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Neiman Marcus, Inc.

10-K

Annual report pursuant to section 13 and 15(d)

Filed on 10/01/2010

Filed Period 07/31/2010

Page 1
Neiman Marcus, Inc. 10-K Annual report pursuant to section 13 and 15(d) Filed on 10/01/2010 Filed Period 07/31/2010

Page 2
... jurisdiction 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...

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 21, 2010, the registrant had outstanding 1,014,915 shares of its common stock, par value $0.01 per...

Page 4
... Disclosures about Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Directors and Executive Officers of the Registrant Executive Compensation Security Ownership...

Page 5
... revenues in fiscal year 2010, 82.1% in fiscal year 2009 and 83.8% in fiscal year 2008. â€¢ Neiman Marcus Stores. Neiman Marcus stores offer distinctive luxury merchandise, including women's couture and designer apparel, contemporary sportswear, handbags, fashion accessories, shoes, cosmetics, men...

Page 6
... weeks ended August 2, 2008. References to fiscal years 2011 and years thereafter relate to our fiscal years for such periods. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and related amendments, available free of charge through our website...

Page 7
... superior merchandise selection and elegant store settings. Critical elements to our customer service approach are knowledgeable, professional and well-trained sales associates; marketing programs designed to promote customer awareness of our offerings of the latest fashion trends; loyalty programs...

Page 8
...and in-store promotions at our Neiman Marcus and Bergdorf Goodman stores have featured vendors such as Chanel, Giorgio Armani, Oscar de la Renta and Manolo Blahnik. Through our print media programs, we mail various publications to our customers communicating upcoming in-store events, new merchandise...

Page 9
... customers' tastes and lifestyles. Our percentages of revenues by major merchandise category are as follows: July 31, 2010 Years Ended August 1, 2009 August 2, 2008 Women's Apparel Women's Shoes, Handbags and Accessories Cosmetics and Fragrances Men's Apparel and Shoes Designer and Precious Jewelry...

Page 10
... 2009. Inventory Management Our merchandising function is decentralized with separate merchandising functions for Neiman Marcus stores, Bergdorf Goodman and Direct Marketing. Each merchandising function is responsible for the determination of the merchandise assortment and quantities to be purchased...

Page 11
... of our main Bergdorf Goodman store in New York City and Neiman Marcus stores in Atlanta and Westchester; and enhancements to merchandising and store systems. In fiscal year 2011, we anticipate capital expenditures for our planned new store in Walnut Creek, California (scheduled to open in March...

Page 12
... 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 13
... debt levels, increases in interest rates, a tightening of consumer credit, uncertainties regarding future economic performance and tax rates and policies, or a decline in consumer confidence, among other factors), fewer customers may shop our stores and websites and those who do shop may limit the...

Page 14
...service requirements, execution of its business strategy or other purposes. â€¢ â€¢ Any of the above listed factors could materially and adversely affect NMG's business, financial condition and results of operations. In addition, NMG's interest expense could increase if interest rates increase...

Page 15
... outstanding indebtedness on a timely basis would likely result in a reduction of NMG's credit rating, which could harm its ability to incur additional indebtedness on acceptable terms. Contractual limitations on NMG's ability to execute any necessary alternative financing plans could exacerbate the...

Page 16
... 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 17
... strategies. We expect that planned new full-line stores will add over 89,000 square feet of new store space over approximately the next three fiscal years, representing an increase of approximately 1.5% above the current aggregate square footage of our full-line Neiman Marcus and Bergdorf Goodman...

Page 18
... relationship-based customer service may suffer. We may not be able to retain our current senior management team, buyers or key sales associates and the loss of any of these individuals could adversely affect our business. Inflation, including price changes resulting from foreign exchange rate...

Page 19
... performance. We have a marketing and servicing alliance with HSBC Bank Nevada, N.A. and HSBC Private Label Corporation (collectively referred to as HSBC). Pursuant to the agreement with HSBC, HSBC offers proprietary credit card accounts to our customers under both the "Neiman Marcus" and "Bergdorf...

Page 20
... elsewhere, our business could be adversely affected. Significant increases in costs associated with the production of catalogs and other promotional materials may adversely affect our operating income. We advertise and promote in-store events, new merchandise and fashion trends through print...

Page 21
...adequately maintain 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...

Page 22
... 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, Neiman Marcus Last Call stores and distribution, support and office...

Page 23
... stores: Bergdorf Goodman Stores Fiscal Year Operations Began Gross Store Sq. Feet Locations New York City (Main)(1) New York City (Men's)(1)* (1) * Leased. Mortgaged to secure our senior secured credit facilities and the 2028 Debentures. 1901 1991 250,000 66,000 Neiman Marcus Last Call stores...

Page 24
...on our common stock in our three most recent fiscal years. For the foreseeable future we intend to retain all current and foreseeable future earnings to support operations and finance expansion. There were no unregistered sales of our equity securities during the quarterly period ended July 31, 2010...

Page 25
... by our consolidated financial statements (and 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. Fiscal year ended July 31, 2010 Fiscal year ended August 1, 2009...

Page 26
... (in millions, except sales per square foot) OTHER OPERATING DATA Capital expenditures Depreciation expense Rent expense and related occupancy costs Change in comparable revenues (7) Number of full-line stores open at period end Sales per square foot NON-GAAP FINANCIAL MEASURE EBITDA (9) Adjusted...

Page 27
... segment consists primarily of Neiman Marcus and Bergdorf Goodman stores. The Direct Marketing segment conducts both online and print catalog operations under the brand names of Neiman Marcus, Bergdorf Goodman and Horchow. The Company acquired The Neiman Marcus Group, Inc. (NMG) on October 6, 2005...

Page 28
... expense by 0.3% of revenues reflecting the current lower level of capital expenditures in fiscal years 2010 and 2009; and an increase in income from our credit card operations by 0.2% of revenues primarily due to lower estimated shared credit card losses. â€¢ â€¢ â€¢ Liquidity-Cash provided...

Page 29
... 2009. We have elected to pay cash interest since the first quarter of fiscal year 2010. After October 15, 2010, we are required to make all interest payments on the Senior Notes entirely in cash. â€¢ Outlook- We do not anticipate the return of consumer spending to historical levels in the near-term...

Page 30
... (LOSS) Specialty Retail stores Direct Marketing Total CHANGE IN COMPARABLE REVENUES (4) Specialty Retail stores Direct Marketing Total SALES PER SQUARE FOOT Specialty Retail stores STORE COUNT Neiman Marcus and Bergdorf Goodman full-line stores: Open at beginning of period Opened during the period...

Page 31
...changes in the level of full-price sales; changes in the level of promotional events conducted by our Specialty Retail stores and Direct Marketing operation; our ability to successfully implement our store expansion and remodeling strategies; and the rate of growth in internet revenues by our Direct...

Page 32
...season and the related impact of such factors on the level of full-price sales; factors affecting revenues generally, including pricing strategies, product offerings and other actions taken by competitors; changes in occupancy costs primarily associated with the opening of new stores or distribution...

Page 33
... payments from HSBC based on net credit card sales and 2) compensation for marketing and servicing activities (HSBC Program Income). The HSBC Program Income is subject to adjustments, both increases and decreases, based upon the overall profitability and performance of the credit card portfolio...

Page 34
... our Specialty Retail stores and Direct Marketing operation of approximately 3.9% of revenues due to 1) lower net markdowns as a result of the closer alignment of on-hand inventories to customer demand in fiscal year 2010 and 2) increases in customer demand and higher levels of full-price sales; and...

Page 35
... charges related to declines in fair value subsequent to the Acquisition date. The reconciliation of segment operating earnings to total operating earnings (loss) is as follows: Fiscal year ended August 1, July 31, 2009 2010 (in millions) Specialty Retail stores Direct Marketing Corporate...

Page 36
...of the goodwill impairment charges, our effective income tax rate was 39.5% for fiscal year 2009. During the fourth quarter of fiscal year 2010, the Internal Revenue Service (IRS) closed their examination of our fiscal year 2007 federal income tax return with no changes or assessments. We anticipate...

Page 37
... Specialty Retail stores. During the first quarter of fiscal year 2008, we incurred incremental advertising and promotions costs in connection with the celebration of the 100th anniversary of Neiman Marcus in October 2007. â€¢ Income from credit card program, net. We earned HSBC Program Income of...

Page 38
... charges related to declines in fair value subsequent to the Acquisition date. The reconciliation of segment operating earnings to total operating (loss) earnings is as follows: Fiscal year ended August 1, August 2, 2009 2008 (in millions) Specialty Retail stores Direct Marketing Corporate...

Page 39
... income tax benefit exists related to the $329.7 million of goodwill impairment charges recorded in fiscal year 2009. Excluding the impact of the goodwill impairment charges, our effective income tax rate was 39.5% for fiscal year 2009. During the third quarter of fiscal year 2009, we closed the IRS...

Page 40
... table reconciles (loss) earnings as reflected in our consolidated statements of operations prepared in accordance with GAAP to EBITDA and Adjusted EBITDA: July 31, 2010 Fiscal year ended August 1, 2009 August 2, 2008 (dollars in millions) (Loss) earnings Income tax (benefit) expense Interest...

Page 41
... funding of our merchandise purchases; capital expenditures for new store construction, store renovations and upgrades of our management information systems; debt service requirements; income tax payments; and obligations related to our Pension Plan. Our primary sources of short-term liquidity are...

Page 42
... payment in the first quarter of fiscal year 2011. For fiscal year 2009, NMG was required to prepay $26.6 million of outstanding term loans in the first quarter of fiscal year 2010 pursuant to the annual excess cash flow requirements. See Note 7 in the Notes to Consolidated Financial Statements...

Page 43
...and $17.9 million in October 2009. We have elected to pay cash interest since the first quarter of fiscal year 2010. After October 15, 2010, we are required to make all interest payments on the Senior Notes entirely in cash. See Note 7 in the Notes to Consolidated Financial Statements in Item 15 for...

Page 44
...scheduled obligations with respect to our Pension Plan consist of expected benefit payments through 2016, as currently estimated using information provided by our actuaries. We made voluntary contributions to our Pension Plan of $30.0 million in fiscal year 2010 and $15.0 million in fiscal year 2009...

Page 45
... which we source our merchandise; terrorist activities in the United States and elsewhere; political, social, economic, or other events resulting in the short- or long-term disruption in business at our stores, distribution centers or offices; Customer Considerations changes in consumer confidence...

Page 46
... Factors competitive responses to our loyalty programs, marketing, merchandising and promotional efforts or inventory liquidations by vendors or other retailers; adverse changes in the financial viability of our competitors; seasonality of the retail business; adverse weather conditions or natural...

Page 47
... our Direct Marketing operation are recognized when the merchandise is delivered to the customer. Revenues associated with gift cards are recognized at the time of redemption by the customer. Revenues exclude sales taxes collected from our customers. Revenues are reduced when customers return goods...

Page 48
... valuation model include future revenue and profitability projections associated with the tradename; estimated market royalty rates that could be derived from the licensing of our tradenames to third parties in order to establish the cash flows accruing to the benefit of the Company as a result of...

Page 49
...0.5% decrease in market royalty rates and by approximately $112 million for each 0.5% increase in the weighted average cost of capital. The assessment of the recoverability of the goodwill associated with our Neiman Marcus stores, Bergdorf Goodman stores and Direct Marketing reporting units involves...

Page 50
...end of each fiscal year. In the third quarter of fiscal year 2010, we froze benefits offered to all remaining employees under our Pension Plan and SERP Plan. Significant assumptions related to the calculation of our obligations include the discount rate used to calculate the present value of benefit...

Page 51
... of the interest rate swap agreements) during fiscal year 2011. The effects of changes in the U.S. equity and bond markets serve to increase or decrease the value of pension plan assets, resulting in increased or decreased cash funding by the Company. The Company seeks to manage exposure to adverse...

Page 52
... consolidated financial statements of the Company and supplementary data are included as pages F-1 through F-44 at the end of this Annual Report on Form 10-K: Index Page Number Management's Report on Internal Control over Financial Reporting Reports of Independent Registered Public Accounting Firm...

Page 53
... positions and offices with the Company, principal occupations during the past five years and other directorships Year first elected director Name Age David A. Barr Managing director of Warburg Pincus LLC and a general partner of Warburg Pincus & Co, a leading global private equity investment...

Page 54
... Retired Managing Director and Senior Advisor of Warburg Pincus LLC. Mr. Lapidus had been employed at Warburg Pincus since 1967. He presently serves as a director of Lennar Corporation and Knoll, Inc. He serves on the boards of a number of non-profit organizations including New York University...

Page 55
... and Chief Financial Officer of The Neiman Marcus Group, Inc. Mr. Skinner serves on the board of directors of Fossil, Inc. President and Chief Executive Officer of Bergdorf Goodman since May 2004. Mr. Gold served as Senior Vice President, General Merchandise Manager of Neiman Marcus Stores from...

Page 56
... Neiman Marcus Group, Inc., Attn. Investor Relations, One Marcus Square, 1618 Main Street, Dallas, Texas 75201. We have established a means for employees, customers, suppliers, or other interested parties to submit confidential and anonymous reports of suspected or actual violations of the Company...

Page 57
... long-term goals and operating plans. Increase customer satisfaction, improve customer service, provide our customers with the high-end luxury merchandise they have come to expect, and increase the amount of business our customers do with us. Align the interests of our executives with the financial...

Page 58
...of our financial goals. Salaries are reviewed before the end of each fiscal year as part of our performance and compensation review process as well as at other times to recognize a promotion or change in job responsibilities. Merit increases are usually awarded to the named executive officers in the...

Page 59
... to date under the Cash Incentive Plan and none are anticipated until a change of control or initial public offering occurs. Risk Assessment of Compensation Policies and Programs We have reviewed our compensation policies and programs for all employees, including the named executive officers, and...

Page 60
... our named executive officers to take unreasonable risks relating to the business. For further information, see "Risk Assessment of Compensation Policies and Programs" on page 56. Role of Management. As part of our annual planning process, the CEO and the Senior Vice President and Chief Human...

Page 61
... each of the named executive officers are listed in the Summary Compensation Table beginning on page 62 of this section under the column titled Bonus. Corporate Performance Targets. At the end of the fiscal year, the Compensation Committee evaluates Company performance against specific financial and...

Page 62
...one year of service with 1,000 or more hours participated in The Neiman Marcus Group, Inc. Retirement Plan (referred to as the Retirement Plan), which paid benefits upon retirement or termination of employment. The Retirement Plan is a "career-accumulation" plan, under which a participant earns each...

Page 63
... 401(K) plans are credited to the account balances of each KEDC Plan participant. KEDC Plan benefits are more fully described under "Nonqualified Deferred Compensation" beginning on page 68 of this section. Matching Gift Program. All employees, including the named executive officers, may participate...

Page 64
... payment equal to one and one-half annual base salary of the named executive officer, payable over an eighteen month period, and reimbursement for COBRA premiums for the same period. â€¢ Other The Company has change in control provisions in its Management Incentive Plan and its retirement plans...

Page 65
...named executive officers) serving at the end of fiscal year 2010. Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) 521,000 786,000 205,000 752,000 721,000 145,369 Name and Principal Position Burton M. Tansky President and Chief Executive Officer Karen W. Katz Executive...

Page 66
... in the Notes to Consolidated Financial Statements beginning on page F-29 of this Annual Report on Form 10-K. For fiscal year 2010, no earnings of each of the named executive officers in the KEDC plan exceeded 120 percent of the applicable federal long-term rate. (5) Includes all items listed in the...

Page 67
... could have been payable pursuant to our annual cash incentive plan and equity awards granted pursuant to our long-term equity plans to our named executive officers for fiscal year 2010. All Other Option Awards: Number of Securities Underlying Options (#) Name Grant Date Estimated Possible Future...

