<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------------------------------------------------------------------------------
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
The Neiman Marcus Group, Inc.
(Name of Registrant as Specified In Its Charter)
Eric P. Geller
The Neiman Marcus Group, Inc.
27 Boylston Street
Chestnut Hill, MA 02467
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
--------------------------------------------------------------------------------
<PAGE> 2
[NEIMAN MARCUS LOGO]
The Neiman Marcus Group,
Inc.
27 Boylston Street
Chestnut Hill, MA 02467
(617) 232-0760
November 22, 2000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 19, 2001
The Annual Meeting of Stockholders of The Neiman Marcus Group, Inc. will be
held at 10:00 a.m., Eastern Standard Time, on Friday, January 19, 2001, AT THE
COMPANY'S CORPORATE HEADQUARTERS, 27 BOYLSTON STREET, CHESTNUT HILL,
MASSACHUSETTS, for the following purposes:
1. To elect two Class I directors, both of whom are Class B
directors.
2. To consider and act on a proposal to ratify the appointment by the
Board of Directors of Deloitte & Touche LLP as the Company's independent
auditors for the current fiscal year.
3. To consider and act on a proposal submitted by a stockholder of
the Company concerning cumulative voting.
4. To transact such other business as may properly come before the
meeting and any adjournments of the meeting.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors
ERIC P. GELLER
Secretary
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE> 3
[NEIMAN MARCUS LOGO]
The Neiman Marcus Group,
Inc.
27 Boylston Street
Chestnut Hill, MA 02467
(617) 232-0760
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 19, 2001
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Neiman Marcus Group, Inc. (the
"Company" or "Neiman Marcus") for use at the Annual Meeting of Stockholders to
be held at 10:00 a.m. on Friday, January 19, 2001, at THE COMPANY'S CORPORATE
HEADQUARTERS, 27 BOYLSTON STREET, CHESTNUT HILL, MASSACHUSETTS, and at any
adjournments or postponements thereof. All shares will be voted in accordance
with the instructions contained in the proxy, but if the proxies which are
signed and returned do not specify a vote on any proposal, the proxies will be
voted FOR the election of the nominees for director named herein, FOR the
ratification of the appointment by the Board of Directors of Deloitte & Touche
LLP as the Company's independent auditors for the current fiscal year and
AGAINST the proposal submitted by a stockholder concerning cumulative voting. If
any other matters are properly presented at the meeting for consideration, the
persons named in the enclosed forms of proxy and acting thereunder will have
discretion to vote on such matters in accordance with their judgment.
Any proxy may be revoked by a stockholder at any time before it is
exercised by providing written notice of revocation to the Secretary of the
Company (at the address set forth above), by executing a proxy bearing a later
date, or by voting in person at the Annual Meeting. The mailing of this proxy
statement and accompanying forms of proxy is expected to commence on or about
November 22, 2000.
In addition to solicitations of proxies by mail, the Company's officers,
directors or employees may solicit proxies by telephone or personal
communication. All costs of soliciting proxies, including reimbursement of fees
of certain brokers, fiduciaries and nominees in obtaining voting instructions
from beneficial owners, will be borne by the Company.
Although stock transfer books will remain open, the Board of Directors has
fixed the close of business on November 21, 2000 as the record date for
determining the stockholders having the right to vote at the Annual Meeting (the
"Record Date"). As of the Record Date there were outstanding and entitled to
vote at the meeting 27,592,692 shares of Class A Common Stock and 19,941,432
shares of Class B Common Stock. Each holder of record of the Company's Class A
Common Stock and Class B Common Stock on the Record Date is entitled to one vote
per share at the meeting. HOWEVER, SINCE ONLY CLASS B DIRECTORS ARE STANDING FOR
ELECTION AT THE 2001 MEETING, ONLY HOLDERS OF CLASS B COMMON STOCK WILL BE
ENTITLED TO VOTE ON THE ELECTION OF DIRECTORS AT THIS MEETING. In all other
matters being submitted to a vote of the stockholders at the meeting, holders of
Class A Common Stock and Class B Common Stock will vote together as a single
class. As further described below, Harcourt General, Inc. has agreed to vote its
shares of Class A Common Stock on all matters in proportion to the votes cast
affirmatively or negatively by all other holders of Class A Common Stock.
<PAGE> 4
Shares of common stock represented in person or by proxy at the Annual
Meeting (including abstentions and broker non-votes) will be tabulated by the
inspectors of election appointed for the meeting and will be counted in
determining that a quorum is present. Votes are counted using written ballots.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of November 8, 2000, with
respect to the beneficial ownership of Class A Common Stock and Class B Common
Stock by (i) each person known to the Company to own beneficially more than 5%
of the outstanding shares of either the Class A Common Stock or the Class B
Common Stock; (ii) each executive officer named in the Summary Compensation
Table; (iii) each director of the Company; and (iv) all current directors and
executive officers of the Company as a group.
Holders of Class A Common Stock have the right to elect up to 18% of the
Board of Directors and holders of Class B Common Stock have the right to elect
at least 82% of the Board of Directors. The Class A Common Stock and Class B
Common Stock are identical in all other respects. Harcourt General has agreed to
vote the shares of the Company's Class A Common Stock retained by it (the
"Retained Shares") following the distribution to its shareholders in October
1999 (the "Distribution") of its controlling equity position in the Company on
all matters in proportion to the votes cast affirmatively or negatively by all
other holders of Class A Common Stock.
<TABLE>
<CAPTION>
TOTAL
CLASS A COMMON STOCK CLASS B COMMON STOCK COMMON STOCK
------------------------- ------------------------- -------------------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF TOTAL
NAME OF BENEFICIAL OWNER NUMBER(1) CLASS NUMBER(1) CLASS COMMON STOCK
------------------------ --------- ------------- --------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
Smith Family Group(2).............. 40,700 * 6,038,586 30.3% 12.7%
c/o Richard A. Smith
Harcourt General, Inc.
27 Boylston Street
Chestnut Hill, MA 02467
Harcourt General, Inc.(3).......... 4,988,542 18.1% -- -- 10.5%
27 Boylston Street
Chestnut Hill, MA 02467
Richard A. Smith(2)................ -- -- 4,007,853 20.1% 8.4%
Nancy L. Marks(2).................. -- -- 3,041,932 15.3% 6.4%
c/o Harcourt General, Inc.
27 Boylston Street
Chestnut Hill, MA 02467
Gabelli Funds, Inc.(4)............. 1,317,553 4.8% 3,782,023 19.0% 10.7%
One Corporate Center
Rye, NY 10580
PRIMECAP Management Company(5)..... 3,163,600 11.5% 1,487,363 7.5% 9.8%
225 South Lake Avenue
Pasadena, CA 91101
Neuberger Berman, LLC(6)........... 1,038,497 3.8% 1,108,596 5.6% 4.5%
605 Third Avenue
New York, NY 10158
Southeastern Asset Management,
Inc.(7).......................... -- -- 2,654,100 13.3% 5.6%
6410 Poplar Avenue
Memphis, TN 38119
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
TOTAL
CLASS A COMMON STOCK CLASS B COMMON STOCK COMMON STOCK
------------------------- ------------------------- -------------------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF TOTAL
NAME OF BENEFICIAL OWNER NUMBER(1) CLASS NUMBER(1) CLASS COMMON STOCK
------------------------ --------- ------------- --------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
Burton M. Tansky(8)................ 228,520 * -- -- *
Hubert W. Mullins(9)............... 57,445 * -- -- *
Gerald A. Sampson(10).............. 106,844 * -- -- *
Karen W. Katz(11).................. 31,984 * -- -- *
Matina S. Horner(12)............... 5,934 * -- -- *
Vincent M. O'Reilly(13)............ 2,566 * 218 * *
Walter J. Salmon(14)............... 11,708 * -- -- *
Robert A. Smith(2)(13)............. 20,350 * 302,088 1.5% *
Brian J. Knez(2)(14)............... 20,350 * 229,468 1.2% *
John R. Cook(15)................... 3,600 * 9,718 * *
All current executive officers and
directors as a group (20
persons)(16)..................... 511,799 1.8% 4,549,600 22.8% 10.6%
</TABLE>
---------------
* Less than 1%.
(1) Unless otherwise indicated in the following footnotes, each stockholder
referred to above has sole voting and dispositive power with respect to the
shares listed. Certain of the shares included in the table have been
counted more than once because of certain rules and regulations of the
Securities and Exchange Commission (the "Commission"). The total number of
shares owned by, or for the benefit of, Richard A. Smith, Nancy L. Marks
and members of their families is as shown for the "Smith Family Group". See
Note 2. Mr. Smith disclaims beneficial ownership of 2,512,752 shares of
Class B Common Stock held by various family trusts, foundations and
companies. Mrs. Marks disclaims beneficial ownership of 1,328,343 shares of
Class B Common Stock held by various family trusts, foundations and
companies.
(2) The Smith Family Group includes Richard A. Smith, Chairman of the Company;
Nancy L. Marks, Mr. Smith's sister; Robert A. Smith, Co-Chief Executive
Officer and a director of the Company and Brian J. Knez, Co-Chief Executive
Officer and a director of the Company, who are, respectively, the son and
son-in-law of Richard A. Smith; other members of their families and various
family trusts, foundations and companies. Members of the Smith Family Group
possess sole or shared voting power over all of the shares shown in the
table. Members of the Smith Family Group may be regarded as controlling
persons of Harcourt General, as the Smith Family Group owns in the
aggregate approximately 28% of the outstanding equity securities of
Harcourt General and virtually all of the Harcourt General Class B Stock
which carries special voting rights under certain circumstances. The shares
beneficially owned by Harcourt General are not included in the amount shown
for the Smith Family Group. See footnote 3 with respect to the proposed
sale of Harcourt General.
