting transfers by such Stockholder of such Restricted
Stock, except for such transfers as may be permitted pursuant to
this Agreement. Without limitations, references to the
" Company" shall include any successor to the Company by merger,
consolidation, acquisition of assets, recapitalization,
reorganization, or otherwise.
As used herein, any reference to Restricted Stock shall
include the Restricted Stock described in the Schedule, all stock
distributed or transferred by the Company with respect to the
Restricted Stock, and all stock issued and from time to time
outstanding by reason of transfers of the Restricted Stock
-5-
described in the Schedule pursuant to Paragraphs 3(i) - (v).
Without limiting the generality of the foregoing, references to
Restricted Stock shall include all shares issued by reason of a
stock split, stock dividend, so-called " reverse stock split,"
combination of shares, exchange offer or otherwise, as well as
rights issuances, with respect to the Restricted Stock subject to
this Agreement.
9. If action is required to be taken by or through a
legal representative of a Stockholder, and there is no such legal
representative, the time within which any action is required
hereunder shall ipso facto be deemed to be extended for such
period as may be reasonably required to permit the designation
and/or appointment of a legal representative, and the Company or
any Stockholder shall have the right to apply to any court having
jurisdiction for the appointment of such legal representative.
10. The failure to insist upon strict compliance with
any of the terms, covenants and conditions herein shall not be
deemed a waiver of such terms, covenants and conditions, nor
shall any waiver or relinquishment of any right at any one or
more times be deemed a waiver or relinquishment of such right at
any other time or times.
11. Any reference in this instrument to the masculine
gender shall be deemed also to include the feminine and the
neuter, and references to the singular shall be deemed also to
include the plural and vice-versa; unless the context otherwise
requires.
12. This Agreement may not be changed orally, but only
by an agreement executed by all of the parties to this Agreement
at the time of such amendment.
IN WITNESS WHEREOF, the parties have hereto set their
hands and seals as of the day and year first above written.
/s/ Richard A. Smith
RICHARD A. SMITH
(Signatures continued on next page)
-6-
/s/ Susan F. Smith
SUSAN F. SMITH
/s/ Nancy L. Marks
NANCY L. MARKS
TRUST U/W/O PHILIP SMITH F/B/O
RICHARD A. SMITH
By: /s/ Nancy. L. Marks
NANCY L. MARKS,
as Trustee and not individually
By: /s/ Richard A. Smith
RICHARD A. SMITH,
as Trustee and not individually
TRUST U/W/O PHILIP SMITH F/B/O
NANCY L. MARKS
By: /s/ Nancy L. Marks
NANCY L. MARKS,
as Trustee and not individually
By: /s/ Richard A. Smith
RICHARD A. SMITH,
as Trustee and not individually
A-D-R TRUST F/B/O DEBRA SMITH KNEZ
U/I/T dated 2/9/67
By: /s/ Susan F. Smith
SUSAN F. SMITH a/k/a SUSAN M.
SMITH, as Trustee and not individually
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
(Signatures continued on next page)
-7-
C-J-P TRUST F/B/O CATHY LURIE U/I/T
dated 12/10/73
By: /s/ Richard A. Smith
RICHARD A. SMITH,
as Trustee and not individually
C-J-P TRUST F/B/O PETER LURIE U/I/T
dated 12/10/73
By: /s/ Richard A. Smith
RICHARD A. SMITH,
as Trustee and not individually
J-J-E 1988 TRUST F/B/O JAMES T.
BERYLSON U/D/T dated 11/1/88
By: /s/ John Berylson
JOHN BERYLSON,
as Trustee and not individually
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
J-J-E 1988 TRUST F/B/O JENNIFER L.
BERYLSON U/D/T dated 11/1/88
By: /s/ John Berylson
JOHN BERYLSON,
as Trustee and not individually
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
(Signatures continued on next page)
-8-
J-J-E 1988 TRUST F/B/O ELIZABETH S.
BERYLSON U/D/T dated 11/1/88
By: /s/ John Berylson
JOHN BERYLSON,
as Trustee and not individually
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
DEBRA AND BRIAN KNEZ 1988
CHILDREN'S TRUST F/B/O JESSICA M.
KNEZ U/D/T dated 12/1/88
By: /s/ Brian J. Knez
BRIAN J. KNEZ,
as Trustee and not individually
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
DEBRA AND BRIAN KNEZ 1988
CHILDREN'S TRUST F/B/O ANDREW P.
KNEZ U/D/T dated 12/1/88
By: /s/ Brian J. Knez
BRIAN J. KNEZ,
as Trustee and not individually
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
(Signatures continued on next page)
-9-
ROBERT SMITH AND DANA WEISS 1994
CHILDREN'S TRUST F/B/O MADELEINE W.
SMITH U/D/T dated 12/1/94
By: /s/ Dana A. Weiss
DANA A. WEISS,
as Trustee and not individually
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
ROBERT SMITH AND DANA WEISS 1994
CHILDREN'S TRUST F/B/O RYAN A.
SMITH U/D/T dated 12/1/94
By: /s/ Dana A. Weiss
DANA A. WEISS,
as Trustee and not individually
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
AMY SMITH BERYLSON 1978 INSURANCE
TRUST U/D/T dated 9/5/78
By: /s/ Amy Smith Berylson
AMY SMITH BERYLSON,
as Trustee and not individually
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
(Signatures continued on next page)
-10-
DEBRA SMITH KNEZ 1978 INSURANCE
TRUST U/D/T dated 9/5/78
By: /s/ Debra Smith Knez
DEBRA SMITH KNEZ,
as Trustee and not individually
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
ROBERT A. SMITH 1978 INSURANCE
TRUST U/D/T dated 9/5/78
By: /s/ Robert A. Smith
ROBERT A. SMITH,
as Trustee and not individually
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
RICHARD A. SMITH FAMILY TRUST U/W/O
MARIAN J. SMITH F/B/O DEBRA SMITH
KNEZ
By: /s/ Richard A. Smith
RICHARD A. SMITH,
as Trustee and not individually
By: /s/ Nancy L. Marks
NANCY L. MARKS,
as Trustee and not individually
(Signatures continued on next page)
-11-
RICHARD A. SMITH FAMILY TRUST U/W/O
MARIAN J. SMITH F/B/O ROBERT A.
SMITH
By: /s/ Richard A. Smith
RICHARD A. SMITH,
as Trustee and not individually
By: /s/ Nancy L. Marks
NANCY L. MARKS,
as Trustee and not individually
NANCY S. LURIE FAMILY TRUST U/W/O
MARIAN J. SMITH F/B/O CATHY J.
LURIE
By: /s/ Nancy Lurie Marks
NANCY LURIE MARKS,
as Trustee and not individually
By: /s/ Richard A. Smith
RICHARD A. SMITH,
as Trustee and not individually
PETER A. LURIE TRUST U/W/O MARIAN
J. SMITH
By: /s/ Nancy Lurie Marks
NANCY LURIE MARKS,
as Trustee and not individually
By: /s/ Richard A. Smith
RICHARD A. SMITH,
as Trustee and not individually
(Signatures continued on next page)
-12-
MORRIS J. LURIE FAMILY TRUST U/I/T
dated 4/15/58 F/B/O CATHY J. LURIE,
ET AL
By: /s/ Nancy L. Marks
NANCY L. MARKS,
as Trustee and not individually
By: /s/ Richard A. Smith
RICHARD A. SMITH,
as Trustee and not individually
MORRIS J. LURIE FAMILY TRUST U/I/T
dated 4/15/58 F/B/O PETER A. LURIE,
ET AL
By: /s/ Nancy L. Marks
NANCY L. MARKS,
as Trustee and not individually
By: /s/ Richard A. Smith
RICHARD A. SMITH,
as Trustee and not individually
SUSAN F. SMITH GRANTOR RETAINED
ANNUITY TRUST - 15 YEARS U/D/T dated
8/10/94
By: /s/ Susan F. Smith
SUSAN F. SMITH,
as Trustee and not individually
By: /s/ Richard A. Smith
RICHARD A. SMITH,
as Trustee and not individually
SUSAN F. SMITH GRANTOR RETAINED
ANNUITY TRUST - 7 YEARS U/D/T dated
8/10/94
By: /s/ Richard A. Smith
RICHARD A. SMITH,
as Trustee and not individually
(Signatures continued on next page)
-13
SUSAN F. SMITH 1998 GRANTOR
RETAINED ANNUITY TRUST - 5 YEARS
U/D/T dated 9/1/98
By: /s/ Richard A. Smith
RICHARD A. SMITH,
as Trustee and not individually
NANCY LURIE MARKS GRANTOR RETAINED
ANNUITY TRUST U/D/T dated 1/15/97
By: /s/ Richard A. Smith
RICHARD A. SMITH,
as Trustee and not individually
AMY SMITH BERYLSON GRANTOR RETAINED
ANNUITY TRUST U/D/T dated 10/25/94
By: /s/ Amy Smith Berylson
AMY SMITH BERYLSON,
as Trustee and not individually
By: /s/ John G. Berylson
JOHN G. BERYLSON,
as Trustee and not individually
AMY SMITH BERYLSON 1998 GRANTOR
RETAINED ANNUITY TRUST U/D/T dated
11/2/98
By: /s/ John G. Berylson
JOHN G. BERYLSON,
as Trustee and not individually
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
(Signatures continued on next page)
-14-
ROBERT A. SMITH GRANTOR RETAINED
ANNUITY TRUST U/D/T dated 10/27/94
By: /s/ Robert A. Smith
ROBERT A. SMITH,
as Trustee and not individually
By: /s/ Dana A. Weiss
DANA A. WEISS,
as Trustee and not individually
ROBERT A. SMITH 1998 GRANTOR
RETAINED ANNUITY TRUST U/D/T dated
11/2/98
By: /s/ Dana A. Weiss
DANA A. WEISS,
as Trustee and not individually
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
DEBRA SMITH KNEZ GRANTOR RETAINED
ANNUITY TRUST U/D/T dated 10/27/94
By: /s/ Debra Smith Knez
DEBRA SMITH KNEZ,
as Trustee and not individually
By: /s/ Brian J. Knez
BRIAN J. KNEZ,
as Trustee and not individually
(Signatures continued on next page)
-15-
DEBRA SMITH KNEZ 1998 GRANTOR
RETAINED ANNUITY TRUST U/D/T dated
11/2/98
By: /s/ Brian J. Knez