Page 68
64

Page 69
Table of Contents OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END The following table sets forth certain information regarding the total number and aggregate value of stock options held by each of our named executive officers at July 31, 2010. Number of Securities Underlying Unexercised Options (#) ...

Page 70
... certain information with respect to retirement payments and benefits under the Retirement Plan and the SERP for each of our named executive officers. Number of Years Credited Service (#)(1) Present Value of Accumulated Benefit ($)(2) Payments During Last Fiscal Year ($) Name Plan Name Burton...

Page 71
... the limits imposed upon annual compensation under Internal Revenue Code Section 401(a)(17). Such limit for 2009 was $245,000 and remains unchanged for 2010 and is adjusted annually for cost-of-living increases. Benefits under the Retirement Plan become fully vested after five years of service with...

Page 72
... Journal on the last business day of the preceding calendar quarter. Amounts credited to an employee's account become payable to the employee upon separation from service, death, unforeseeable emergency, or change of control of the Company. In the event of separation of service, payment is made in...

Page 73
... of his employment agreement effective October 5, 2010 whereby he will retire as President and Chief Executive Officer. Pursuant to a Director's Service Agreement dated April 26, 2010 by and among the Company, The Neiman Marcus Group, Inc. and Mr. Tansky, he will continue as a non-employee chairman...

Page 74
... before the end of the term due to death or inability to perform (as defined in the employment agreement), we will pay him or his estate, as applicable, 85% of base salary multiplied by a fraction, the numerator of which is the number of days during the fiscal year up to the termination date and the...

Page 75
... pay equal to a prorated portion of her target bonus amount for the year in which the employment termination date occurs. Ms. Katz's agreement also contains a tax gross-up provision whereby if, in the event of a change in control following the existence of a public market for the Company's stock...

Page 76
... to 4,300 shares of Common Stock of the Company with an exercise price equal to the fair market value of the Common Stock at the time of grant. The stock option will expire no later than the seventh anniversary of the grant date. SERP benefits for Ms. Katz under her new agreement are substantially...

Page 77
...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...

Page 78
... the exercise price and $1,576, the estimated fair value of our common stock as of the end of the fiscal year); a lump sum basic life insurance benefits payment of $1,000,000 payable by the Company's life insurance provider, and a lump sum amount payable under the Cash Incentive Plan, more fully...

Page 79
...Ms. Katz's target bonus, lump sum payout under the deferred compensation plan, and long-term disability payments of $20,000 per month for twelve months payable from the Company's long-term disability insurance provider. Represents a lump sum payment of the target bonus and two times base salary, two...

Page 80
... good reason ($)(3) Executive Benefits and Payments Upon Separation Change in Control ($)(1)(4) JAMES E. SKINNER Compensation: Severance Benefits & Perquisites: Retirement Plans Deferred Compensation Plan Cash Incentive Plan Payment Long-Term Disability Health and Welfare Benefits Life Insurance...

Page 81
.... Tansky 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 our employees. In connection with the Acquisition, affiliates of the Sponsors receive an annual management fee equal to the lesser of...

Page 82
...James Coulter(2) 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 (5) 1618 Main Street Dallas, TX 75201 Karen W. Katz (6) 1618 Main Street Dallas, TX 75201 James...

Page 83
... within 60 days Total Stock and Stock Based Holdings Name of Beneficial Owner Percent of Class (1) James J. Gold 754 Fifth Avenue New York, NY 10019 Jonathan Coslet(7) 345 California Street Suite 3300 San Francisco, CA 94104 John G. Danhakl 11111 Santa Monica Boulevard Suite 2000 Los Angeles, CA...

Page 84
... and James G. Coulter are directors, officers and sole shareholders of Group Advisors and Advisors III and may therefore also be deemed to be the beneficial owners of the common shares directly held by the TPG Funds, WP VIII and WP IX. The mailing address for each of Group Advisors, Advisors III and...

Page 85
... sources for comparable services or products and (d) the terms available to or from, as the case may be, unrelated third parties or to or from employees generally. Related Person Transactions Newton Holding, LLC Limited Liability Company Operating Agreement The investment funds associated with or...

Page 86
...the Delaware General Corporation Law will not apply to the Company. Section 203 restricts "business combinations" between a corporation and "interested stockholders," generally defined as stockholders owning 15% or more of the voting stock of a corporation. Management Stockholders' Agreement Subject...

Page 87
... for the audits of the Company's annual financial statements for the fiscal years ended July 31, 2010 and August 1, 2009 and for the reviews of the financial statements included in our Quarterly Reports on Form 10-Q were $1,455,000 and $1,748,000, respectively. Audit-Related Fees. The aggregate fees...

Page 88
..., among The Neiman Marcus Group, Inc., Newton Acquisition, Inc., and Newton Merger Sub, Inc. (1) 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 (1). Amended and...

Page 89
... quarter ended January 31, 2009. Rollover Agreement dated as of October 4, 2005 by and among The Neiman Marcus Group, Inc., Newton Acquisition, Inc., and Burton M. Tansky, incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended August 1, 2009. Amendment...

Page 90
...herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended August 1, 2009. (2) Amended and Restated Pledge and Security Agreement dated as of July 15, 2009 by and among The Neiman Marcus Group, Inc., the Company, subsidiaries named therein and Bank of America, N.A., as...

Page 91
... reference to Neiman Marcus, Inc.'s Quarterly Report on Form 10-Q for the quarter ended January 31, 2009. Employment Agreement dated April 26, 2010 by and between The Neiman Marcus Group, Inc. and Karen Katz, incorporated herein by reference to the Company's Current Report on Form 8-K dated April 28...

Page 92
... Equity VIII K.G., Warburg Pincus Private Equity IX, L.P., and the other parties signatory thereto, incorporated herein by reference to Neiman Marcus, Inc.'s Quarterly Report on Form 10-Q for the quarter ended January 31, 2009. The Neiman Marcus Group, Inc. Key Employee Deferred Compensation Plan...

Page 93
... Rents, Security Agreement and Financing Statement from The Neiman Marcus Group, Inc. to Bank of America, N.A, incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended August 1, 2009. Amendment No. 2 to the Amended and Restated Neiman Marcus Group, Inc...

Page 94
...FINANCIAL STATEMENTS Page Management's Report on Internal Control over Financial Reporting Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Cash Flows Consolidated Statements of Shareholders' Equity...

Page 95
... policies and 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...

Page 96
... balance sheets of Neiman Marcus, Inc. as of July 31, 2010 and August 1, 2009, and the related consolidated statements of operations, cash flows, and shareholders' equity for each of the three years in the period ended July 31, 2010. Our audits also included the financial statement schedule listed...

Page 97
... Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Neiman Marcus, Inc. as of July 31, 2010 and August 1, 2009, and the related consolidated statements of operations, cash flows, and shareholders' equity for each of the three years in the period ended July...

Page 98
... NEIMAN MARCUS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except shares) July 31, 2010 August 1, 2009 ASSETS Current assets: Cash and cash equivalents Merchandise inventories Deferred income taxes Other current assets Total current assets Property and equipment, net Customer lists, net...

Page 99
Table of Contents NEIMAN MARCUS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS July 31, 2010 Fiscal year ended August 1, 2009 August 2, 2008 (in thousands) Revenues Cost of goods sold including buying and occupancy costs (excluding depreciation) Selling, general and administrative expenses (excluding...

Page 100
... Deferred income taxes Gain on curtailment of defined benefit retirement obligations Other-primarily costs related to defined benefit pension and other long-term benefit plans Changes in operating assets and liabilities: Merchandise inventories Other current assets Other assets Accounts payable and...

Page 101
... market value of financial instruments, net of tax of ($19,229) Reclassification to earnings, net of tax of $10,287 Change in unfunded benefit obligations, net of tax of ($52,865) Other Total comprehensive loss BALANCE AT AUGUST 1, 2009 Stock based compensation expense Comprehensive loss: Net loss...

Page 102
... to fiscal year 2008 relate to the fifty-three weeks ended August 2, 2008. The accompanying consolidated financial statements include the amounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Certain prior period balances have been...

Page 103
...and $283.0 million at August 1, 2009 is not reflected in our consolidated balance sheets. Cost of goods sold also includes delivery charges we pay to third-party carriers and other costs related to the fulfillment of customer orders not delivered at the point-of-sale. Long-lived Assets. Property and...

Page 104
... our current revenue and profitability projections, market royalty rates decrease or the weighted average cost of capital increases. The assessment of the recoverability of the goodwill associated with our Neiman Marcus stores, Bergdorf Goodman stores and Direct Marketing reporting units involves...

Page 105
... our Direct Marketing operation are recognized when the merchandise is delivered to the customer. Revenues associated with gift cards are recognized at the time of redemption by the customer. Revenues exclude sales taxes collected from our customers. Revenues are reduced when customers return goods...

Page 106
... payments from HSBC based on net credit card sales and 2) compensation for marketing and servicing activities (HSBC Program Income). The HSBC Program Income is subject to adjustments, both increases and decreases, based upon the overall profitability and performance of the credit card portfolio...

Page 107
...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 108
... a marketing and servicing alliance with HSBC Bank Nevada, N.A. and HSBC Private Label Corporation (collectively referred to as HSBC). Pursuant to the agreement with HSBC, HSBC offers proprietary credit card accounts to our customers under both the "Neiman Marcus" and "Bergdorf Goodman" brand names...

Page 109
... upon the overall profitability and performance of the proprietary credit card portfolio. In addition, we receive payments from HSBC for marketing and servicing activities as we continue to handle key customer service functions, primarily customer inquiries and collections, for HSBC. Our estimated...

Page 110
... 2009 Accrued salaries and related liabilities Amounts due customers Self-insurance reserves Interest payable Sales returns reserves Sales taxes Loyalty program liability Other Total NOTE 7. LONG-TERM DEBT The significant components of our long-term debt are as follows: (in thousands) Interest Rate...

Page 111
... in personal property consisting of inventory and related accounts, cash, deposit accounts, all payments received by NMG or the subsidiary guarantors from credit card clearinghouses and processors or otherwise in respect of all credit card charges for sales of inventory by NMG and the subsidiary...

Page 112
... of (1) the prime rate of Credit Suisse and (2) the federal funds effective rate plus 1/2 of 1% or (b) a LIBOR rate, subject to certain adjustments, in each case plus an applicable margin. The interest rate on the outstanding borrowings pursuant to the Senior Secured Term Loan Facility was 2.47...

Page 113
...million payment in the first quarter of fiscal year 2011. For fiscal year 2009, NMG was required to prepay $26.6 million of outstanding term loans in the first quarter of fiscal year 2010 pursuant to the annual excess cash flow requirements. If a change of control (as defined in the credit agreement...

Page 114
... had available borrowing capacity under our $600.0 million revolving credit facility. Accordingly, we elected to pay PIK Interest for the three quarterly interest periods ending October 14, 2009 and to make such interest payments with the issuance of additional Senior Notes at the PIK Interest rate...

Page 115
... capital stock of NMG's subsidiaries; consolidate or merge; create liens; and enter into sale and lease back transactions. The fair value of NMG's Senior Notes was approximately $767.5 million at July 31, 2010 and $539.9 million at August 1, 2009 based on quoted market prices. Senior Subordinated...

Page 116
...if any, to the date of purchase. The fair value of NMG's Senior Subordinated Notes was approximately $517.5 million at July 31, 2010 and $355.0 million at August 1, 2009 based on quoted market prices. Maturities of Long-Term Debt. At July 31, 2010, annual maturities of long-term debt during the next...

Page 117
... other comprehensive loss, net of taxes $ $ $ $ 1,040 (22,661) - 17,281 $ $ $ $ - - (57,750) 35,508 A summary of the recorded amounts related to our interest rate swaps reflected in our consolidated statements of operations are as follows: July 31, 2010 Fiscal year ended August 1, 2009 August...

Page 118
...declines in the domestic and global financial markets during the first and second quarters of fiscal year 2009. Utilizing our then-current operating forecasts to estimate the fair values of our Neiman Marcus stores, Bergdorf Goodman stores and Direct Marketing operation, we determined certain of our...

Page 119
... in fiscal year 2009 and $6.4 million in fiscal year 2008. Grant Date Fair Value of Stock Options. All grants of stock options have an exercise price equaling or exceeding the fair market value of our common stock on the date of grant. Because we are privately held and there is no public market for...

Page 120
... rates is as Fiscal year ended August 1, 2009 (in thousands) July 31, 2010 August 2, 2008 Income tax (benefit) expense at statutory rate State income taxes, net of federal income tax benefit Impairment of nondeductible goodwill Tax expense (benefit) related to tax settlements and other changes...

Page 121
... closed their examination of fiscal year 2007 federal income tax return with no changes or assessments. We anticipate the IRS will begin an examination of fiscal years 2008 and 2009 sometime in our fiscal year 2011. With respect to state and local jurisdictions, with limited exceptions, the Company...

Page 122
... plan (Pension Plan) and an unfunded supplemental executive retirement plan (SERP Plan) which provides certain employees additional pension benefits. Benefits under both plans are based on the employees' years of service and compensation over defined periods of employment. We froze benefits offered...

Page 123
...of the market related value of plan assets. At July 31, 2010, the market related value of plan assets exceeded fair value by $20.7 million. Benefit Obligations. Our obligations for the Pension Plan, SERP Plan and Postretirement Plan are valued annually as of the end of each fiscal year. With respect...

Page 124
... 2010 2009 2010 SERP Plan Fiscal years 2009 Postretirement Plan Fiscal years 2010 2009 Projected benefit obligations: Beginning of year Service cost Interest cost Actuarial loss Curtailment Benefits paid, net Plan amendments End of year Accumulated benefit obligations: Beginning of year End of year...

Page 125
...relative credit information, observed market movements, and sector news, all of which is applied to pricing applications and models. Pension Plan investments in hedge funds and other limited partnerships are classified as Level 3 investments within the fair value hierarchy. Hedge funds are valued at...

Page 126
... a summary of changes in the fair value of the Pension Plan's Level 3 investment assets for the year ended July 31, 2010. (in thousands) Balance, beginning of year Realized loss Unrealized gains relating to investments still held at July 31, 2010 Purchases Sales Balance, end of year F-33 $ $ 108...

Page 127
... the obligation and annual expense for the Pension and SERP Plans. As a result of the freeze of our benefits offered to all remaining employees under our Pension Plan and SERP Plan in the third quarter of fiscal year 2010, the rate of future compensation increase is no longer applicable to the...

Page 128
... year periods beginning in fiscal year 2006. Earned awards for each completed performance period will be credited to a book account and will earn interest at a contractually defined annual rate until the award is paid. Awards will be paid upon a change of control, as defined, or an initial public...

Page 129
...the Neiman Marcus, Bergdorf Goodman and Horchow brand names. Both the Specialty Retail stores and Direct Marketing segments derive their revenues from the sales of high-end fashion apparel, accessories, cosmetics and fragrances from leading designers, precious and fashion jewelry and decorative home...

Page 130
... tables set forth the information for our reportable segments: July 31, 2010 Fiscal year ended August 1, 2009 August 2, 2008 (in thousands) REVENUES Specialty Retail stores Direct Marketing Total OPERATING EARNINGS (LOSS) Specialty Retail stores Direct Marketing Corporate expenses Other expenses...

Page 131
... table presents our revenues by merchandise category as a percentage of net sales: July 31, 2010 Years Ended August 1, 2009 August 2, 2008 Women's Apparel Women's Shoes, Handbags and Accessories Cosmetics and Fragrances Men's Apparel and Shoes Designer and Precious Jewelry Home Furnishings and...

Page 132
... AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable Accrued liabilities Other current liabilities Total current liabilities Long-term liabilities: Long-term debt Deferred income taxes Other long-term liabilities Total long-term liabilities Total shareholders' equity Total liabilities and...

Page 133
...) Company Fiscal year ended August 1, 2009 NonGuarantor NMG Subsidiaries Eliminations Consolidated Revenues Cost of goods sold including buying and occupancy costs (excluding depreciation) Selling, general and administrative expenses (excluding depreciation) Income from credit card program...