The Smith Family Group has filed a Schedule 13D with the Commission which
discloses that certain members of the Smith Family Group have entered into
a stockholders agreement dated as of September 1, 1999 (the "Stockholders
Agreement"). The Stockholders Agreement provides that members of the Smith
Family Group holding a total of 5,897,710 shares of Class B Common Stock
(representing 98% of the shares of Class B Common Stock beneficially owned
by the Smith Family Group) are prohibited from transferring such shares for
three years from the date of the Distribution subject to certain
exceptions. Following such three-year period, such shares will be subject
to a right of first offer pursuant to which any party to the Stockholders
Agreement desiring to transfer such shares must first offer to sell such
shares to the other parties to the
3
<PAGE> 6
Stockholders Agreement and, to the extent such parties do not buy all the
shares, then to the Company.
(3) The Company and Harcourt General are parties to an agreement pursuant to
which Harcourt General has agreed to vote the Retained Shares on all
matters in proportion to the votes cast affirmatively or negatively by all
other holders of Class A Common Stock. In addition, Harcourt General has
agreed, subject to certain exceptions, that for the two year period ending
on October 21, 2001, it will not sell, exchange or transfer in any 60-day
period Retained Shares representing 5% or more of the total outstanding
shares of the Class A Common Stock and Class B Common Stock without first
offering to the Company the right to purchase such shares. Harcourt General
intends to dispose of the Retained Shares as market conditions permit and,
in any event, before 2005. On October 27, 2000, Harcourt General announced
that it had entered into a definitive agreement to sell Harcourt General to
a subsidiary of Reed Elsevier plc which, upon completion of such
transaction, would become subject to Harcourt General's obligations as set
forth in this Note 3.
(4) The information reported with respect to the Class A Common Stock is based
on a Schedule 13D dated October 24, 2000 filed with the Commission by the
Gabelli Funds, Inc. and its affiliates (collectively, the "Gabelli
Affiliates"). With respect to the Class B Common Stock, the information
reported is based on a Schedule 13D dated November 6, 2000 filed with the
Commission by the Gabelli Affiliates. The Gabelli Affiliates have sole
voting power and sole dispositive power with respect to all of the shares
reported in the table.
(5) The information reported with respect to the Class A Common Stock is based
on a Schedule 13G dated October 31, 2000 filed with the Commission by
PRIMECAP Management Company. With respect to the Class B Common Stock, the
information reported is based on a Schedule 13G dated November 19, 1999
filed with the Commission by PRIMECAP Management Company. PRIMECAP
Management Company has sole voting power with respect to 609,800 shares of
Class A Common Stock and 359,055 shares of Class B Common Stock reported in
the table and sole dispositive power with respect to all of the shares
reported in the table.
(6) The information reported is based on information provided by Neuberger
Berman, LLC as of November 17, 2000 with respect to its ownership of Neiman
Marcus common stock. Neuberger Berman, LLC has sole voting power and shared
dispositive power with respect to all of the shares reported in the table.
(7) The information reported with respect to the Class A Common Stock is based
on a Schedule 13G dated January 7, 2000 filed with the Commission by
Southeastern Asset Management, Inc. Southeastern Asset Management, Inc. has
shared voting and dispositive power with respect to all of the shares
reported in the table.
(8) Includes 156,620 shares of Class A Common Stock which are subject to
outstanding options exercisable within 60 days of November 8, 2000. Also
includes 47,900 shares of restricted Class A Common Stock over which Mr.
Tansky has voting but not dispositive power.
(9) Includes 17,920 shares of Class A Common Stock which are subject to
outstanding options exercisable within 60 days of November 8, 2000. Also
includes 36,100 shares of restricted Class A Common Stock over which Mr.
Mullins has voting but not dispositive power and 1,977 shares of Class A
Common Stock allocated to Mr. Mullins under the Company's Employee Savings
Plan ("ESP") as to which Mr. Mullins shares voting power with the trustee
of the ESP.
(10) Includes 51,920 shares of Class A Common Stock which are subject to
outstanding options exercisable within 60 days of November 8, 2000. Also
includes 20,500 shares of restricted Class A Common Stock over which Mr.
Sampson has voting but not dispositive power.
(11) Includes 12,800 shares of Class A Common Stock which are subject to
outstanding options exercisable within 60 days of November 8, 2000. Also
includes 13,300 shares of restricted Class A Common Stock over which Ms.
Katz has voting but not dispositive power and 1,084 shares of
4
<PAGE> 7
Class A common Stock allocated to Ms. Katz under the ESP as to which Ms. Katz
shares voting power with the trustee of the ESP.
(12) Dr. Horner, Mr. O'Reilly and Mr. Salmon hold, respectively, 5,934, 1,766
and 1,766 common stock based units which are included in the table. These
directors do not have voting or dispositive power with respect to these
common stock based units. See Directors' Compensation.
(13) Includes 11,100 shares of Class A Common Stock which are subject to
outstanding options exercisable within 60 days of November 8, 2000. Also
includes 4,398 shares of restricted Class B Common Stock and 9,250 shares
of restricted Class A Common Stock over which Mr. Smith has voting but not
dispositive power. All of the shares reported for Mr. Smith are included in
the shares owned by the Smith Family Group. See Note 2. Mr. Smith disclaims
beneficial ownership of 4,000 shares of Class B Common Stock held by a
charitable foundation and 4,652 shares of Class B Common Stock held by a
trust.
(14) Includes 11,100 shares of Class A Common Stock which are subject to
outstanding options exercisable within 60 days of November 8, 2000. Also
includes 4,398 shares of restricted Class B Common Stock and 9,250 shares
of restricted Class A Common Stock over which Mr. Knez has voting but not
dispositive power. All of the shares reported for Mr. Knez are included in
the shares owned by the Smith Family Group. See Note 2. Mr. Knez disclaims
beneficial ownership of 228,579 shares of Class B Common Stock held by his
spouse and by various family trusts and foundations.
(15) Includes 3,600 shares of Class A Common Stock which are subject to
outstanding options exercisable within 60 days of November 8, 2000. Also
includes 2,199 shares of restricted Class B Common Stock and 3,000 shares
of restricted Class A Common Stock with respect to which Mr. Cook has
voting but not dispositive power.
(16) Includes (i) 281,260 shares of Class A Common Stock which are subject to
outstanding options exercisable within 60 days of November 8, 2000, (ii)
152,800 shares of restricted Class A Common Stock and 18,371 shares of
restricted Class B Common Stock over which individuals in the group have
voting but not dispositive power, (iii) 3,061 shares of Class A Common
Stock allocated to individuals in the group under the ESP as to which such
individuals share voting power with the trustee of the ESP, and (iv) the
9,466 common stock based units referred to in Note 12 above.
5
<PAGE> 8
1. ELECTION OF DIRECTORS
The Company's Board of Directors is separated into three classes (Class I,
Class II and Class III), only one of which classes is scheduled for election
each year. At each Annual Meeting a Class of directors is elected for a full
term of three years. In addition, pursuant to the Company's Restated Certificate
of Incorporation, as amended (the "Certificate of Incorporation"), holders of
Class B Common Stock are entitled to elect at least 82% of the Company's Board
of Directors and holders of the Class A Common Stock are entitled to elect the
remaining directors. The Board of Directors has fixed the number of directors at
seven, one of whom is elected by the holders of the Class A Common Stock and six
of whom are elected by the holders of the Class B Common Stock. To ensure that
there will be at least one Class A director at all times, the Company's Board of
Directors may not consist of less than six members.
AT THE 2001 ANNUAL MEETING, TWO CLASS I DIRECTORS ARE TO BE ELECTED, BOTH
OF WHOM ARE CLASS B DIRECTORS. CONSEQUENTLY, ONLY HOLDERS OF CLASS B COMMON
STOCK ARE ENTITLED TO VOTE FOR THE ELECTION OF DIRECTORS AT THIS MEETING. The
persons named in the accompanying forms of proxy will vote each proxy for the
election of the nominees listed below, unless directed otherwise. Each of the
nominees is currently a member of the Board of Directors. The Company has no
reason to believe that either of the listed nominees will become unavailable for
election, but if for any reason that should be the case, the proxies may be
voted for substitute nominees. A plurality of the votes cast by the holders of
the Class B Common Stock at the Annual Meeting is required to elect the
nominees.
Both of the nominees for director, and the directors who will continue to
serve after the 2001 Annual Meeting, are listed below with their principal
occupations for the last five years.
NOMINEES FOR TERMS EXPIRING IN 2004 (CLASS I DIRECTORS)
RICHARD A. SMITH, age 76, Director since 1987, Class B Director
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
1999 and prior to December 1991; Chairman and Chief Executive Officer (until
October 2000) of GC Companies, Inc.; Director of the Company, Harcourt General
and GC Companies, Inc. In October 2000, GC Companies, Inc. filed a voluntary
petition in the United States Bankruptcy Court for the District of Delaware
under Chapter 11 of the Bankruptcy Code. Mr. Smith is the father of Robert A.
Smith and the father-in-law of Brian J. Knez.
ROBERT A. SMITH, age 41, Director since 1997, Class B Director
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 since November 1999; Co-Chief Executive
Officer of Harcourt, Inc. since May 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 1999;
Group Vice President of the Company and of Harcourt General prior to January
1997; President and Chief Operating Officer of GC Companies, Inc. until October
2000; Director of the Company and of Harcourt General. In October 2000, GC
Companies, Inc. filed a voluntary petition in the United States Bankruptcy Court
for the District of Delaware under Chapter 11 of the Bankruptcy Code. Mr. Smith
is the son of Richard A. Smith and the brother-in-law of Brian J. Knez.