BRIAN J. KNEZ,
as Trustee and not individually
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
RICHARD A. SMITH 1976 TRUST F/B/O
AMY SMITH BERYLSON U/D/T dated
12/16/76
By: /s/ Susan F. Smith
SUSAN F. SMITH,
as Trustee and not individually
RICHARD A. SMITH 1976 TRUST F/B/O
ROBERT A. SMITH U/D/T dated
12/16/76
By: /s/ Susan F. Smith
SUSAN F. SMITH,
as Trustee and not individually
RICHARD A. SMITH 1976 TRUST F/B/O
DEBRA SMITH KNEZ U/D/T dated
12/16/76
By: /s/ Susan F. Smith
SUSAN F. SMITH,
as Trustee and not individually
MARIAN SMITH D-R-A 1976 TRUST F/B/O
AMY SMITH BERYLSON U/D/T dated
12/16/76
By: /s/ Susan F. Smith
SUSAN F. SMITH,
as Trustee and not individually
(Signatures continued on next page)
-16-
MARIAN SMITH D-R-A 1976 TRUST F/B/O
ROBERT A. SMITH U/D/T dated
12/16/76
By: /s/ Susan F. Smith
SUSAN F. SMITH,
as Trustee and not individually
MARIAN SMITH D-R-A 1976 TRUST F/B/O
DEBRA SMITH KNEZ U/D/T dated
12/16/76
By: /s/ Susan F. Smith
SUSAN F. SMITH,
as Trustee and not individually
NANCY LURIE MARKS 1976 TRUST F/B/O
JEFFREY R. LURIE U/D/T dated
12/16/76
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
By: /s/ Darline M. Lewis
DARLINE M. LEWIS,
as Trustee and not individually
NANCY LURIE MARKS 1976 TRUST F/B/O
CATHY J. LURIE U/D/T dated 12/16/76
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
By: /s/ Darline M. Lewis
DARLINE M. LEWIS,
as Trustee and not individually
(Signatures continued on next page)
-17-
NANCY LURIE MARKS 1976 TRUST F/B/O
PETER A. LURIE U/D/T dated 12/16/76
By: /s/ Mark D. Balk
MARK D. BALK,
as Trustee and not individually
By: /s/ Darline M. Lewis
DARLINE M. LEWIS,
as Trustee and not individually
MARIAN SMITH J-C-P 1976 TRUST F/B/O
JEFFREY R. LURIE U/D/T dated
12/16/76
By: /s/ Nancy Lurie Marks
NANCY LURIE MARKS,
as Trustee and not individually
MARIAN SMITH J-C-P 1976 TRUST F/B/O
CATHY J. LURIE U/D/T dated 12/16/76
By: /s/ Nancy Lurie Marks
NANCY LURIE MARKS,
as Trustee and not individually
MARIAN SMITH J-C-P 1976 TRUST F/B/O
PETER A. LURIE U/D/T dated 12/16/76
By: /s/ Nancy Lurie Marks
NANCY LURIE MARKS,
as Trustee and not individually
SMITH MANAGEMENT COMPANY
By: /s/ Richard A. Smith
RICHARD A. SMITH
Its
Hereunto duly authorized
(Signatures continued on next page)
-18-
MARIAN REALTY COMPANY
By: /s/ Richard A. Smith
RICHARD A. SMITH
Its
Hereunto duly authorized
/s/ Amy S. Berylson
AMY S. BERYLSON
/s/ John G. Berylson
JOHN G. BERYLSON
/s/ Jennifer L. Berylson
JENNIFER L. BERYLSON
/s/ Robert A. Smith
ROBERT A. SMITH
/s/ Debra S. Knez
DEBRA S. KNEZ
/s/ Brian J. Knez
BRIAN J. KNEZ
/s/ Jeffrey R. Lurie
JEFFREY R. LURIE
/s/ Cathy J. Lurie
CATHY J. LURIE
/s/ Jeffrey R. Lurie
JEFFREY R. LURIE, as Guardian of
the
Property of Milena C. Lurie
(Signatures continued on next page)
-19-
/s/ Jeffrey R. Lurie
JEFFREY R. LURIE, as Guardian of
the
Property of Julian M.J. Lurie
/s/ Amy Smith Berylson
AMY SMITH BERYLSON, as Guardian
of the Property of James T.
Berylson
/s/ John G. Berylson
JOHN G. BERYLSON, as Guardian of
the
Property of James T. Berylson
/s/ Amy Smith Berylson
AMY SMITH BERYLSON, as Guardian
of the Property of Elizabeth S.
Berylson
/s/ John G. Berylson
JOHN G. BERYLSON, as Guardian of
the
Property of Elizabeth S. Berylson
Receipt of a counterpart execution copy of this Smith-Lurie/Marks
Family Stockholders' Agreement is acknowledged this 1st day
of September, 1999.
THE NEIMAN MARCUS GROUP, INC.
By: /s/ Eric P. Geller
ERIC P. GELLER
Its Senior Vice President, General Counsel and Secretary
Hereunto duly authorized
-20-
EXHIBIT 13.1
[BEGIN PAGE 16]
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
The Company's operations include specialty retail stores, which
consist of Neiman Marcus Stores and Bergdorf Goodman, and a
direct marketing operation, NM Direct. The Company's revenues
rose to $2.55 billion in fiscal 1999, representing a 15.6%
increase over revenues of $2.21 billion in fiscal 1997. Net
earnings increased 2.5% from $91.2 million in fiscal 1997.
Approximately 86% of the Company's revenues are generated by
its specialty retail stores with the balance generated
primarily by NM Direct. Revenue growth over the last three
fiscal years at Neiman Marcus Stores and Bergdorf Goodman can
be attributed principally to increases in overall comparable
store sales and new store openings. Since August 1996 the
Company has opened three new Neiman Marcus stores, including
most recently a new store in Honolulu, Hawaii, in September
1998. The Company currently also plans to open six new Neiman
Marcus stores in the next five years, two of which will be
replacement stores. In fiscal 1999, average store sales per
gross square foot reached a record high of $453, representing
an increase of 7.9% over three years. The Company has
consistently focused on renovating and modernizing its stores
to improve productivity. The Company also aims to improve
average transaction amounts and comparable sales growth with
carefully edited assortments and marketing and sales programs
which are designed to increase its customers' awareness of
merchandise offerings in the stores.
The Company opened The Galleries of Neiman Marcus stores in
Cleveland, Ohio, in November 1998 and in Phoenix, Arizona, in
December 1998. The Galleries concept is a smaller retail store
of approximately 10,000 to 15,000 square feet focusing on
precious and fine jewelry, gifts and home accessories. The
Company plans to open the next Galleries store in Seattle,
Washington, in October 1999. In January 1998, the Company
acquired Chef's Catalog, a direct marketer of gourmet cookware
and high-end kitchenware.
The Company also launched its Brand Development Initiative in
fiscal 1999, a strategy designed to create shareholder value by
investing in designer resources that serve affluent customers.
In February 1999, the Company acquired a 56% interest in Kate
Spade LLC, a manufacturer of high-end fabric and leather
handbags and accessories. In November 1998, the Company
acquired a 51% interest in Gurwitch Bristow Products, which
manufactures and markets the Laura Mercier cosmetic lines.
In addition to opening new stores, the Company continues to
make significant capital investments in an effort to increase
productivity. In particular, during fiscal 1997, 1998 and 1999,
the Company invested a total of approximately $225.2 million to
remodel its existing stores, to construct a new Neiman Marcus
store in Hawaii and to purchase a building adjacent to its
existing San Francisco store as part of a plan to enlarge and
remodel that store. In fiscal 2000, major projects will include
the commencement of multiyear construction projects to remodel
and expand Neiman Marcus stores in San Francisco and Las Vegas,
as well as the continued remodeling of the plaza level of the
main store of Bergdorf Goodman.
[END PAGE 16]
[BEGIN PAGE 17]
In fiscal 1999, a committee of independent directors of the
Company, and the Boards of Directors of the Company and of
Harcourt General, Inc. ("Harcourt General"), approved a series
of transactions (the "Transactions") relating to a plan by
Harcourt General to spin off to the holders of Harcourt
General's common stock approximately 21.4 million of the
approximately 26.4 million shares of the Company's common stock
held by Harcourt General in a distribution to be tax-free to
Harcourt General and its shareholders. On September 15, 1999,
the shareholders of the Company approved a recapitalization in
which, among other things, the approximately 21.4 million
shares of the Company's common stock to be distributed will be
exchanged for a new class of common stock of the Company that
will have the right to elect approximately 82% of the Company's
Board of Directors, with the remaining shares having the right
to elect approximately 18% of the Company's Board of Directors
( the "Recapitalization"). The Transactions are expected to be
completed in October 1999.
OPERATING RESULTS
<TABLE>
<CAPTION>
Fiscal years ended
---------------------------------
July 31, August 1, August 2,
(Dollars in Millions) 1999 1998 1997
---------------------------------
REVENUES
<S> <C> <C> <C>
Specialty Retail Stores $2,209.5 $2,089.5 $1,950.5
Direct Marketing 321.7 283.8 259.4
Other(1) 22.2 _ _
---------------------------------
Total $2,553.4 $2,373.3 $2,209.9
=================================
OPERATING EARNINGS
Specialty Retail Stores $ 178.0 $ 198.1 $ 169.9
Direct Marketing 14.5 15.6 25.5
Other(1) (12.1) (14.6) (14.4)
---------------------------------
Total $ 180.4 $ 199.1 $ 181.0
=================================
OPERATING PROFIT MARGIN
Specialty Retail Stores 8.1% 9.5% 8.7%
Direct Marketing 4.5% 5.5% 9.8%
---------------------------------
Total(2) 7.1% 8.4% 8.2%
=================================
(1) OTHER INCLUDES UNALLOCATED CORPORATE EXPENSES, KATE SPADE AND GURWITCH BRISTOW PRODUCTS.