Page 134
...year ended August 2, 2008 NonGuarantor NMG Subsidiaries Eliminations (in thousands) Company Consolidated Revenues Cost of goods sold including buying and occupancy costs (excluding depreciation) Selling, general and administrative expenses (excluding depreciation) Income from credit card program...

Page 135
... amortization expense Deferred income taxes Impairment charges Paid-in-kind interest Other, primarily costs related to defined benefit pension and other long-term benefit plans Intercompany royalty income payable (receivable) Equity in loss (earnings) of subsidiaries Changes in operating assets and...

Page 136
...income taxes Impairment of Horchow tradename Gain on curtailment of defined benefit retirement obligations Other, primarily costs related to defined benefit pension and other long-term benefit plans Intercompany royalty income payable (receivable) Equity in (earnings) loss of subsidiaries Changes in...

Page 137
...1,106.6 (668.0) (1) Gross profit includes revenues less cost of goods sold including buying and occupancy costs (excluding depreciation). (2) For fiscal year 2009, net earnings (loss) include pretax impairment charges related to 1) $291.1 million for the writedown to fair value of goodwill, 2) $242...

Page 138
...Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NEIMAN MARCUS, INC. By: /S/ NELSON A. BANGS Nelson A. Bangs Senior Vice President and General Counsel Dated: October 1, 2010 Pursuant to the requirements of the...

Page 139
...to Charged to Costs and Other Expenses Accounts Column D Column E Balance at End of Period Description Deductions Reserve for estimated sales returns Year ended July 31, 2010 Year ended August 1, 2009 Year ended August 2, 2008 Reserves for self-insurance Year ended July 31, 2010 Year ended August...

Page 140
EXHIBIT 2.1 AGREEMENT AND PLAN OF MERGER among NEWTON ACQUISITION, INC. and THE NEIMAN MARCUS GROUP, INC. Dated as of May 1, 2005

Page 141
... * Authority * No Conflict; Required Filings and Consents * Compliance * SEC Filings; Financial Statements; No Undisclosed Liabilities * Absence of Certain Changes or Events * Absence of Litigation * Employee Benefit Plans * Labor and Employment Matters * Insurance * Properties * Tax Matters * Proxy...

Page 142
... * Absence of Litigation * Proxy Statement * Brokers * Financing * Parent and Merger Sub * Ownership of Shares * Vote/Approval Required * No Other Representations or Warranties * ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER * SECTION 5.1 Conduct of Business of the Company Pending the Merger *

Page 143
... Meeting * Proxy Statement * Resignation of Directors * Access to Information; Confidentiality * Acquisition Proposals * Employment and Employee Benefits Matters * Directors' and Officers' Indemnification and Insurance * Further Action; Efforts * Public Announcements * Financing * Notification...

Page 144
...Corporation Exhibit B Bylaws of Merger Sub Non-Survival of Representations, Warranties, Covenants and Agreements * Notices * Certain Definitions * Severability * Entire Agreement; Assignment * Parties in Interest * Governing Law * Headings * Counterparts * Specific Performance; Jurisdiction * Parent...

Page 145
... Stock Class B Shares Class C Common Stock Class C Shares Closing Closing Date Code Company Company Common Stock Company Disclosure Schedule Company Employees Company Plans Company Requisite Vote Company Rights Company Securities Company Stock Plans Compensation Confidentiality Agreement Contract...

Page 146
... Employee Debt Financing Debt Financing Commitments Deferred Compensation Plans DGCL Dissenting Shares DOJ Effective Time employee benefit plan Environmental Laws Environmental Permits Equity Financing Equity Financing Commitments ERISA Exchange Act Expenses Financial Advisors Financing Financing...

Page 147
... Required Financial Information Restricted Shares Rights Plan SAR Sarbanes-Oxley Act SEC SEC Reports Securities Act Shares Stock Units Stockholder Agreement Stockholders Meeting subsidiaries subsidiary Superior Proposal Surviving Corporation Tax Return Taxes Termination Date Termination...

Page 148
... "Agreement"), among NEWTON ACQUISITION, INC., a Delaware corporation ("Parent"), NEWTON ACQUISITION MERGER SUB, INC., a Delaware corporation and a direct whollyowned subsidiary of Parent ("Merger Sub"), and THE NEIMAN MARCUS GROUP, INC., a Delaware corporation (the "Company"). WHEREAS, the Board of...

Page 149
...8.1 hereof, in the event that the final day of the Marketing Period shall not have occurred before such termination (or the Closing may be consummated at such other place or on such other date as Parent and the Company may mutually agree). The date on which the Closing actually occurs is hereinafter...

Page 150
... of the Surviving Corporation and as provided by Law. SECTION 1.5 Directors and Officers. The directors of the Company immediately prior to the Effective Time shall submit their resignations to be effective as of the Effective Time. Immediately after the Effective Time, Parent shall take the...

Page 151
...to Restricted Shares, Shares or cash equal to or based on the value of Shares (including any right to "Deferred Common Stock" pursuant to, and as such term is defined in, the Company's Key Employee Bonus Plan) (collectively, "Stock Units") which, in each case, is outstanding as of the Effective Time...

Page 152
... Corporation, in consideration for such cancellation, an amount in cash equal to the product of (A) the number of Shares previously subject to such Stock Unit and (B) the Merger Consideration, less any required withholding taxes. (d) All account balances under the Company's Key Employee Bonus Plan...

Page 153
... Share shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the applicable Merger Consideration as contemplated by this Article II. (c) At any time following the date that is twelve months after the Effective Time, the Surviving Corporation...

Page 154
...under applicable Tax (as defined below) Laws. To the extent that amounts are so properly withheld by the Paying Agent, the Surviving Corporation or Parent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in...

Page 155
... change, circumstance, effect, event or occurrence that would be materially adverse to the assets, liabilities, business, financial condition or results of operations of the Company and its subsidiaries taken as a whole, other than any change or effect resulting from (i) changes in general economic...

Page 156
... issued pursuant to the Company's 2005 Stock Incentive Plan, 1997 Incentive Plan and 1987 Stock Incentive Plan (the "Company Stock Plans") and the Deferred Compensation Plans. Section 3.3(a) of the Company Disclosure Schedule sets forth, as of the date specified thereon, each equity-based award and...

Page 157
... Company Stock Plans or Deferred Compensation Plans, as applicable, the number of shares issuable thereunder and the vesting schedules, expiration date and exercise or conversion price relating thereto. From the close of business on the Capitalization Date until the date of this Agreement, no shares...

Page 158
...' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and any implied covenant of good faith and fair dealing. The Board of Directors of the Company has unanimously authorized the execution, delivery and performance of this Agreement and approved...

Page 159
...case of clauses (iii) and (iv), for any such conflict, violation, breach, default, loss, right or other occurrence which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (b) The execution, delivery and performance of this Agreement by the Company...

Page 160
...flows and changes in stockholders' equity for the periods indicated. The unaudited consolidated financial statements of the Company (including any related notes thereto) for all interim periods included in the SEC Reports have been prepared in accordance with generally accepted accounting principles...

Page 161
... to any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of the Company. (h) Neither the Company nor any of its subsidiaries has any liabilities of a nature required by generally accepted accounting principles to be reflected in a consolidated balance sheet or...

Page 162
... of any shares of capital stock of the Company or any of its subsidiaries; (iv) prior to the date of this Agreement, (x) any granting by the Company or any of its subsidiaries to any of their directors, officers, employees, independent contractors or consultants of any increase in compensation or...

Page 163
...other material director and employee plan, program, agreement or arrangement, vacation or sick pay policy, fringe benefit plan, compensation, severance or employment agreement, stock bonus, stock purchase, stock option, restricted stock, stock appreciation right or other equity-based plan, and bonus...

Page 164
... an event under any Company Plan or any trust or loan related to any of those plans or agreements that will or may result in any payment, acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Company Employee, or...

Page 165
National Labor Relations Board or any other labor relations tribunal or authority. As of the date of this Agreement, there are no strikes, work stoppages, slowdowns, lockouts, material arbitrations or material grievances, or other material labor disputes pending or, to the knowledge of the Company, ...

Page 166
... course of business, to date, adequate reserves in accordance with generally accepted accounting principles have been established by the Company and its subsidiaries for all Taxes not yet due and payable in respect of taxable periods ending on the date hereof, (iv) no deficiency for any Tax has been...

Page 167
... For purposes of this Agreement, "Tax Return" shall mean any return, report or statement required to be filed with any governmental authority with respect to Taxes, including any schedule or attachment thereto or amendment thereof. SECTION 3.15 Proxy Statement. None of the information supplied or to...

Page 168
... to a Distribution Date or Stock Acquisition Date (each as defined in the Rights Plan), and (b) the Company Rights will expire in their entirety immediately prior to the Effective Time without any payment being made in respect thereof. The Company has made available to Parent a complete and correct...

Page 169
... matter has been threatened to the knowledge of the Company. (b) The Company has made available to Parent copies of all material environmental, health and safety reports, audits, assessments or other material communications or documentation relating to environmental, health or safety matters in its...

Page 170
... to a joint venture, partnership, limited liability or other similar agreement or arrangement (excluding information technology Contracts) relating to the formation, creation, operation, management or control of any partnership or joint venture that is material to the business of the Company and the...

Page 171
... Agreement, purchase orders for the purchase of inventory in the ordinary course of business or Real Property Leases); or (vii)with respect to any acquisition pursuant to which the Company or any of its subsidiaries has continuing indemnification, "earn-out" or other contingent payment obligations...

Page 172
...by this Agreement. Parent owns beneficially and of record all of the outstanding capital stock of Merger Sub free and clear of all Liens (other than any Liens created pursuant to the Financing). Prior to the date hereof, Parent has provided to the Company the name of the "ultimate parent entity" for...

Page 173
...' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and any implied covenant of good faith and fair dealing. SECTION 4.3 No Conflict; Required Filings and Consents. The execution, delivery and performance of this Agreement by Parent and Merger...

Page 174
.... None of the information supplied or to be supplied by Parent or Merger Sub for inclusion or incorporation by reference in the Proxy Statement will, at the date it is first mailed to the stockholders of the Company and at the time of the Stockholders Meeting or at the date of any amendment thereof...

Page 175
... and to pay all related fees and expenses. As of the date of this Agreement, Parent does not have any reason to believe that any of the conditions to the Financing will not be satisfied or that the Financing will not be available to Merger Sub on the Closing Date. SECTION 4.8 Parent and Merger...

Page 176
... of Shares tendered by employees or former employees in connection with a cashless exercise of Options or in order to pay taxes in connection with the exercise of Options or the lapse of restrictions in respect of Restricted Stock or Stock Units, in each case, pursuant to the terms of a Company Plan...

Page 177
..., consolidation or sale of stock or assets or otherwise) or enter into any other material transaction outside the ordinary course of business with respect to the Company's credit operations, Neiman Marcus Credit Services, the Company's proprietary card accounts or the receivables balances thereunder...

Page 178
... course of business with respect to independent contractors, consultants and employees who are not directors or officers), (ii) grant any severance or termination pay not provided for under any Company Plan, (iii) enter into any employment, consulting, change of control or severance agreement or...

Page 179
...); (o) open or close, or commit to open or close, any retail locations other than any such openings or closings disclosed in the SEC Reports; (p) enter into or amend any transaction, arrangement, understanding or Contract with any executive officer, director or other affiliate of the Company or any...

Page 180
... that the Board of Directors of the Company may fail to make or withdraw, modify or change such recommendation and/or may fail to use such efforts (subject to the Company having (A) provided Parent at least three business days' prior written notice of the Company's Board of Directors' intention to...

Page 181
... Time. SECTION 6.4 Access to Information; Confidentiality. From the date hereof to the Effective Time or the earlier termination of this Agreement, upon reasonable prior notice, the Company shall, and shall use its reasonable best efforts to cause its subsidiaries, officers, directors and employees...

Page 182
... required in order for the Board of Directors to comply with its fiduciary duties under applicable Law. Notwithstanding the foregoing, nothing contained in this Agreement shall prevent the Company or its Board of Directors from (i) taking and disclosing to its stockholders a position contemplated by...

Page 183
... (including without limitation information relating to the financing thereof), and thereafter shall keep Parent reasonably informed of the status and material terms and conditions of such Acquisition Proposal and provide a copy of all written materials provided to or by the Company in connection...

Page 184
...such offer). SECTION 6.6 Employment and Employee Benefits Matters. (a) Without limiting any additional rights that any Company Employee may have under any Company Plan, Parent shall cause the Surviving Corporation and each of its subsidiaries, for a period commencing at the Effective Time and ending...

Page 185
... Time, Parent will cause the Surviving Corporation and all of their subsidiaries to honor, in accordance with its terms, (x) each existing employment, change in control, severance and termination plan, policy or agreement of or between the Company or any of its subsidiaries and any officer, director...

Page 186
... the existing policies also include coverage for the Company) with a claims period of at least six years from the Effective Time from an insurance carrier with the same or better credit rating as the Company's current insurance carrier with respect to directors' and officers' liability insurance...

Page 187
...a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby as promptly as practicable and in any event within five business days of the date hereof and to supply as promptly as reasonably practicable any additional information and documentary material...

Page 188
... hereby, each of Parent, Merger Sub and the Company shall use its reasonable best efforts to resolve any such objections or suits so as to permit consummation of the transactions contemplated by this Agreement, including in order to resolve such objections or suits which, in any case if not resolved...

Page 189
...for use of their reports in any materials relating to the Debt Financing), (iv) furnishing Parent and Merger Sub and their Financing sources with financial and other pertinent information regarding the Company as may be reasonably requested by Parent, including all financial statements and financial...

Page 190
... it would interfere unreasonably with the business or operations of the Company or its subsidiaries, (vii) using its commercially reasonable efforts to provide monthly financial statements (excluding footnotes) within 25 days of the end of each month prior the Closing Date, (viii) taking all actions...

Page 191
... mailing, and provided, further, that if the Marketing Period would end on or after August 15, 2005, the Initiation Date shall be the later of (A) September 1, 2005 and (B) the date the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2005 is filed with the SEC. Parent shall...

Page 192
... in which case as of such earlier date), except for any failure to be true and correct that would be immaterial to Parent and Merger Sub; and (ii) the other representations and warranties of the Company contained in this Agreement shall be true and correct (without giving effect to any limitation on...

Page 193
... respects with the agreements and covenants, required to be performed by or complied with by it under this Agreement at or prior to the Closing Date; and (c) the Company shall have received certificates of the Chief Executive Officer or the Chief Financial Officer of each of Parent and Merger Sub...

Page 194
...case, such breach is not capable of being cured or, if capable of being cured, shall not have been cured prior to the earlier of (A) 20 business days following notice of such breach to the Company and (B) the Termination Date; provided that Parent shall not have the right to terminate this Agreement...

Page 195
... on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement. Payment of Parent's Expenses pursuant to this Section 8.2(b) shall be made not later than two business days after delivery to the Company of notice of demand for...

Page 196
... by Parent or the Company pursuant to Section 8.1(c) and at any time after the date of this Agreement and prior to the termination of this Agreement, an Acquisition Proposal shall have been publicly disclosed or otherwise communicated to the senior management or Board of Directors of the Company and...

Page 197
..., printing and mailing of the Proxy Statement shall be shared equally by Parent and the Company. SECTION 8.4 Amendment. This Agreement may be amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time, whether before...

Page 198
... or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent or Merger Sub: c/o Texas Pacific Group 301 Commerce Street, Suite 3300...

Page 199
..., holding, voting or disposing of any Shares (and the term "beneficially owned" shall have a corresponding meaning); (c) "business day" means any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings or, in the case of determining a date when any payment is...

