Neiman Marcus 2004 Annual Report Download - page 17

Lease Terms. The terms of the leases for substantially all of our stores, assuming all outstanding renewal options are exercised, range from 15 to
99 years. The lease on the Bergdorf Goodman Main Store expires in 2050 and the lease on the Bergdorf Goodman Men's Store expires in 2010, with two 10-
year renewal options. Most leases provide for monthly fixed rentals or contingent rentals based upon sales in excess of stated amounts and normally require us
to pay real estate taxes, insurance, common area maintenance costs and other occupancy costs.
For further information on our properties and lease obligations, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and Note 10 of the Notes to Consolidated Financial Statements in Item 15.
ITEM 3. LEGAL PROCEEDINGS
We are currently involved in various legal actions and proceedings that arose in the ordinary course of our business. We believe that any liability arising
as a result of these actions and proceedings will not have a material adverse effect on our financial position, results of operations or cash flows.
On May 4, 2005, a purported class action complaint, NECA-IBEW Pension Fund (The Decatur Plan) v. The Neiman Marcus Group, Inc. et al. (CA
No. 3-05 CV-0898B), was filed by a putative stockholder in federal court in the Northern District of Texas against The Neiman Marcus Group, Inc. and its
directors challenging the proposed merger. An amended complaint was filed on July 25, 2005. The amended complaint alleges a cause of action for breach of
fiduciary duty against us and our directors, claiming, among other things, that the defendants are endeavoring to complete the sale of The Neiman Marcus
Group, Inc. and its assets at a grossly inadequate and unfair price and pursuant to an unfair process that fails to maximize shareholder value. In addition, the
amended complaint alleges that the directors are not independent and breached their fiduciary duties in connection with the approval of the merger by, among
other things, tailoring the transaction to serve the interests of the defendants and the family of Richard A. Smith, chairman of our board of directors and our
largest stockholder, rather than structuring the merger to obtain the highest price for stockholders, depriving public stockholders of the value of certain assets
(including the credit card business and our third quarter 2005 profits), failing to realize the financial benefits from the sale of the credit card business, not
engaging in a fair process of negotiating at arm' s length, including provisions precluding superior competing bids (including a termination fee and no
solicitation provision) and structuring a preferential deal for insiders. The amended complaint further claims that our financial advisor had a conflict of
interest by also acting as a financing source for the merger, and that our proxy statement in respect of the merger allegedly omitted material information
purportedly necessary to ensure a fully informed shareholder vote. The amended complaint currently seeks, among other things, injunctive relief to enjoin the
consummation of the merger, to rescind any actions taken to effect the merger, to direct the defendants to sell or auction The Neiman Marcus Group, Inc. for
the highest possible price, and to impose a constructive trust in favor of plaintiffs upon any benefits improperly received by defendants. The lawsuit is in its
preliminary stage and we expect to file a motion to dismiss the lawsuit in October 2005. While we believe that the lawsuit is without merit and intend to
defend vigorously against it, there can be no assurance that it will not adversely affect our business, including the merger and related transactions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our security holders during the quarter ended July 30, 2005.
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