(2) INCLUDES OTHER.
</TABLE>
FISCAL 1999 COMPARED TO FISCAL 1998
Revenues in fiscal 1999 increased $180.1 million to $2.55
billion from $2.37 billion in fiscal 1998. The 7.6% increase
was primarily attributable to higher overall comparable sales,
sales from Chef's Catalog, acquired in January 1998, and the
new Neiman Marcus store in Hawaii which opened in September
1998. Total comparable sales increased 2.6%. Comparable sales
increased 3.4% at Neiman Marcus Stores, decreased 2.3% at
Bergdorf Goodman, and increased 2.0% at NM Direct.
Cost of goods sold including buying and occupancy costs
increased 8.6% to $1.74 billion in fiscal 1999 from $1.60
billion in fiscal 1998, primarily due to increased sales. As a
percentage of revenues, cost of goods sold was 68.2% in fiscal
1999 compared to 67.6% in fiscal 1998. The increase in fiscal
1999 resulted primarily from lower gross margins at both Neiman
Marcus Stores and Bergdorf Goodman in comparison to the prior
year, principally as a result of higher markdowns.
Selling, general and administrative expenses increased 10.8% in
fiscal 1999 to $615.9 million from $556.1 million in fiscal
1998. As a percentage of revenues, selling, general and
administrative expenses increased to 24.1% in
[END PAGE 17]
[BEGIN PAGE 18]
fiscal 1999 from 23.4% in fiscal 1998. The proportionate increase
in 1999 was primarily due to higher selling and sales promotion
expenses.
Corporate expenses, which consist primarily of charges for
salaries, benefits and overhead for the individuals who provide
services under the intercompany services agreement with
Harcourt General and professional fees, increased 12.2% to
$16.4 million from $14.6 million in the prior year. The
increase resulted primarily from expenses incurred in
connection with the Company's Recapitalization.
Operating earnings decreased by 9.4% to $180.4 million from
$199.1 million in the prior year. This decrease was
attributable to lower gross margins, higher selling and sales
promotion expenses and Bergdorf Goodman's decline in comparable
sales.
Interest expense increased 14.2% in fiscal 1999 to $25.0
million from $21.9 million in the prior year. The increase
resulted from higher average borrowings as well as a higher
effective interest rate, which resulted from the issuance of
fixed rate debt in May 1998.
The Company's effective income tax rate was 39% in fiscal 1999,
as compared to 40% in fiscal 1998.
FISCAL 1998 COMPARED TO FISCAL 1997
Revenues in fiscal 1998 increased to $2.37 billion from $2.21
billion in fiscal 1997. The 7.4% increase was primarily
attributable to comparable sales growth of 7.0% and 8.0% at
Neiman Marcus Stores and Bergdorf Goodman, respectively. NM
Direct revenues increased in comparison to the prior year
period as a result of sales from Chef's Catalog, which was
acquired in January 1998. On a comparable basis, revenues at NM
Direct decreased 2.3%.
Cost of goods sold increased 6.6% to $1.60 billion in fiscal
1998, primarily due to increased sales. As a percentage of
revenues, cost of goods sold was 67.6% in fiscal 1998 compared
to 68.1% in fiscal 1997. The decrease in fiscal 1998 resulted
primarily from proportionately lower buying and occupancy
costs. Gross margins at both Neiman Marcus Stores and Bergdorf
Goodman were essentially unchanged, while gross margins at NM
Direct decreased in comparison to the prior year primarily as a
result of higher markdowns.
Selling, general and administrative expenses increased 9.1% in
fiscal 1998 to $556.1 million. As a percentage of revenues,
selling, general and administrative expenses increased to 23.4%
in fiscal 1998 from 23.1% in fiscal 1997. The proportionate
increase in 1998 was primarily due to higher catalogue
circulation costs at NM Direct and pre-opening expenses
associated with the new Neiman Marcus store in Hawaii.
Corporate expenses, which consist primarily of charges for
salaries, benefits and overhead for the individuals who provide
services under the intercompany services agreement with
Harcourt General and professional fees, increased 1.8% to $14.6
million in fiscal 1998 compared to fiscal 1997. The increase
was primarily due to higher professional fees.
Operating earnings increased by 10% to $199.1 million from
$181.0 million in the prior year. This increase is attributed to
higher sales volume, particularly the comparable sales increases at
Neiman Marcus stores and Bergdorf Goodman.
Interest expense decreased 17.0% in fiscal 1998 to $21.9 million.
The decrease resulted from lower average borrowings as well as a
lower effective interest rate which resulted from the repayment at
maturity of the Company's fixed rate senior notes with
borrowings under its revolving credit facility.
The Company's effective income tax rate was 40% in fiscal 1998,
as compared to 41% in fiscal 1997.
[END PAGE 18]
[BEGIN PAGE 19]
REVIEW OF FINANCIAL CONDITION
In fiscal 1999, the Company had sufficient cash flows from
operations and its revolving credit facility to finance its
working capital needs, capital expenditures, stock repurchases
and the acquisitions of Gurwitch Bristow Products and Kate
Spade LLC. Operating activities provided net cash of $120.0
million in fiscal 1999.
The Company's capital expenditures in fiscal 1999 included the
purchase of a building adjacent to the Neiman Marcus store in
Union Square in San Francisco for a future expansion of this store,
existing store renovations and completion of the construction of
the new Neiman Marcus store in Honolulu, Hawaii opened in
September 1998. Capital expenditures were $91.0 million in fiscal
1999, $81.2 million in fiscal 1998 and $53.0 million in fiscal
1997. Capital expenditures are currently estimated to approximate
$115 million for fiscal 2000.
In February 1999, the Company acquired a 56% interest in Kate
Spade LLC for approximately $33.6 million in cash. In November
1998, the Company acquired a 51% interest in Gurwitch Bristow
Products for approximately $6.7 million in cash. Both
acquisitions were funded primarily through borrowings under the
Company's revolving credit facility. In January 1998, the
Company acquired Chef's Catalog for approximately $31.0 million
in cash, which was also funded primarily through borrowings
under the Company's revolving credit facility.
In September 1998, the Company's Board of Directors authorized
an increase in the stock repurchase program to 1.5 million
shares. In fiscal 1999 the Company repurchased 827,000 shares
at an average price of $18.57; in fiscal 1998 the Company
repurchased 160,100 shares at an average price of $29.32. At
July 31, 1999 there were 512,900 shares remaining under this
program.
In May 1998, the Company issued $250 million of senior notes
and debentures to the public, the proceeds from which were used
to repay borrowings outstanding on the Company's revolving
credit facility. The debt is comprised of $125 million 6.65%
senior notes due 2008 and $125 million 7.125% senior debentures
due 2028. Interest on the securities is payable semiannually.
At July 31, 1999, the Company had $625.0 million available
under its $650.0 million revolving credit facility, which
expires in October 2002. In September 1999 the Company reduced
the revolving credit facility to $450 million, to reflect its
current and anticipated cash flow requirements. Additionally,
the Company's five year revolving securitization of its
accounts receivable matures in the year 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.
In October 1996, the Company issued 8.0 million shares of
common stock to the public at $35.00 per share. The net
proceeds were used in November 1996, together with 3.9 million
shares of the Company's common stock and borrowings of
approximately $20.0 million, to purchase all of its outstanding
redeemable preferred stock from Harcourt General and pay
accrued and unpaid dividends. The Company declared and paid the
final dividends on its preferred stock in the first quarter of
fiscal 1997 in the amount of $5.8 million on November 12, 1996
concurrent with the repurchase of this preferred stock.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK
The market risk inherent in the Company's financial instruments
represents the potential loss arising from adverse changes in
interest rates. The Company does not enter into financial
instruments for trading purposes.
At July 31, 1999 and August 1, 1998, the fair values of the
Company's fixed-rate debt were estimated at $230.4 million and
$251.6 million, respectively, using quoted market prices and
comparable publicly-traded issues. Such fair values were less
than carrying value by approximately $22.3 million at July 31,
1999 and greater than the carrying value by approximately $1.2
million at August 1, 1998. Market risk is estimated as the
potential change in fair value resulting from a hypothetical
10% adverse change in interest rates and amounted to
approximately $15.2 million at July 31, 1999.
[END PAGE 19]
[BEGIN PAGE 20]
At July 31, 1999 and August 1, 1998, the Company had $25.0
million and $35.0 million, respectively, of variable rate
borrowings outstanding under its revolving credit facility,
which approximate fair value. A hypothetical 10% adverse change
in interest rates for this variable rate debt would have an
approximate $1.7 million negative effect on the Company's
earnings and cash flows.
The Company uses derivative financial instruments to manage
foreign currency risk related to merchandise inventories. The
effect of such instruments was not material to the Company's
financial condition, results of operations or cash flows.
SEASONALITY
The specialty retail industry is seasonal in nature, and a
disproportionately higher level of the Company's sales and
earnings are generated in the fall and holiday selling seasons.
The Company's working capital requirements and inventories
increase substantially in the first quarter in anticipation of
the holiday selling season.
IMPACT OF INFLATION
The Company has adjusted selling prices to maintain certain
profit levels and will continue to do so as competitive
conditions permit. In general, management believes that the
impact of inflation or of changing prices has not had a
material effect on the Company's results of operations during
the last three fiscal years.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (SFAS 133), which will require recognition
of all derivatives as either assets or liabilities on the
balance sheet at fair value. The Company is currently
evaluating the additional disclosures required in implementing
SFAS 133, which will be effective for fiscal 2001.
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 operation of such systems
will not be adversely affected by the Year 2000 date change.
The Company is presently in the process of renovating
noncompliant 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 approximately 90% complete,
with substantial completion of the Year 2000 project currently
anticipated for October 1999.
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' failures to rectify their
own Year 2000 issues. Based on responses 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 following up to monitor
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.
[END PAGE 20]
[BEGIN PAGE 21]
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 October
1999.
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.