6
<PAGE> 9
DIRECTORS WHOSE TERMS EXPIRE IN 2002 (CLASS II DIRECTORS)
MATINA S. HORNER, PH.D., age 61, Director since 1993, Class B Director
Executive Vice President of the Teachers Insurance and Annuity
Association-College Retirement Equities Fund (TIAA-CREF) and President Emerita
of Radcliffe College since 1989; Trustee of Nstar.
BRIAN J. KNEZ, age 43, Director since 1998, Class B Director
Co-Chief Executive Officer of the Company since May 1999; President and
Co-Chief Executive Officer of Harcourt General since November 1999; President
and Co-Chief Operating Officer of Harcourt General from January 1997 until
November 1999; Co-Chief Executive Officer of Harcourt, Inc. since May 1999;
President (until November 1998) and Chief Executive Officer of Harcourt, Inc.
prior thereto; Director of the Company and of Harcourt General. Mr. Knez is the
son-in-law of Richard A. Smith and the brother-in-law of Robert A. Smith.
WALTER J. SALMON, age 70, Director since 1987, Class B Director
Stanley Roth Sr. Professor of Retailing (Emeritus since 1997), Graduate
School of Business Administration, Harvard University; Director of The Quaker
Oats Company, Circuit City Stores, Inc., CarMax, Inc., Luby's Cafeterias, Inc.,
Harrah's Entertainment, Inc., Cole National Corporation and PetsMart, Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 2003 (CLASS III DIRECTORS)
VINCENT M. O'REILLY, age 63, Director since 1997, Class A Director
Distinguished Senior Lecturer, Carroll School of Management, Boston College
since October 1997; Executive Vice Chairman of Coopers & Lybrand prior thereto;
Director of Eaton Vance Corp. and Teradyne, Inc.
JOHN R. COOK, age 59, Director since 1998, Class B Director
Senior Vice President and Chief Financial Officer of the Company and of
Harcourt General.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended July 29, 2000, the Board of Directors held
five meetings and acted by unanimous written consent on eight other occasions.
During fiscal 2000, each director of the Company attended at least 75% of the
aggregate number of Board meetings and meetings held by committees of which he
or she is a member. The Board of Directors has designated five principal
standing committees. Set forth below are descriptions of the functions of such
committees and the names of their current members.
Audit Committee. The members of the Audit Committee, which met five times
during fiscal 2000, are Mr. O'Reilly (Chair), Dr. Horner and Mr. Salmon. The
functions of the Audit Committee include the review of the scope of the services
of the Company's independent auditors and the responsibilities of the Company's
internal audit department and a continuing review of the Company's internal
procedures and controls. The Audit Committee annually reviews the Company's
audited financial statements, considers the qualifications and fees of the
independent auditors of the Company and makes recommendations to the Board of
Directors as to the selection of the auditors and the scope of audit services.
The Audit Committee has adopted a charter, a copy of which is attached hereto as
7
<PAGE> 10
Appendix A. The Company's securities are listed on the New York Stock Exchange
("NYSE") and are governed by its listing standards; all of the members of the
Audit Committee meet the independence requirements of these standards.
Special Review Committee. The members of the Special Review Committee are
Mr. Salmon (Chairman), Dr. Horner and Mr. O'Reilly. The Special Review Committee
met once during fiscal 2000. A continuing function of the Special Review
Committee is to give consideration to those matters requiring the approval of an
"Independent Committee" under the terms of the Amended and Restated Intercompany
Services Agreement (the "Intercompany Services Agreement") between the Company
and Harcourt General, including the consideration of the fees charged to the
Company by Harcourt General pursuant to such agreement. For information
regarding the Intercompany Services Agreement, see Note 1 to the Summary
Compensation Table.
Compensation Committee. The members of the Compensation Committee, which
met once during fiscal 2000 and acted six times by unanimous written consent,
are Mr. Salmon (Chairman), Dr. Horner and Mr. O'Reilly. The functions of the
Compensation Committee are to review or determine salaries, benefits and other
compensation for officers and key employees of the Company and its subsidiaries
and to administer the Company's incentive plans.
Nominating Committee. All of the directors of the Company serve on the
Nominating Committee, which did not meet during fiscal 2000. The functions of
the Nominating Committee are to nominate directors, make recommendations
concerning the structure and membership of the various committees of the Board
of Directors, consider questions of management, organization and succession and
to act on such other matters as from time to time may be requested by the Board
of Directors. In carrying out its responsibilities to nominate directors, the
Nominating Committee will consider candidates recommended by the Board of
Directors and by stockholders of the Company. All suggestions by stockholders
for nominees for director must be made in writing and received by the Secretary
of the Company, 27 Boylston Street, Chestnut Hill, Massachusetts 02467 no later
than October 20, 2001 (see "Deadline for Submission of Stockholder Proposals and
Nominations for Director for Annual Meeting of Stockholders to be held in
January 2002"). Such writing must set forth (i) the name and address of the
stockholder who intends to make the nomination and of each person to be
nominated, (ii) a representation that the stockholder is a holder of record of
the Company's stock entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person named, (iii) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person pursuant to which the nomination is to be made
by the stockholder, (iv) the consent of each proposed nominee to serve as a
director of the Company if so elected and (v) such other information regarding
each proposed nominee as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission.
Executive Committee. The members of the Executive Committee, which did not
meet during fiscal 2000, are Richard A. Smith (Chairman), Walter J. Salmon,
Brian J. Knez and Robert A. Smith. The By-Laws confer upon the Executive
Committee the authority to manage the affairs of the Company in the intervals
between meetings of the Board of Directors, except that the Committee may not
effect certain fundamental corporate actions such as (a) declaring a dividend,
(b) amending the Restated Certificate of Incorporation or the By-Laws, (c)
adopting an agreement of merger or consolidation or (d) imposing a lien on
substantially all the assets of the Company. In practice, the Executive
Committee meets infrequently and does not act except on matters which must be
dealt with prior to the next scheduled Board of Directors meeting and which are
not sufficiently important to require action by the full Board of Directors.
8
<PAGE> 11
DIRECTORS' COMPENSATION
Directors who are not employees of the Company or Harcourt General
("Non-Employee Directors") each receive (i) an annual cash retainer of $20,000,
(ii) a fee of $2,000 per Board of Directors meeting attended, (iii) a fee of
$750 (the Chairperson receives $1,500) for each committee meeting attended, and
(iv) reimbursement for travel and incidental expenses (an aggregate of $1,807 in
fiscal 2000) incurred in attending meetings and carrying out their duties as
directors. If a Non-Employee Director is unable to attend a meeting in person
but participates by telephone, he or she receives one-half of the fee that would
otherwise be payable.
In addition, each Non-Employee Director is entitled to receive grants of
stock-based units in an aggregate amount equal to the value of the annual cash
retainer. Grants are made quarterly, with the number of stock-based units in
each grant calculated by dividing $5,000 (the amount of the quarterly cash
retainer) by the trailing five day average of the closing price of the Company's
Class A Common Stock at the end of each fiscal quarter. The value of each
Non-Employee Director's stock-based units will be payable only in cash when the
Non-Employee Director ceases to serve as a member of the Board of Directors of
the Company. These stock-based units do not carry voting or dispositive rights.
The Company offers Non-Employee Directors the right to elect to receive all
or part of the cash portion of their fees on a deferred basis (i) in the form of
cash with interest at a rate equal to the average of the top rates paid by major
New York banks on three-month negotiable certificates of deposit as quoted on
the last business day of the fiscal quarter, or (ii) in the form of stock-based
units, calculated on the basis of the trailing five day average of the closing
price of the Company's Class A Common Stock at the end of each fiscal quarter.
For fiscal 2000, Dr. Horner elected to receive all of her fees on a deferred
basis using the stock based method.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than 10%
of any class of the Company's common stock to file initial reports of ownership
and reports of changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. The Company believes that all filing
requirements applicable to its insiders were complied with during fiscal 2000.
9
<PAGE> 12
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE(1)
The following table provides information on the compensation provided by
the Company during fiscal 2000, 1999 and 1998 to the Company's Co-Chief
Executive Officers and the four most highly paid executive officers of the
Company during fiscal 2000. Under the Intercompany Services Agreement between
the Company and Harcourt General, Harcourt General provides certain management
services to the Company, including the services of the Company's Co-Chief
Executive Officers. Harcourt General has notified the Company of the termination
of the Intercompany Services Agreement effective May 14, 2001.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION(3)
--------------------
AWARDS
ANNUAL COMPENSATION --------------------
-------------------------------------- RESTRICTED
OTHER ANNUAL STOCK ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(4) ($)(5) ($)(6) (#) ($)(7)
------------------ ------ ---------- ---------- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert A. Smith 2000 -- -- -- $252,063 55,500 --
Co-Chief Executive 1999 -- -- -- -- -- --
Officer(1)(2) 1998 -- -- -- -- -- --
Brian J. Knez 2000 -- -- -- $252,063 55,500 --
Co-Chief Executive 1999 -- -- -- -- -- --
Officer(1)(2) 1998 -- -- -- -- -- --
Burton M. Tansky 2000 $1,000,000 $1,116,000 -- $695,000 140,000 $43,615
President and Chief 1999 $ 882,930 $ 220,000 -- $248,125 55,000 $27,419
Operating Officer of 1998 $ 807,968 $ 470,000 -- $260,206 20,200 $$20,227
the Company
Hubert W. Mullins 2000 $ 648,000 $ 750,000 -- $687,750 189,600 $25,349
Chairman and Chief 1999 -- -- -- -- -- --
Executive Officer of 1998 -- -- -- -- -- --
Neiman Marcus Stores(8)
Gerald A. Sampson 2000 $ 540,000 $ 409,000 -- $275,813 69,800 $19,797
President and Chief 1999 $ 540,000 $ 75,000 -- $119,100 12,500 $14,400
Operating Officer of 1998 $ 520,000 $ 220,000 -- $125,163 9,600 $14,126
Neiman Marcus Stores
Karen W. Katz 2000 $ 338,000 $ 251,000 -- $208,563 65,000 $11,076
President and Chief 1999 -- -- -- -- -- --
Executive Officer of 1998 -- -- -- -- -- --
Neiman Marcus Direct(9)
</TABLE>
---------------
(1) Robert A. Smith, a director and previously President of the Company, became
Chief Executive Officer of the Company in December 1998, succeeding Richard
A. Smith, the Chairman of the Company, who had served as Chief Executive
Officer of the Company from January 1997 until December 1998. In May 1999,
Brian J. Knez, a director of the Company, was elected by the Board of
Directors to serve along with Robert A. Smith as Co-Chief Executive Officer
of the Company. Robert A. Smith and Brian J. Knez also serve as President
and Co-Chief Executive Officers of Harcourt General. Of the amounts payable
under the Intercompany Services Agreement (see Note 2), approximately
$664,000 and $673,000 were attributable to Robert A. Smith's services for
fiscal 2000 and 1999, respectively, and $399,000 and $205,000 were
attributable to Brian J. Knez's services for fiscal 2000 and 1999,
respectively. These amounts include costs related to base
10
<PAGE> 13
compensation, bonuses, benefits and amounts necessary to fund retirement
benefits, all of which are direct obligations of Harcourt General.
