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Neiman Marcus, Inc.
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 09/28/2006
Filed Period 07/29/2006

Table of contents

  • Page 1
    Neiman Marcus, Inc. 10-K Annual report pursuant to section 13 and 15(d) Filed on 09/28/2006 Filed Period 07/29/2006

  • Page 2
    ... of incorporation or organization) 1618 Main Street Dallas, Texas (Address of principal executive offices) 20-3509435 (I.R.S. Employer Identification No.) 75201 (Zip code) Neiman Marcus, Inc. Registrant's telephone number, including area code: (214) 743-7600 Securities registered pursuant...

  • Page 3
    ...No x The aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates of the registrant is zero. The registrant is a privately held corporation. As of September 25, 2006, the registrant had outstanding 1,012,264 shares of its common stock, par value $0.01 per...

  • Page 4
    ...with Accountants on Accounting and Financial Disclosure Controls and Procedures Other information Directors and Executive Officers of the Registrant Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related...

  • Page 5
    ... a premier luxury retailer in New York City well known for its couture merchandise, opulent shopping environment and landmark Fifth Avenue locations. Bergdorf Goodman features high-end apparel, fashion accessories, shoes, decorative home accessories, precious and designer jewelry, cosmetics and gift...

  • Page 6
    ... 900 shares of its common stock to the Company in exchange for a capital contribution of $900. Holding, the Company and Merger Sub were formed by investment funds affiliated with Texas Pacific Group and Warburg Pincus LLC (the Sponsors) for the purpose of acquiring The Neiman Marcus Group, Inc. (NMG...

  • Page 7
    ... the acquired assets and liabilities at fair value. The purchase accounting adjustments increased the carrying value of our property and equipment and inventory, established intangible assets for our tradenames, customer lists and favorable lease commitments and revalued our long-term benefit plan...

  • Page 8
    ...; higher price points and limited distribution of luxury merchandise, which have generally protected high-end specialty retailing from the growth of discounters and mass merchandisers; aggressive marketing by luxury brands; and consumer trends towards aspirational lifestyles. Customer Service and...

  • Page 9
    ...and in-store promotions at our Neiman Marcus and Bergdorf Goodman stores have featured designers such as Chanel, Giorgio Armani and Oscar de la Renta. Through our print media programs, we mail various publications to our customers communicating upcoming in-store events, new merchandise offerings and...

  • Page 10
    ... of revenues generated by leased departments) by major merchandise category are as follows: Years Ended July 29, 2006 July 30, 2005 July 31, 2004 Women's Apparel Women's Shoes, Handbags and Accessories Cosmetics and Fragrances Men's Apparel and Shoes Designer and Precious Jewelry Home Furnishings...

  • Page 11
    ...with designer resources. Our women's and men's apparel and fashion accessories businesses are especially dependent upon our relationships with these designer resources. We monitor and evaluate the sales and profitability performance of each vendor and adjust our future purchasing decisions from time...

  • Page 12
    ...related primarily to the construction of new stores in San Antonio, Boca Raton and Charlotte, as well as a store in Austin to be opened in fiscal year 2007; the renovation and expansion of our main Bergdorf Goodman store in New York City and Neiman Marcus stores in San Francisco, Newport Beach, Las...

  • Page 13
    ...from regional and local high-end luxury retailers through our diverse product selection, strong national brand, loyalty programs, customer service, prime shopping locations and strong vendor relationships that allow us to offer the top merchandise from each vendor. Vendor-owned proprietary boutiques...

  • Page 14
    ...% interest in Kate Spade LLC, which designs and markets high-end designer handbags and accessories. A minority investor owns the remaining 44% interest. Our investment in and relationship with Kate Spade LLC is governed by an operating agreement that provides for an orderly transition process in the...

  • Page 15
    ... used for letters of credit. Effective December 6, 2005, NMG entered into floating to fixed interest rate swap agreements for an aggregate notional amount of $1,000.0 million to limit its exposure to interest rate increases related to a portion of its floating rate indebtedness. To service NMG...

  • Page 16
    ... terms are defined in the credit agreement for the senior secured asset-based revolving credit facility) is at least 1.1 to 1.0. Our ability to meet this financial ratio may be affected by events beyond our control, and we cannot assure you that we will meet this ratio. NMG's inability to generate...

  • Page 17
    ... specialty apparel stores and direct marketing firms. We compete for customers principally on the basis of quality and fashion, customer service, value, assortment and presentation of merchandise, marketing and customer loyalty programs and, in the case of Neiman Marcus and Bergdorf Goodman, store...

  • Page 18
    ... expansion strategy, we expect that planned new stores will add over 660,000 square feet of new store space over approximately the next four fiscal years, representing an increase of over 12% above the current aggregate square footage of our full-line Neiman Marcus and Bergdorf Goodman stores, and...

  • Page 19
    ... customers and remain competitive with loyalty programs offered by other high-end specialty retailers. Given that approximately 46% of our revenues at Neiman Marcus stores in calendar year 2005 were generated by our InCircle loyalty program members, our failure to continue to provide quality service...

  • Page 20
    ... marks, including the "Neiman Marcus," "Bergdorf Goodman" and "Kate Spade" marks. Our trademarks and service marks are registered in the United States and in various foreign countries, primarily in Europe. The laws of some foreign countries do not protect proprietary rights to the same extent as...

  • Page 21
    ...and update the information technology systems supporting our online operations, sales operations or inventory control could prevent our customers from purchasing merchandise on our websites or prevent us from processing and delivering merchandise, which could adversely affect our business. Delays in...

  • Page 22
    ...for Neiman Marcus, Bergdorf Goodman and Direct Marketing are located in Dallas, Texas; New York, New York; and Irving, Texas, respectively. Properties that we use in our operations include Neiman Marcus stores, Bergdorf Goodman stores, clearance centers and distribution support and office facilities...

  • Page 23
    (4) * ** Owned. Mortgaged to secure our senior secured credit facilities and the 2028 Debentures. Expected to be mortgaged to secure our senior secured credit facilities and the 2028 Debentures. 19

  • Page 24
    ... is located. The Longview facility is the principal merchandise processing and distribution facility for Neiman Marcus stores. We currently utilize a regional distribution facility in Totowa, New Jersey and five regional service centers in New York, Florida, Illinois, Texas and California. We...

  • Page 25
    ... of these actions and proceedings will not have a material adverse effect on our financial position, results of operations or cash flows. 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 29, 2006. 21

  • Page 26
    ... the related Notes thereto) contained in Item 15 and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7. We derived the selected financial data as of July 29, 2006 and July 30, 2005 and for the forty-three weeks ended...