[END PAGE 21]
[BEGIN PAGE 22]
<TABLE>
Consolidated Balance Sheets
<CAPTION>
July 31, August 1,
(Dollar Amounts in Thousands) 1999 1998
----------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and equivalents $ 29,191 $ 56,644
Undivided interests in NMG Credit Card Master Trust 133,151 138,867
Accounts receivable, less allowance for
doubtful accounts of $2,300 and $1,800 59,317 53,571
Merchandise inventories 528,452 499,068
Deferred income taxes 21,953 24,058
Other current assets 53,102 61,188
----------------------
TOTAL CURRENT ASSETS 825,166 833,396
----------------------
PROPERTY AND EQUIPMENT
Land, buildings and improvements 486,862 435,166
Fixtures and equipment 364,757 310,726
Construction in progress 47,656 66,927
----------------------
899,275 812,819
Less accumulated depreciation and amortization 385,836 333,563
----------------------
PROPERTY AND EQUIPMENT, NET 513,439 479,256
----------------------
OTHER ASSETS 163,583 125,140
----------------------
$1,502,188 $1,437,792
=======================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and current maturities of long-term
liabilities $ 921 $ 5,963
Accounts payable 203,071 201,490
Accrued liabilities 176,188 180,809
----------------------
TOTAL CURRENT LIABILITIES 380,180 388,262
----------------------
LONG-TERM LIABILITIES
Notes and debentures 274,640 284,617
Other long-term liabilities 74,664 71,083
Deferred income taxes 32,038 37,139
----------------------
TOTAL LONG-TERM LIABILITIES 381,342 392,839
----------------------
MINORITY INTEREST 4,485 -
COMMITMENTS AND CONTINGENCIES
COMMON STOCK
Common stock - $.01 par value
Authorized - 100,000,000 shares
Issued and outstanding - 49,039,035 and
49,759,686 shares 490 498
ADDITIONAL PAID-IN CAPITAL 467,283 481,295
RETAINED EARNINGS 268,408 174,898
----------------------
$1,502,188 $1,437,792
======================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
[END PAGE 22]
[BEGIN PAGE 23]
<TABLE>
Consolidated Statements of Earnings
<CAPTION>
Years Ended
-----------------------------------
July 31, August 1, August 2,
(In Thousands Except for Per Share Data) 1999 1998 1997
-----------------------------------
<S> <C> <C> <C>
Revenues $2,553,421 $2,373,347 $2,209,891
Cost of goods sold including buying and occupancy costs 1,740,711 1,603,602 1,504,858
Selling, general and administrative expenses 615,890 556,051 509,687
Corporate expenses 16,406 14,620 14,364
-----------------------------------
Operating earnings 180,414 199,074 180,982
Interest expense 24,972 21,862 26,330
-----------------------------------
Earnings before income taxes and minority interest 155,442 177,212 154,652
Income taxes 60,622 70,885 63,407
-----------------------------------
Earnings before minority interest 94,820 106,327 91,245
Minority interest in net earnings of subsidiaries (1,310) - -
-----------------------------------
Net earnings 93,510 106,327 91,245
Loss on redemption of redeemable preferred stocks - - (22,361)
Dividends and accretion on redeemable preferred stocks - - (6,201)
-----------------------------------
Net earnings applicable to common shareholders $ 93,510 $ 106,327 $ 62,683
-----------------------------------
Weighted average number of common and
common equivalent shares outstanding:
Basic 49,129 49,808 47,162
===================================
Diluted 49,237 49,981 47,335
===================================
Earnings per share applicable to common shareholders:
Basic $ 1.90 $ 2.13 $ 1.33
===================================
Diluted $ 1.90 $ 2.13 $ 1.32
===================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
[END PAGE 23]
[BEGIN PAGE 24]
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
Years Ended
-----------------------------------
July 31, August 1, August 2,
(In Thousands) 1999 1998 1997
-----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net earnings $ 93,510 $ 106,327 $ 91,245
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 64,921 60,097 59,820
Deferred income taxes (2,996) 228 1,190
Minority interest 1,310 - -
Other (4,344) 1,629 2,199
Changes in current assets and liabilities:
Accounts receivable (1,999) 2,431 (3,991)
Merchandise inventories (25,642) (33,006) (16,464)
Accounts payable and accrued liabilities (12,944) 48,841 (15,790)
Other 8,151 (3,985) (8,971)
-----------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 119,967 182,562 109,238
-----------------------------------
CASH FLOWS USED FOR INVESTING ACTIVITIES
Additions to property and equipment (91,026) (81,176) (53,037)
Purchases of held-to-maturity securities (641,364) (636,342) (461,791)
Maturities of held-to-maturity securities 647,080 625,816 447,842
Acquisitions, net of cash acquired (36,754) (31,000) -
-----------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (122,064) (122,702) (66,986)
-----------------------------------
CASH FLOWS USED FOR FINANCING ACTIVITIES
Proceeds from borrowings - 249,617 113,500
Repayment of debt (10,000) (265,000) (132,000)
Payment of redemption of preferred stock - - (281,426)
Issuance (repurchase) of common stock (15,356) (4,694) 267,672
Dividends paid - - (5,796)
-----------------------------------
NET CASH USED FOR FINANCING ACTIVITIES (25,356) (20,077) (38,050)
-----------------------------------
CASH AND EQUIVALENTS
Increase (decrease) during the year (27,453) 39,783 4,202
Beginning balance 56,644 16,861 12,659
-----------------------------------
Ending balance $ 29,191 $ 56,644 $ 16,861
===================================
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 26,098 $ 20,932 $ 28,441
===================================
Income taxes $ 62,626 $ 59,656 $ 63,951
===================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
[END PAGE 24]
[BEGIN PAGE 25]
<TABLE>
Consolidated Statements of Common Shareholder's Equity
<CAPTION>
Retained
Additional Earnings
Common Stock Paid-in (Accumulated
(In Thousands) Shares Amount Capital Decit)
------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE - AUGUST 4, 1996 38,004 $ 380 $ 83,106 $ (7,879)
Net earnings - - - 91,245
Accretion of redeemable preferred stock - - - (405)
Preferred dividends - - - (5,796)
Loss on redemption of redeemable preferred stock - - - (8,594)
Issuance of common stock 11,857 119 402,161 -
Other equity transactions 12 - 391 -
------------------------------------------------
BALANCE - AUGUST 2, 1997 49,873 499 485,658 68,571
Net earnings - - - 106,327
Repurchase of common stock (160) (2) (4,692) -
Other equity transactions 47 1 329 -
------------------------------------------------
BALANCE - AUGUST 1, 1998 49,760 498 481,295 174,898
Net earnings - - - 93,510
Repurchase of common stock (827) (11) (15,345) -
Other equity transactions 106 3 1,333 -
------------------------------------------------
BALANCE - JULY 31, 1999 49,039 $ 490 $ 467,283 $ 268,408
================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
[END PAGE 25]
[BEGIN PAGE 26]
Notes to Consolidated Financial Statements
NOTE 1 Summary of Significant Accounting Policies
BASIS OF REPORTING
The Company's businesses consist of specialty retail stores,
which includes Neiman Marcus Stores and Bergdorf Goodman, and
NM Direct, the Company's direct marketing operation. The
consolidated financial statements include the accounts of all
of the Company's majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
The Company's fiscal year ends on the Saturday closest to July
31.
CASH AND EQUIVALENTS
Cash and equivalents consist of cash and highly liquid
investments with maturities of three months or less from the
date of purchase.
UNDIVIDED INTERESTS IN NMG CREDIT CARD MASTER TRUST
In March 1995, the Company sold all of its Neiman Marcus credit
card receivables through a subsidiary to The Neiman Marcus
Group Credit Card Master Trust (the "Trust") in exchange for
certificates representing undivided interests in such
receivables. The undivided interests in the Trust include the
interests retained by the Company's subsidiary which are
represented by the Class C Certificate ($54.0 million) and the
Seller's Certificate (the excess of the total receivables
transferred to the Trust over the portion represented by
certificates sold to investors and the Class C Certificate).
The undivided interests in the Trust represent securities which
the Company intends to hold to maturity in accordance with
Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities." Due to the short-term revolving nature of the
credit card portfolio, the carrying value of the Company's
undivided interests in the Trust approximates fair value.
MERCHANDISE INVENTORIES
Inventories are stated at the lower of cost or market.
Substantially all of the Company's inventories are valued using
the retail method on the last-in, first-out (LIFO) basis. Some
specialty retailers use the first-in, first-out (FIFO) method
and, accordingly, the Company has provided the following data
for comparative purposes.
If the FIFO method of inventory valuation had been used to
value all inventories, merchandise inventories would have been
$16.7 million and $14.5 million higher than reported at July
31, 1999 and August 1, 1998, respectively. As a result of using
the LIFO valuation method, net earnings were $1.3 million lower
in 1999, $0.3 million higher in 1998, and $0.9 million lower in
1997 than they would have been using the FIFO method.
[END PAGE 26]
[BEGIN PAGE 27]
OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist primarily of certain
employee benefit obligations, postretirement health care
benefits and the liability for scheduled rent increases.
DERIVATIVES
The Company uses treasury lock agreements (a derivative) as a
means of managing interest-rate risk associated with current
debt or anticipated debt transactions. The differentials to be
received or paid under these contracts designated as hedges are
deferred and amortized to interest expense over the remaining
life of the associated debt. Derivative financial instruments
are not held for trading purposes.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization are provided on a straight-line
basis over the shorter of the estimated useful lives of the
related assets or the lease term. Buildings and improvements
are depreciated over 15 to 30 years while fixtures and
equipment are depreciated over two to 15 years.
When property and equipment are retired or have been fully
depreciated, the cost and the related accumulated depreciation
are eliminated from the respective accounts. Gains or losses
arising from dispositions are reported as income or expense.
Intangibles are amortized on a straight-line basis over their
estimated useful lives, ranging from four to 40 years.
Amortization expense was $6.4 million in 1999, $4.8 million in
1998 and $3.7 million in 1997.