(2) Under the Intercompany Services Agreement, Harcourt General provides certain
management, accounting, financial, legal, tax, human resources and other
corporate services to the Company, including the services of certain senior
officers of Harcourt General who are also senior officers of the Company, in
consideration of a fee based on Harcourt General's direct and indirect costs
of providing the corporate services. The level of Harcourt General services
and fees are subject to the approval of the Special Review Committee of the
Board of Directors of the Company, which consists entirely of directors who
are independent of Harcourt General. During fiscal years 2000, 1999, and
1998, the Company paid or accrued approximately $6.2 million, $6.0 million
and $5.4 million, respectively, to Harcourt General for all of its services
under the Intercompany Services Agreement. Prior to fiscal 2000, the senior
officers of Harcourt General who provide services to the Company under the
Intercompany Services Agreement received all of their compensation for such
services from Harcourt General. In fiscal 2000, the Compensation Committee
of the Company awarded restricted stock and stock options to these officers.
See "Option Grants in Last Fiscal Year" and "Compensation Committee Report
on Executive Compensation" below.
In connection with the proposed sale of Harcourt General (see Note 3 to the
table included under "Stock Ownership of Certain Beneficial Owners and
Management"), Harcourt General has notified the Company of the termination
of the Intercompany Services Agreement effective May 14, 2001.
(3) Other than restricted stock, stock options and equity based awards which may
be granted under the Company's 1997 Incentive Plan, the Company does not
have a long-term compensation program for its executive officers that
includes long-term incentive payouts.
(4) Bonus payments are reported with respect to the year in which the related
services were performed.
(5) No disclosure regarding items included in this category is required since no
amounts in any of the fiscal years reported for any of the named executive
officers exceed the lesser of $50,000 or 10% of the annual salary and bonus
for the named executive officer.
(6) Calculated by multiplying the closing price of the Company's Class A Common
Stock on the New York Stock Exchange on the date of grant by the number of
shares awarded. For all shares of restricted Class A Common Stock granted in
fiscal 1998 and 1999 and certain shares of restricted Class A Common Stock
granted in fiscal 2000, the restrictions lapse upon the achievement of
specified performance targets or, if the specified targets are not reached
within five years of the date of grant, then the restrictions lapse eight
years from the date of grant. The specified performance targets have not yet
been attained. For the remaining shares of restricted Class A Common Stock
granted in fiscal 2000, twenty percent of each award is freed from the
restrictions each year, commencing one year after the date of grant,
provided that the recipient continues to be employed by the Company on the
anniversary date of the grant. Holders of restricted stock are entitled to
vote their restricted shares and receive all dividends which may be paid
with respect to such shares. In the event of termination of employment for
any reason, other than death or permanent disability, restricted shares are
forfeited by the holders and revert to the Company. At the end of fiscal
2000, the named executive officers' restricted stock holdings and market
values (based on the New York Stock Exchange closing price of $32.625 for
the Company's Class A Common Stock and $31.5625 for the Company's Class B
Common Stock at fiscal year-end) were as follows: Mr. Smith -- 13,648
($440,593); Mr. Knez -- 13,648 ($440,593); Mr. Tansky -- 47,900
($1,562,738); Mr. Mullins -- 36,100 ($1,177,763); Mr. Sampson -- 20,500
($668,813); and Ms. Katz -- 13,300 ($433,913).
(7) The items accounted for in this column include the cost to the Company of
(a) matching contributions under the Company's Key Employee Deferred
Compensation Plan and (b) group life insurance premiums. For fiscal 2000,
such amounts for each of the named executive officers were, respectively, as
follows: Mr. Tansky -- $36,091 and $7,524; Mr. Mullins -- $23,859 and
$1,490; Mr. Sampson -- $14,895 and $4,902; Ms. Katz -- $10,356 and $720.
11
<PAGE> 14
(8) Mr. Mullins became an executive officer of the Company on October 6, 1999.
(9) Ms. Katz became an executive officer of the Company on May 15, 2000.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding options to purchase
shares of Class A Common Stock granted under the Company's 1997 Incentive Plan
during the fiscal year ended July 29, 2000 to the executive officers named in
the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
----------------------------------------------- POTENTIAL REALIZABLE
% OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS EMPLOYEES OR BASE OPTION TERM(2)
GRANTED IN FISCAL PRICE EXPIRATION -----------------------
NAME (#) YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
R. Smith...................... 55,500 3.94% $27.25 12/23/09 $ 951,125 $2,410,336
B. Knez....................... 55,500 3.94% $27.25 12/23/09 $ 951,125 $2,410,336
B. Tansky..................... 30,000 2.13% $23.1250 10/07/09 $ 436,926 $1,105,659
110,000 7.80% $23.1875 11/04/09 $1,604,074 $4,065,039
H. Mullins.................... 9,600 0.68% $23.1250 10/07/09 $ 139,615 $ 353,811
80,000 5.67% $23.1875 11/04/09 $1,166,600 $2,956,392
100,000 7.09% $22.9375 2/15/10 $1,442,527 $3,655,647
G. Sampson.................... 4,800 0.34% $23.1250 10/07/09 $ 69,807 $ 176,905
65,000 4.61% $23.1875 11/04/09 $ 947,862 $2,402,069
K. Katz....................... 4,000 0.28% $23.1250 10/07/09 $ 58,173 $ 147,421
26,000 1.84% $23.1875 11/04/09 $ 379,145 $ 960,827
35,000 2.48% $25.9375 5/16/10 $ 570,918 $1,446,819
</TABLE>
---------------
(1) No stock appreciation rights were granted to any named executive officer
during fiscal 2000. All option grants are non-qualified stock options to
purchase shares of the Company's Class A Common Stock and have a term of 10
years and one day. They become exercisable at the rate of 20% on each of the
first five anniversary dates of the grant. All options were granted at fair
market value measured by the closing price of the Class A Common Stock on
the New York Stock Exchange on the date of grant. See "Severance Agreements;
Change of Control Arrangements" below.
(2) These potential realizable values are based on assumed rates of appreciation
required by applicable regulations of the Securities and Exchange
Commission.
12
<PAGE> 15
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information regarding stock options/SARs
exercised during fiscal 2000 and the number and value of stock options held at
July 29, 2000 by the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
JULY 29, 2000(#) JULY 29, 2000($)
--------------------- ---------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
---- --------------- ----------- --------------------- ---------------------
<S> <C> <C> <C> <C>
R. Smith..................... -- -- 0/55,500 $ 0/$298,313
B. Knez...................... -- -- 0/55,500 $ 0/$298,313
B. Tansky.................... -- -- 111,580/200,120 $1,700,000/$1,664,375
H. Mullins................... -- -- 9,400/200,700 $ 107,875/$1,871,200
G. Sampson................... -- -- 29,840/90,560 $ 366,381/$778,563
K. Katz...................... 2,300 $27,544 4,600/72,900 $ 37,531/$558,063
</TABLE>
---------------
(1) The value of unexercised in-the-money options is calculated by multiplying
the number of underlying shares by the difference between the closing price
of the Company's Class A Common Stock on the New York Stock Exchange at
fiscal year-end ($32.625) less the option exercise price for those shares.
These values have not been realized.
PENSION PLANS
The Company maintains a funded, qualified pension plan known as The Neiman
Marcus Group, Inc. Retirement Plan (the "Retirement Plan"). Most non-union
employees over age 21 who have completed one year of service with 1,000 or more
hours participate in the Retirement Plan, which pays benefits upon retirement or
termination of employment. The Retirement Plan is a "career-average" plan, under
which a participant earns each year a retirement annuity equal to 1% of his or
her compensation for the year up to the Social Security wage base and 1.5% of
his or her compensation for the year in excess of such wage base. Benefits under
the Retirement Plan become fully vested after five years of service with the
Company.
The Company also maintains a Supplemental Executive Retirement Plan (the
"SERP"). The SERP is an unfunded, nonqualified plan under which benefits are
paid from the Company's general assets to supplement Retirement Plan benefits
and Social Security. Executive, administrative and professional employees (other
than those employed as salespersons) with an annual base salary at least equal
to a minimum established by the Company ($160,000 as of July 29, 2000) are
eligible to participate. At normal retirement age (age 65), a participant with
25 or more years of service is entitled to payments under the SERP sufficient to
bring his or her combined annual benefit from the Retirement Plan and SERP,
computed as a straight life annuity, up to 50% of the participant's highest
consecutive 60 month average of annual pensionable earnings, less 60% of his or
her estimated annual primary Social Security benefit. If the participant has
fewer than 25 years of service, the combined benefit is proportionately reduced.