Page 200
... in each case, as applicable, as of the time of the relevant financial statements referred to herein (g) "industries in which the Company and its subsidiaries operate" means the luxury retail segments of the apparel, accessories, jewelry, beauty and decorative home products industries (h) "knowledge...

Page 201
... as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible. SECTION 9.5 Entire Agreement; Assignment. This Agreement (including the Exhibits hereto), the Company Disclosure Schedule, the Parent Disclosure Schedule...

Page 202
... Each of the Company, Parent and Merger Sub hereby agrees that service of any process, summons, notice or document by U.S. registered mail to the respective addresses set forth in Section 9.2 shall be effective service of process for any suit or proceeding in connection with this Agreement or the...

Page 203
..., Parent, Merger Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. THE NEIMAN MARCUS GROUP, INC. By: /s/ Burton M. Tansky Name: Burton M. Tansky Title: President and Chief Executive Officer NEWTON...

Page 204
EXHIBIT 2.2 PURCHASE, SALE AND SERVICING TRANSFER AGREEMENT PURCHASE, SALE AND SERVICING TRANSFER AGREEMENT AMONG HSBC BANK NEVADA, N.A., HSBC FINANCE CORPORATION, THE NEIMAN MARCUS GROUP, INC. AND BERGDORF GOODMAN, INC. DATED AS OF JUNE 8, 2005

Page 205
...-Closing Access. SECTION 5.10. Cooperation in Litigation SECTION 5.11. Preservation of and Access to Books and Records SECTION 5.12. Bulk Sales Law. SECTION 5.13. NFC SECTION 5.14. Allocation of the Purchase Price SECTION 5.15. New Securitization Opinions ARTICLE VI TAX MATTERS SECTION 6.1. Taxes...

Page 206
... Indemnification by the Parent SECTION 9.3. Indemnification by the Purchaser SECTION 9.4. Notice,...Agreement; Amendment; Waiver SECTION 10.5. Counterparts SECTION 10.6. Governing Law SECTION 10.7. Waiver of Jury Trial and Venue SECTION 10.8. Severability SECTION 10.9. No Petition SECTION 10.10. Public...

Page 207
...of Purchase Price Third Party Consents Required for Closing Indemnity Matters Form of Program Agreement Form of Instrument of Assignment and Assumption Form of Required Amendments Form of Securitization Transfer Agreement Form of Servicing Agreement Form of Purchaser Parent Guaranty * Neiman Marcus...

Page 208
PURCHASE, SALE AND SERVICING TRANSFER AGREEMENT, dated as of June 8, 2005 (this "Agreement"), among The Neiman Marcus Group, Inc., a Delaware corporation (the "Parent"), Bergdorf Goodman, Inc., a New York corporation ("BG"), HSBC Bank Nevada, N.A., a national credit card bank (the "Purchaser"), and ...

Page 209
... as of the Closing Date, including any such account that is a Charged Off Account. "Account Agreement" means an agreement (including related disclosure) between the Parent or BG and a Person or Persons under which Accounts are established and Credit Cards or Non-Card Payment Plans are issued to...

Page 210
... a Credit Card or Non-Card Payment Plan is or has been issued by the Parent and in whose name(s) an Account, in connection with which the Credit Card or Non-Card Payment Plan may be used, has been established pursuant to an Account Agreement. "Cardholder List" means a list of the names, addresses...

Page 211
... card that may be used by the holder to purchase goods and services of Parent or its Subsidiaries or their respective licensees through open-end revolving credit, commonly known as a credit or charge card; provided that the term does not include: (i) any gift card; (ii) any debit card, stored value...

Page 212
... used in the conduct of the Business; (10) all customer data relating to customers of the Sellers and their Affiliates (whether or not any portion thereof is duplicated in the Cardholder List and the Master File); and (11) all current Taxes receivable, deferred Tax assets and prepaid Taxes, Tax...

Page 213
...365-day year. "Final Closing Statement" means a statement prepared by the Parent, substantially in the form of Schedule A, showing in reasonable detail the Parent's calculation of the Purchase Price, based on the data with respect to the Accounts and the Acquired Assets as of the Cut-Off Time. "GAAP...

Page 214
... in economic, business or financial conditions generally or affecting the credit card services or consumer credit business, the banking or financial services industry or the retail department store industry, (2) financial market conditions, including interest rates or changes therein, (3) changes in...

Page 215
... of the Seller Disclosure Schedules and such other payment plans not associated with a Credit Card as may be offered by Sellers following the date hereof and prior to the Closing Date pursuant to which the obligor thereunder may purchase goods and services of the Parent and its Subsidiaries and...

Page 216
... contemplated by this Agreement, (ii) changes required to provide for the origination, ownership and contribution to the Master Trust of Non-Card Payment Plan receivables by an Affiliate of Purchaser) and the satisfaction of any applicable Rating Agency Conditions in order to consummate the...

Page 217
...Merger Closing, any New Seller established at the time of the Merger Closing. "Sellers' Securitization Counsel" means Mayer, Brown, Rowe & Maw LLP. "Service Provider" means PaySys and any other data processing service provider used by the Sellers in connection with the Accounts. "Servicing Agreement...

Page 218
...: Term Section Accountant Actions Agreement BG Buyer Tax Act Closing Closing Date Confidentiality Agreement Credit Card Marks De Minimis Claim Indemnified Party Indemnifying Party Losses NFC Parent Pooling and Servicing Agreement Program Agreement Purchase and Assumption Purchaser Purchaser Parent...

Page 219
... to the conditions of this Agreement, at the Closing and effective from and after the Closing Date the Purchaser or (without limiting the Purchaser's and Purchaser Parent's obligations under Article IX) the Purchaser's designee shall assume, pay, defend, discharge and perform as and when due the...

Page 220
...Business Days after the Purchase Price has been finally determined pursuant to Section 2.4(c), pay such deficiency to the Parent, on behalf of the Sellers, together with interest on such deficiency for the period from and including the Closing Date to but excluding the date of such payment at a rate...

Page 221
... Eastern time on the Closing Date to an account or accounts specified by the Parent at least one Business Day prior to the Closing Date. (d) In the event that the Closing occurs after the Merger Closing, the Purchaser shall pay the Estimated Purchase Price by wire transfer of immediately available...

Page 222
... not reasonably be expected to have a Material Adverse Effect on the Business or the Sellers. (d) No Conflicts. The execution, delivery and performance by the applicable Sellers of this Agreement and the Ancillary Agreements do not, and (subject to obtaining the Requisite Regulatory Approvals and...

Page 223
... case to Permissible Liens). This Agreement shall, following the Closing Date, and subject to the filing of appropriate financing statements and all required continuations, amendments and replacements thereof, vest in the Purchaser all right, title and interest of the Sellers in and to the Accounts...

Page 224
... the date of this Agreement, the Sellers have not effected any change in operating policies and procedures of the Business relating to the origination or maintenance of, and collection policies with respect to, the Accounts. (4) the Sellers are in compliance with the applicable Account Agreements...

Page 225
... a Material Adverse Effect on the Business or the Sellers. (p) Taxes. The Sellers have filed all material Tax Returns that they were required to file on or before the date of this Agreement (taking into account all applicable extensions) with respect to the Business, the Acquired Assets, the Assumed...

Page 226
... the Closing Date. The Purchaser and the Purchaser Parent have no reason to believe that they will not be able to obtain the Requisite Regulatory Approvals on a timely basis. (d) No Conflicts. The execution, delivery and performance by the Purchaser and the Purchaser Parent of this Agreement and...

Page 227
...the Business after the Closing Date, (A) the Purchaser is in compliance with all Requirements of Law relating to its credit card business; and (B) neither the Purchaser nor any of its Affiliates is subject to any capital plan or supervisory agreement, ceaseand-desist or similar order or directive or...

Page 228
... of the Purchaser to perform its duties as servicer under the Pooling and Servicing Agreement following the Closing Date. (h) Financing. The Purchaser has sufficient cash, available lines of credit or other sources of immediately available funds to enable it to pay the Estimated Purchase Price as...

Page 229
..., until the Closing Date, the Purchaser shall use its commercially reasonable efforts to preserve intact the business organizations and relationships with third parties relating to its credit card business, to keep available the services of required employees of its credit card business and to...

Page 230
SECTION 5.3. Access and Confidentiality. (a) Until the Closing Date, upon reasonable prior notice and subject to applicable laws relating to the exchange of information, the Parent and BG shall permit (and shall cause NFC to permit) the Purchaser and its authorized representatives to have reasonable...

Page 231
... to the Closing Date as the Parent, on behalf of the Sellers, may reasonably request, including those actions that are incident to the satisfaction of any applicable Rating Agency Condition in connection with the assumption by the Purchaser and the Purchaser's designee of the roles of servicer and...

Page 232
...or in equity. SECTION 5.7. Credit Card Marks; Branding. It is expressly agreed that, except for the limited license granted in the Program Agreement, the Purchaser Parent and the Purchaser are not purchasing or acquiring any right, title or interest in the name "Neiman Marcus", "Bergdorf Goodman" or...

Page 233
... and Records of the Business and all information relating to the accounting, business, financial and Tax affairs of the Business that are in existence on the Closing Date or that come into existence after the Closing Date but relate to the Business prior to the Closing Date for a period of seven...

Page 234
... Internal Revenue Service or any applicable state or local taxing authority) and in the course of any Tax audit, Tax review or Tax litigation relating thereto; provided, however, that in the event that any Governmental Authority challenges any position taken by the Purchaser Parent, the Purchaser or...

Page 235
... to the Business or the Acquired Assets that relates to any period prior to the Closing Date, it shall promptly pay over such refund or the amount of such credit to the Sellers. (h) The Sellers shall be responsible for any applicable 2005 federal or state information reporting for events or payments...

Page 236
... Financing Statements. Sellers shall have executed and delivered UCC-1 financing statements to be filed in the Offices of the Secretaries of State of the states of Delaware and New York and any other state necessary to perfect the sale of the Gross Receivables purchased pursuant to the Purchase and...

Page 237
... received a certificate signed on the Sellers' behalf by an executive officer of the Parent, dated the Closing Date, to the effect that the conditions set forth in Sections 7.2(a), 7.2(b) and 7.2(f) have been satisfied. (d) Tax Opinion. The Purchaser shall have received copies of any Tax Opinions of...

Page 238
... Documents, rating agencies or trustee in connection with the assumption of the roles of seller and servicer under the Master Trust in order to consummate the transactions contemplated hereby. (e) Purchaser Parent Guarantee. The Purchaser Parent Guarantee shall have been duly executed and delivered...

Page 239
...date; or (e) by either the Purchaser or the Parent, in the event of a breach or default in the performance by the other party of any representation, warranty, covenant or agreement...case may be, not to be satisfied at the Closing Date and (ii) has not been, or cannot be, cured within thirty (30) days ...

Page 240
... inaction with respect to the Business prior to the Closing, (7) the failure by the Parent or any of its Affiliates or any of their respective agents, directors, officers or employees to disclose Account Agreement terms to Cardholders at any time prior to the Closing, or (8) any false or misleading...

Page 241
... of its Affiliates or any of their respective agents, directors, officers or employees to disclose Account Agreement terms to Cardholders at any time from and after the Closing, or (8) any false or misleading advertising or other misrepresentation by the Purchaser or any of its Affiliates or any of...

Page 242
..., compromise or payment thereof shall be Losses subject to indemnification by the Indemnifying Party (subject to the provisions and limitations of Sections 9.2 and 9.3, as applicable). Each Indemnified Party shall make available to the Indemnifying Party all information reasonably available to such...

Page 243
... Services Division Facsimile: (847) 205-7417 if to the Sellers to: c/o The Neiman Marcus Group, Inc. One Marcus Square 1618 Main Street Dallas, Texas 75201 Attention: General Counsel Facsimile: (214) 573-5354 with a copy to: Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York...

Page 244
... the Closing Date (and all monies paid or otherwise collected on charged-off accounts prior to the Closing Date) shall be retained by the Sellers subject to their contractual obligations under the Securitization Documents. (c) The Purchaser shall be responsible for all fees of the rating agencies in...

Page 245
..., each of the Purchaser and the Purchaser Parent, on the one hand, and the Parent and BG, on the other hand, agrees that it shall not (and, in the case of the Parent, shall cause NFC not to) issue a press release, make any other public statement or make any statement to employees with respect to the...

Page 246
...Vice President HSBC FINANCE CORPORATION By /s/ Sandra L. Derickson Name: Sandra L. Derickson Title: Vice Chairman THE NEIMAN MARCUS GROUP, INC. By /s/ Steven P. Dennis Name: Steven P. Dennis Title: Senior Vice President, Strategy, Business Development and Multichannel Marketing BERGDORF GOODMAN, INC...

Page 247
... with the Securities and Exchange Commission pursuant to a request for confidential treatment. AMENDED AND RESTATED CREDIT CARD PROGRAM AGREEMENT by and among THE NEIMAN MARCUS GROUP, INC. BERGDORF GOODMAN, INC. HSBC BANK NEVADA, N.A. and HSBC CARD SERVICES INC. Dated as of September 23rd, 2010

Page 248
... of the NMG Companies 4.3 Certain Responsibilities of Bank 4.4 Ownership of Accounts; Account Documentation 4.5 Branding of Accounts/Credit Cards/Cardholder Documentation/Solicitation Materials 4.6 Underwriting and Risk Management 4.7 Cardholder Terms 4.8 Internet Services 4.9 Sales Taxes 4.10...

Page 249
... Use or Disclosure of Confidential Information 13.4 Return or Destruction of Confidential Information ARTICLE XIV RETAIL PORTFOLIO ACQUISITIONS 14.1 Retailer that Operates a Credit Card Business 14.2 Retailer that has a Credit Card with another Issuer 14.3 Retailer that has a Credit Card with Bank...

Page 250
... Term or a Renewal Term 16.3 Termination by Bank Prior to the End of the Initial Term or a Renewal Term 16.4 Effective Date of Termination ARTICLE XVII EFFECTS OF TERMINATION 17.1 General Effects 17.2 The NMG Companies' Option to Purchase the Program Assets 17.3 Card Acceptance and Loyalty Program...

Page 251
... XX RECOURSE CREDIT PROGRAM 20.1 Recourse Credit Program 20.2 NMG Obligations 20.3 Collection of Charged-Off Partial Recourse Accounts and Purchased Full Recourse Accounts 20.4 Performance 20.5 Reports 20.6 Termination 20.7 Portfolio Cap 20.8 Removals from Recourse Portfolio 20.9 Annual Review iv

Page 252
... Neiman Marcus Group, Inc., a Delaware corporation ("NMG"), Bergdorf Goodman, Inc., a New York corporation ("BG, and together with NMG, the "NMG Companies"), HSBC Bank Nevada, N.A., a national credit card bank ("Bank"), and HSBC Card Services Inc. (formerly merged with HSBC Private Label Corporation...

Page 253
... [***] and ending on the first date thereafter when the forecast for each of the first [***] forecast in the ABA Delinquency Forecast published for the most recent month is less than or equal to [***]. "Account" means any Private Label Account or Non-Card Payment Plan account under which a purchase...

Page 254
... a request for Program Asset Information, the following applicable date: (i) in connection with an expected expiration of this Agreement at the end of a Term, the date that is one year prior to the end of the Term; (ii) the date on which Bank proposes a change in Risk Management Policies that NMG...

Page 255
... under any Private Label Accounts. "Average Interest Free Receivables" means, for any Program Year, the average for each Program Month occurring in such Program Year of the Program Month-end Billed Cardholder Debt as to which no interest will accrue in accordance with the terms of credit plans in...

Page 256
...through the end of the month ended prior to the Risk Information Date. "BG" has the meaning set forth in the preamble hereof. "Billed Cardholder Debt" means (i) all amounts charged and owing to Bank by Cardholders that were billed with respect to the Private Label Accounts and Non-Card Payment Plans...