Upon occurrence of an event or a change in circumstances, the
Company compares the carrying value of its long-lived assets
against projected undiscounted cash flows to determine any
impairment and to evaluate the reasonableness of the
depreciation or amortization periods.
INCOME TAXES
Income taxes are calculated in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting
for Income Taxes." SFAS 109 requires the asset and liability
method of accounting for income taxes.
REVENUE RECOGNITION
The Company recognizes revenue at point-of-sale or upon
shipment.
RECEIVABLES AND FINANCE CHARGE INCOME
The Company's credit operations generate finance charge income,
which is recognized as income when earned and is recorded as a
reduction of selling, general and administrative expenses.
Finance charge income amounted to $45.8 million in 1999, $47.8
million in 1998 and $47.0 million in 1997.
Concentration of credit risk with respect to trade receivables
is limited due to the large number of customers to whom the
Company extends credit. Ongoing credit evaluation of customers'
financial position is performed, and collateral is not required
as a condition of extending credit. The Company maintains
reserves for potential credit losses.
In 1997, the Company adopted Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" (SFAS
125). The effect of adopting SFAS 125 was not material to the
Company's consolidated financial position or results of
operations.
PREOPENING EXPENSES
Costs associated with the opening of new stores are expensed as
incurred.
[END PAGE 27]
[BEGIN PAGE 28]
ADVERTISING AND CATALOGUE COSTS
Direct response advertising relates primarily to the production
and distribution of the Company's catalogues and is amortized
over the estimated life of the catalogue. All other advertising
costs are expensed in the period incurred. Advertising expenses
were $125.0 million, $114.4 million and $108.7 million in 1999,
1998 and 1997, respectively. Direct response advertising
amounts included in other current assets in the consolidated
balance sheets of July 31, 1999 and August 1, 1998 were $10.6
million and $9.5 million, respectively.
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
In 1998, the Company adopted Statement of Financial Accounting
Standards No. 128 (SFAS 128), "Earnings per Share." All
earnings per share amounts for all periods presented have been
restated to conform to the requirements of SFAS 128.
SIGNIFICANT ESTIMATES
In the process of preparing its consolidated financial
statements, the Company estimates the appropriate carrying
value of certain assets and liabilities which are not readily
apparent from other sources. The primary estimates underlying
the Company's consolidated financial statements include
allowances for doubtful accounts, accruals for pension and
postretirement benefits and other matters. Actual results could
differ from these estimates. Management bases its estimates on
historical experience and on various assumptions which are
believed to be reasonable under the circumstances.
RECENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board (FASB)
issued SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities," which will require recognition and
measurement of all derivatives as either assets or liabilities
on the balance sheet at fair value. The Company is currently
evaluating the effect of implementing SFAS 133, which will be
effective for fiscal 2001.
NOTE 2 Acquisitions
On February 1, 1999, the Company acquired a 56% interest in
Kate Spade LLC for approximately $33.6 million in cash. Kate
Spade is a manufacturer and marketer of high-end fabric and
leather handbags and accessories. The acquisition has been
accounted for by the purchase method of accounting and,
accordingly, the results of operations of Kate Spade for the
period from February 1, 1999 are included in the accompanying
consolidated financial statements. The excess of cost over the
estimated fair value of net assets acquired of $32.7 million
was allocated to trademarks which are amortized on a straight-
line basis over 25 years. Assets acquired and liabilities
assumed have been recorded at their estimated fair values.
On November 2, 1998, the Company acquired a 51% interest in
Gurwitch Bristow Products for approximately $6.7 million in
cash. Gurwitch Bristow Products manufactures and markets the
Laura Mercier cosmetic lines. The acquisition has been
accounted for by the purchase method of accounting and,
accordingly, the results of operations of Gurwitch Bristow
Products for the period from November 2, 1998 are included in
the accompanying consolidated financial statements. The excess
of cost over the estimated fair value of net assets acquired of
$5.3 million was allocated to trademarks, which is amortized on
a straight-line basis over 25 years. Assets acquired and
liabilities assumed have been recorded at their estimated fair
values.
On January 5, 1998, the Company acquired Chef's Catalog for
approximately $31.0 million in cash. Chef's Catalog is a direct
marketer of gourmet cookware and high-end kitchenware, and its
operations have been integrated with NM Direct. The acquisition
has been accounted for by the purchase method of accounting
and, accordingly, the results of operations of Chef's Catalog
for the period from the date of acquisition are included in the
accompanying consolidated financial statements. The excess of
cost over the estimated fair value of net assets acquired of
$30.3 million was allocated to goodwill, customer lists, and
trademarks, which are amortized on a straight-line basis over
lives ranging from four to 30 years.
These acquisitions did not materially impact consolidated
results, and therefore no pro forma information is provided.
[END PAGE 28]
[BEGIN PAGE 29]
NOTE 3 COMPANY PUBLIC OFFERING
In October 1996, the Company completed a public offering of 8.0
million shares of its common stock at a price of $35.00 per
share. The net proceeds from the offering ($267.3 million) were
used by the Company to partially fund the repurchase of all of
the Company's issued and outstanding preferred stocks from
Harcourt General, Inc. In addition to the net proceeds, on
November 12, 1996 the Company issued Harcourt General 3.9
million shares of the Company's common stock (valued at $135.0
million at $35.00 per share) and completed the exchange for all
of the Company's issued and outstanding preferred stocks. The
total consideration paid by the Company to Harcourt General in
connection with the repurchase was $416.4 million, representing
98% of the aggregate stated value of the preferred stock, plus
accrued and unpaid dividends through the date of the closing of
the public offering.
In connection with the transaction, the Company incurred a non-
recurring charge to net earnings applicable to common
shareholders of $22.4 million, comprised of two components: (i)
$8.6 million, representing the difference between the book
value of the preferred stock and the total purchase price, and
(ii) $13.8 million, representing the fair value of shares
issued to Harcourt General in excess of the number of shares
that would have been issued in accordance with the conversion
terms of the 6% Preferred Stock. Had the public offering and
repurchase of the preferred stock taken place at the beginning
of the period, diluted net earnings per share applicable to
common shareholders would have been $1.82 in 1997.
NOTE 4 Other Assets
Other assets consisted of the following:
<TABLE>
<CAPTION>
July 31, August 1,
(In Thousands) 1999 1998
---------------------
<S> <C> <C>
Trademarks $ 126,654 $ 88,300
Goodwill 33,202 33,202
Other 47,460 40,894
---------------------
207,316 162,396
Accumulated amortization (43,733) (37,256)
---------------------
$ 163,583 $ 125,140
=====================
</TABLE>
Trademarks and goodwill are amortized using the straight-line
method over their estimated useful lives, ranging from 25 to 40
years. Customer lists (which are included in Other) are
amortized using the straight-line method over their estimated
useful lives, ranging from four to 11 years.
NOTE 5 Accrued Liabilities
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
July 31, August 1,
(In Thousands) 1999 1998
---------------------
<S> <C> <C>
Accrued salaries and related liabilities $ 33,698 $ 37,857
Self-insurance reserves 25,436 24,694
Income taxes payable 27,474 26,552
Other 90,294 91,706
---------------------
$ 176,902 $ 180,809
=====================
</TABLE>
[END PAGE 29]
[BEGIN PAGE 30]
NOTE 6 Notes and Debentures
Notes and debentures consisted of the following:
<TABLE>
<CAPTION>
Interest July 31, August 1,
(In Thousands) Rate 1999 1998
---------------------------------
<S> <C> <C> <C>
Revolving credit facility(a) Variable $ 25,000 $ 35,000
Senior notes(b) 6.65% 124,863 124,848
Senior debentures(b) 7.125% 124,777 124,769
---------------------
$ 274,640 $ 284,617
=====================
</TABLE>
(a) The Company has a revolving credit facility with 21 banks,
pursuant to which the Company may borrow up to $650 million at
July 31,1999. The facility, which expires in October 2002, may be
terminated by the Company at any time on three business days'
notice. The rate of interest payable (5.4% at July 31, 1999)
varies according to one of four pricing options selected by the
Company. The revolving credit facility contains covenants which
require the Company to maintain certain leverage and fixed charge
ratios.
(b) In May 1998, the Company issued $250 million of senior
notes and debentures to the public. The proceeds of the debt
offering were used to repay borrowings outstanding on the
Company's revolving credit facility. The debt is comprised of
$125 million 6.65% senior notes due 2008 and $125 million
7.125% senior debentures due 2028. Interest on the securities
is payable semiannually.
The aggregate maturities of notes and debentures are $0 million
in fiscal 2000, fiscal 2001 and fiscal 2002, $25.0 million in
fiscal 2003, $0 million in fiscal 2004 and $249.6 million
thereafter.
NOTE 7 Redeemable Preferred Stocks
The Company is authorized to issue up to 50,000,000 shares of
preferred stock. In fiscal 1997, the Company repurchased its
issued and outstanding preferred stocks which consisted of
1,000,000 shares of 6% Cumulative Convertible Preferred Stock
and 500,000 shares of 9 1/4% Cumulative Redeemable Preferred
Stock, all of which were owned by Harcourt General.
NOTE 8 Common Shareholders' Equity
OWNERSHIP BY AND RELATIONSHIP WITH HARCOURT GENERAL
At July 31, 1999, Harcourt General owned approximately 26.4
million shares of Common Stock, representing approximately 54%
of the issued and outstanding shares of Common Stock of the
Company.
The Company and Harcourt General are parties to an agreement
pursuant to which Harcourt General provides certain management,
accounting, financial, legal, tax and other corporate services
to the Company. The fees for these services are based on
Harcourt General's costs and are subject to the approval of a
committee of directors of the Company who are independent of
Harcourt General. This agreement may be terminated by either
party on 180 days' notice. Charges to the Company under this
agreement were $6.0 million in 1999, $5.4 million in 1998 and
$5.7 million in 1997.
Most of the senior officers of the Company serve in similar
capacities with Harcourt General. Three of such officers also
serve as directors of both companies.
COMMON STOCK
Common Stock is entitled to dividends if and when declared by
the Board of Directors, and each share carries one vote.
Holders of Common Stock have no cumulative voting, conversion,
redemption or preemptive rights.