Benefits under the SERP become fully vested after five years of service with the
Company.
13
<PAGE> 16
The following table, which includes benefits under the Retirement Plan and
the SERP, shows the estimated annual pension benefits payable to employees in
various compensation and years of service categories. The estimated benefits
apply to an employee retiring at age 65 in 2000 who elects to receive his or her
benefit in the form of a straight life annuity. The amounts actually payable
will be lower than the amounts shown below, since such amounts will be reduced
by 60% of the participant's estimated primary Social Security benefit.
ESTIMATED ANNUAL RETIREMENT BENEFITS
UNDER RETIREMENT PLAN AND SERP
<TABLE>
<CAPTION>
AVERAGE TOTAL YEARS OF SERVICE
PENSIONABLE --------------------------------------------------------
EARNINGS 5 10 15 20 25
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 300,000 $ 30,000 $ 60,000 $ 90,000 $120,000 $150,000
500,000 50,000 100,000 150,000 200,000 250,000
700,000 70,000 140,000 210,000 280,000 350,000
900,000 90,000 180,000 270,000 360,000 450,000
1,100,000 110,000 220,000 330,000 440,000 550,000
</TABLE>
The following table shows the pensionable earnings and credited years of
service for the executive officers named in the Summary Compensation Table as of
July 29, 2000 and years of service creditable at age 65.
<TABLE>
<CAPTION>
PENSIONABLE EARNINGS YEARS OF SERVICE(2)
FOR YEAR ENDED ------------------------------
NAME JULY 29, 2000(1) AT JULY 29, 2000 AT AGE 65
---- -------------------- ----------------- ---------
<S> <C> <C> <C>
Co-Chief Executive Officers(3)....... -- -- --
B. Tansky............................ $1,000,000 --(4) 21(4)
H. Mullins........................... 648,000 9 25
G. Sampson........................... 540,000 --(5) 21(5)
K. Katz.............................. 338,000 15 25
</TABLE>
---------------
(1) In computing the combined benefit under the Retirement Plan and SERP,
"pensionable earnings" means, with respect to the Retirement Plan, base
salary and any bonus and, with respect to the SERP, base salary only. The
amounts shown above include base salary only.
(2) The credited years of service set forth in the table reflect years of
credited service under the Retirement Plan, which is a "career average plan"
with no limitation on years of credited service. However, credited service
under the SERP may not exceed 25 years.
(3) None of the executive officers of Harcourt General who are also officers of
the Company, including those executive officers of Harcourt General who
serve as Co-Chief Executive Officers of the Company, participate in the
Company's Retirement Plan or SERP.
(4) For purposes of determining Mr. Tansky's retirement benefits under the SERP,
Mr. Tansky will be credited with two times his years of service with the
Company provided (i) he remains continuously employed by the Company until
his 65th birthday and, following his retirement, agrees not to compete with
the Company for a period of three years, (ii) the Company terminates his
employment other than for cause, or (iii) he resigns under certain
circumstances following a change of control of the Company; otherwise, Mr.
Tansky's accrued service under the SERP will be calculated at 5/3 times his
years of service if he retires after age 65 and in the normal manner in all
other cases. Mr. Tansky is 62 years old.
14
<PAGE> 17
(5) For purposes of determining Mr. Sampson's retirement benefits under the
SERP, Mr. Sampson will be credited with 20/13 times his years of service
with the Company provided (i) he remains continuously employed by the
Company until his 65th birthday, (ii) the Company terminates his employment
other than for cause, or (iii) he resigns under certain circumstances before
age 65 or following a change of control of the Company; otherwise, Mr.
Sampson's accrued service under the SERP will be calculated in the normal
manner. Mr. Sampson is 59 years old.
SEVERANCE AGREEMENTS; CHANGE OF CONTROL ARRANGEMENTS
Messrs. Tansky, Mullins and Sampson and Ms. Katz each has an agreement with
the Company effective November 1999, October 1999, September 1998 and May 2000,
respectively, pursuant to which each such executive officer is entitled to
receive severance payments in the event his or her employment with the Company
is terminated in certain situations. If the Company terminates the executive's
employment other than for cause or other than due to his or her total disability
or death, the executive shall have the right to receive an amount equivalent to
two times his then-current annual base salary payable in 24 monthly
installments, in the case of Mr. Tansky and one and one-half times his or her
then current annual base salary, payable in 18 monthly installments, in the case
of Messrs. Mullins and Sampson and Ms. Katz. The executive also will be entitled
to receive such payments if his or her employment is terminated by a successor
to the Company within 24 months of a change of control of the company in the
case of Mr. Tansky, or within 18 months in the case of Messrs. Mullins and
Sampson and Ms. Katz (or if the executive resigns within such periods because he
or she is not permitted to continue in a position comparable in duties and
responsibilities to that which he or she held prior to the change of control).
The Company's 1997 Incentive Plan and the terms of all outstanding
individual award agreements provide that in the event of a change of control of
the Company all outstanding awards become fully vested and exercisable. In
addition, following receipt of a notice of termination of the Company's
Intercompany Services Agreement with Harcourt General, all outstanding stock
options and restricted stock granted to officers of the Company who are also
officers of Harcourt General become fully vested and exercisable at the earlier
of (i) such time as any such person ceases to be an officer or employee of the
Company for any reason other than voluntary resignation prior to the time such
person ceases to be an officer of Harcourt General or removal for cause, or (ii)
the termination date of the Intercompany Services Agreement, except that if any
such person remains an officer or regular employee of the Company six months
after termination of the Intercompany Services Agreement, such person's stock
awards will continue to vest in accordance with the terms of the 1997 Incentive
Plan and the applicable award instrument. Outstanding stock options held by any
of such officers who cease to be officers or employees of the Company remain
exercisable for the lesser of two years or the expiration date of the applicable
grant. Harcourt General has notified the Company of the termination of the
Intercompany Services Agreement effective May 14, 2001. See Footnote 2 to the
"Summary Compensation Table" above.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During fiscal 2000 and through November 7, 2000, Messrs. Tansky and Sampson
and Ms. Katz had outstanding loans under the Company's Key Executive Stock
Purchase Loan Plan (the "Loan Plan") in the respective maximum aggregate
principal amounts of $367,594, $536,648 and $178,102. At November 7, 2000, the
outstanding amounts of such loans were as follows: Mr. Tansky -- $367,594; Mr.
Sampson -- $536,648 and Ms. Katz -- $0. In accordance with the provisions of the
Loan Plan, these loans were used to acquire shares of the Company's common stock
either in the open market or
15
<PAGE> 18
pursuant to stock option exercises and to discharge certain tax liabilities
incurred in connection with the release of restrictions on previous grants of
restricted common stock. The loans are secured by a pledge of the purchased
shares and bear interest at an annual rate of 5%, payable quarterly. Pursuant to
the terms of the Loan Plan, each executive officer's loan will become due and
payable seven months after his or her employment with the Company terminates. No
other executive officer of the Company had outstanding loans under the Loan Plan
in excess of $60,000 during fiscal 2000 or subsequent thereto.
------------------------
16
<PAGE> 19
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT
OF 1934, EACH AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS
PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION, STOCK PERFORMANCE GRAPH AND REPORT OF THE
AUDIT COMMITTEE SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILINGS, NOR SHALL SUCH SECTIONS OF THIS PROXY STATEMENT BE DEEMED TO BE
INCORPORATED INTO ANY FUTURE FILINGS MADE BY THE COMPANY UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Introduction
The Compensation Committee is composed of Walter J. Salmon (Chairman),
Matina S. Horner, and Vincent M. O'Reilly. The members of the Compensation
Committee are all independent directors.
The principal responsibility of the Committee is to review the performance
of, and determine the compensation for, the executive officers of the Company
who are not also executive officers of Harcourt General. The individuals in this
group for fiscal 2000 include Messrs. Tansky, Sampson, Mullins, and Ms. Katz,
all of whom are named executive officers in the Summary Compensation Table. The
compensation of Harcourt General's executive officers, most of whom are also
executive officers of the Company, is determined by Harcourt General's
Compensation Committee, except that the Committee decides whether and to what
extent any of such officers should receive any stock-based awards under the
Company's 1997 Incentive Plan.
Compensation Policies
The principal objectives of the Company's executive compensation program
are to (i) reward competitively its executive officers, (ii) attract and retain
individuals important to the success of the Company, (iii) provide incentives
that will motivate those executives, and (iv) reward the Company's executives
for achieving the business objectives of the Company and its operating divisions
over both the short and long terms.
The Committee makes annual and long term incentives a significant component
of the Company's executive officers' total compensation. The Committee also
increases the variable risk and reward of such incentive compensation in
proportion to an executive's level of responsibility in the Company.
Early in each fiscal year, the Committee considers the recommendations of
the Co-Chief Executive Officers, which are supported by data generated by the
Company's Human Resources Department and/or outside compensation consultants,
for each component of compensation of the Company's executive officers and for
the totality of their compensation. The Committee reviews those recommendations
and then approves them or makes such modifications as it deems appropriate.
The principal components of the Company's compensation program are (i) base
salary, (ii) annual incentive bonus, and (iii) stock incentives.
Base Salary
For fiscal 2000, base salary was determined with reference both to
salary survey information from recognized compensation consulting firms
and to each executive officer's level of responsibility, experience and
performance. The salary survey data was used to establish
17
<PAGE> 20
benchmark amounts for both base salary and total cash compensation for
each executive position. Comparisons were made to a broad range of
domestic publicly held retailing companies, including "upscale" specialty
retailing companies. Because the Company competes for executive talent
with a broad range of companies, the Committee did not limit its
comparison information for compensation purposes to the companies included
in the peer group in the Stock Performance Graph. For fiscal 2000, the
Committee generally set its salary and total cash compensation benchmarks
(assuming that target bonuses would be achieved) for executive officers at
the middle range of the comparison group of companies.