Page 257
... information collected by or on behalf of Bank (including by NMG Servicer in its capacity as such) with regard to each purchase charged by a Cardholder using his or her NMG Credit Card or Non-Card Payment Plan (including NMG Charge Transaction Data with respect to charges on Private Label Accounts...

Page 258
... addresses (as available), telephone numbers or social security numbers of any or all Cardholders. "Change in Law" means any of the events or circumstances specified in subsections (a) through (c) below, if such event occurs after the Effective Date: (a) the enactment or promulgation of (i) a new...

Page 259
... As used herein, "Repeat Change in Law" means any Change in Law as to which the substantive requirements thereof applicable to Bank or the NMG Companies, as the case may be, shall have been the subject of a prior certification pursuant to Section 4.6(j). For example, in the event that Bank shall...

Page 260
... payment system that is generally acceptable to sellers of goods and services. "Comparable Partner Programs" means from time to time other major Credit Card programs of Bank designated annually by the Management Committee that are comparable to the Program in terms of program size, public profile...

Page 261
... user may purchase goods and services, obtain cash advances or convenience checks, and transfer balances through open-end revolving credit, commonly known as a credit or charge card; provided that the term does not include: (i) any gift card; (ii) any debit card, stored value card, electronic or...

Page 262
... and ending on the date on which NMG makes its election with respect to its purchase of the Program Assets or such extension expires, as the case may be. "Effective Annual Servicing Fee Rate" has the meaning ascribed to it in the Servicing Agreement. "Effective Date" means July 7, 2010. "Event of...

Page 263
... month during any period, [***]. "Full Recourse Accounts" means (a) Accounts issued pursuant to Applications that NMG requests Bank to approve that Bank would otherwise decline under the Risk Management Policies then in effect, (b) Accounts where NMG requests Bank to grant a credit line increase...

Page 264
... such credit and collection policies (and not as a result of fraud) during such period. "High Collar" has the meaning set forth on Schedule 1.1(d) hereto. "Housing Price Forecast" means, with respect to any month, the forecast of housing prices designated "FHFA Conventional and Conforming Home Price...

Page 265
... Applicable Law based on certain attributes available to Bank or NMG without contacting such Person, such as demographic qualities and/or information in a consumer's credit report. "Incremental Annual Servicing Fee Rate" means, at any time, the excess, if any, by which the Annual Servicing Fee Rate...

Page 266
..., the finance charges assessed and reversed on any Accounts that have undergone any Existing Term Change or change in New Account Terms in such Program Year shall be excluded from both the numerator and denominator during the period of [***] after the effective date of such terms change. "Interim...

Page 267
... business [***]. "Loyalty Card" means a card issued for the Program pursuant to any Loyalty Program providing for access to an Account, including the Loyalty Cards listed in Section B of Schedule 1.1(f) hereto. "Loyalty Programs" means a points-based system that rewards Credit Card usage or customer...

Page 268
...the Annual Servicing Fee Rate divided by twelve (12). "Monthly Settlement Sheet" has the meaning set forth in Section 7.1(b) hereof. "Net Credit Sales" means, for any period, an amount equal to (A) gross credit sales on Accounts (including gift card sales, sales tax, delivery charges, Licensee sales...

Page 269
... be used solely to finance purchases of NMG Goods and Services through any NMG Channel, including the Credit Cards listed in Section B of Schedule 1.1(g). "NMG Credit Event" means the occurrence and continuance of any of the following: (i) the amount available for borrowing by the NMG Companies and...

Page 270
... products and services sold, charged or offered by or through NMG Channels, including for personal, household, or business purposes, and including accessories, delivery services, protection agreements, gift cards, shipping and handling, and work or labor to be performed for the benefit of customers...

Page 271
... the Cardholder Indebtedness related to the Private Label Accounts and Non-Card Payment Plans at the time of any purchase of the Program Assets, or Wind-Down Assets, as the case may be, excluding written-off Cardholder Indebtedness (in accordance with Bank's write-off policy then applicable to the...

Page 272
... set forth in the Purchase Agreement. "Privacy Policy" means the privacy policy and associated disclosures to be provided by Bank to Cardholders in connection with the Program. "Private Label Accounts" means the Accounts linked to NMG Credit Cards. "Profit Sharing Differential" means, with respect...

Page 273
...means the purchase and sale agreement, dated as of June 8, 2005, among the NMG Companies, Bank and the other parties thereto. "Quarterly Settlement Sheet" has the meaning set forth in Section 7.1(c) hereof. "RAM Condition" means any time commencing on the first date on which the Rolling 3 Month Post...

Page 274
... with Schedule 1.1(i)) and (iii) two. "Risk Change Compensation Percentage" means a percentage equal to the percentage of Net Credit Sales forecasted by Bank to be generated during the period commencing on the occurrence of a Preliminary Non-Purchase Event and ending on the effective date of...

Page 275
...with the terms of this Agreement, including policies, procedures and practices for credit and Account openings, transaction authorization, collections, credit line assignment, increases and decreases, over-limit decisions, Account closures, payment crediting and charge-offs. "Rolling 3 Month Post MP...

Page 276
...calendar month period. "Sales Tax Refunds" means refunds, rebates, credits or deductions of sales and use tax by any taxing authority in respect of an Account, and all allowable interest relating thereto. "Second-Look Credit Card Program" has the meaning set forth in Section 2.2(b) hereof. "Services...

Page 277
... Rate, (%, SA)" "FLBRM.US" "baseline scenario" as most recently published in the Moody's publication "Economy.com". "Unemployment Forecast Condition" means: (i) with respect to each month during the period from the Effective Date through February 2012, the period commencing on the first date...

Page 278
... by the number of days in such Program Month occurring during such period. "Wind-Down Assets" has the meaning set forth in Section 17.5(a). "Wind-Down Implementation Requirements" means, with respect to any proposed modification to any New Account Policy, the forecasted effect of such change on the...

Page 279
...2.1 Credit Program. During the Term, Bank shall offer the NMG Credit Cards and the Non-Card Payment Plans. Bank shall promptly open a new Account and issue a new NMG Credit Card and/or Non-Card Payment Plan with respect to each Application approved in accordance with the Risk Management Policies. To...

Page 280
... Effective Date, in six Neiman Marcus store locations and [***], in a number of stores equal to [***] plus the number of anniversaries of the Effective Date that have occurred prior to such date (i.e, up to [***] by the last year of the Initial Term); and NMG may accept additional Credit Cards not...

Page 281
...Companies shall not enter into any arrangement with an unaffiliated third Person other than Bank or Bank's Affiliates with respect to the provision of a product pursuant to which credit is extended to finance purchases of NMG Goods and Services solely over the Internet. (ii) If (A) prior to the date...

Page 282
.... NMG shall provide written notice to Bank not less than [***] Business Days prior to executing any such agreement with any such third Person and shall provide written notice to Bank at least [***] prior to such product becoming commercially available. If the NMG Companies do not enter into any such...

Page 283
...) participate in rewards programs and promotions by card associations or for cards not branded with any of the NMG Licensed Marks (e.g., American Express Membership Rewards); or (iii) offer its customers rewards or promotional programs or other value propositions, including Loyalty Programs, of any...

Page 284
... all times have as one of its designees the Person with overall responsibility for the performance of the Program within his or her respective corporate organization, which in the case of Bank, shall be the Chief Financial Officer or Chief Operating Officer of the private label Credit Card business...

Page 285
... offering by the Parties of new NMG Credit Cards, Approved Ancillary Products, NonCard Payment Plans or other payment products pursuant to the Program; changes in Account terms, including any of the terms set forth on Schedule 4.7; subject to Section 4.6(b), changes to the Risk Management Policies...

Page 286
... to resolve such matter for at least ten (10) Business Days after the relevant subcommittee vote and has failed to do so), then initially the Chief Executive Officer of HSBC Card & Retail Services and Senior Vice President, General Counsel and Secretary of NMG (or any other similarly ranking...

Page 287
... (ii) Bank adopts, and certifies to the NMG Companies that it has adopted, the same position with respect to each of its other Comparable Partner Programs that are similarly impacted by such Applicable Law or to which such Applicable Law could similarly be applied. (iii) Customer Service Disputes...

Page 288
...-Card Payment Plans or other products and services proposed to be offered to Cardholders and, in each case, the approval of any compensation payable to the NMG Companies in respect thereof; provided, that the economic terms and compensation arrangements related to such new products or services shall...

Page 289
... Management Policies relating to or governing existing Accounts and the implementation of Existing Term Changes to the extent permitted by and subject to Section 4.7(b) or New Account Terms to the extent permitted by and subject to Section 4.7(c); (v) changes to Account terms required by Applicable...

Page 290
...-Purchase Event, provided that an NMG Credit Event is then in effect, implementation of New Account Terms. 3.3 Program Relationship Managers; Program Team. (a) The NMG Companies and Bank shall each appoint one Program relationship manager (each, a "Manager"). The Managers shall exercise day-to-day...

Page 291
... in the Servicing Agreement, in its capacity as NMG Servicer, maintain a System to process Applications, using the underwriting and credit limit assignment policy set forth in the Risk Management Policies and the Operating Procedures, as maintained by NMG in effect as of the Effective Date; (ii) as...

Page 292
... In-Store Payments in accordance with procedures that comply with Applicable Law, subject to Section 8.3(b); (viii) (ix) pay sales associate compensation relating to the solicitation of new Accounts; and continue to make available a Program Loyalty Program. 4.3 Certain Responsibilities of Bank...

Page 293
...' other Credit Card programs and customers of Bank's and its Affiliates' other consumer loan programs and assist the NMG Companies and their Affiliates in using such information to develop marketing plans for their businesses; (vii) to the fullest extent permitted by Applicable Law and Bank's or...

Page 294
... NMG Companies shall accept payments made with respect to an Account (i) in an NMG Companies' store as provided in Section 8.3, (ii) by telephone through the ACH Pay by Phone system and (iii) online through the Program Website. (f) With respect to all Account Documentation, NMG Servicer, shall hold...

Page 295
... Risk Management Policies, Bank shall promptly establish a Private Label Account and/or a Non-Card Payment Plan, as applicable. (ii) Bank shall have the right, power and privilege to review periodically the creditworthiness of Cardholders to determine the range of credit limits to be made available...

Page 296
..., following delivery of all information required pursuant to Section 4.6(c), any proposed modification to the Risk Management Policies that would not be subject to approval as a Bank Matter may be approved by Bank's Program Manager and NMG's senior credit officer provided approval of such change is...

Page 297
... of such modification on open-to-buy amounts (in the case of credit line decrease strategies), authorization rates, Net Credit Sales, Post MP RAM, [***] and [***] for the aggregate period of [***] following such proposed implementation, and in the case of a change that Bank proposes to implement as...

Page 298
... Implementation Requirements. In the event that NMG elects to extend the time during which NMG can exercise its Program Assets purchase option pursuant to Section 17.2(b), changes to New Account Policies shall become Bank Matters; provided, however, if NMG thereafter timely delivers notice that it...

Page 299
... proposed change shall cease to be a Bank Matter in the event NMG makes a timely election to purchase the Program Assets; and (ii) Prior to the [***] after the Risk Information Date, if NMG is in compliance with the requirements of Section 4.6(h) with respect to the New Account Loss Reserve Amount...

Page 300
... changes to New Account Policies shall become Bank Matters without limit; provided that Bank may implement such Bank Matters following such [***] without any consideration or vote thereon by the Management Committee so long as Bank shall have provided NMG with not less than five (5) Business Days...

Page 301
... to NMG pursuant to Section 9.1(a)(i), for application pursuant to Section 17.5(g), an amount equal to the WindDown Asset Purchase Reserve Amount. (iv) If Bank Parent's senior debt has an Investment Grade Credit Rating from at least [***] of the Rating Agencies, then any amount withheld pursuant to...

Page 302
... to exist or by the end of such additional [***] (whichever is earlier). (n) On or prior to April 1, 2011, Bank shall use an Imputed Income Model for the Program in either proactive credit line increase or real time line increase decisions, so long as such model conforms with Applicable Law. NMG and...

Page 303
... pursuant to Section 3.2(g)(v), at the time of any proposal with respect to the implementation of any Existing Terms Change, Bank shall deliver to NMG a report (including relevant information regarding Account terms in effect for credit cards offered to customers of the NMG Primary Competitors) to...

Page 304
... test results. (ii) NMG shall use all reasonable efforts to support Bank's test of such New Account Terms meeting the foregoing requirements within a [***] timeframe following the date on which Bank first proposes such implementation of New Account Terms to the Management Committee. (iii) The test...

Page 305
... such New Account Term or Existing Term Change as so requested. In such event, NMG shall reimburse Bank for all reasonable out-of-pocket costs incurred by Bank in order to prepare for implementation of such New Account Term or Existing Term Change. 4.8 Internet Services. (a) Cardholder Website. Bank...

Page 306
... to directly recover sales taxes charged to any Account written off by Bank, the NMG Companies shall sign such forms and provide any such other information as reasonably requested by Bank to enable Bank 55 Internet Services Representations and Warranties. Bank represents and warrants during the Term...

Page 307
... the Private Label Accounts reflected in the Year-End Settlement Sheet with respect to the preceding Program Year is greater than the applicable High Collar, the NMG Companies shall pay Bank an amount equal to [***]. 4.11 Interest Free Receivables. Bank shall offer and support credit plans providing...

Page 308
...used by Bank and its Affiliates. Any amount in the Joint Marketing Fund for a given Fiscal Year that is not spent in that Fiscal Year shall remain available for use at the direction of the Management Committee during the Term. (e) In the event that the NMG Companies expand acceptance of Credit Cards...

Page 309
... Plans; conduct mailings and other related marketing efforts on behalf of NMG and its Affiliates, which may include marketing materials promoting the Program, the NMG Credit Cards and Non-Card Payment Plans, the NMG Channels and/or the NMG Goods and Services at NMG's option, based upon the customer...

Page 310
...NMG Credit Cards and the Program but in no event less frequently than annually. Such surveys shall be in a form and employ reasonable methodologies developed in consultation with the NMG Companies and shall provide for a level of information reasonably acceptable to NMG. Bank shall make available to...

Page 311
... of target audience; planned budget, specifying Bank's share and the NMG Companies' share, if any; distribution among the NMG Channels and types of Accounts; and target implementation date (e.g., mailing dates, calling dates, delivery dates). (d) Each Marketing Plan shall address development...

Page 312
... on "do not mail" lists (or other similar lists), and Bank shall promptly comply with such requests with respect to its solicitation of NMG Credit Cards and Approved Ancillary Products. Bank shall, subject to Applicable Law, promptly provide to the NMG Companies a complete list of any Cardholders 61

Page 313
...Bank may use the Cardholder Data in compliance with Applicable Law and the Program Privacy Policy solely (i) for purposes of soliciting or marketing (in each case, solely as directed by the NMG Companies or the Management Committee) or servicing customers listed in the Cardholder Data for NMG Credit...

Page 314
... to Applicable Law and the Program Privacy Policy, Bank shall transmit to the NMG Companies at such times as may be requested by NMG and in formats agreed to by the Parties in advance from time to time: (i) for any customer who has applied for an NMG Credit Card, regardless of the marketing channel...

Page 315
... each case as directed by the NMG Companies. Without limiting the foregoing, NMG and each of its Affiliates may receive, use and disclose the Cardholder Data in compliance with Applicable Law and the Program Privacy Policy (i) for purposes of promoting the Program or promoting NMG Goods and Services...

Page 316
... interest in the Cardholder Data to NMG or its Nominated Purchaser as part of such transaction, and Bank's right to use and disclose the Cardholder Data shall terminate upon the date on which this 65 With respect to the sharing, use and disclosure of the Cardholder Data following the termination of...

Page 317
... prior to the Effective Time. (b) Subject to compliance with Applicable Law, NMG's privacy policies, the Marketing Plan and such criteria (including format) as may be mutually agreed to from time to time, the NMG Companies shall make available to Bank, free of charge, a list of customers of NMG and...