[END PAGE 30]
[BEGIN PAGE 31]
COMMON STOCK INCENTIVE PLANS
The Company has established common stock incentive plans
allowing for the granting of stock options, restricted stock
and other stock-based awards to its employees. The Company
applies Accounting Principles Board (APB) Opinion No. 25 and
related interpretations in accounting for its plans. The
Company has adopted the disclosure-only provision of the
Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123).
Had the fair-value based method of accounting been applied at
grant date to the Company's stock incentive plans, net earnings
and earnings per share would have been reduced to pro forma
amounts for the years ended July 31, 1999, August 1, 1998 and
August 2, 1997 as follows:
<TABLE>
<CAPTION>
(In Thousands, Except Per Share Amounts) 1999 1998 1997
---------------------------------
<S> <C> <C> <C>
Net earnings:
As reported $ 93,510 $ 106,327 $ 62,683
Pro forma $ 91,686 $ 105,339 $ 62,320
Basic earnings per share:
As reported $ 1.90 $ 2.13 $ 1.33
Pro forma $ 1.87 $ 2.11 $ 1.32
Diluted earnings per share:
As reported $ 1.90 $ 2.13 $ 1.32
Pro forma $ 1.86 $ 2.11 $ 1.32
</TABLE>
The effects on pro forma net earnings and earnings per share of
expensing the estimated fair value of stock options are not
necessarily representative of the effects on reported net
earnings for future years due to such factors as the vesting
period of the stock options and the potential for issuance of
additional stock options in future years. In addition, the
disclosure requirements of SFAS 123 are presently applicable
only to options granted subsequent to July 30, 1995.
The Company has adopted the 1997 Incentive Plan (the "1997
Plan") which is currently used for grants of equity-based
awards to employees. All outstanding equity-based awards at
July 31, 1999 were granted under the Company's 1997 Plan and
the 1987 Stock Incentive Plan. At July 31, 1999, there were 1.7
million shares of Common Stock available for grants under the
1997 Plan.
Options outstanding at July 31, 1999 were granted at prices
(not less than 100% of the fair market value on the date of the
grant) varying from $11.63 to $33.38. Options generally vest
ratably over five years and expire after ten years. There were
116 employees with options outstanding at July 31, 1999. For
all outstanding options at July 31, 1999, the weighted average
exercise price was $24.36, and the weighted average remaining
contractual life was approximately 7.1 years.
The fair value of each option grant is estimated on the date of
the grant using the Black-Scholes option pricing model with the
following assumptions used for grants in 1999, 1998 and 1997,
respectively:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------
<S> <C> <C> <C>
Expected life (years) 7 8 7
Expected volatility 45.6% 29.4% 31.1%
Risk-free interest rate 6.0% 5.5% 7.0%
==============================
</TABLE>
[END PAGE 31]
[BEGIN PAGE 32]
A summary of the status of the Company's 1997 and 1987 Stock
Incentive Plans as of July 31, 1999, August 1, 1998 and August
2, 1997 and changes during the years ended on those dates is
presented below:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year 847,960 $ 23.83 660,780 $ 17.95 653,077 $ 14.41
Granted 468,000 24.82 325,800 32.87 131,050 33.38
SAR Surrenders - - (107,240) 17.75 (82,207) 14.45
Exercised (47,400) 14.62 (2,300) 14.90 (1,200) 14.53
Canceled (88,860) 26.98 (29,080) 24.92 (39,940) 17.85
--------- -------- -------
Outstanding at
end of year 1,179,700 $ 24.36 847,960 $ 23.83 660,780 $ 17.95
========= ======== =======
Options exercisable
at year-end 403,150 $ 19.23 286,700 $ 15.53 273,090 $ 14.21
========= ======= =======
The weighted-average fair value of options granted in 1999, 1998 and 1997 was
$14.17, $15.94 and $16.32, respectively.
</TABLE>
The following summarizes information about the Company's stock options as of
July 31, 1999.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------------------
Weighted- Weighted- Weighted-
Shares Average Average Shares Average
Outstanding Remaining Exercise Outstanding Exercise
Range of Exercise Prices At 7/31/99 Contractual Life Price At 7/31/99 Price
-----------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$11.63 - $12.75 60,070 2.9 $ 12.15 60,070 $ 12.15
$13.38 - $16.75 297,720 4.5 $ 14.69 234,600 $ 14.63
$24.81 - $24.94 426,000 9.1 $ 24.82 - -
$29.19 - $33.38 395,910 7.6 $ 33.00 108,480 $ 33.08
--------------- --------- -------
$11.63 - $33.38 1,179,700 7.1 $ 24.36 403,150 $ 19.23
============== ========= =======
</TABLE>
NOTE 9 Stock Repurchase Program
In December 1997, the Board of Directors of the Company
authorized the repurchase of up to 1 million shares of common
stock in the open market. In September 1998, the Company's
Board of Directors authorized an increase in the stock
repurchase program to 1.5 million shares.
During the year ended July 31, 1999, the Company repurchased
827,000 shares at an average price of $18.57 per share under
this stock repurchase program; 512,900 shares were remaining
under this program at July 31, 1999. During the year ended
August 1, 1998, the Company repurchased 160,100 shares at an
average price of $29.32 per share.
[END PAGE 32]
[BEGIN PAGE 33]
NOTE 10 Income Taxes
Income tax expense was as follows:
<TABLE>
<CAPTION>
Years Ended
---------------------------------
July 31, August 1, August 2,
(In Thousands) 1999 1998 1997
---------------------------------
<S> <C> <C> <C>
Current:
Federal $ 56,397 $ 62,100 $ 53,292
State 7,221 8,557 8,925
---------------------------------
63,618 70,657 62,217
---------------------------------
Deferred:
Federal (1,993) (101) 836
State (1,003) 329 354
---------------------------------
(2,996) 228 1,190
---------------------------------
Income tax expense $ 60,622 $ 70,885 $ 63,407
=================================
</TABLE>
The Company's effective income tax rate was 39% in 1999, 40% in
1998 and 41% 1997. The difference between the statutory federal
tax rate and the effective tax rate is due primarily to state
income taxes.
Significant components of the Company's net deferred income tax
liability stated on a gross basis were as follows:
<TABLE>
<CAPTION>
July 31, August 1,
(In Thousands) 1999 1998
--------------------
<S> <C> <C>
Gross deferred income tax assets:
Financial accruals and reserves $ 17,311 $ 19,901
Employee benefits 25,640 25,472
Inventories 9,219 12,068
Deferred lease payments 2,003 2,618
Other 639 537
--------------------
Total deferred tax assets 54,812 60,596
--------------------
Gross deferred income tax liabilities:
Excess tax depreciation (55,610) (63,092)
Pension accrual (1,273) (4,087)
Other assets previously deducted on tax return (8,014) (6,498)
--------------------
Total deferred tax liabilities (64,897) (73,677)
--------------------
Net deferred income tax liability $ (10,085) $ (13,081)
====================
</TABLE>
NOTE 11 Pension Plans and Postretirement Health Care Benefits
In fiscal 1999, the Company adopted SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits."
The provisions of SFAS No. 132 provide new disclosure
requirements for pensions and other postretirement benefit
plans but do not change the measurement or recognition of these
plans. SFAS No. 132 standardizes the disclosure requirements
for pensions and other postretirement benefits to the extent
practicable and requires additional information on the changes
in benefit obligations and fair values of plan assets.
The Company has a noncontributory defined benefit pension plan
covering substantially all full-time employees. The Company
also sponsors an unfunded supplemental executive retirement
plan which provides certain employees additional pension
benefits. Benefits under the plans are based on the employees'
years of service and compensation over defined periods of
employment. When funding is required, the Company's policy is
to contribute amounts that are deductible for federal income
tax purposes. Pension plan assets consist primarily of equity
and fixed income securities.
[END PAGE 33]
[BEGIN PAGE 34]
Retirees and active employees hired prior to March 1, 1989 are
eligible for certain limited postretirement health care
benefits if they have met certain service and minimum age
requirements. The cost of these benefits is accrued during the
years in which an employee provides services. The Company paid
postretirement health care benefit claims of $1.2 million
during 1999, $1.3 million during 1998 and $1.2 million during
1997.
Components of net pension expense were as follows:
<TABLE>
<CAPTION>
Years Ended
---------------------------------
July 31, August 1, August 2,
(In Thousands) 1999 1998 1997
---------------------------------
<S> <C> <C> <C>
Service cost $ 7,160 $ 5,527 $ 5,591
Interest cost on projected benefit obligation 12,641 10,843 10,055
Expected return on assets (11,826) (9,270) (8,592)
Net amortization and deferral 1,208 1,178 2,127
---------------------------------
Net pension expense $ 9,183 $ 8,278 $ 9,181
=================================
The periodic postretirement health care benefit cost was as follows:
Years Ended
---------------------------------
July 31, August 1, August 2,
(In Thousands) 1999 1998 1997
---------------------------------
Net periodic cost:
Service cost $ 136 $ 155 $ 48
Interest cost on accumulated
benefit obligation 1,151 1,282 819
Net amortization and deferral (17) (30) (563)
---------------------------------
Total $ 1,270 $ 1,407 $ 304
=================================
</TABLE>
The changes in the benefit obligations and the reconciliations
of the funded status of the Company's plans to the consolidated
balance sheets were as follows:
<TABLE>
<CAPTION>
CHANGE IN BENEFIT OBLIGATIONS: Pension Benefits Postretirement Benefits
---------------------- ---------------------
(In Thousands) 1999 1998 1999 1998
---------------------- ---------------------
<S> <C> <C> <C> <C>
Benefit obligations at
beginning of year $ 179,427 $ 144,676 $ 16,942 $ 17,554
Service cost 7,160 5,527 136 155
Interest 12,641 10,844 1,151 1,282
Benefits paid (5,710) (5,249) (1,247) (1,276)
Actuarial loss (gain) (9,746) 23,629 (3,340) (773)
---------------------- ---------------------
Benefit obligation at end of year $ 183,772 $ 179,427 $ 13,642 $ 16,942
====================== =====================
</TABLE>
<TABLE>
<CAPTION>
CHANGE IN PLAN ASSETS: Pension Plans
--------------------
(In Thousands) 1999 1998
--------------------
<S> <C> <C>
Fair value of plan assets
at beginning of year $ 159,093 $ 144,288
Actual return on assets 9,302 16,750
Company contributions 980 3,304
Benefits paid (5,710) (5,249)
--------------------
Fair value of plan assets at
end of year $ 163,665 $ 159,093
=====================
</TABLE>
[END PAGE 34]
[BEGIN PAGE 35]
<TABLE>
<CAPTION>
FUNDED STATUS: Pension Plans Postretirement Plans
---------------------- -----------------------
(In Thousands) 1999 1998 1999 1998
---------------------- -----------------------
<S> <C> <C> <C> <C>
Fair value of plan assets
less than benefit obligation $ (20,107) $ (20,334) $ (13,642) $ (16,942)
Unrecognized net actuarial gain (9,195) (1,058) (5,343) (2,020)
Unrecognized prior service cost 4,845 4,650 - -
Unrecognized net obligation
at transition 2,305 2,796 - -
------------------------------------------------
Liability recognized in the
consolidated balance sheets $ (22,152) $ (13,946) $ (18,985) $ (18,962)
================================================
</TABLE>
<TABLE>
<CAPTION>
Pension Benefits
----------------------
WEIGHTED AVERAGE ASSUMPTIONS: 1999 1998
----------------------
<S> <C> <C>
Discount rate 7.5% 7.0%
Expected long-term rate of return on
plan assets 9.0% 9.0%
Rate of future compensation increases 5.0% 5.0%
</TABLE>
The weighted average assumptions for postretirement health care
benefits included a discount rate of 7.5% in 1999 and 7.0% in
1998.