  • Page 27
    ... to the disposition of Chef's Catalog and a $6.2 million pretax gain related to the sale of our credit card portfolio. For fiscal year 2005, net earnings reflect tax benefits aggregating $7.6 million resulting from favorable settlements associated with previous state tax filings and reductions in...

  • Page 28
    ...'s Catalog (prior to its disposition in November 2004). We also own a 56% interest in Kate Spade LLC, which designs and markets high-end designer handbags and accessories. Neiman Marcus, Inc. (formerly Newton Acquisition, Inc.) acquired The Neiman Marcus Group, Inc. (NMG) on October 6, 2005 through...

  • Page 29
    ...; changes in the level of full-price sales; changes in the level of promotional events conducted by our Specialty Retail stores; our ability to successfully implement our store expansion and remodeling strategies; the rate of growth in internet sales by our Direct Marketing operation; and general...

  • Page 30
    ... on the level of full-price sales; our ability to order an appropriate amount of merchandise to match customer demand and the related impact on the level of net markdowns incurred; factors affecting revenues generally; changes in occupancy costs primarily associated with the opening of new stores or...

  • Page 31
    ... this alliance, HSBC offers credit card and non-card payment plans bearing our brands and we receive ongoing payments from HSBC based on net credit card sales and compensation for marketing and servicing activities (HSBC Program Income). We recognize HSBC Program Income when earned. Prior to fiscal...

  • Page 32
    ...store marketing activities designed to stimulate customer buying, a lower level of markdowns and higher margins are again characteristic of this quarter. Revenues are generally the lowest in the fourth fiscal quarter with a focus on promotional activities offering Spring season goods to the customer...

  • Page 33
    ...'s apparel, men's apparel and shoes are typically ordered six to nine months in advance of the products being offered for sale while handbags, jewelry and other categories are typically ordered three to six months in advance. As a result, inherent in the successful execution of our business plans is...

  • Page 34
    ... on Credit Card Sale Impairment and other charges Total OPERATING PROFIT MARGIN Specialty Retail stores Direct Marketing Total CHANGE IN COMPARABLE REVENUES(2) Specialty Retail stores Direct Marketing Total SALES PER SQUARE FOOT Specialty Retail stores STORE COUNT Neiman Marcus and Bergdorf Goodman...

  • Page 35
    ...774.8 million in fiscal year 2005, reflecting increases in comparable revenues, revenues from new stores and higher internet sales. Revenues increased in fiscal year 2006 compared to fiscal year 2005 at all our operating companies, except for Kate Spade. Comparable revenues for fiscal year 2006 were...

  • Page 36
    ... with the opening of our San Antonio store in September 2005 and our Boca Raton store in November 2005 by approximately 0.1% of revenues. Income from credit card operations. We received HSBC Program Income of $57.2 million, or 1.4% of revenues, in fiscal year 2006 compared to net finance charge...

  • Page 37
    ...due to the sale of our credit card operations to HSBC in July 2005, 2) higher preopening costs and 3) higher depreciation charges as a result of higher levels of capital expenditures for new stores and store remodels in recent years. Operating earnings for Direct Marketing increased to $98.2 million...

  • Page 38
    ... level of consumer spending, in general, with a higher increase coming from the affluent luxury customers we serve. In addition, we believe the increases in our comparable revenues were driven by sales events conducted by our Specialty Retail stores and by the growth of internet sales for Direct...

  • Page 39
    .... Gain on Credit Card Sale. On July 7, 2005, HSBC purchased our approximately three million private label Neiman Marcus and Bergdorf Goodman credit card accounts and related assets, as well as the outstanding balances associated with such accounts in connection with the Credit Card Sale. The total...

  • Page 40
    ...we also recognized a tax benefit of $7.5 million related to favorable settlements associated with previous state tax filings. Excluding this benefit, our effective tax rate was 39.0% for fiscal year 2004. Inflation and Deflation We believe changes in revenues and net earnings that have resulted from...

  • Page 41
    ... by a number of factors, including revenues, working capital levels, vendor terms, the level of capital expenditures, cash requirements related to financing instruments and debt service obligations following the Transactions, Pension Plan funding obligations and our tax payment obligations, among...

  • Page 42
    ... year 2006 related to the construction of new stores in San Antonio, Boca Raton, Charlotte and Austin and the remodels of our San Francisco, Houston, Beverly Hills and Bergdorf Goodman stores. We opened our San Antonio store in September 2005, our Boca Raton store in November 2005 and our Charlotte...

  • Page 43
    ... other secured public debt obligations without requiring the preparation and filing of separate financial statements of such subsidiary in accordance with applicable SEC rules. As a result, the collateral under NMG's Asset-Based Revolving Credit Facility will include shares of capital stock or other...

  • Page 44
    ... pursuant to the annual excess cash flow requirements. If a change of control (as defined in the credit agreement) occurs, NMG will be required to offer to prepay all outstanding term loans, at a prepayment price equal to 101% of the principal amount to be prepaid, plus accrued and unpaid interest...

  • Page 45
    .... Stock of Kate Spade LLC and its assets also will not constitute collateral under NMG's Senior Secured Term Loan Facility. The credit agreement governing the Senior Secured Term Loan Facility contains a number of negative covenants that are substantially similar to those governing the Senior Notes...

  • Page 46
    ... of NMG or any direct or indirect parent of NMG to the extent such net proceeds are contributed to NMG. At any time prior to October 15, 2010, NMG also may redeem all or a part of the Senior Notes at a redemption price equal to 100% of the principal amount of Senior Notes redeemed plus an applicable...

  • Page 47
    ... Rate Swaps. NMG uses derivative financial instruments to help manage its interest rate risk. Effective December 6, 2005, NMG entered into floating to fixed interest rate swap agreements for an aggregate notional amount of $1,000.0 million to limit its exposure to interest rate increases related...

  • Page 48
    ... other employee benefit plans and arrangements, are not currently estimable. (5) In the normal course of our business, we issue purchase orders to vendors/suppliers for merchandise. Our purchase orders are not unconditional commitments but, rather represent executory contracts requiring performance...

  • Page 49
    ... interest in Kate Spade LLC, which designs and markets high-end designer handbags and accessories. A minority investor owns the remaining 44% interest. Our investment in and relationship with Kate Spade LLC are governed by an operating agreement that provides for an orderly transition process in the...