Page 318
... Bank. Bank shall not use, or permit to be used, the NMG Prospect List except as provided in this Section 6.3(c). Bank may use the NMG Prospect List in compliance with Applicable Law solely for purposes of soliciting customers listed in the NMG Prospect List for Accounts or as required by Applicable...

Page 319
... such termination, Bank shall return or destroy all the NMG Shopper Data and NMG Prospect Lists and shall certify such return or destruction to the NMG Companies upon request. ARTICLE VII OPERATING STANDARDS 7.1 Reports. (a) Within [***] after the end of each Fiscal Month or such other time as may...

Page 320
...or its supporting financial accounting subsystems. (b) Within[***] after the end of each Program Month other than the last Program Month of each Program Year, NMG Servicer shall deliver to Bank a statement, in the form set forth on Schedule 7.1(b), setting forth all information required to determine...

Page 321
... such arrangement. 7.3 Service Level Standards. (a) 7.3(a). (b) Primary Servicer shall report to the NMG Companies monthly, in a mutually agreed upon format and on a calendar month basis, Primary Servicer's performance under each of the SLAs set forth on Schedule 7.3(a). If Primary Servicer fails to...

Page 322
...test the plan annually and shall promptly implement such plan upon the occurrence of a disaster or business interruption. Primary Servicer shall be excused from its failure to meet any applicable SLAs that result directly from the failure of any of the NMG Systems. 7.4 Credit Systems. (a) Bank shall...

Page 323
... amount is billed to an NMG Credit Card or Non-Card Payment Plan and the remainder is paid through one or more other forms of payment), transactions over the phone, on-line or hand keyed, as applicable, or down-payments on NMG Goods and Services for later delivery. If any Retail Merchant is unable...

Page 324
... credit toward the applicable open-to-buy limits of the respective Account upon receipt of an In-Store Payment). The NMG Companies, on behalf of the Retail Merchants, shall notify Bank upon receipt of In-Store Payments and Bank shall include the NMG Charge Transaction Data related to such In-Store...

Page 325
... the end of each Program Month, NMG Servicer shall deliver or cause to be delivered to Bank a report for such preceding Program Month of all Special Discounts reflected in the NMG Charge Transaction Data and paid for by Bank in such preceding Program Month (and, in the case of NMG Charge Transaction...

Page 326
... Cardholder at the time of the Application; NMG ships merchandise to a Cardholder at a previously unused address; The charge or Account arose from fraud of any employee or agent in a NMG call center; The charge or Account arose from the unauthorized removal of information from an NMG store or owned...

Page 327
...NMG Compensation. (a) Payments. (i) Not later than 1:00 pm (Central time) on [***], Bank shall pay to NMG an amount equal to the amount set forth on Schedule 9.1(a)(i) with respect to the Accounts. (ii) Not later than 1:00 pm (Central time) on the [***] after the date on which the Monthly Settlement...

Page 328
..., and (y) NMG shall inform Bank of the level to which NMG shall commit to increase Post MP RAM, and the number of months for which NMG commits to increasing Post MP RAM ([***]). At the end of the period of the commitment, Bank will calculate the difference between the estimated payments made by NMG...

Page 329
... Bank shall: (i) discontinue immediately all use of the NMG Licensed Marks, or any of them, and any colorable imitation thereof; and (ii) destroy all unused NMG Credit Cards, Applications, Account Documentation, Solicitation Materials, periodic statements, materials, displays, advertising and sales...

Page 330
... Marks together with any logos or trademarks of any other companies involved in the financial services industry; and (C) NMG shall not use the Bank Licensed Marks in association with any other marks to form a new mark. All uses of the Bank Licensed Marks shall require the prior written approval of...

Page 331
... NMG Credit Cards, Applications, Account Documentation, Solicitation Materials, periodic statements, materials, displays, advertising and sales literature and any other items, in each case, bearing any of the Bank Licensed Marks. (d) Ownership of the Bank Licensed Marks. Each of the NMG Companies...

Page 332
... Parties, the sole property of the providing Party, and if applicable, shall be considered "Confidential Information" under Section 13.1. Any Intellectual Property, systems or networks of a Party used to process, store or analyze information or data of the other Party remain, as between the Parties...

Page 333
... of the NMG Companies to perform their obligations under this Agreement, the NMG Companies are in compliance with all requirements of Applicable Law relating to the Credit Card Business and neither of the NMG Companies nor any of their Affiliates is subject to any order, directive or restriction of...

Page 334
... perform its obligations under this Agreement. (g) Books and Records. All books and records of the NMG Companies related to the Credit Card Business have been maintained accurately and in accordance with all requirements of Applicable Law applicable to the NMG Companies and the Credit Card Business...

Page 335
... rights of creditors generally and by general equity principles including those respecting the availability of specific performance). (c) Conflicts; Defaults; Etc. The execution, delivery and performance of this Agreement by each of the Bank Companies, their compliance with the terms hereof, and the...

Page 336
... in compliance with all requirements of Applicable Law relating to their Credit Card business; and none of the Bank Companies or any of their Affiliates is subject to any capital plan or supervisory agreement, cease-and-desist or similar order or directive or memorandum of understanding between it...

Page 337
... any time during the Term, NMG does not publicly file periodic reports with the Securities and Exchange Commission, NMG shall provide to Bank (i) its audited consolidated annual financial statements within [***] of the end of each Fiscal Year, and (ii) its unaudited consolidated quarterly financial...

Page 338
...Program Support. NMG shall not take any action that Bank reasonably concludes is materially inconsistent with the Program Objectives or otherwise materially adversely affects the Program or Bank's private label Credit Card business. 11.5 General Covenants of the Bank Companies. (a) Litigation. Bank...

Page 339
... by Applicable Law, (b) such records are legally privileged, (c) such records are company planning documents of such Party or any of its Affiliates, operating budgets, management reviews or employee records, (d) such records relate to other customers of, or credit programs operated by, Bank or...

Page 340
... by Applicable Law, (b) such records are legally privileged, (c) such records are company planning documents of such Party or any of its Affiliates, operating budgets, management reviews or employee records, (d) such records relate to other customers of, or credit programs operated by, Bank or...

Page 341
... Party's position with respect thereto, the Managers shall meet for the purpose of negotiating in good faith to seek resolution of such dispute. Management Committee. If, after a period of five (5) Business Days, the Managers are unable to resolve the dispute to the satisfaction of NMG and Bank, the...

Page 342
...after a period of five (5) Business Days, the Management Committee is unable to resolve the dispute to the satisfaction of both the NMG Companies and Bank, each Party shall appoint a designated knowledgeable, responsible representative who is one of the top five highest executives in the Credit Card...

Page 343
... each case including: (A) information concerning marketing plans, objectives and financial results; (B) information regarding business systems, methods, processes, financing data, programs and products; (C) information regarding any products offered or proposed to be offered under the Program or the...

Page 344
... limitations, prospective Nominated Purchasers and their employees and representatives who have a reasonable need to access such Confidential Information in connection with the Program, the sale of Program Assets or other assets of NMG and its Affiliates or the establishment of a new Credit Card...

Page 345
... such right, Bank shall have a right of first offer to acquire the related Credit Card business offered for sale by such retailer in connection with NMG's or its Subsidiary's acquisition of the retail department store business (such Credit Card business accounts, the "New Portfolio") as follows...

Page 346
... by merger, consolidation or other business combination) a retail department store business that through Bank or any of its Affiliates issues a Credit Card in the United States, Bank and NMG shall assess and mutually agree whether to integrate such Credit Card portfolio with the Program or operate...

Page 347
... under this Agreement. (ii) Purchased co-branded Credit Card accounts shall continue under the same terms and conditions being offered to the purchased retailer's customers, or such other terms and conditions upon which NMG and Bank shall mutually agree. (b) Bank shall cover all costs related to...

Page 348
...is due pursuant to Schedule 7.3(c). (d) Bank Parent shall fail to make payment in full of any amount owed under the Bank Guarantee to one or more of the NMG Companies when due and payable. (e) Any Bank Company or Bank Parent shall no longer be solvent or shall fail generally to pay its debts as they...

Page 349
...shall constitute an event of default by the NMG Companies hereunder: (a) NMG shall fail to make payment in full of any amount set forth on a Monthly Settlement Sheet, Quarterly Settlement Sheet or Yearly Settlement Sheet when due and payable. (b) within [***]. (c) A decree or order by a court having...

Page 350
... a Change of Control of Bank Parent or (ii) one or more Persons that is not an Affiliate of Bank on the date of this Agreement acquires a direct or indirect controlling interest in Bank or any other Person conducting a substantial part of the Credit Card business conducted within the corporate group...

Page 351
... Risk Information Date in respect of a proposed modification to a Risk Management Policy, other than a modification that would be Bank Matter as described in Section 3.2(g)(i), if such modification is an Unapproved Matter and either: (i) in the case of a proposed modification to a New Account Policy...

Page 352
... existing Accounts if the cumulative effect of such change in Risk Management Policy and all other changes implemented pursuant to Sections 3.2(g)(iii) and (iv) as Bank Matters is a decrease in such Net Credit Sales by more than [***] in any rolling [***] period based on the information required...

Page 353
... process. 16.4 Effective Date of Termination. A termination by NMG or Bank, as applicable, prior to the end of the Term shall become effective on the applicable date set forth below, in each case subject to Section 17.1: (a) a termination in respect of an NMG Event of Default or a Bank Event...

Page 354
...notice, ending on the expiration date of the applicable period set forth in Section 17.2(b) as so extended), (A) no amounts shall be withheld in respect of the Existing Account Reserve Amount and (B) Bank shall withhold from the Merchant Participation an amount equal to [***] of Net Credit Sales and...

Page 355
... Purchase Date". (d) The purchase price for the Program Assets purchased, payable on the Program Purchase Date, shall be equal to the Par Value thereof at the time of purchase, except that if the purchase right arises as a result of (A) an early termination of this Agreement by Bank for an NMG Event...

Page 356
... pursuant to clause (i) above by delivering written notice of such extension to Bank or NMG and the Nominated Purchaser, as applicable, not less than [***] prior to the date on which the Interim Servicing Period would end in absence of such extension or pursuant to clause (ii) above by delivering...

Page 357
... the methods and reflecting the information set forth in Schedule 17.2(g) reflecting a segmentation of all Accounts as to which Bank proposes to make any change to Risk Management Policies (other than changes as required by Applicable Law); a report further segmenting (i.e., subsegmenting) each of...

Page 358
...by Bank for other similar private label Credit Card programs, shall take into account trends at the time such proposed change would be implemented and shall be certified as meeting the foregoing requirements of this Section by the Chief Financial Officer of Bank's Credit Card business. (h) Following...

Page 359
changes to Risk Management Policies implemented as Bank Matters (other than Bank Matters approved pursuant to Section 3.2(g)(i)) to not apply to such Accounts. 17.3 Card Acceptance and Loyalty Program During Wind-Down. Following the occurrence of a Preliminary Non-Purchase Event occurring after a ...

Page 360
..., in no event shall Bank use or disclose or permit any of its Affiliates to use or disclose the Cardholder Data to market or promote a Credit Card or ancillary product together with any retailer. (d) If NMG gives written notice that it shall not exercise the option to purchase the Program Assets...

Page 361
... of the time to complete such purchase as set forth in this Agreement, NMG shall pay to Bank, within [***] after such expiration, an amount equal to [***], Bank shall be entitled to draw upon and retain such amount from the segregated account, escrow account or letter of credit established pursuant...

Page 362
...' Indemnification of the NMG Companies. From and after the Effective Date, the Bank Companies' shall indemnify and hold harmless NMG, its Affiliates and their respective officers, directors and employees from and against and in respect of any and all losses, liabilities, damages, costs and expenses...

Page 363
... by the Management Committee and used by any of the NMG Companies in that form and in accordance with Bank's instructions and/or the Operating Procedures that fails to comply with Applicable Law, other than any content in the Solicitation Materials that primarily relates to Loyalty Programs and was...

Page 364
...Precautionary Security Interest. The NMG Companies and Bank agree that this Agreement contemplates the extension of credit by Bank to Cardholders and that the NMG Companies' submission of NMG Charge Transaction Data to Bank shall constitute assignment by the NMG Companies of any and all right, title...

Page 365
...acquired: (i) all Accounts, Cardholder Indebtedness, Account Documentation and NMG Charge Transaction Data, (ii) all deposits, credit balances and reserves on the Bank's books relating to the Program, and (iii) all proceeds of the Cardholder Indebtedness. In addition, the NMG Companies agree to take...

Page 366
... instructing NMG to pay directly to the State of Texas the Texas sales and use tax due under this Agreement. 19.7 Amendment. Except as provided herein, this Agreement may not be amended except by a written instrument signed by each of the Bank Companies and each of the NMG Companies. 19.8 Non-Waiver...

Page 367
...delivery service, addressed as follows: If to the NMG Companies: c/o The Neiman Marcus Group, Inc. One Marcus Square 1618 Main Street Dallas, Texas 75201 Attention: General Counsel c/o The Neiman Marcus Group, Inc. One Marcus Square 1618 Main Street Dallas, Texas 75201 Attention: Credit Card Program...

Page 368
...Avenue New York, New York 10017 Attention: Maripat Alpuche, Esq. c/o HSBC Bank Nevada, N.A. 26525 N. Riverwoods Blvd. Mettawa, Illinois 60045 Attention: SVP - Client Development, HSBC Card & Retail Services HSBC Card Services, Inc. 26525 N. Riverwoods Blvd. Mettawa, Illinois 60045 Attention: General...

Page 369
... and other announcements as may be required by Applicable Law or the applicable rules and regulations of any governmental agency or stock exchange and (b) publications prepared solely by and for employees of any of the NMG Companies or the Bank Companies, or their respective Affiliates. 19.19 No Set...

Page 370
... Parties under this Agreement shall cease, except that the obligations of the Parties pursuant to Schedule 4.6(f) and the corresponding provisions of Section 4.6(f) (Alternative Risk Change Payment Arrangements), ARTICLE VI (Cardholder Information), Section 8.5 (Bank Right to Charge Back), Article...

Page 371
... Account balance of any Partial Recourse Account that exceeds the credit line that would have been in effect in absence of such designation as a Partial Recourse Account in the event such Partial Recourse Account is charged off in accordance with the Risk Management Policies. NMG agrees to purchase...

Page 372
... XX. 20.9 Annual Review. At the end of each Program Year, Bank will review the performance of the Recourse Portfolio and shall, with respect to any of such Recourse Accounts that would qualify as an Account with the credit line then in effect thereunder under the Risk Management Policies then in...

Page 373
[Remainder of Page Intentionally Left Blank] 122

Page 374
... above written. THE NEIMAN MARCUS GROUP, INC. By: /s/ James E. Skinner Name: James E. Skinner Title: EVP & CFO BERGDORF GOODMAN, INC. By: /s/ James E. Skinner Name: James E. Skinner Title: EVP & CFO HSBC BANK NEVADA, N.A. By: /s/ Brian Hughes Name: Brian Hughes Title: EVP HSBC CARD SERVICES INC. By...

Page 375
SCHEDULE 1.1(a) ABA Delinquency Forecast Table with Moody's March 2010 forecast and the [***] trigger as follows: Month A=March 2010 Forecast Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 ...

Page 376
...Forecast Condition shall be determined to exist as of August 2011 if any month within the range of months bounded by [***] of the ABA Delinquency Forecast published in [***] exceeds the corresponding value of B = Trigger. 2. Example of (ii) of "ABA Delinquency Forecast Condition": An ABA Delinquency...

Page 377
SCHEDULE 1.1(b) Bank Licensed Marks Mark Serial/Registration Number HSBC Card Services HSBC Bank Nevada HSBC Finance Corporation HSBC Retail Services HSBC Card & Retail Services HSBC 74586917/ 2000657 74586917/ 2000657 74586917/ 2000657 74586917/ 2000657 74586917/ 2000657 74586917/ 2000657 ...