The Committee reviewed in detail the base salary levels for each of the
named executive officers of the Company. While the Committee used the
benchmarks described above as a reference point, a particular individual's
base salary may vary from the benchmark depending upon his or her salary
history, experience, individual performance, guidelines established by the
Co-Chief Executive Officers with respect to salary increases for the
entire Company, and the subjective judgment of the Committee.
Annual Incentive Bonus
The annual incentive bonus program is intended to put substantial
amounts of total cash compensation at risk with the intent of focusing the
attention of the executives on achieving both the Company's and their
division's performance goals and their individual goals, thereby
contributing to profitability and building shareholder value. For fiscal
2000 the named executive officers' cash bonus opportunity for performance
at the level of meeting the fiscal 2000 threshold budget targets ranged
from 9.0625% to 15% of base salary, and increased to a range of 36.25% to
60% of base salary for performance above the fiscal 2000 budget. For
performance in fiscal 2000 which represented a significant improvement
over the Company's fiscal 2000 budget, cash bonus opportunities ranged
from 72.5% to 120% of base salary. The determination of annual bonuses for
the named executive officers for fiscal 2000 was based principally on (i)
the achievement of performance objectives by the operating division for
which the executive was responsible, (ii) the individual executive's own
performance, and (iii) the Company's overall performance. The divisional
performance component of the bonus was determined based on a weighting of
several factors, the most important of which was operating earnings before
corporate expenses. Other factors included return on net assets for Neiman
Marcus Stores and Bergdorf Goodman, and growth in the number of customer
accounts for Neiman Marcus Direct. The individual performance goals for
each of the Company's named executive officers included the achievement of
certain specified tasks.
Bonuses actually awarded to the named executive officers for fiscal
2000 were determined by an assessment of all of these factors, as well as
certain subjective factors.
In September 2000 the Compensation Committee established the Company's
and each division's performance goals for fiscal 2001 and determined the
executive officers who should participate in the annual incentive plan for
that year and their respective bonus award opportunities. For fiscal 2001
the named executive officers' cash bonus opportunity for performance at
the level of meeting the fiscal 2001 threshold budget targets will range
from 10% to 15% of base salary, and will increase to a range of 40% to 60%
of base salary for performance above the fiscal 2001 budget which would
represent an improvement over the Company's fiscal 2000 results. For
performance in fiscal 2001 which would represent a significant improvement
over the Company's fiscal 2001 budget, cash bonus opportunities will range
from 80% to 120% of base
18
<PAGE> 21
salary. If performance is below the fiscal 2001 threshold budget targets,
the Committee may reduce cash bonus awards or not grant them at all.
Stock Incentives
The Committee's purpose in awarding equity based incentives is to
achieve as much as possible an identity of interest between the Company's
executives and the long term interest of the stockholders. For fiscal
2000, the principal factors considered in determining which executives
(including the named executive officers and those Harcourt General
officers who also serve as executive officers of the Company) were awarded
equity based compensation, and in determining the types and amounts of
such awards, included salary levels, equity awards granted to executives
at competing retail companies, and the performance, experience, and level
of responsibility of each executive.
The Company granted three kinds of equity based incentives in fiscal
2000: (i) non-qualified stock options, (ii) performance accelerated
restricted stock and (iii) time-lapse restricted stock. Non-qualified
stock options vest over a five year period and terminate ten years and one
day from the date of grant. The restrictions on performance accelerated
restricted stock lapse upon the earlier of (i) the achievement of
specified business objectives (including without limitation improvements
in operating earnings and return on net assets) within five years of the
date of grant, or (ii) the eighth anniversary of the date of grant. The
restrictions on the time-lapse restricted stock lapse, and the
non-qualified stock options vest twenty percent (20%) per year on each of
the first five anniversaries of the grant.
Compensation of the Co-Chief Executive Officers
The Company's Co-Chief Executive Officers, Messrs. Smith and Knez, receive
all of their cash compensation from Harcourt General and not from the Company.
For further information regarding the charges incurred by the Company for the
services of its Co-Chief Executive Officers under the Intercompany Services
Agreement between the Company and Harcourt General, see Note 1 to the Summary
Compensation Table. While the Special Review Committee of the Company reviews
each year the appropriateness of the charges by Harcourt General to the Company
under the Intercompany Services Agreement, neither this Committee nor the
Special Review Committee plays any role in determining the compensation that any
executive officer of Harcourt General receives from Harcourt General.
In order to align the interest of the Co-Chief Executive Officers
specifically with those of the Company's stockholders, in December 1999 the
Committee granted to each of Messrs. Smith and Knez options to purchase 55,500
shares of Class A Common Stock and awarded to each of them 9,250 shares of
restricted Class A Common Stock. The options become exercisable at the rate of
20% per year on each of the first five anniversaries of the grant, and the
restrictions on the sale of the restricted stock lapse ratably over five years,
provided that, following receipt of a notice of termination of the Company's
Intercompany Services Agreement with Harcourt General, all outstanding stock
options and restricted stock granted to officers of the Company who are also
officers of Harcourt General, including the Co-Chief Executive Officers, become
fully vested and exercisable at the earlier of (i) such time as any such person
ceases to be an officer or employee of the Company for any reason other than
voluntary resignation prior to the time such person ceases to be an officer of
Harcourt General or removal for cause, or (ii) the termination date of the
Intercompany Services Agreement, except that if any such person remains an
officer or regular employee of the Company six months after
19
<PAGE> 22
termination of the Intercompany Services Agreement, such person's stock awards
will continue to vest in accordance with the terms of the 1997 Incentive Plan
and the applicable award instrument. Outstanding stock options held by any of
such officers who cease to be officers or employees of the Company remain
exercisable for the lesser of two years or the expiration date of the applicable
grant. Harcourt General has notified the Company of the termination of the
Intercompany Services Agreement effective May 14, 2001.
Compliance with the Internal Revenue Code
The Internal Revenue Code (the "Code") generally disallows a tax deduction
to public companies for compensation in excess of $1 million per year which is
not "performance based" paid to each of the executive officers named in the
Summary Compensation Table. During fiscal 1997, the Committee, the Board of
Directors and the stockholders of the Company approved The Neiman Marcus Group
1997 Incentive Plan. This Plan allows the Committee to award stock incentives
and cash bonuses based on objective criteria. It is expected that the stock
incentives and cash bonuses awarded under the Plan will generally be
characterized as "performance based" compensation and therefore will be fully
deductible by the Company. The Company expects that the executive officers of
the Company will, in appropriate cases, agree to defer income if and to the
extent that their compensation is not deductible by the Company under the Code.
The Committee will continue to monitor the requirements of the Code to determine
what actions should be taken by the Company in order to preserve the tax
deduction for executive compensation to the maximum extent, consistent with the
Company's continuing goals of providing the executives of the Company with
appropriate incentives and rewards for their performance.
COMPENSATION COMMITTEE
Walter J. Salmon, Chairman
Matina S. Horner
Vincent M. O'Reilly
20
<PAGE> 23
STOCK PERFORMANCE GRAPH
The following graph compares the total cumulative return over five years on
the Company's Common Stock to the total cumulative return over the same period
of the common stocks of companies in (i) the Standard & Poor's 500 Index, and
(ii) a peer group index used by the Company in fiscal 1999 (Old Peer Index)
consisting of Tiffany & Co. and Nordstrom, Inc., and (iii) a new peer index (New
Peer Index) which includes Saks, Inc. and Federated Department Stores, Inc.,
along with Tiffany and Nordstrom. The Old Peer Index has been expanded to
provide a more meaningful comparison to a broader group of retailers. For
example, during the most recent five year period, the stock price of Tiffany &
Co. appreciated from $4.75 to $34.25 (adjusted for stock splits), an increase of
621%. The graph assumes that the value of an investment in the Company's Common
Stock and each index was $100 at July 29, 1995, and that all dividends were
reinvested. The predecessor of Saks, Inc. began trading on the New York Stock
Exchange in May 1996 and, accordingly, is included in the New Peer Index
commencing as of the end of the Company's 1996 fiscal year. The graph uses the
price of the Company's Class A Common Stock for the period since the October 22,
1999 recapitalization of the Company which created two classes of common stock,
Class A and Class B. Returns on the common stocks of the companies in each peer
group index have been weighted annually at the beginning of each fiscal year to
reflect relative stock market capitalization. The comparisons provided in this
graph are not intended to be indicative of possible future performance of the
Company's stock.
[Stock Performance Graph]
<TABLE>
<CAPTION>
THE NEIMAN MARCUS
GROUP, INC. S&P 500 INDEX OLD PEER INDEX NEW PEER INDEX
----------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
July 29, 1995 100.00 100.00 100.00 100.00
August 3, 1996 174.80 113.86 115.86 110.14
August 2, 1997 181.71 169.79 160.21 150.18
August 1, 1998 214.63 199.39 300.75 210.82
July 31, 1999 162.60 236.40 410.06 211.81
July 29, 2000 212.23 254.57 387.93 142.21
</TABLE>
21
<PAGE> 24
REPORT OF THE AUDIT COMMITTEE
In accordance with its written charter adopted by the Board of Directors
(Board), the Audit Committee of the Board (Committee) assists the Board in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting, auditing and financial reporting practices of the Company. During
fiscal 2000, the Committee met five times, and beginning in April 2000, the
Committee chairman, as representative of the Committee, discussed the interim
financial information contained in each quarterly earnings announcement and Form
10-Q with management, the internal auditors and independent auditors prior to
public release.