  • Page 50
    ... to provide credit to our customers; Merchandise Procurement and Supply Chain Considerations changes in our relationships with designers, vendors and other sources of merchandise, including adverse changes in their financial viability; delays in receipt of merchandise ordered due to work stoppages...

  • Page 51
    ... under our senior secured credit facilities may place on our ability to respond to changes in our business or to take certain actions. Other Factors impact of funding requirements related to our noncontributory defined benefit pension plan; the design and implementation of new information systems...

  • Page 52
    ..., HSBC offers credit card and non-card payment plans bearing our brands and we receive ongoing payments from HSBC based on credit card sales and compensation for marketing and servicing activities (HSBC Program Income). We recognize HSBC Program Income when earned. Prior to the Credit Card Sale...

  • Page 53
    ... Sold Interests arising from the monthly transfers of new credit card receivables to the Trust. Under the Credit Card Facility, we serviced the credit card receivables for a contractually defined servicing fee. We earned servicing fees of $5.4 million in fiscal year 2005 and $6.3 million in fiscal...

  • Page 54
    ... points for gifts. Generally, points earned in a given year must be redeemed no later than ninety days subsequent to the end of the annual program period. The estimates of the costs associated with the loyalty programs require us to make assumptions related to customer purchasing levels, redemption...

  • Page 55
    ... increase annual pension expense by $0.3 million. Self-insurance and Other Employee Benefit Reserves. We use estimates in the determination of the required accruals for general liability, workers' compensation and health insurance as well as short-term disability, supplemental executive retirement...

  • Page 56
    ...18.7 million. NMG uses derivative financial instruments to help manage its interest rate risk. Effective December 6, 2005, NMG entered into floating to fixed interest rate swap agreements for an aggregate notional amount of $1,000.0 million to limit its exposure to interest rate increases related to...

  • Page 57
    ... in Internal Control over Financial Reporting In the ordinary course of business, we routinely enhance our information systems by either upgrading our current systems or implementing new systems. No change occurred in our internal controls over financial reporting during the quarter ended July 29...

  • Page 58
    ..., Director Senior Vice President and Chief Financial Officer Senior Vice President and General Counsel Senior Vice President, Human Resources Senior Vice President, Strategy, Business Development and Multi-Channel Marketing President and Chief Executive Officer of Neiman Marcus Stores President and...

  • Page 59
    ...Officer of Neiman Marcus Stores from May 1994 until February 1998. He served as Chairman and Chief Executive Officer of Bergdorf Goodman from 1990 until 1994. Mr. Tansky also serves on the board of directors of International Flavors and Fragrances Inc. James E. Skinner has been Senior Vice President...

  • Page 60
    ...Stock at the end of each fiscal quarter. Dividend equivalents in the form of additional units representing Class A Common Stock were credited to each independent director's account on each dividend payment date equal to (i) the per-share cash dividend divided by the average of the high and low price...

  • Page 61
    ... receives no compensation for his service as a Board member. We offer to each of our directors a discount at our stores at the same rate that is available to employees. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended, required...

  • Page 62
    ... into shares of the Company's stock. Options awarded the Named Executive Officers in fiscal year 2006 were awarded under the Neiman Marcus, Inc. Management Equity Incentive Plan. The amounts reported include the cost of matching contributions under the Key Employee Deferred Compensation Plan, which...

  • Page 63
    ...changed since the stock options were granted, therefore the value of any unexercised stock options is shown as zero. (2) PENSION PLAN TABLE We maintain a funded, qualified pension plan known as The Neiman Marcus Group, Inc. Retirement Plan (the "Retirement Plan"). Most non-union employees over age...

  • Page 64
    ... 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 2006 who elects to receive his...

  • Page 65
    ... on the six-month anniversary of the subsequent change of control and receive severance under his agreements. The employment agreement with Ms. Katz provides that she will act as Chief Executive Officer and President of Neiman Marcus Stores, a division of The Neiman Marcus Group, Inc., until October...

  • Page 66
    ... the payments payable to the Named Executive Officer will be reduced so that no excise tax is imposed. As a condition to receiving any payments or benefits under the agreements, the officers must execute a release of claims in respect of their employment with us. In addition to the change of control...

  • Page 67
    ... stock, (ii) each of our directors, (iii) each of Named Executive Officers and (iv) all directors and executive officers as a group. Number of Common Shares Beneficially Owned Name Percent of Class (1) Newton Holding, LLC 301 Commerce Street Suite 3300 Fort Worth, Texas 76102 Affiliates of Texas...

  • Page 68
    ... James Coulter(5) 345 California Street, Suite 3300 San Francisco, CA 94104 Sidney Lapidus(4) 466 Lexington Avenue New York, NY 10017 Kewsong Lee(4) 466 Lexington Avenue New York, NY 10017 Burton M. Tansky(6) 1618 Main Street Dallas, TX 75201 Karen W. Katz(7) 1618 Main Street Dallas, TX 75201 James...

  • Page 69
    Carrie Wheeler(5) 345 California Street Suite 3300 San Francisco, CA 94104 All current executive officers and directors as a group (17 persons) * Represents less than 1% of the class. 64 - 1,026,985 * 99.77%

  • Page 70
    ... agreement, to have shared voting or dispositive power. David Bonderman, James G. Coulter and William S. Price, III are directors, officers and sole shareholders of each of i) TPG Advisors III, Inc., which is the general partner of TPG Partners III, which in turn is the managing member of TPG...

  • Page 71
    ... nominated by investment funds that are affiliates of Credit Suisse Securities (USA) LLC and Leonard Green Partners) has one vote. Certain major decisions of the board of directors of Newton Holding, LLC require the approval of each of Texas Pacific Group and Warburg Pincus and certain other...

  • Page 72
    ... of Employment and Change-in-Control Arrangements" for a description of the Employment Agreement with Mr. Tansky. Management Stockholders' Agreement Subject to the Management Stockholders' Agreement, certain members of management, including Burton M. Tansky, Karen W. Katz, James E. Skinner, Brendan...

  • Page 73
    ...annual financial statements for the fiscal years ended July 29, 2006 and July 30, 2005 and for the reviews of the financial statements included in our Quarterly Reports on Form 10-Q were $1,957,000 and $1,346,000, respectively. Audit-Related Fees. The aggregate fees billed for audit-related services...

  • Page 74
    ... reference to The Neiman Marcus Group, Inc.'s Current Report on Form 8-K dated May 4, 2005. Purchase, Sale and Servicing Transfer Agreement dated as of June 8, 2005, among The Neiman Marcus Group, Inc., Bergdorf Goodman, Inc., HSBC Bank Nevada, N.A. and HSBC Finance Corporation, incorporated herein...