Page 378
SCHEDULE 1.1(c) Comparable Partner Programs Saks Incorporated Helzberg Diamonds Bon Ton

Page 379
SCHEDULE 1.1(d) Collar Information "High Collar" means (i) with respect to the Finance Charge Reversal Percentage applicable to the Private Label Accounts, [***], (ii) with respect to the Late Fee Reversal Percentage applicable to the Private Label Accounts, [***]; provided, however that the Parties...

Page 380
SCHEDULE 1.1(e) Housing Price Forecast Table with Moody's March 2010 forecast and the [***] trigger as follows: Month A=March 2010 Forecast C=March 2012 Forecast (TBD) [***] Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 ...

Page 381
...-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 1. 348.02 349.62 351.19 352.75 354.20 Example of (i) of "Housing Price Forecast Condition": A Housing Price Forecast Condition shall be determined to exist as of August 2011 if any month within the range of

Page 382
... of (ii) of "Housing Price Forecast Condition": A Housing Price Forecast Condition shall be determined to exist as of [***] if any month within the range of months bounded by [***] of the Housing Price Forecast published in [***] is less than the corresponding value of [***] in the table above...

Page 383
... carried over into the next annual program period. Points are not earned on sales tax, beauty salons, delivery and processing, alterations or gift packaging charges. Points are not convertible to cash or payment on Neiman Marcus or Bergdorf Goodman credit accounts. Customers are responsible for all...

Page 384
Section B: Loyalty Cards InCircle Gift CardÂ®

Page 385
SCHEDULE 1.1(g) Non-Card Payment Plans and Private Label Credit Cards Section A: Non-Card Payment Plans Signature Accounts Commercial or Corporate Accounts (including Studio Accounts) Section B: Private Label Credit Cards Neiman Marcus Neiman Marcus Card Bergdorf Goodman Bergdorf Goodman Card

Page 386
...Licensed Marks Mark Serial/Registration Number BERGDORF GOODMAN BERGDORF GOODMAN INCIRCLE REWARDS NEIMAN MARCUS NEIMAN MARCUS NEIMAN MARCUS NEIMAN MARCUS (stylized) NEIMAN-MARCUS NM PLATINUM PREFERENCE REWARDS IN (design) INCIRCLE INCIRCLE (design) HORCHOW GIFT CARD 1902799 0992733 2442806 2209260...

Page 387
SCHEDULE 1.1 (i) RAM Deficient Account Methodology [***] "Finance Charge Yield" means, for any period, the Net Interest Income divided by the Average Daily Gross Receivables, which shall be Annualized. "Late Fee Yield" means, for any period, (i) the total dollar amount of revenue received as a ...

Page 388
SCHEDULE 1.1(j) Special Discounts [***]

Page 389
SCHEDULE 1.1(k) Unemployment Forecast Table with Moody's March 2010 forecast and the [***] trigger as follows: Month A=March 2010 Forecast Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 ...

Page 390
...": An Unemployment Forecast Condition shall be determined to exist as of [***] if any month within the range of months bounded by [***] of the Unemployment Forecast published in [***] is greater than the corresponding value of B = Trigger in the table above. Example of (ii) of "Unemployment Forecast...

Page 391
... as of the Effective Date between NMG and American Express providing for the issuance of InCircle points for use of platinum and centurion Credit Cards issued by American Express and such arrangement shall be deemed not to violate Section 2.2(g), and (ii) the International Customer Rewards Program.

Page 392
... and Payment: Bank shall ensure that the following full-time employees, in each case having the experience and skills referred to below shall devote 100% of their work efforts to the Program: (i) Two (2) marketing strategists with cumulative experience in the credit card or retail marketing industry...

Page 393
SCHEDULE 3.3(d) List of Competing Retail Programs Saks Nordstrom Barney's Bloomingdale's Coach Jeffrey Tiffany Holt Renfrew Fred Segal Stanley Korshak Scoop LVMH Prada Group PPR Group Macy's

Page 394
SCHEDULE 4.1(b) Risk Management Policies and Operating Procedures Refer to attached document

Page 395
HSBC CARD & RETAIL SERVICES NMG CREDIT RISK MANAGEMENT POLICIES AND OPERATING PROCEDURES DOCUMENT FINAL 1.19 SEPTEMBER 2010 COPYRIGHT HSBC Card & Retail Services 2010 ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by ...

Page 396
3SBC Card & Retail Services NMG Operating Procedure Document Document Control [***] ii Draft v 1.13 JUNE 2010

Page 397
[***] iii

Page 398
Table of Contents Page # Section 1: Introduction 1.1 Purpose and Scope 1.2 Objectives 1.3 Definitions and Abbreviations [***] iv 1 1 1 1

Page 399
[***] v

Page 400
..., it requires secure disposal of consumer information. Financial Authorization System Neiman Marcus Group, comprised of Neiman Marcus and Bergdorf/Goodman Risk Asset Acceptance Policy Request Manager - form used to update system access/entitlements Retail Credit Management Ratification is the act of...

Page 401
[*** This page and the next 38 pages subject to confidential treatment ***] 2

Page 402
... document retention policy: Title Description Retention Regulatory Complaints Customer Application & Agreement Forms General Customer Correspondence Complaint resolutions resulting from complaints to any regulatory agency. Samples of forms used for customers applying for credit. Forms include two...

Page 403
...but new reporting to be developed for all new applicants going forward Account opening information such as: Name, Date of Birth, Social Security Number and Physical Address are stored on-line but not all information is necessarily required to open new account Pass/fail indicators of each new account...

Page 404
... real data): [***] Step III : Estimate the annual impacted Accounts due to the proposed new test assuming that the new CLD action will be implemented in Month 1: [***] (1) Test/Control data from like portfolio will be leveraged in case historical Test/Control data from Neiman Marcus is not available

Page 405
... to Risk Management Policy Monthly Analysis of Cumulative Impact on [***] *Numbers below within the chart are for illustrative purposes only Example of Calculation of Sales Impact The following example illustrates the calculation of the [***]impact for an underwriting change for a given month In...

Page 406
...month Gross Receivables and performance [***] with respect to such Test Actioned Accounts. Bank shall report all of the foregoing information, pursuant to a report in form and substance reasonably satisfactory to NMG, on a quarterly basis, no later than the 20th day following the end of each Program...

Page 407
... to Section 9.1(a)(iii). As used herein, "Alternative Payment Amount" with respect to any Program Quarter means the sum of [***]. As used herein, "Payment Period" means the period commencing with the occurrence of a Preliminary Non-Purchase Event and ending on the date that is the earlier of...

Page 408
SCHEDULE 4.6(h) Risk Change Shortfall [***] "Net Fee Income" means, for any period, the total dollar amount of revenue received as a result of late fees and other fees assessed upon Cardholders, less any late fee waivers or other fee waivers granted.

Page 409
SCHEDULE 4.6(i) VIP Assignments New VIP assignments will be permitted only in the following instances: â€¢ High Balance on the Account must be or have been at one time Recourse Accounts [***] Cap on VIP Assignment: [***] on open Accounts, at any given time will be no more than [***]

Page 410
...: Account management expansion initiatives will be implemented across at least [***]: i. Proactive Batch Credit Line Increases (CLI): Utilizing this strategy, guidelines would be systemically increased through a batch process on Accounts meeting specific credit criteria with no customer interaction...

Page 411
Example 1. [***]. Example 2: [***]. Example 3: [***]. Example 4: [***].

Page 412
... and $35, in case late fee has been assessed in the past 6 cycles Returned Check Fees Minimum Payment Amount Minimum Finance Charge Standard APR Grace Period for the Imposition of Late Fees Grace Period for the Repayment of Purchases Method of Computing the Balance for Purchases None 5% of billed...

Page 413
... detect fraudulent address sending. [***]Month Promotional Plan Offer - On furniture and Home DÃ©cor items, Bank shall offer NM On-line customers a [***]month, no interest tender option for those purchases over [***] dollars. The real-time authorization processing for these Accounts must allow...

Page 414
...necessary. E-Service Functionality - Additional services to provide cycle-to-date balance information as well as customer address maintenance and credit card re-ordering capabilities must also be maintained for self-servicing by the cardholder. Additionally all "Contact Us" free-form e-mail requests...

Page 415
Schedule 4.11 Promotional Credit Plans [***]

Page 416
... Net Credit Sales for NMG's Fiscal Year ended July 31, 2010. Section A: NMG Marketing Commitment The NMG Marketing Commitment for each Fiscal Year shall be equal to (i) [***], plus (ii) in the case of any Fiscal Year following the first Fiscal Year, [***] multiplied by the applicable Program Growth...

Page 417
...purchases and your account performance. Neiman Marcus Group uses the information we share solely in connection with providing the benefits and services available to you as a Neiman Marcus or Bergdorf Goodman cardholder. Except for accounts with Vermont mailing addresses, we may also share non-public...

Page 418
... of services on behalf of HSBC. The information we may share also comes from the sources described above and might include your name, address, phone number, and account experience with us. Finally, we may provide information about you to non-affiliated companies such as credit reporting agencies and...

Page 419
To limit marketing offers under this section, you must call us at 1-800-685-6695. The attached reply form may not be used for this particular opt out choice.

Page 420
... Marcus Group companies is available at neimanmarcus.com and bergdorfgoodman.com, at any Neiman Marcus or Bergdorf Goodman location, or by writing to The Neiman Marcus Group, Inc., P.O. Box 720937, Dallas, Texas 75372-0937. Special Notice for Vermont Residents HSBC does not share your information...

Page 421
SCHEDULE 7.1(a)(i) Bank Reports Department Report Name Source Frequency Accounts Receivable [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] ...

Page 422
... HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC Cycle Daily Weekly Daily Daily Monthly...

Page 423
SCHEDULE 7.1(a)(ii) NMG Reports A/R System Manager Overrides Report (daily) Traveler's Check Payment Report (daily) Gift Card Payment Report (daily) Cash Payment Report (daily)

Page 424
... of all Joint Marketing Commitment amounts spent by the NMG Companies in such Program Month; the number of In-Store Payments received by any of the NMG Companies in such Program Month; an amount equal to the Monthly Servicing Fee for the immediately preceding Program Month; and (d) any other...

Page 425
... RAM and the Profit Sharing Post MP RAM (and for each, the components thereof) for the [***]; and (c) the amount payable by Bank or NMG, as the case may be, as set forth under the caption "Merchant Participation True-Up" in Schedule 9.1(a)(iii); (d) (e) the amount payable by Bank as set forth under...

Page 426
... by the NMG Companies in the last Program Month of such Program Year; (b) the number of In-Store Payments received by any of the NMG Companies in the last Program Month of such Program Year; (c) the Finance Charge Reversal Percentage for the immediately preceding Program Year and the calculation...

Page 427
... browse access): [***] 2. B. Credit Card Production Services Bank will meet the following service levels on average each month: 1. Percentage of all new account and replacement credit cards that will be mailed out within 4 business days after they are requested (monthly reporting will be completed...

Page 428
... a Credit Balance under $1: [***] [Regulatory SLA] 6. The percentage of Fair Credit billing and all other customer initiated disputes that are addressed within [***] days of receipt of notification: [***] [Regulatory SLA] 7. The percentage of time that Bank shall make its customer service operations...

Page 429
1. Percentage of time that all Internet-based system functionality provided and maintained by Bank will be available to cardholders [***] hours a day, [***] days a week (other than scheduled system maintenance not exceeding [***] hours per month during the hours of 2 am and 6 am CST: [***] * ...

Page 430
... Servicer of Applicable Law (such failure, a "Regulatory Failure"). II. Remedies. (a) In the event of a Significant Failure, Primary Servicer shall: (A) promptly report to NMG the reasons for the Starred SLA failure(s); (B) within [***] days of such Significant Failure, propose a remediation plan...

Page 431
... to Bank. Following the delivery by the applicable Party of written notice of a servicing transfer or termination, NMG shall have reasonable access to Primary Servicer's operations and systems to ensure continuity of business and systems required to service the Accounts until such time as...

Page 432
... digit account number at POS to [***] digits and not mailing out billing statement for zero balance customers. Future versions of bank systems and/or their successors must provide similar functionality. Future versions of bank systems and/or their successors will be reviewed with NMG management to...

Page 433
... interruption to NMG's technology support and/or customer service. 3. All credit system interfaces (see attached batch and on-line credit system interface lists) including POS, NM and BG Sales Audit, CMOS and InCircle must continue without interruption or delayed service from Bank before and after...

Page 434
... NMG & Vendor Interface Systems Credit Application Input/Output Feed Processing Timeframe Frequency NM Sales Audit BG Sales Audit NMD/NMO Sales Audit HR NM Payroll deduction HR BG Payroll deduction Incircle Incircle EDW Incircle Loss Prevention Credit Balance Refunds Donnelley, Abacus, Commerce...

Page 435
... Frequency Processing Time-frame ** POS Store System - POS Express (new apps) NMD - (new apps) New Application [***] New Application POS Store System - POS Express (account lookup) POS Store System - Sales Authorization (NM & BG charge cards) NMD (CMOS) Sales Authorization (NM & BG charge cards...

Page 436
SCHEDULE 9.1(a)(i) Daily NMG Compensation Bank shall pay to NMG an amount equal to the aggregate for all Private Label Accounts and Non-Card Payment Plans of the following: For each such Private Label Account or Non-Card Payment Plan, the product of [***] and Net Credit Sales under such Account ...

Page 437
SCHEDULE 9.1(a)(ii) Monthly NMG Compensation On the dates set forth in Section 9.1(a)(ii), Bank shall pay the following amounts to NMG: (a) (b) Marketing Reimbursement. The aggregate of all Joint Marketing Commitment amounts spent by the NMG Companies in the prior Program Month. In-Store Payment ...

Page 438
... in such Program Year is greater than [***], an amount equal to [***] times Net Credit Sales for such Program Quarters. (b) RAM Sharing. The "Quarterly RAM Sharing Amount " shall be calculated as set forth below and (i) if the Quarterly RAM Sharing Amount exceeds the aggregate amount paid by Bank to...

Page 439
... the number of days in the preceding Program Quarters in such Program Year and the denominator of which is 365. (iii) If the Profit Sharing Post MP RAM for the Program Quarters in the current Program Year is greater than [***], Bank shall pay to NMG an amount equal to (1) the sum of (A) [***] times...

Page 440
... equal to [***] times Net Credit Sales for the immediately preceding Program Year. (b) RAM Sharing. The "Annual RAM Sharing Amount " shall be calculated as set forth below and (i) if the Annual RAM Sharing Amount exceeds the aggregate amount paid by Bank to NMG pursuant to the provisions of Schedule...

Page 441
... in respect of the immediately preceding Program Year, NMG shall pay the amount of such deficiency to Bank. As used herein, the "Annual RAM Sharing Amount" means the following: (i) If the Profit Sharing Post MP RAM for the immediately preceding Program Year is equal to or greater than [***] but less...

Page 442
...Texas (Willow Bend) Tampa, Florida Coral Gables, Florida Orlando, Florida San Antonio, Texas Boca Raton, Florida Austin, Texas Charlotte, North Carolina Natick, Massachusetts Topanga, California Bellevue, Washington Bergdorf Goodman, New York City (Women's Store) Bergdorf Goodman, New York City (Men...

Page 443
SCHEDULE 17.2(g) Segmentation Methodology Sample Segmentation - Illustrative purposes only [***] Sample Segmentation - Valid Protection Selection [***] Sample Segmentation - INVALID Protection Selection [***]

Page 444
...) has been omitted from this document and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. AMENDED AND RESTATED SERVICING AGREEMENT between THE NEIMAN MARCUS GROUP, INC. and HSBC BANK NEVADA, N.A. Dated as of September 23rd, 2010

Page 445
... 2.05. Section 2.06. Appointment Servicer Compensation Services Service Level Standards Use of Subservicers Disaster Recovery ARTICLE III REPRESENTATIONS AND WARRANTIES Section 3.01. Section 3.02. Representations and Warranties of Servicer Representations and Warranties of Bank ARTICLE IV ADDITIONAL...