In discharging its oversight responsibility as to the audit process, the Audit
Committee received from the independent auditors the written disclosures and
letter required by Independence Standards Board Standard No. 1, "Independence
Discussions with Audit Committees", and discussed with the independent auditors
the independent auditors' independence. The Committee also discussed with
management, the internal auditors, and the independent auditors the quality and
adequacy of the Company's internal controls and the internal audit function's
organization, responsibilities, budget and staffing. The Committee reviewed with
both the independent and the internal auditors their audit plans, audit scope,
and identification of audit risks.
The Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements. The Committee also discussed the results of the
internal audit examinations.
The Committee discussed and reviewed the audited financial statements of the
Company as of and for the fiscal year ended July 29, 2000, with management, the
internal auditors and the independent auditors. Management has the
responsibility for the preparation of the Company's financial statements and the
independent auditors have the responsibility for the examination of those
statements.
Based on the above-mentioned review and discussions with management, the
internal auditors and the independent auditors, the Committee recommended to the
Board that the Company's audited financial statements be included in its Annual
Report on Form 10-K for the fiscal year ended July 29, 2000, for filing with the
Securities and Exchange Commission. The Committee also recommended the
reappointment, subject to shareholder approval, of Deloitte & Touche LLP as the
independent auditors for the Company.
September 22, 2000
AUDIT COMMITTEE
Vincent M. O'Reilly, Chairman
Matina S. Horner
Walter J. Salmon
22
<PAGE> 25
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Although Delaware law does not require that the selection by the Board of
Directors of the Company's auditors be approved each year by the stockholders,
the Board of Directors believes it is appropriate to submit its selection to the
stockholders for their approval and to abide by the result of the stockholders'
vote. The Board of Directors recommends that the stockholders ratify the
appointment of Deloitte & Touche LLP as independent auditors to audit the
financial statements of the Company for the fiscal year ending July 28, 2001.
Representatives of Deloitte & Touche LLP will be present at the Annual
Meeting, will have an opportunity to make a statement if they wish, and will be
available to respond to appropriate questions from stockholders. The Company
paid, or accrued, approximately $3.1 million on account of professional services
rendered by Deloitte & Touche LLP for the fiscal year ended July 29, 2000.
Approval of the proposal to ratify the selection of Deloitte & Touche LLP
as the Company's independent auditors for the current fiscal year requires a
favorable vote of a majority of the shares present or represented at the Annual
Meeting. On this proposal, abstentions will have the same effect as votes
against the proposal and broker non-votes will have no effect.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL
TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING JULY 28, 2001.
3. STOCKHOLDER PROPOSAL
Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W.,
Suite 215, Washington, DC 20037, the record owner of 150 shares of the Company's
Class A Common Stock, has submitted for consideration at the Annual Meeting the
proposal set forth below. Following the proposal is the stockholder's statement
in support thereof, in the form received by the Company, and the statement of
the Company's Board of Directors in opposition thereto.
"RESOLVED: That the stockholders of Neiman Marcus, assembled in Annual
Meeting in person and by proxy, hereby request the Board of Directors to take
the necessary steps to provide for cumulative voting in the election of
directors, which means each stockholder shall be entitled to as many votes as
shall equal the number of shares he or she owns multiplied by the number of
directors to be elected, and he or she may cast all of such votes for a single
candidate, or any two or more of them as he or she may see fit."
"REASONS: Many states have mandatory cumulative voting, so do National
Banks."
"In addition, many corporations have adopted cumulative voting."
"Last year the owners of 10,666,718 shares, representing approximately 26%
of shares voting, voted FOR this proposal."
"If you AGREE, please mark your proxy FOR this resolution."
Statement of the Board of Directors in Opposition
The Company's present system for election of directors, which is like that
of many major publicly traded corporations, allows all stockholders to vote on
the basis of their share ownership. The Board of Directors believes that the
current voting system is most likely to produce an effective Board of Directors
which will represent the interests of all of the Company's stockholders.
Cumulative voting,
23
<PAGE> 26
which permits relatively small groups of stockholders to elect directors to
represent their particular interests or points of view, could result in the
creation of an adversarial Board of Directors, where each director advocates the
positions of the group responsible for his or her election rather than the
positions which are in the best interest of the Company and all of the
stockholders. The Board of Directors believes there should never be any question
as to whether a Director is acting for the benefit of all of the stockholders,
rather than as a representative of any special group.
Approval of this advisory proposal requires a favorable vote of a majority
of the shares present or represented at the Annual Meeting. On this proposal,
abstentions will have the same effect as votes cast against the proposal and
broker non-votes will have no effect. Section 214 of the General Corporation Law
of the State of Delaware states that a certificate of incorporation may provide
for cumulative voting. In order actually to effect cumulative voting, therefore,
stockholders of the Company must vote to amend the Company's Restated
Certificate of Incorporation to so provide. No such proposal has been placed
before the stockholders, but if it were, it would require the favorable vote of
the holders of shares representing at least a majority of the issued and
outstanding Class A Common Stock and Class B Common Stock voting as a single
class.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THIS
STOCKHOLDER PROPOSAL.
4. OTHER MATTERS
The Board of Directors knows of no other matters which are likely to be
brought before the meeting. If any other matters should be properly brought
before the meeting, it is the intention of the persons named in the enclosed
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
AND NOMINATIONS FOR DIRECTOR
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD IN JANUARY 2002
In order for stockholder proposals which are submitted pursuant to Rule
14a-8 of the Securities Exchange Act of 1934 (the "Exchange Act") to be
considered by the Company for inclusion in the proxy material for the Annual
Meeting of Stockholders to be held in January 2002, they must be received by the
Secretary of the Company by July 20, 2001.
For proposals that stockholders intend to present at the Annual Meeting of
Stockholders to be held in January 2002 outside the processes of Rule 14a-8 of
the Exchange Act, unless the stockholder notifies the Secretary of the Company
of such intent by October 20, 2001, any proxy that management solicits for such
Annual Meeting will confer on the holder of the proxy discretionary authority to
vote on the proposal so long as such proposal is properly presented at the
meeting.
In order for suggestions by stockholders for nominees for director to be
considered by the Nominating Committee, they must be received by the Secretary
of the Company by October 20, 2001; see "Meetings and Committees of the Board of
Directors -- Nominating Committee."
24
<PAGE> 27
All such communications to the Secretary of the Company must be in writing
and must be received by the Company at its principal executive offices (27
Boylston Street, Chestnut Hill, Massachusetts 02467) by the applicable date.
By Order of the Board of Directors
ERIC P. GELLER
Secretary
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, ALL STOCKHOLDERS ARE URGED TO
PROMPTLY COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
25
<PAGE> 28
APPENDIX A
THE NEIMAN MARCUS GROUP, INC.
AUDIT COMMITTEE CHARTER
I. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
- Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance.
- Monitor the independence and performance of the Company's independent
auditors and internal auditing department.
- Provide an avenue of communication for the independent auditors,
management, the internal auditing department, and the Board of Directors.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the requirements of the New York Stock
Exchange. The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent nonexecutive
directors, free from any relationship that would interfere with the exercise of
his or her independent judgment. All members of the Committee shall have a basic
understanding of finance and accounting and be able to read and understand
fundamental financial statements, and at least one member of the Committee shall
have accounting or related financial management expertise.
Audit Committee members shall be appointed by the Board on recommendation
of the Nominating Committee. If an audit committee Chair is not designated or
present, the members of the Committee may designate a Chair by majority vote of
the Committee membership.
The Committee shall meet regularly to carry out its responsibilities. The
Committee shall meet privately in executive session at least annually with
management, the director of the internal auditing department, the independent
auditors, and as a Committee to discuss any matters that the Committee or each
of these groups believe should be discussed.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
General
1. Review and reassess the adequacy of this charter at least annually.
Make recommendations to the Board of Directors, as conditions dictate,
to revise this charter. Publish the charter as required by SEC
regulations.
2. The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and shall have direct
access to the independent auditors as well as anyone in the
organization. The Audit Committee may retain, at the Company's expense,
legal counsel or accounting or other experts as it deems necessary in
the performance of its duties.
3. Maintain communication with management, independent accountants,
internal auditors, legal counsel and other key personnel.
<PAGE> 29
4. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the Board
deems necessary or appropriate.
5. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
6. Annually prepare a report to shareholders as required by the Securities
and Exchange Commission for inclusion in the Company's annual proxy
statement.
Financial Reporting
7. Review the Company's annual audited financial statements prior to the
release of earnings and/or the filing of the Company's Form 10-K. The
review should include discussions with management and the independent
auditors of significant issues regarding accounting principles,
practices, judgments and the quality of financial reporting. The review
should also include all communications required of the independent
auditors by generally accepted auditing standards.
8. In consultation with the management, the independent auditors, and the
internal auditors, consider the integrity of the Company's financial
reporting processes and controls. Discuss significant financial risk
exposures and the steps management has taken to monitor, control, and
report such exposures. Review significant findings prepared by the
independent auditors and the internal auditing department together with
management's responses. Assess SEC inquiries and the results of
examinations by other regulatory authorities in terms of important
findings, recommendations and management's response.
9. Review with financial management and the independent auditors the
Company's quarterly financial results prior to the release of earnings
and/or the Company's quarterly financial statements prior to the filing
of the Company's Form 10-Q. Discuss any significant changes to the
Company's accounting principles and any items required to be
communicated by the independent auditors in accordance with generally
accepted auditing standards. The Chair of the Committee or his designee
may represent the entire Audit Committee for purposes of this review.
Independent Auditors
10. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall review
the independence and performance of the auditors and annually
recommend to the Board of Directors the appointment of the independent
auditors or approve any discharge of auditors when circumstances
warrant. The Audit Committee shall also review and approve the
appointment of the lead audit partner.