  • Page 75
    ... Credit Partners L.P., as co-syndication agents, General Electric Capital Corporation as documentation agent and the lenders thereunder, incorporated herein by reference to The Neiman Marcus Group, Inc.'s Current Report on Form 8-K dated October 12, 2005. Credit Agreement dated as of October 6, 2005...

  • Page 76
    ... Agreement between The Neiman Marcus Group, Inc. and Karen Katz, dated February 1, 2006, effective as of October 6, 2005, incorporated herein by reference to The Neiman Marcus Group, Inc.'s Current Report on Form 8-K dated February 1, 2006. Management Services Agreement, dated as of October 6, 2005...

  • Page 77
    ...Card Program Agreement, dated as of June 8, 2005, by and among The Neiman Marcus Group, Inc., Bergdorf Goodman, Inc., HSBC Bank Nevada, N.A. and Household Corporation, incorporated herein by reference to The Neiman Marcus Group, Inc.'s Current Report on Form 8-K dated June 8, 2005. Form of Servicing...

  • Page 78
    .... (1) The Neiman Marcus Group, Inc. Key Employee Deferred Compensation Plan effective as of January 1, 2006. (1) Computation of Ratio of Earnings to Fixed Charges. (1) The Neiman Marcus Group, Inc. Code of Ethics and Conduct, incorporated herein by reference to the Company's Annual Report on Form 10...

  • Page 79
    ... STATEMENTS Page Management's Report on Internal Control over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Earnings Consolidated Statements of Cash Flows Consolidated Statements of Shareholders' Equity Notes to...

  • Page 80
    ... guidelines which require employees to maintain a high level of ethical standards. In addition, the Audit Committee of the Board of Directors meets periodically with management, the internal auditors and the independent registered public accounting firm to review internal accounting controls, audit...

  • Page 81
    ... PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Neiman Marcus, Inc. Dallas, Texas We have audited the accompanying consolidated balance sheets of Neiman Marcus, Inc. and subsidiaries (the Company) as of July 29, 2006 (Successor Company) and July 30, 2005 (Predecessor Company...

  • Page 82
    NEIMAN MARCUS, INC. CONSOLIDATED BALANCE SHEETS (Successor) (in thousands, except shares) July 29, 2006 (Predecessor) July 30, 2005 ASSETS Current assets: Cash and cash equivalents Accounts receivable, net of allowance Merchandise inventories Deferred income taxes Other current assets Current ...

  • Page 83
    ... paid-in capital Accumulated other comprehensive income (loss) Retained earnings Treasury stock, at cost (768,731 shares at July 30, 2005) Total shareholders' equity Total liabilities and shareholders' equity See Notes to Consolidated Financial Statements. F-4 10 1,405,373 9,829 12,455 - 1,427,667...

  • Page 84
    ... ended July 30, 2005 (in thousands) Nine weeks ended October 1, 2005 Fiscal year Ended July 31, 2004 Revenues Cost of goods sold including buying and occupancy costs (excluding depreciation) Selling, general and administrative expenses (excluding depreciation) Income from credit card operations...

  • Page 85
    ...'s Catalog Gain on Credit Card Sale Net cash received from Credit Card Sale Impairment of intangible assets and other charges Minority interest Other-primarily costs related to defined benefit pension and other long-term benefit plans Changes in operating assets and liabilities: Increase in accounts...

  • Page 86
    ...contribution from Holding Equity contribution from management shareholders Reduction in equity for deemed dividend to management shareholders Additions to property and equipment Borrowings assumed by HSBC in connection with the Credit Card Sale See Notes to Consolidated Financial Statements. F-7 15...

  • Page 87
    ... in fair market value of financial instruments, net of tax ($349) Reclassification of amounts to net earnings, net of tax of ($466) Minimum pension liability, net of tax of $13,755 Other Total comprehensive income BALANCE AT JULY 31, 2004 Issuance of 491 shares for stock based compensation awards...

  • Page 88
    ...) Successor: Equity contributions Carryover basis adjustment Stock based compensation expense Comprehensive income: Net earnings Adjustments for fluctuations in fair market value of financial instruments, net of tax of $6,510 Other Total comprehensive income BALANCE AT JULY 29, 2006 Class Class...

  • Page 89
    ... 900 shares of its common stock to the Company in exchange for a capital contribution of $900. Holding, the Company and Merger Sub were formed by investment funds affiliated with Texas Pacific Group and Warburg Pincus LLC (the Sponsors) for the purpose of acquiring The Neiman Marcus Group, Inc. (NMG...

  • Page 90
    ... payable includes $66.5 million of outstanding checks not yet presented for payment at July 29, 2006 and $45.0 million at July 30, 2005. Accounts Receivable. Accounts receivable primarily consist of credit card receivables. Merchandise Inventories and Cost Of Goods Sold. We utilize the retail...

  • Page 91
    ... our vendors in support of the merchandise we purchase for resale. We receive certain allowances to reimburse us for markdowns taken and/or to support the gross margins earned in connection with the sales of the vendor's merchandise. We recognize these allowances as an increase to gross margin when...

  • Page 92
    ... employee benefit obligations, postretirement health care benefit obligations and the liability for scheduled rent increases. Revenues. Revenues include sales of merchandise and services, net commissions earned from leased departments in our retail stores and delivery and processing revenues related...

  • Page 93
    ..., HSBC offers credit card and non-card payment plans bearing our brands and we receive ongoing payments from HSBC based on credit card sales and compensation for marketing and servicing activities (HSBC Program Income). We recognize HSBC Program Income when earned. Prior to the Credit Card Sale...

  • Page 94
    ...points for gifts. Generally, points earned in a given year must be redeemed no later than 90 days subsequent to the end of the annual program period. The estimates of the costs associated with the loyalty programs require us to make assumptions related to customer purchasing levels, redemption rates...

  • Page 95
    ... volatility Risk-free interest rate Dividend yield 5 25.0% 3.3% 1.0% 5 32.7% 3.1% - The weighted-average fair value of options granted was $14.38 in fiscal year 2005 and $14.79 in fiscal year 2004. The effects on pro forma net earnings of expensing the estimated fair value of stock options are...

  • Page 96
    ... information. As of July 29, 2006, we have recorded purchase accounting adjustments to increase the carrying value of our property and equipment and inventory, to establish intangible assets for our tradenames, customer lists and favorable lease commitments and to revalue our long-term benefit plan...