Page 446
... Payment Terms Entire Agreement No Set-Off Notices Severability Headings Survival Costs and Expenses Drafting Counterparts Assignment; Successors Governing Law Waiver of Jury Trial and Venue SCHEDULES Schedule 1.01(a) Services Schedule 2.04(a) Service Level Standards Schedule 5.02 Remedies Schedule...

Page 447
... from time to time, this "Agreement"), dated as of September 23rd, 2010, is between The Neiman Marcus Group, Inc., a Delaware corporation ("Servicer"), and HSBC Bank Nevada, N.A., a national credit card bank ("Bank"). WHEREAS, Servicer and certain of its subsidiaries (together, the "NMG Companies...

Page 448
...private label credit card programs serviced by Bank divided by (x) the sum of all credit card accounts under such programs that would have been considered Active Accounts in any month in such period if such accounts were "Accounts" under the Program divided by (y) the number of months in such period...

Page 449
... occurrence of any one of the events listed in Section 6.02. "Services": As defined in Section 2.02(a) hereof. "Significant Failure": As defined in Section 5.01(a) hereof. "SLA": Each individual performance standard set forth on Schedule 2.04(a). "Solvent": When used with respect to any Person, that...

Page 450
... the "Services"), in each case in accordance with this Agreement and the Risk Management Policies and Operating Procedures. Servicer shall service the Accounts in compliance with Applicable Law, in such a way as to not disparage or embarrass the Bank Parties or either of their names, with a level of...

Page 451
... technology and information of the Bank Parties and their Affiliates relating to the Accounts. Servicer shall obtain all licenses and authorizations necessary to perform the Services that it provides hereunder. Section 2.04. Service Level Standards. (a) Servicer shall perform the applicable Services...

Page 452
... the rights of creditors generally and by general equity principles including those respecting the availability of specific performance). (c) Conflicts; Defaults; Etc. The execution, delivery and performance of this Agreement by Servicer, its compliance with the terms hereof, and consummation of...

Page 453
... of Bank, and (iii) is enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, receivership or other laws affecting the rights of creditors generally and by general equity principles including those respecting the availability of specific performance...

Page 454
... that occur in the performance of the Services. Section 4.04. Changes in Law. (a) Bank shall notify Servicer from time to time, in a timely manner, of any expiration, revocation or amendment of, or other material developments relating to, any requirements of Applicable Law affecting the provision...

Page 455
... than or equal to [***], in which case the Annual Servicing Fee Rate will remain unchanged, then the Annual Servicing Fee Rate in effect from and after the date of any Change in Servicing Law shall be [***] (or $[***] decreased, if applicable, as set forth in Section 2.03(b) in the event that Late...

Page 456
... used or being implemented by Bank in connection with such Changes in Servicing Law in servicing other private label credit card portfolios as to which it is issuer. Such systematic process shall be implemented within a timeframe mutually agreed by the Servicer and Bank, which timeframe shall target...

Page 457
... less than a reasonable standard of care. In the event Servicer becomes aware of any unauthorized use of or access to customer information, Servicer shall immediately notify Bank and shall cooperate with Bank, as it deems necessary or as required by Applicable Law, (x) to assess the nature and scope...

Page 458
... Months following a Significant Failure or (ii) a second Regulatory Failure of the same Regulatory SLA , Bank shall, in addition to payment as provided in paragraph (c) above, have the right to terminate the Program Agreement by providing [***] days prior written notice to Servicer, in which event...

Page 459
... to Servicer. Following the delivery by the applicable Party of written notice of a servicing transfer or termination, Bank shall have reasonable access to Servicer's operations and systems to ensure continuity of business and systems required to service the Accounts until such time as Bank or...

Page 460
... perform, the Services in accordance with the provisions of Sections 7.2 and 7.3 of the Program Agreement. ARTICLE VII INDEMNIFICATION Section 7.01. IndemnificationBy Servicer. Servicer agrees to indemnify and hold harmless Bank, its Affiliates and their respective officers, directors and employees...

Page 461
...expenses of such counsel shall be at Bank's expense, unless (i) the employment of such counsel has been authorized in writing by Servicer, (ii) Servicer has not employed counsel to take charge of the defense within twenty (20) days after delivery of the applicable notice or, having elected to assume...

Page 462
...indemnification under this Section 7.03 may be sought, such failure shall not limit the liability of Servicer; provided, however, that this provision shall not be deemed to limit Servicer's rights to recover from Bank for any loss, cost or expense which it can establish resulted from such failure to...

Page 463
... with providing Services hereunder, in each case including: (A) information concerning marketing plans, objectives and financial results; (B) information regarding business systems, methods, processes, financing data, programs and products; (C) information regarding any products offered or proposed...

Page 464
...in any way or make use of such Confidential Information for any other purpose. (ii) Each Receiving Party shall: (i) limit access to the Disclosing Party's Confidential Information to those employees, authorized agents, vendors, consultants, service providers, accountants, advisors and subcontractors...

Page 465
... are company planning documents of such Party or any of its Affiliates, operating budgets, management reviews or employee records, (d) such records relate to other customers of, or credit programs operated by, the Bank Parties or Servicer or (e) such records relate to other customers or operations...

Page 466
... this Agreement shall be made by wire transfer in lawful money of the United States, immediately available funds, to such account as the receiving Party shall specify prior to noon, New York time, two Business Days prior to the date payment is required. Any payment required to be made on a day that...

Page 467
Dallas, Texas 75201 Attention: Credit Card Program Manager Facsimile: (214) 743-7646 With a copy to: Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York 10017 Attention: Maripat Alpuche, Esq. Facsimile: (212) 455-2502 (b) In the case of Bank: HSBC Bank Nevada, N.A. 26525 N. ...

Page 468
... and permitted assigns of the Parties. Section 8.17. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within such State, and the obligations, rights and remedies of the parties...

Page 469
Name: James E. Skinner Title: EVP & CFO HSBC BANK NEVADA, N.A. By: /s/ Brian Hughes Name: Brian Hughes Title: EVP 23

Page 470
... and store inquiries and handles card program billing-related claims for Neiman Marcus, Bergdorf Goodman and the InCircle loyalty program. Other support groups involved in the customer resolution process include Bill Adjustments, Media Retention and Retrieval, Accounts Receivable reconciliation...

Page 471
... the following service levels on average each month (as measured by Servicer's standard practices): 1. 2. Percentage of all customer service inquiry batch-work correspondence (including address or name changes or credit bureau inquiries) that will be opened and reviewed within [***] days of receipt...

Page 472
...by mail correspondence that will be sent out within 9 days of such request or cycle end date provided that no Credit Balance refund will be sent out for a Credit Balance under [***] [Regulatory SLA] Percentage of Fair Credit billing and all other customer initiated disputes that are addressed within...

Page 473
SCHEDULE 5.02 Remedies "Initial Penalty Amount": [***]. "Subsequent Penalty Amount": [***].

Page 474
SCHEDULE 7.04 Indemnity Matters "Deductible Amount": [***].

Page 475
... effect on August 1 of the preceding calendar year (or, if later, on the Employee's date of hire) a rate of Base Pay of at least 80% of the Compensation Limitation applicable to such preceding calendar year, or (ii) was an Eligible Employee who was a Participant in this Plan on July 31, 2010, or was...

Page 476
...eligibility criteria reflected in Section 4-1(b)(1) above, shall be equal to the product of: (A) that portion of such Eligible Employee's Eligible Compensation for the Plan Year that exceeds the Compensation Limitation, and (B) the applicable percentage that corresponds with the highest age attained...

Page 477
... this Section 4-1 will be credited to the Employee's Defined Contribution Account no later than as soon as administratively practicable following the close of the Plan Year to which such Defined Contribution relates. IN WITNESS WHEREOF, this Amendment has been executed this 17th day of July, 2010 to...

Page 478
... of Employment and benefit payments shall not commence to any such Participant until payments would otherwise commence to such Participant under the terms of the Plan; and (ii) a Participant who is not a Grandfathered Rule of 65 Employee shall continue to be entitled to credit for Service after...

Page 479
... the terms of the Plan; (ii) a Participant shall continue to be entitled to credit for Service after the Freeze Date for purposes of determining whether such Participant has attained the required years of Service to vest in a benefit or to commence receiving a benefit prior to Normal Retirement Date...

Page 480
...12.1 Neiman Marcus, Inc. Computation of Ratio of Earnings to Fixed Charges (Unaudited) Fiscal year ended July 31, 2010 Fiscal year ended August 1, 2009 (Successor) Fiscal year ended August 2, 2008 Fiscal year ended July 28, 2007 Forty-three weeks ended July 29, 2006(a) (Predecessor) Nine weeks ended...

Page 481
...The Code reiterates and emphasizes the Company's long-standing policies on matters such as antitrust, insider trading, product safety, and equal employment opportunities, and sets forth procedures to ensure compliance. Educational programs enable each associate to recognize and respond appropriately...

Page 482
...THE CODE Karen Katz President and Chief Executive Officer - Neiman Marcus Stores Brendan Hoffman President and Chief Executive Officer - Neiman Marcus Direct Jim Gold President and Chief Executive Officer - Bergdorf Goodman, Inc. The Code contains important information about the Company's ethics...

Page 483
... Legal Department. The Company and its associates are prohibited from imposing any form of retaliation against anyone who files a report in good faith, without regard to the identity or position of the suspect offender. Reports submitted in bad faith or containing false or misleading information may...

Page 484
... as value to the customer, costs and competitive pressure in the marketplace. Associates must not communicate either directly or indirectly with competitors concerning sensitive information such as prices charged, sale dates or percentages, business or marketing strategies, profit margins or credit...

Page 485
... the purchase or sale of a publicly traded security based upon "inside" information unavailable to outside parties. The term "inside information" means any material information that has not been publicly disclosed by the Company. These laws also prohibit employers, directors, officers and associates...

Page 486
... other, the relationship must be disclosed to management immediately and the conflict must be resolved. The Company reserves the right to take appropriate action to avoid potential problems, including, but not limited to, changing an associate's job or changing the reporting relationship between the...

Page 487
...qualified applicants or associates with actual or perceived disabilities, or customers with actual or perceived disabilities. All requests for accommodation should be made in writing and directed to the Human Resources Department. DISCRIMINATION AND HARASSMENT NMG has adopted a corporate policy that...

Page 488
... safety of its associates, visitors, and the public. The Company's policy is to maintain its facilities and run its business operations in compliance with all occupational health and safety laws. Associates must follow all applicable laws and regulations and promptly report to management any unsafe...

Page 489
... products satisfy applicable legal requirements. Such steps protect the Company's reputation and customer relationships, and limit the risk of potential legal liability. While not an exhaustive list, the following provides a brief overview of some requirements. FLAMMABILITY STANDARDS Textiles used...

Page 490
...line of products or services from those belonging to another person or company. The Company owns a number of trademarks which are extremely valuable and well recognized by the public. Associates must vigilantly protect all Company trademarks by using them correctly and notifying the Legal Department...

Page 491
.... Associates shall not, at any time, either directly or indirectly, divulge, disclose or communicate any confidential or non-public information relating to Company business, including information regarding customers, product pricing, Company operations strategies, practices, business plans...

Page 492
... with the FCPA, all payments to such parties must be pre-approved by the Legal Department. IMPORT AND CUSTOMS CONTROLS Associates are required to comply with all U.S. laws, U.S. Customs Services regulations ("Customs"), and all regulations created by federal agencies relating to, or governing, the...

Page 493
... subject to specific registration, reporting, and financial disclosure requirements, associates are prohibited from engaging in any lobbying activities without pre-approval by the Legal Department. IMPROPER OR UNRECORDED PAYMENTS / EXCESSIVE GIFTS It is the Company's policy to maintain accurate and...

Page 494
...each store. An associate must never offer a customer the option to ship a purchase in order to avoid paying sales tax. Failure to adhere to these rules will result in disciplinary action up to and including termination of employment. FALSE STATEMENTS AND SCHEMES TO DEFRAUD It is the Company's policy...

Page 495
â€¢ customers, vendors, suppliers, government agencies or other business contacts; and using the Company's proprietary information, trade secrets or other assets improperly or without proper authorization. All violations or suspected violations must be reported immediately to Loss Prevention, an ...

Page 496
... MEDIA AND THE FINANCIAL COMMUNITY Associates are prohibited from commenting or providing financial information to anyone outside the Company without the prior approval of the Chief Executive Officer, Chief Financial Officer, Controller, Treasurer, or the General Counsel. Public responses and press...

Page 497
... similar locations. Associates are further prohibited from developing or establishing websites or web pages using the Company's name, images, or trademarks without proper authorization from the Legal Department. NO EXPECTATION OF PRIVACY All of the data, documents and messages transmitted or stored...

Page 498
... not limited to officers and directors are of special concern and must be disclosed to and approved by the Company's Board of Directors. It is not a conflict for associates to own insubstantial amounts of stock in publicly held companies with whom the Company does business or competes, or to accept...

Page 499
... not limited to, cash, merchandise, services, or any other thing of value that is not available to all associates on an equal basis. Associates are generally discouraged from accepting unsolicited gifts, and are specifically prohibited from accepting gifts of money or gifts in any other form which...

Page 500
... use the Employee Assistance Program at 1-800-445-8988. Additional information about this program is available from the Human Resources Department. An associate whose job performance or behavior indicates that he or she may be unfit for duty will not be permitted to work. If allowed under applicable...

Page 501
... on an annual basis. Signed Certifications will be inserted into an associate's personnel file. The Company retains the right to update, amend, or modify the Code at any time without prior notice. Associates will be bound by such changes. The Company may also periodically distribute additional...

Page 502
... and confer with Company management regarding any recommended course of action. Associates are required to ...direction of the Legal Department. Investigations may raise complicated legal issues, and could result in adverse consequences. RETENTION OF OUTSIDE LEGAL COUNSEL Periodically, the Company...

Page 503
... its associates. The Code of Ethics for Financial Professionals applies to the NMG Chief Executive Officer and Chief Financial Officer, Financial and Accounting Officers at all NMG divisions and subsidiaries, and all professionals serving in a finance, accounting, treasury, tax or investor relations...

Page 504
... because of your position within the company or through the use of company property or information. (h) Not falsify or distort the true nature of any transaction, always recording and classifying transactions in the proper accounting period, and supporting transactions with accurate documentation...

Page 505
... Beverage Parent Corporation NM Financial Services, Inc. NMGP, LLC NM Nevada Trust Neiman Marcus Holdings, Inc. The Neiman Marcus Group, Inc. Worth Avenue Leasing Company New York New York Delaware Texas Texas Texas Delaware Virginia Massachusetts California Delaware Florida Neiman Marcus Holdings...

Page 506
...424(b) of our reports dated October 1, 2010, with respect to the consolidated financial statements and schedule of Neiman Marcus, Inc. and the effectiveness of internal control over financial reporting of Neiman Marcus, Inc. included in this Annual Report (Form 10-K) for the year ended July 31, 2010...

Page 507
... Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Burton M. Tansky, certify that: 1. 2. I have reviewed this annual report on Form 10-K of Neiman Marcus, Inc.; Based on my knowledge, this report does not contain any untrue statement of a material...

Page 508
... Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, James E. Skinner, certify that: 1. 2. I have reviewed this annual report on Form 10-K of Neiman Marcus, Inc.; Based on my knowledge, this report does not contain any untrue statement of a material...

Page 509
... undersigned officer of Neiman Marcus, Inc. (the Company) hereby certifies, to such officer's knowledge, that: (i) the Annual Report on Form 10-K of the Company for the fiscal year ended July 31, 2010 (the Report) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable...

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