For measurement purposes, a 7.0% annual rate of increase in the
per capita cost of covered care benefits was assumed for fiscal
2000. The rate was assumed to decrease gradually to 5.0% in
fiscal 2002 and remain at that level beyond.
If the health care trend rate was increased one percentage
point, postretirement benefit costs for the year ended July 31,
1999 would have been $0.1 million higher, and the accumulated
postretirement benefit obligation as of July 31, 1999 would
have been $1.4 million higher. If the health care trend rate
was decreased one percentage point, postretirement benefit
costs for the year ended July 31, 1999 would have been $0.1
million lower, and the accumulated postretirement benefit
obligations as of July 31, 1999 would have been $1.2 million
lower.
The Company has a qualified defined contribution 401(k) plan,
which covers substantially all employees. Employees make
contributions to the plan, and the Company matches 25% of an
employee's contribution up to a maximum of 6% of the employee's
compensation. Company contributions for the years ended July
31, 1999, August 1, 1998 and August 2, 1997 were $2.9 million,
$2.9 million and $2.6 million, respectively.
NOTE 12 Commitments and Contingencies
OPERATING LEASES
The Company's operations are conducted primarily in leased
properties which include retail stores, distribution centers
and other facilities. Substantially all leases are for periods
of up to thirty years with renewal options at fixed rentals,
except that certain leases provide for additional rent based on
revenues in excess of predetermined levels.
[END PAGE 35]
[BEGIN PAGE 36]
Rent expense under operating leases was as follows:
<TABLE>
<CAPTION>
Years Ended
---------------------------------
July 31, August 1, August 2,
(In Thousands) 1999 1998 1997
---------------------------------
<S> <C> <C> <C>
Minimum rent $ 34,000 $ 31,800 $ 31,200
Rent based on revenues 14,500 13,300 11,600
---------------------------------
Total rent expense $ 48,500 $ 45,100 $ 42,800
=================================
</TABLE>
Future minimum lease payments, excluding renewal options, under
operating leases are as follows: fiscal 2000 - $37.7 million;
fiscal 2001 - $36.8 million; fiscal 2002 - $36.1 million;
fiscal 2003 - $34.4 million; fiscal 2004 - $37.0 million; all
years thereafter - $528.8 million.
LITIGATION
The Company is involved in various suits and claims in the
ordinary course of business. Management does not believe that
the disposition of any such suits and claims will have a
material adverse effect upon the consolidated results of
operations, cash flows or the financial position of the
Company.
LETTERS OF CREDIT
The Company had approximately $21.4 million of outstanding
irrevocable letters of credit relating to purchase commitments
and insurance liabilities at July 31, 1999.
NOTE 13 Fair Value of Financial Instruments
The estimated fair values of the Company's financial
instruments are as reported and disclosed in the consolidated
financial statements, and as discussed below.
SECURITIZATION OF CREDIT CARD RECEIVABLES
In March 1995, the Company sold all of its Neiman Marcus credit
card receivables through a subsidiary to The Neiman Marcus
Group Credit Card Master Trust (the "Trust") in exchange for
certificates representing undivided interests in such
receivables. Certificates representing undivided interests in
$246.0 million of these receivables were sold to third parties
in a public offering of $225.0 million of 7.60% Class A
certificates and $21.0 million of 7.75% Class B certificates.
The Company used the proceeds from this offering to pay down
existing debt. The Company's subsidiary will retain the
remaining undivided interests in the receivables not
represented by the Class A and Class B certificates. A portion
of these interests is subordinated to the Class A and Class B
certificates. The Company continues to service all receivables
for the Trust.
In anticipation of the securitization, the Company entered into
several forward interest rate lock agreements. The agreements
allowed the Company to establish a weighted average effective
interest rate of approximately 8.0% on the certificates issued
as part of the securitization.
NOTE 14 Earnings Per Share
Pursuant to the provisions of SFAS 128, the weighted average
shares used in computing basic and diluted earnings per share
(EPS) are presented in the table below. No adjustments were
made to net earnings applicable to common shareholders for the
computations of basic and diluted EPS during the periods
presented. Options to purchase 395,910 shares of common stock
were not included in the computation of diluted EPS for the
year ended July 31, 1999, because the exercise price of those
options was greater than the average market price of the common
shares. All options were included in the computation of diluted
EPS for the years ended August 1, 1998 and August 2, 1997,
because the exercise price of those options was less than the
average market price of the common shares.
[END PAGE 36]
[BEGIN PAGE 37]
<TABLE>
<CAPTION>
Years Ended
---------------------------------
July 31, August 1, August 2,
(In Thousands of Shares) 1999 1998 1997
---------------------------------
<S> <C> <C> <C>
Shares for computation of basic EPS 49,129 49,808 47,162
Effect of assumed option exercises 108 173 173
---------------------------------
Shares for computation of diluted EPS 49,237 49,981 47,335
=================================
</TABLE>
NOTE 15 Segment Reporting
In 1999, the Company adopted SFAS 131, "Disclosure about
Segments of an Enterprise and Related Information," which
established reporting and disclosure standards for an
enterprise's operating segments. Operating segments are defined
as components of an enterprise for which separate financial
information is available and regularly reviewed by the
Company's senior management. The accounting policies of the
operating segments are the same as those described in the
summary of significant accounting policies. 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.
In applying SFAS 131, the Company identified two reportable
segments, which are as follows: specialty retail stores and
direct marketing. The specialty retail stores segment includes
all specialty retail stores which the Company operates. 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 and operations which do not meet the
quantitative thresholds of SFAS 131, including Kate Spade and
Gurwitch Bristow Products.
The following tables set forth the information for the
Company's reportable segments:
<TABLE>
<CAPTION>
Years Ended
------------------------------------
July 31, August 1, August 2,
(In Thousands) 1999 1998 1997
------------------------------------
REVENUES
<S> <C> <C> <C>
Specialty Retail Stores $ 2,209,451 $ 2,089,553 $ 1,950,544
Direct Marketing 321,747 283,794 259,347
Other 22,223 - -
------------------------------------
Total $ 2,553,421 $ 2,373,347 $ 2,209,891
====================================
OPERATING EARNINGS
Specialty Retail Stores $ 177,982 $ 198,123 $ 169,877
Direct Marketing 14,543 15,571 25,469
Other (12,111) (14,620) (14,364)
------------------------------------
Total $ 180,414 $ 199,074 $ 180,982
====================================
CAPITAL EXPENDITURES
Specialty Retail Stores $ 89,296 $ 79,920 $ 48,301
Direct Marketing 970 1,256 4,736
Other 760 _ _
------------------------------------
Total $ 91,026 $ 81,176 $ 53,037
====================================
</TABLE>
[END PAGE 37]
[BEGIN PAGE 38]
NOTE 16 Subsequent Event
On May 14, 1999, a committee of independent directors of the
Company, and the Boards of Directors of the Company and of
Harcourt General approved a series of transactions (the
"Transactions") relating to a plan by Harcourt General to spin
off to the holders of Harcourt General's common stock
approximately 21.4 million of the approximately 26.4 million
shares of the Company's common stock held by Harcourt General
in a distribution to be tax-free to Harcourt General and its
shareholders (the "Distribution"). The Transactions were
approved by the shareholders of the Company and Harcourt
General on September 15, 1999. Harcourt General received a
favorable ruling from the Internal Revenue Service dated
September 22, 1999 that the Distribution could be completed on
a tax-free basis. The approximately 21.4 million shares to be
distributed are shares of Class B common stock of the Company
that will have the right to elect approximately 82% of the
Company's Board of Directors, and the remaining shares,
designated Class A common stock, will have the right to elect
approximately 18% of the Company's Board of Directors. The
Distribution is expected to be completed in October 1999.