  • Page 97
    ... real estate credits 9) Increase in long-term benefit obligations, primarily pension obligations 10) Tax impact of purchase accounting adjustments 11) Increase carrying values of assets of Gurwitch Products, L.L.C. Deemed dividend to management shareholders Net assets acquired at fair value Goodwill...

  • Page 98
    ... their affiliates. NOTE 6. CREDIT CARD RECEIVABLES Credit Card Sale. On July 7, 2005, HSBC Bank Nevada, National Association (HSBC) purchased our approximately three million private label Neiman Marcus and Bergdorf Goodman credit card accounts and related assets, as well as the outstanding balances...

  • Page 99
    ... at the contractually-defined rate of one month LIBOR plus 0.27% annually. The distributions to the Class A Certificate holders were payable from the finance charge income generated by the credit card receivables held by the Trust. In order to maintain the committed level of securitized assets, cash...

  • Page 100
    ... of receivables Delinquent principal over 90 days Annual credit losses (net of recoveries) $ $ 527.7 1.8 % 14.3 A summary of the income earned in connection with our proprietary credit card program is as follows: (Successor) Forty-three weeks ended July 29, 2006 Nine weeks ended October 1, 2005...

  • Page 101
    ... are as follows: (Successor) July 29, 2006 (Predecessor) July 30, 2005 Accrued salaries and related liabilities Amounts due customers Self-insurance reserves Sales returns reserves Interest payable Income taxes payable Sales tax Loyalty program liability Other Total $ $ 65,853 48,045 45,505 43...

  • Page 102
    ..., subject to a borrowing base equal to at any time the lesser of 80% of eligible inventory (valued at the lower of cost or market value) and 85% of net orderly liquidation value of the eligible inventory, less certain reserves. The Asset-Based Revolving Credit Facility includes borrowing capacity...

  • Page 103
    ... obligations without requiring the preparation and filing of separate financial statements of such subsidiary in accordance with applicable Securities and Exchange Commission's rules. As a result, the collateral under NMG's AssetBased Revolving Credit Facility will include shares of capital stock or...

  • Page 104
    ... a change of control (as defined in the credit agreement) occurs, NMG will be required to offer to prepay all outstanding term loans, at a prepayment price equal to 101% of the principal amount to be prepaid, plus accrued and unpaid interest to the date of prepayment. The Company also must offer to...

  • Page 105
    .... The Company is not required to make any mandatory redemption or sinking fund payments with respect to the Senior Notes, but under certain circumstances, NMG may be required to offer to purchase Senior Notes as described below. The Company may from time to time acquire Senior Notes by means...

  • Page 106
    ... of NMG or any direct or indirect parent of NMG to the extent such net proceeds are contributed to NMG. At any time prior to October 15, 2010, NMG also may redeem all or a part of the Senior Notes at a redemption price equal to 100% of the principal amount of Senior Notes redeemed plus an applicable...

  • Page 107
    .... The Company uses derivative financial instruments to help manage its interest rate risk. Effective December 6, 2005, NMG entered into floating to fixed interest rate swap agreements for an aggregate notional amount of $1,000.0 million to limit its exposure to interest rate increases related to...

  • Page 108
    ...the fifth anniversary of the date of grant or (iii) the occurrence of a change in control; provided that in the event the Sponsors cause the sale of shares of the Company to an unaffiliated entity, the exercise price will cease to accrete at the time of the sale with respect to a pro rata portion of...

  • Page 109
    ... the Predecessor Board of Directors authorized various stock repurchase programs and increases in the number of shares subject to repurchase. The Predecessor repurchased 58,504 shares at an average price of $52.74 in fiscal year 2005 and repurchased 175,600 shares at an average purchase price of $40...

  • Page 110
    ...tax benefit of $7.5 million related to favorable settlements associated with previous state tax filings. Excluding this benefit, our effective tax rate was 39.0% for 2004. The Company's federal tax returns for fiscal years 2004 and 2003 are currently under examination by the Internal Revenue Service...

  • Page 111
    ... additional benefits and a profit sharing and a defined contribution retirement plan for employees of Kate Spade LLC. Our aggregate expense related to these plans were approximately $9.1 million for the forty-three weeks ended July 29, 2006, $1.8 million for the nine weeks ended October 1, 2005, $10...

  • Page 112
    ...2006 Nine weeks ended October 1, 2005 (Predecessor) Fiscal year ended July 30, 2005 Fiscal year ended July 31, 2004 (in thousands) Pension Plan: Service cost Interest cost Expected return on plan assets Net amortization of losses and prior service costs Pension Plan expense SERP Plan: Service cost...

  • Page 113
    ...plans include the discount rate used to calculate the actuarial present value of benefit obligations to be paid in the future, the expected long-term rate of return on assets held by the Pension Plan, the average rate of compensation increase by Pension Plan and SERP Plan participants and the health...

  • Page 114

  • Page 115
    ...Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003," we revalued our projected benefit obligation as of January 31, 2005 1) to incorporate the benefit associated with the federal subsidy we expect to receive and 2) to reduce the discount rate...

  • Page 116
    ... payments. Changes in the assets held by the Pension Plan in fiscal years 2006 and 2005 are as follows: Fiscal years (in thousands) 2006 (Successor) 2005 (Predecessor) Fair value of assets at beginning of year Actual return on assets Company contributions Benefits paid Fair value of assets at end...

  • Page 117
    F-36

  • Page 118
    ... 29, 2006 relates primarily to the change in discount rate from the date of the Acquisition to the end of the year. In addition, we had cumulative unrecognized gains for the SERP Plan and Postretirement Plan aggregating $4.0 million at July 29, 2006. NOTE 13. LOSS ON DISPOSITION OF CHEF'S CATALOG In...

  • Page 119
    ... public offering, as defined in the Cash Incentive Plan, provided that the internal rate of return to the Sponsors is positive. Investment in Kate Spade LLC. We currently own a 56% interest in Kate Spade LLC, which designs and markets high-end designer handbags and accessories. A minority investor...

  • Page 120
    ... under the Neiman Marcus, Bergdorf Goodman and Horchow brand names. Other includes the operations of Kate Spade LLC. Both the Specialty Retail stores and Direct Marketing segments, as well as Kate Spade LLC, derive their revenues from the sales of high-end fashion apparel, accessories, cosmetics and...

  • Page 121
    ... Nine weeks ended October 1, 2005 (Predecessor) Fiscal year ended July 30, 2005 Fiscal year ended July 31, 2004 REVENUES Specialty Retail stores Direct Marketing Other Total OPERATING EARNINGS Specialty Retail stores Direct Marketing Other Subtotal Corporate expenses Amortization of customer lists...