11. On an annual basis, the Committee should review the independent
auditor's written affirmation of independence and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditor's independence.
12. Approve the fees and other significant compensation paid to the
independent auditors.
13. Review the independent auditors audit plan -- discuss scope, staffing,
locations, reliance upon management and internal audit and general
audit approach.
<PAGE> 30
Internal Audit Department and Legal Compliance
14. Review the budget, plan, activities, organizational structure, and
qualifications of the internal audit department.
15. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the Company's
financial statements, the Company's compliance with applicable laws
and regulations, and inquiries received from regulators or
governmental agencies.
<PAGE> 31
714-PS-00
<PAGE> 32
CLASS A COMMON STOCK PROXY CLASS A COMMON STOCK
THE NEIMAN MARCUS GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS, JANUARY 19, 2001
Robert A. Smith, Brian J. Knez and Eric P. Geller, and each of them
singly, each with power of substitution, are hereby authorized to represent and
vote all shares of Class A Common Stock of the undersigned at the Annual Meeting
of Stockholders of The Neiman Marcus Group, Inc. to be held at the Company's
corporate headquarters, 27 Boylston Street, Chestnut Hill, Massachusetts on
Friday, January 19, 2001, at 10:00 a.m. and at any adjournments or postponements
thereof. The undersigned hereby revokes any Proxy previously given and
acknowledges receipt of the Notice of Annual Meeting and Proxy Statement, dated
November 22, 2000, and a copy of the Annual Report for the year ended July 29,
2000.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. THE BOARD OF DIRECTORS OF THE NEIMAN MARCUS GROUP, INC. RECOMMENDS
A VOTE FOR PROPOSAL 2 AND AGAINST PROPOSAL 3. IF THIS PROXY IS SIGNED AND
RETURNED AND DOES NOT SPECIFY A VOTE ON ANY PROPOSAL, THE PROXY WILL BE VOTED IN
ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
----------- -----------
SEE REVERSE (SEE REVERSE SIDE TO CAST VOTE) SEE REVERSE
SIDE CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE SIDE
----------- -----------
<PAGE> 33
--------------------------------------------------------------------------------
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
1. Election of Directors: No Class A Directors
are to be elected.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
--------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of appointment of Deloitte & Touche LLP
as independent auditors of the Company for [ ] [ ] [ ]
the current fiscal year.
--------------------------------------------------------------------------------
-----------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST PROPOSAL 3.
-----------------------------------------------------------------------
FOR AGAINST ABSTAIN
3. Approval of stockholder proposal concerning
cumulative voting. [ ] [ ] [ ]
-----------------------------------------------------------------------
MARK HERE MARK HERE
FOR ADDRESS [ ] IF YOU PLAN [ ]
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
For joint accounts, each owner should sign. Executors, Administrators,
Trustees, etc. should give full title.
Signature: ________________ Date: _____ Signature: ________________ Date: _____
<PAGE> 34
DETACH HERE
CLASS B COMMON STOCK PROXY CLASS B COMMON STOCK
THE NEIMAN MARCUS GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS, JANUARY 19, 2001
Robert A. Smith, Brian J. Knez and Eric P. Geller, and each of them
singly, each with power of substitution, are hereby authorized to represent and
vote all shares of Class B Common Stock of the undersigned at the Annual
Meeting of Stockholders of The Neiman Marcus Group, Inc. to be held at the
Company's corporate headquarters, 27 Boylston Street, Chestnut Hill,
Massachusetts on Friday, January 19, 2001, at 10:00 a.m. and at any adjournments
or postponements thereof (the "Annual Meeting"). The undersigned hereby revokes
any Proxy previously given and acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement, dated November 22, 2000, and a copy of the Annual
Report for the year ended July 29, 2000.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. THE BOARD OF DIRECTORS OF THE NEIMAN MARCUS GROUP, INC. RECOMMENDS
A VOTE FOR THE NOMINEES SET FORTH BELOW, FOR PROPOSAL 2 AND AGAINST PROPOSAL 3.
IF THIS PROXY IS SIGNED AND RETURNED AND DOES NOT SPECIFY A VOTE ON ANY
PROPOSAL, THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE
BOARD OF DIRECTORS.
ELECTION OF CLASS B DIRECTORS
NOMINEES: (01) RICHARD A. SMITH, (02) ROBERT A. SMITH
----------- -----------
SEE REVERSE (SEE REVERSE SIDE TO CAST VOTE) SEE REVERSE
SIDE CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE SIDE
----------- -----------
<PAGE> 35
DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE ]
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
--------------------------------------------------------------------------------
FOR WITHHELD
1. Election of Class B Directors (See reverse) [ ] [ ]
[ ]______________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Approval of the appointment of Deloitte & Touche
LLP as independent auditors of the Company for [ ] [ ] [ ]
the current fiscal year.
--------------------------------------------------------------------------------
----------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST PROPOSAL 3.
----------------------------------------------------
FOR AGAINST ABSTAIN
3. Approval of stockholder
proposal concerning [ ] [ ] [ ]
cumulative voting.
----------------------------------------------------
MARK HERE MARK HERE
FOR ADDRESS [ ] IF YOU PLAN [ ]
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
For joint accounts, each owner should sign.
Executors, Administrators, Trustees, etc. should
give full title.
Signature: ________________ Date: _____ Signature: ________________ Date: _____
<PAGE> 36
DETACH HERE
CONFIDENTIAL VOTING INSTRUCTIONS
TO: FIDELITY MANAGEMENT TRUST COMPANY
AS TRUSTEE UNDER
THE NEIMAN MARCUS GROUP, INC.
EMPLOYEE SAVINGS PLAN
WITH RESPECT TO THE ANNUAL MEETING OF STOCKHOLDERS OF
THE NEIMAN MARCUS GROUP, INC.-- JANUARY 19, 2001
I hereby instruct the Trustee to vote (in person or by proxy) all shares of
Class A Common Stock of The Neiman Marcus Group, Inc. which are credited to my
account under the above-referenced Plan at the Annual Meeting of Stockholders of
The Neiman Marcus Group, Inc. to be held at the Company's corporate
headquarters, 27 Boylston Street, Chestnut Hill, Massachusetts on Friday,
January 19, 2001, at 10:00 a.m. and at any adjournments or postponements
thereof. The undersigned hereby revokes any instruction previously given and
acknowledges receipt of the Notice of Annual Meeting and Proxy Statement dated
November 22, 2000, and a copy of the Annual Report for the year ended July 29,
2000.
THE SHARES REPRESENTED BY THIS INSTRUCTION CARD WILL BE VOTED BY THE TRUSTEE AS
DIRECTED BY THE UNDERSIGNED. FIDELITY MANAGEMENT TRUST COMPANY MAKES NO
RECOMMENDATIONS CONCERNING YOUR INSTRUCTIONS. THE BOARD OF DIRECTORS OF THE
NEIMAN MARCUS GROUP, INC. RECOMMENDS A VOTE FOR PROPOSAL 2 AND AGAINST PROPOSAL
3. IF THIS INSTRUCTION CARD IS SIGNED AND RETURNED AND DOES NOT SPECIFY A VOTE
ON ANY PROPOSAL, THE INSTRUCTION CARD WILL BE VOTED IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE BOARD OF DIRECTORS. IF THIS INSTRUCTION CARD IS NOT
RECEIVED BY JANUARY 15, 2001, THE SHARES CREDITED TO YOUR ACCOUNT WILL NOT BE
VOTED.
----------- -----------
SEE REVERSE (SEE REVERSE SIDE TO CAST VOTE) SEE REVERSE
SIDE CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE SIDE
----------- -----------
<PAGE> 37
--------------------------------------------------------------------------------
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
THIS INSTUCTION CARD IS SOLICITED BY THE PLAN TRUSTEE
1. Election of Directors: No Class A Directors
are to be elected.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
--------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of appointment of Deloitte & Touche LLP
as independent auditors of the Company for the [ ] [ ] [ ]
current fiscal year.
--------------------------------------------------------------------------------
-----------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST PROPOSAL 3.
-----------------------------------------------------------------------
FOR AGAINST ABSTAIN
3. Approval of stockholder proposal concerning
cumulative voting. [ ] [ ] [ ]
-----------------------------------------------------------------------
MARK HERE MARK HERE
FOR ADDRESS [ ] IF YOU PLAN [ ]
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
For joint accounts, each owner should sign. Executors, Administrators,
Trustees, etc. should give full title.
Signature: ________________ Date: _____
<PAGE> 38
To: Participants in The Neiman Marcus Group, Inc.
Employee Savings Plan
From: Fidelity Management Trust Company
Trustee of the Employee Savings Plan
Date: November 22, 2000
As a participant in The Neiman Marcus Group, Inc. Employee Savings Plan,
which owns shares of The Neiman Marcus Group, Inc., you are entitled to instruct
the Trustee on how to vote the shares of The Neiman Marcus Group, Inc. Class A
Common Stock in your account on matters scheduled to come before the Annual
Meeting of Stockholders of The Neiman Marcus Group, Inc. to be held on Friday,
January 19, 2001.
A proxy statement, voting instruction card and return envelope are
enclosed. Please complete, date and sign the voting instruction card and mail it
in the return envelope by January 15, 2001 to exercise your right to direct the
trustee with respect to shares of The Neiman Marcus Group, Inc. allocated to
your account.
If you own shares of The Neiman Marcus Group, Inc. outside of the
Employee Savings Plan, you will receive similar materials for those shares in a
separate mailing. Please return both cards in their separate return envelopes if
you wish to fully participate in the matters being submitted to the stockholders
of The Neiman Marcus Group, Inc.
Enclosures