NOTE 17 Quarterly Financial Information (unaudited)
<TABLE>
<CAPTION>
Year Ended July 31, 1999
-------------------------------------------------
First Second Third Fourth
(In Millions, Except for Per Share Data) Quarter Quarter Quarter Quarter Total
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 587.1 $ 789.2 $ 611.8 $ 565.3 $ 2,553.4
=================================================
Gross profit $ 202.2 $ 241.4 $ 214.3 $ 154.8 $ 812.7
=================================================
Net earnings applicable
to common shareholders $ 25.0 $ 30.6 $ 35.2 $ 2.7 $ 93.5
=================================================
Earnings per share applicable
to common shareholders:
Basic $ 0.50 $ 0.62 $ 0.72 $ .06 $ 1.90
=================================================
Diluted $ 0.50 $ 0.62 $ 0.72 $ .06 $ 1.90
=================================================
Year Ended August 1, 1998
--------------------------------------------------
First Second Third Fourth
(In Millions, Except for Per Share Data) Quarter Quarter Quarter Quarter Total
--------------------------------------------------
Revenues $ 580.5 $ 708.4 $ 547.7 $ 536.7 $ 2,373.3
=================================================
Gross profit $ 204.4 $ 221.4 $ 179.3 $ 164.6 $ 769.7
=================================================
Net earnings applicable
to common shareholders $ 32.6 $ 33.5 $ 24.0 $ 16.2 $ 106.3
=================================================
Earnings per share applicable
to common shareholders:
Basic $ .65 $ .67 $ .48 $ .33 $ 2.13
=================================================
Diluted $ .65 $ .67 $ .48 $ .33 $ 2.13
=================================================
</TABLE>
In the fourth quarter, the effect of adjusting the LIFO reserve
for inventories to actual amounts increased net earnings by $.5
million in 1999 and $3.9 million in 1998.
[END PAGE 38]
[BEGIN PAGE 39]
Independent Auditors' Report
BOARD OF DIRECTORS AND SHAREHOLDERS
THE NEIMAN MARCUS GROUP, INC.
CHESTNUT HILL, MASSACHUSETTS
We have audited the accompanying consolidated balance sheets of
The Neiman Marcus Group, Inc. and subsidiaries as of July 31,
1999 and August 1, 1998, and the related consolidated
statements of earnings, common shareholders' equity and cash
flows for each of the three fiscal years in the period ended
July 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
financial position of The Neiman Marcus Group, Inc. and
subsidiaries as of July 31, 1999 and August 1, 1998, and the
results of their operations and their cash flows for each of
the three fiscal years in the period ended July 31, 1999, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 31, 1999
(September 22, 1999 as to Note 16)
Statement of Management's
Responsibility for Financial Statements
The management of The Neiman Marcus Group, Inc. and its
subsidiaries is responsible for the integrity and objectivity
of the financial and operating information contained in this
Annual Report, including the consolidated financial statements
covered by the Independent Auditors' Report. These statements
were prepared in conformity with generally accepted accounting
principles and include amounts that are based on the best
estimates and judgments of management.
The Company maintains a system of internal controls which
provides management with reasonable assurance that transactions
are recorded and executed in accordance with its
authorizations, that assets are properly safeguarded and
accounted for, and that records are maintained so as to permit
preparation of financial statements in accordance with
generally accepted accounting principles. This system includes
written policies and procedures, an organizational structure
that segregates duties, financial reviews and a comprehensive
program of periodic audits by the internal auditors. The
Company also has instituted policies and guidelines which
require employees to maintain a high level of ethical
standards.
In addition, the Audit Committee of the Board of Directors,
consisting solely of outside directors, meets periodically with
management, the internal auditors and the independent auditors
to review internal accounting controls, audit results and
accounting principles and practices and annually recommends to
the Board of Directors the selection of independent auditors.
JOHN R. COOK
Senior Vice President and
Chief Financial Officer
CATHERINE N. JANOWSKI
Vice President and Controller
[END PAGE 39]
[BEGIN PAGE 40]
<TABLE>
Selected Financial Data (Unaudited)
<CAPTION>
Years Ended
--------------------------------------------------------
July 31, August 1, August 2, August 3, July 29,
(In Millions, Except for Per Share Data) 1999 1998 1997 1996(A) 1995
--------------------------------------------------------
OPERATING RESULTS
<S> <C> <C> <C> <C> <C>
Revenues $ 2,553.4 $ 2,373.3 $ 2,209.9 $ 2,075.0 $ 1,888.2
========================================================
Earnings from continuing operations $ 93.5 $ 106.3 $ 91.2 $ 77.4 $ 67.3
Loss from discontinued operations - - - - (11.7)
--------------------------------------------------------
Net earnings $ 93.5 $ 106.3 $ 91.2 $ 77.4 $ 55.6
========================================================
Net earnings
applicable to common
shareholders $ 93.5 $ 106.3 $ 62.7 $ 48.3 $ 26.5
========================================================
Basic amounts per share
applicable to common
shareholders:
Continuing operations $ 1.90 $ 2.13 $ 1.33 $ 1.27 $ 1.01
Discontinued operations - - - - (.31)
--------------------------------------------------------
Basic net earnings $ 1.90 $ 2.13 $ 1.33 $ 1.27 $ .70
========================================================
Diluted amounts per share
applicable to common shareholders:
Continuing operations $ 1.90 $ 2.13 $ 1.32 $ 1.26 $ 1.01
Discontinued operations - - - - (.31)
--------------------------------------------------------
Diluted net earnings $ 1.90 $ 2.13 $ 1.32 $ 1.26 $ .70
========================================================
Common dividends $ - $ - $ - $ - $ .10
========================================================
FINANCIAL POSITION
Total assets $ 1,503.1 $ 1,437.8 $ 1,287.9 $ 1,252.4 $ 1,108.4
Long-term liabilities $ 381.6 $ 392.8 $ 401.6 $ 395.3 $ 341.9
Redeemable preferred stocks $ - $ - $ - $ 407.4 $ 405.4
========================================================
</TABLE>
The selected financial data should be read in conjunction with
the Consolidated Financial Statements contained elsewhere in
this report.
(A)FISCAL 1996 WAS A 53-WEEK YEAR.
[END PAGE 40]
[BEGIN PAGE 41]
SHAREHOLDER INFORMATION
Requests for general information or published financial
information should be made in writing to:
CORPORATE RELATIONS DEPARTMENT
The Neiman Marcus Group, Inc.
Post Office Box 9187
Chestnut Hill, MA 02467-9187
(617) 232-0760
TRANSFER AGENT AND REGISTRAR
BankBoston, N.A.
c/o EquiServe Limited Partnership
Post Office Box 8040, Mail Stop 45-01-05
Boston, MA 02266-8040
(800) 730-4001
FORM 10-K
THE COMPANY'S FORM 10-K AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS AVAILABLE UPON WRITTEN REQUEST TO THE
CORPORATE RELATIONS DEPARTMENT OF THE COMPANY.
ANNUAL MEETING
The Annual Meeting of Stockholders will be held on Friday,
January 21, 2000 at 10:00 a.m. at the Company's Corporate
Headquarters, 27 Boylston Street, Chestnut Hill, Massachusetts.
SHARES OUTSTANDING
The Neiman Marcus Group had 49.0 million common shares
outstanding and 11,463 common shareholders of record at July
31, 1999.
CORPORATE ADDRESS
The Neiman Marcus Group, Inc.
27 Boylston Street
Post Office Box 9187
Chestnut Hill, MA 02467-9187
(617) 232-0760
STOCK INFORMATION
The Neiman Marcus Group's Class A common stock and Class B com-
mon stock are currently traded on the New York Stock Exchange
under the symbols NMG.A and NMG.B, respectively.
The following table indicates for the past two fiscal years the
quarterly price range of the Common Stock, traded under the
symbol NMG prior to the Company's recapitalization during the
first quarter of fiscal 2000.
<TABLE>
<CAPTION>
1999 1998
----------------------------------------
Quarter High Low High Low
----------------------------------------
<S> <C> <C> <C> <C>
First $ 33.50 $ 16.08 $ 35.56 $ 27.88
Second $ 26.75 $ 22.08 $ 35.36 $ 28.81
Third $ 27.00 $ 22.00 $ 41.00 $ 34.63
Fourth $ 31.00 $ 24.18 $ 43.44 $ 33.00
================= =================
</TABLE>
[END PAGE 41]
<TABLE>
EXHIBIT 21.1
THE NEIMAN MARCUS GROUP, INC.
SUBSIDIARIES & AFFILIATES
<CAPTION>
JURISDICTION
OF
SUBSIDIARY/AFFILIATE INCORPORATION
<S> <C>
Bergdorf Goodman, Inc. New York
Bergdorf Graphics, Inc. New York
Chef's Catalog, Inc. Delaware
Ermine Trading Corporation California
Gurwich Bristow Products, L.L.C. Delaware
Kate Spade LLC Delaware
NM Direct de Mexico, S.A. de C.V. Mexico
NM Financial Services, Inc. Delaware
NM Nevada Trust Massachusetts
Neiman Marcus Funding Corporation Delaware
Neiman Marcus Holdings, Inc. California
Neiman Marcus Special Events, Inc. Delaware
Pastille By Mail, Inc. Delaware
Worth Avenue Leasing Corporation Florida
</TABLE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-352599, No. 333-35829 and 333-49893 of The
Neiman Marcus Group, Inc. and subsidiaries on Form S-8, S-8 and
S-3, respectively, of our reports dated August 31, 1999
(September 22, 1999 as to Note 16), appearing and incorporated by
reference in the Annual Report on Form 10-K of The Neiman Marcus
Group, Inc. and subsidiaries for the year ended July 31, 1999.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Need legend
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> JUL-31-1999
<CASH> 29,191
<SECURITIES> 133,151
<RECEIVABLES> 61,617
<ALLOWANCES> 2,300
<INVENTORY> 528,452
<CURRENT-ASSETS> 825,166
<PP&E> 899,275
<DEPRECIATION> 385,836
<TOTAL-ASSETS> 1,502,188
<CURRENT-LIABILITIES> 380,180
<BONDS> 274,640
0
0
<COMMON> 490
<OTHER-SE> 735,691
<TOTAL-LIABILITY-AND-EQUITY> 1,502,188
<SALES> 2,553,421
<TOTAL-REVENUES> 2,553,421
<CGS> 1,740,711
<TOTAL-COSTS> 2,373,007
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,366
<INTEREST-EXPENSE> 24,972
<INCOME-PRETAX> 155,442
<INCOME-TAX> 60,622
<INCOME-CONTINUING> 93,510
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 93,510
<EPS-BASIC> 1.90
<EPS-DILUTED> 1.90
</TABLE>