  • Page 122
    ...operations of its Bergdorf Goodman stores and NM Nevada Trust which holds legal title to certain real property and intangible assets used by the Company in conducting its operations). Non-guarantor subsidiaries consist principally of Kate Spade LLC and Neiman Marcus Funding Corporation through which...

  • Page 123
    July 30, 2005 (Predecessor) Guarantor Subsidiaries NonGuarantor Subsidiaries (in thousands) NMG Eliminations Consolida ASSETS Current assets: Cash and cash equivalents Accounts receivable, net of allowance Merchandise inventories Other current assets Current assets of discontinued operation ...

  • Page 124
    ... thousands) Company NMG Eliminations Consoli Revenues Cost of goods sold including buying and occupancy costs (excluding depreciation) Selling, general and administrative expenses (excluding depreciation) Income from credit card operations Depreciation expense Amortization of customer lists and...

  • Page 125
    (Loss) earnings from discontinued operation, net of taxes Net earnings (loss) - $ 44,154 $ - 66,128 $ (552 ) (1,440 ) $ 206 (64,688 ) $ (346 ) 44,154 F-43

  • Page 126
    ... Revenues Cost of goods sold including buying and occupancy costs (excluding depreciation) Selling, general and administrative expenses (excluding depreciation) Income from credit card operations Depreciation expense Loss on disposition of Chef's Catalog Gain on credit card sale Operating earnings...

  • Page 127

  • Page 128
    ...in carrying value of inventory Stock-based compensation charges Deferred income taxes Minority interest Other, primarily costs related to defined benefit pension and other long-term benefit plans Intercompany royalty income payable (receivable) Equity in earnings of subsidiaries Changes in operating...

  • Page 129
    (Decrease) increase during the period Beginning balance Ending balance $ - - - $ (619,437 ) 841,745 222,308 $ 64 922 986 $ 241 1,228 1,469 $ - - - $ (61 84 22 F-45

  • Page 130
    ...earnings to net cash provided by operating activities: Depreciation Stock-based compensation charges Deferred income taxes Minority interest Other, primarily costs related to defined benefit pension and other long-term benefit plans Intercompany royalty income payable (receivable) Equity in earnings...

  • Page 131
    ... of Chef's catalog Gain on Credit Card Sale Net cash received from Credit Card Sale Minority Interest Other, primarily costs related to defined benefit pension and other long-term benefit plans Intercompany royalty income payable (receivable) Equity in earnings of subsidiaries Changes in operating...

  • Page 132
    ... taxes Impairment of intangible assets and other charges Minority Interest Other, primarily costs related to defined benefit pension and other long-term benefit plans Intercompany royalty income payable (receivable) Equity in earnings of subsidiaries Changes in operating assets and liabilities, net...

  • Page 133
    ... Bergdorf Goodman stores, NM Nevada Trust which holds legal title to certain real property and intangible assets used by NMG in conducting its operations, Kate Spade LLC and Neiman Marcus Funding Corporation through which NMG previously conducted its credit card operations prior to the Credit Card...

  • Page 134
    (in thousands) NMG July 30, 2005 (Predecessor) NonGuarantor Subsidiaries Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents Accounts receivable, net of allowance Merchandise inventories Other current assets Current assets of discontinued operation Total current assets ...

  • Page 135
    ...Company Forty-three weeks ended July 29, 2006 (Successor) NonGuarantors NMG Subsidiaries Eliminations Consolidat Revenues Cost of goods sold including buying and occupancy costs (excluding depreciation) Selling, general and administrative expenses (excluding depreciation) Income from credit card...

  • Page 136
    ... Revenues Cost of goods sold including buying and occupancy costs (excluding depreciation) Selling, general and administrative expenses (excluding depreciation) Income from credit card operations Depreciation expense Loss on disposition of Chef's catalog Gain on Credit Card Sale Operating earnings...

  • Page 137
    ...in carrying value of inventory Stock-based compensation charges Deferred income taxes Minority interest Other, primarily costs related to defined benefit pension and other long-term benefit plans Intercompany royalty income payable (receivable) Equity in earnings of subsidiaries Changes in operating...

  • Page 138
    ...earnings to net cash provided by operating activities: Depreciation Stock-based compensation charges Deferred income taxes Minority interest Other, primarily costs related to defined benefit pension and other long-term benefit plans Intercompany royalty income payable (receivable) Equity in earnings...

  • Page 139
    ... of Chef's catalog Deferred income taxes Gain on Credit Card Sale Net cash received from Credit Card Sale Minority Interest Other, primarily costs related to defined benefit pension and other long-term benefit plans Intercompany royalty income payable (receivable) Equity in earnings of subsidiaries...

  • Page 140
    ... taxes Impairment of intangible assets and other charges Minority Interest Other, primarily costs related to defined benefit pension and other long-term benefit plans Intercompany royalty income payable (receivable) Equity in earnings of subsidiaries Changes in operating assets and liabilities, net...

  • Page 141
    ... of Chef's Catalog. (5) Net earnings for the fourth quarter of fiscal year 2005 includes a pretax gain of $6.2 million related to the sale of our credit card portfolio, tax benefits aggregating $7.6 million related to favorable settlements associated with previous state tax filings and reductions...

  • Page 142
    ..., thereunto duly authorized. NEIMAN MARCUS, INC. By: /s/ NELSON A. BANGS Nelson A. Bangs Senior Vice President and General Counsel Dated: September 27, 2006 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of...

  • Page 143
    ...)(A) $ Gross margin on actual sales returns, net of commissions. Fiscal years 2005 and 2004 have been adjusted to exclude the operations of Gurwitch Products, L.L.C. Reserve eliminated in connection with the sale of our proprietary credit card receivables. Write-off of uncollectible accounts net of...

  • Page 144
    ... forth in the Management Stockholders' Agreement. (e) "Committee" means the Board of Directors of the Company or any committee the Board of Directors may designate from among its members to administer this Plan. (f) "Common Stock" means the common stock of the Company, par value US $0.01 per share...

  • Page 145
    ...the Company is positive. The Majority Stockholder's internal rate of return shall be calculated in the case of an Initial Public Offering as if the Majority Stockholder sold all of its direct and indirect equity interests in the Company at a per share price equal to the Initial Public Offering price...

  • Page 146
    ...the value of its equity interests implied by the transaction giving rise to the Change of Control, and in each case, taking into account all investments made directly or indirectly in the Company, all management and transaction fees paid by the Company or its subsidiaries to the Majority Stockholder...

