Neiman Marcus 2008 Annual Report Download - page 72

Table of Contents
payment in an amount that would place her in the same after-tax position that she would have been in if no excise tax had applied.
However, under certain conditions, rather than receive a gross-up payment, the payments payable to her will be reduced so that no
excise tax is imposed.
Ms. Katz's agreement also contains obligations on her part regarding non-competition and non-solicitation of employees
following the termination of her employment for any reason, confidential information and non-disparagement of the Company and its
business. The non-competition agreement generally prohibits Ms. Katz during employment and for a period of one year from
termination from becoming a director, officer, employee or consultant for any competing business that owns or operates a luxury
specialty retail store located in the geographic areas of the Company's operations. The agreement also requires that she disclose and
assign to the Company any trademarks or inventions developed by her which relate to her employment by the Company or to the
Company's business.
Confidentiality, Non-Competition and Termination Benefits Agreements
Each of the named executive officers and certain other officers, except for Mr. Tansky, are party to a confidentiality, non-
competition and termination benefits agreement that will provide for severance benefits if the employment of the affected individual is
terminated by the Company other than in the event of death, disability or termination for cause. These agreements provide for a
severance payment equal to one and one-half annual base salary payable over an eighteen month period, and reimbursement for
COBRA premiums for the same period. Each confidentiality, non-competition and termination benefits agreement contains restrictive
covenants as a condition to receipt of any payments payable thereunder.
Cash Incentive Plan
Following the consummation of the Acquisition, the Neiman Marcus, Inc. Cash Incentive Plan (referred to as the Cash
Incentive Plan) was adopted to aid in the retention of certain key executives, including the named executive officers. The Cash
Incentive Plan provides for the creation of a $14 million cash bonus pool to be shared by the participants based on the number of stock
options that were granted to each such participant pursuant to the Management Incentive Plan. Each participant in the Cash Incentive
Plan will be entitled to a cash bonus upon the earlier to occur of a change of control or an initial public offering, provided that the
internal rate of return to certain of our investors is positive. If the internal rate of return to certain of our investors is not positive, no
amounts will be paid under the Cash Incentive pool. The Cash Incentive Plan was adopted in connection with the acquisition of NMG
by the Sponsors, and was intended to align the interests of certain key executives with those of the Sponsors. Furthermore, it has been
our experience that it often takes a long period of time to consummate a change in control transaction with a large retail company. As
a result, it was our view and the view of the Sponsors that a "single trigger" payment upon an initial public offering or change in
control of the Company correctly aligns the interests of management, on the one hand, and the Company and its shareholders, on the
other hand, and also provides the Company with an effective and durable retention mechanism that incentivizes each named executive
officer to remain with us prior to the consummation of such an event.
Based on the foregoing, each of the named executive officers would be entitled to receive the following percentages of the
remaining cash bonus pool on August 1, 2009, assuming there was a change in control or an initial public offering on that date, and
the rate of return to the Sponsors was positive:
Name Percentage
Burton M. Tansky 22.00%
Karen W. Katz 15.65%
James E. Skinner 7.83%
James J. Gold 7.83%
Gerald A. Barnes 1.57%
All required federal, state, or local government tax will be withheld from all payments made to participants under the Cash
Incentive Plan. No payments have been made or are currently anticipated under the Cash Incentive Plan.
Potential Payments Upon Termination or Change-in-Control
The tables below show certain potential payments that would have been made to a named executive officer if the named
executive officer's employment had terminated on August 1, 2009 under various scenarios, including a change in control. Because the
payments to be made to a named executive officer depend on several factors, the actual amounts to be
68