  • Page 147
    (g) Governing Law. This Plan and the rights of all persons under this Plan shall be construed and administered in accordance with the laws of the State of Delaware, without regard to its conflict of law principles. (h) Effective Date. This Plan is effective as of November 29, 2005. 4

  • Page 148
    ... to the Management Stockholder, the Management Stockholder is required to execute this Agreement; and WHEREAS, the Management Stockholder, the Majority Stockholder and the Company desire to enter into this Agreement and to have this Agreement apply to any shares of Common Stock acquired by the...

  • Page 149
    ... the Agreement and Plan of Merger by and among the Company, Newton Acquisition Merger Sub, Inc. and The Neiman Marcus Group, Inc, dated as of May 1, 2005. (h) "Employment" shall mean employment with the Company or any Affiliate and shall include the provision of services as a director or consultant...

  • Page 150
    ... opportunity or benefits that applies to all employees of the Company or its Affiliates otherwise eligible to participate in the affected plan, or (iii) a relocation of a Management Stockholder's primary work location more than 50 miles from the Management Stockholder's work location immediately...

  • Page 151
    ...is exercised at a per Share price equal to the Fair Market Value of a share of Common Stock determined as of the date such right is exercised. The Company (or its designated assignee) shall exercise such right by delivering to the Management Stockholder or Transferee, as applicable, a written notice...

  • Page 152
    ... or event of default under, any Financing Agreement, and such payment shall equal the amount that would have been paid to the Management Stockholder or Transferee if no delay had occurred plus interest for the Delay Period, calculated at an annual rate equal to the average annual prime rate charged...

  • Page 153
    ... Board receives the advice of counsel selected by the Company and reasonably acceptable to the Management Stockholder or any Transferee that the inclusion of the call right or the put right described in this Section 3 would result in the Option or Shares becoming subject to Section 409A of the Code...

  • Page 154
    ...terms and conditions (including price per share of Common Stock) as the Majority Stockholder. In the event that the transferee does not wish to acquire all of the Shares offered by the Management Stockholder or Transferee, the number of Shares of Common Stock to be purchased by such transferee shall...

  • Page 155
    .... If the managing underwriter shall inform the Company in writing that the number of shares of Common Stock requested to be included in such registration exceeds the number which can be sold in (or during the time of) such offering within a price range acceptable to the Majority Stockholder, then...

  • Page 156
    ... records of the Company or its Affiliate; With a copy to: Cleary Gottlieb Steen & Hamilton LLP One Liberty Plaza New York, NY 10006 Attention: Robert J. Raymond If to the Company: Newton Acquisition, Inc. 301 Commerce Street, Suite 3300 Fort Worth, TX 76102 Attention: General Counsel With a copy to...

  • Page 157
    ... & Hamilton LLP One Liberty Plaza New York, NY 10006 Attention: Robert J. Raymond If to the Management Stockholder, to its most recent address shown on records of the Company or its Affiliate; With a copy to: Morgan, Lewis & Bockius LLP 101 Park Avenue New York, NY 10178 Attention: Gary Rothstein...

  • Page 158
    NEWTON HOLDING, LLC By: /s/ David A. Spuria Name: David A. Spuria Title: Vice President & Secretary TPG NEWTON III LLC By: TPG Partners III, L.P., its Managing Member By: TPG GenPar III, L.P., its General Partner By: TPG Advisors III, Inc., its General Partner By: /s/ David A. Spuria Name David A. ...

  • Page 159
    ... Pincus Partners, LLC, its General Partner By: Warburg Pincus & Co., its Managing Member By: /s/ Kewsong Lee Name: Kewsong Lee Title: Managing Director WARBURG PINCUS PRIVATE EQUITY IX, L.P. By: Warburg Pincus IX LLC, its General Partner By: /s/ Kewsong Lee Name: Kewsong Lee Title: Managing Director

  • Page 160
    ...MANAGEMENT STOCKHOLDERS By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name... Hussey /s/ Jonathan Joselove Jonathan Joselove /s/ Karen Katz Karen Katz /s/ Lisa M. Kazor Lisa M. Kazor ...

  • Page 161
    By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: /s/ Gregory G. Shields Gregory G. Shields /s/ Stacie Shirley Stacie Shirley /s/ James E. Skinner James E. Skinner /s/ Margaret E. Spaniolo Margaret E. Spaniolo /s/ Thomas P. Stangle Thomas P. Stangle /s/ T. ...

  • Page 162
    EXHIBIT 10.35 THE NEIMAN MARCUS GROUP, INC. KEY EMPLOYEE DEFERRED COMPENSATION PLAN (Effective January 1, 2006)

  • Page 163
    ...2.13 2.14 2.15 2.16 2.17 2.18 2.19 2.20 2.21 2.22 2.23 2.24 "Account" "Affiliate" "Base Pay" "Bonus" "Change in Control" "Code" "Committee" "Company" "Compensation" "Discretionary Credit" "Effective Date" "Elective Deferral" "Eligible Employee" "Employer" "ERISA" "Matching Deferral" "Maximum Savings...

  • Page 164
    ... Termination of Plan Existing Rights ARTICLE 9. MISCELLANEOUS 9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8 9.9 No Funding; Source of Payments Nonassignability; Domestic Relations Order Limitation of Participants' Rights Participants Bound Receipt and Release Governing Law No Guarantee of Tax Consequences...

  • Page 165
    ... plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" within the meaning of Sections 201(2) and 301(a)(3) of ERISA and is intended to comply with the requirements of Code...

  • Page 166
    ... to any Person or group of related persons for purposes of Section 13(d) of the Securities Exchange Act of 1934 (a "Group"), together with any CIC Affiliates thereof other than to a Majority Stockholder; (ii) the approval by the holders of the outstanding voting power of the Company of any plan or...

  • Page 167
    ...under direct or indirect common control with such entity. (b) "Common Stock" shall mean the common stock of the Company, $0.01 par value per share. (c) "Majority Stockholder" shall mean , collectively or individually as the context requires, Newton Holding, LLC, TPG Newton III, LLC, TPG Partners IV...

  • Page 168
    ... The Neiman Marcus Group, Inc., a Delaware corporation, and any successor, including a successor to all or substantially all of the Company's assets or business which assumes the obligations of the Company. 2.9 2.10 Section 4.3. 2.11 2.12 "Compensation" means Base Pay and any Bonus payable by an...

  • Page 169
    ... shorter period of service as may be specified by the Chief Executive Officer of The Neiman Marcus Group, Inc. in such officer's sole discretion; (b) had in effect on August 1 of the preceding calendar year (or, if later, on the employee's date of hire) an annual rate of Base Pay of at least $300...

  • Page 170
    ...ii) attained age 55 and reached the fifteenth anniversary of the date he or she first performed an hour of service (as defined in Section 2.24 below). 2.23 "Savings Plan" means The Neiman Marcus Group, Inc. Employee Savings Plan, as amended from time to time. 2.24 "Year of Service" means completion...

  • Page 171
    ... her Account. ARTICLE 4. DEFERRALS AND CREDITS 4.1 Elective Deferrals. (a) Base Pay. An individual who is or will be an Eligible Employee as of any January 1 may elect to defer a designated whole percentage, not to exceed 15 percent, of all Base Pay that is payable to the individual for services to...

  • Page 172
    ... for any fiscal year ending more than six months subsequent to the date of such revocation, modified election, or new election. (c) The provisions of paragraphs (a) and (b) to the contrary notwithstanding, in the event that an employee receives a hardship distribution from the Savings Plan at a 8

  • Page 173
    ...hardship distribution from the Savings Plan shall be revoked at the time the employee receives such hardship distribution from the Savings Plan and such employee shall not be eligible to make a new election to defer a Bonus for any fiscal year ending less than six months after the date such hardship...

  • Page 174
    ... Section 4.1 and 4.2, with the approval of the Board of Directors of the Company, at any time during a Plan Year an Employer may make a Discretionary Credit to the Account of any Eligible Employee in the employ of such Employer. Any such Discretionary Credit shall be made solely in the discretion of...

  • Page 175
    ...at an annual rate equal to the average prime interest rate published in the Eastern Edition of The Wall Street Journal on the last business day of the preceding calendar quarter (or, if two or more such rates are published, the average of such rates), increased by two percentage points. 5.3 Payments...

  • Page 176
    ...or before the deadline applicable to such initial election to begin making Elective Deferrals to the Plan, elect the time and form of payment from among the options set forth in this Section for the amounts credited to his or her Account. Each other individual who is an Eligible Employee but who has...

  • Page 177
    ... lump sum payment; or (ii) annual installments to be paid in the same calendar quarter each year over a period elected by the Participant up to ten (10) years, the amount of each installment to equal the balance of his or her Account immediately prior to the installment divided by the number of...

  • Page 178
    ...Change in Control. In the event of a Change in Control on or after January 1, 2006, all amounts credited to a Participant's Account shall be distributed in a single lump sum payment at the time of such Change in Control or within five business days thereafter. Notwithstanding the preceding, a Change...

  • Page 179
    ...defined in Code section 152(a)), loss of the Participant's property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance), or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of...

  • Page 180
    ... time at which his or her Account will be paid or begin to be paid, or the form of such payment, or both, after commencing participation in the Plan provided that (i) no such change shall be effective until 12 months after the date such modified election is made, (ii) no change related to a payment...

  • Page 181
    ... lump sum in the calendar quarter following the calendar quarter in which such six-month period ends. 6.9 409A Income Inclusion. Any provision of the Plan to the contrary notwithstanding, although the Plan is designed to comply in form and operation with the requirements of Code Section 409A, in the...

  • Page 182
    ... with the terms of the Plan. Any act which this Plan authorizes or requires the Committee to do may be done by a majority of the members of the Committee acting hereunder; and the action of such majority of the members of the Committee, expressed from time to time by a vote at a meeting or...

  • Page 183
    ..., the Employers shall supply full and timely information to the Committee on all matters relating to the compensation of Participants, their employment, retirement, death, termination of employment, and such other pertinent facts as the Committee may require. 7.4 Indemnification of Committee. The...

  • Page 184
    ... support the granting of the benefit being claimed. The final decision of the Committee with respect to the claim being reviewed ... the matter being reviewed. ARTICLE 8. AMENDMENT AND TERMINATION 8.1 Amendments. The Company shall have the right to amend this Plan from time to time, subject to Section...

  • Page 185
    ..., nor will anything herein be construed to give any employee or any other person rights to any specific assets of an Employer or of any other person. Benefit payments to be made with respect to a Participant's Accounts shall be paid in cash from the general assets of the Employer, and shall be the...

  • Page 186
    ...to be a "domestic relations order" as defined in Code Section 414(p)(1)(B). 9.3 Limitation of Participants' Rights. Participation in this Plan shall not give any Eligible Employee the right to be retained in the employ of an Employer or an Affiliate or any right or interest in the Plan other than as...

  • Page 187
    ... to be fully effective. 9.7 No Guarantee of Tax Consequences. No person connected with the Plan in any capacity, including, but not limited to, the Employers and any Affiliate and their respective directors, officers, agents and employees, makes any representation, commitment or guarantee that any...

  • Page 188
    ... are not to be considered in the construction of the provisions hereof. IN WITNESS WHEREOF, The Neiman Marcus Group, Inc. has caused this Plan to be executed by its duly authorized officer this 16th day of December, 2005. THE NEIMAN MARCUS GROUP, INC. By: /s/ Marita O'Dea Senior Vice President 24

  • Page 189
    ...12.1 Neiman Marcus, Inc. Computation of Ratio of Earnings to Fixed Charges (Unaudited) Successor Fortythree weeks ended July 29, 2006 Nine weeks ended October 1, 2005 Predecessor (in thousands, except ratios) Fiscal year ended July 30, 2005(1) Fiscal year ended July 31, 2004(1) Fiscal year ended...

  • Page 190
    ... Corporation Worth Avenue Leasing Company New York New York Delaware Delaware Texas Texas Texas Delaware Virginia Massachusetts Delaware California Ontario, Canada Delaware Texas Florida Neiman Marcus Holdings, Inc. Bergdorf Goodman, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group...

  • Page 191
    ..., 2006, relating to the consolidated financial statements and financial statement schedule of Neiman Marcus, Inc., and management's report on the effectiveness of internal control over financial reporting appearing in this Annual Report on Form 10-K of Neiman Marcus, Inc. for the year ended July 29...

  • Page 192
    ... in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and any fraud, whether or not material, that involves management or other employees who...

  • Page 193
    ... in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and any fraud, whether or not material, that involves management or other employees who...

  • Page 194
    ... James E. Skinner Senior Vice President and Chief Financial Officer (1) A signed original of this written statement required by Section 906 has been provided to Neiman Marcus, Inc. and will be retained by Neiman Marcus, Inc. and furnished to the Securities and Exchange Commission or its staff...