Neiman Marcus 2009 Annual Report Download - page 62

Table of Contents
costs added back for the determination of Adjusted EBITDA were not anticipated at the time performance targets for fiscal year 2010
were set by the Compensation Committee.
For purposes of evaluating performance and annual incentive compensation, the ROIC metric is calculated by dividing 1)
adjusted earnings before interest and taxes (adjustments are consistent with those used to determine Adjusted EBITDA) by 2) average
invested capital excluding cash, accrued interest, deferred taxes and amounts related to financial derivatives and is used to assess our
efficiency at turning capital into profitable investments. The inventory turnover metric is calculated by dividing sales by average
inventory and is used to assess our efficiency in managing inventories.
2010 Annual Incentive Bonus. As actual operating performance for fiscal year 2010 exceeded the performance targets set at
the beginning of the year (as shown in the Corporate Performance Targets Table on page 58 of this section), annual incentive amounts
were paid to each of the named executive officers. The incentive bonus amounts were paid to the named executive officers based
upon the actual target percentages. The Compensation Committee did not exercise their discretion to adjust the actual payout
amounts. Actual amounts paid are listed in the Summary Compensation Table under the heading "Non-Equity Incentive Plan
Compensation" on page 62 of this section.
Stock Options. In the second quarter of fiscal year 2010, the Compensation Committee approved 1) a tender offer for
outstanding Accreting Options, except Mr. Tansky's (Eligible Options), 2) the extension of the option term with respect to Fixed Price
Options to October 6, 2017 and 3) the modification of additional Fixed Price Options to purchase additional shares. In the third
quarter of fiscal year 2010, the Compensation Committee approved 1) the modification of Mr. Tansky's Accreting Options and 2) the
extension of the option term with respect to Mr. Tansky's Fixed Price Options to October 6, 2015. The stock option modifications
effected in both the second and third quarters of fiscal year 2010 are collectively referred to as the Modification Transactions. The
Modification Transactions were taken in response to declines in capital markets and general economic conditions that resulted in the
exercise prices for the prior options being in excess of the estimated fair value of our common stock.
In connection with the modifications of the Accreting Options, option holders were allowed to tender their Eligible Options
for new options at an exchange rate of 1.5 Eligible Options to 1.0 new option. The new options issued 1) have an initial exercise price
of $1,000 per share, which exercise price will escalate at a 10% compound rate per year through the fourth anniversary of the grant
date, 2) vest over four years and 3) generally expire eight years after the grant date. The tender offer was completed in
December 2009 with the tender of all Eligible Options and the issuance of new options for 17,743 shares. The modification
completed in April 2010 resulted in the tender of Mr. Tansky's options subject to modification for the purchase of shares and the
issuance of new options for 5,668 shares.
Further details about our tender offer are included in Note 11 in the Notes to Consolidated Financial Statements included in
this Annual Report and in the Schedule TO-I we filed with the SEC on November 17, 2009, as amended.
Other Compensation Components
We maintain the following compensation components in order to provide a competitive total rewards package that supports
retention of key executives.
Health and Welfare Benefits. Executive officers are eligible to participate under the same plans as all other eligible
employees for medical, dental, vision, disability, and life insurance. These benefits are intended to be competitive with benefits
offered in the retail industry.
Retirement Plan. Prior to 2008, most non-union employees over age 21 who had completed 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 year a retirement annuity equal to one percent of his or her compensation for the year up to the Social Security wage base and 1.5
percent of his or her compensation for the year in excess of such wage base. A participant becomes fully vested after five years of
service with us. Effective as of December 31, 2007, eligibility and benefit accruals under the Retirement Plan were frozen for all
participants except for those "Rule of 65" employees who elected to continue participation in the Retirement Plan. "Rule of 65"
employees included only those active employees who had completed at least 10 years of service and whose combined years of service
and age equaled at least 65 as of December 31, 2007. Mr. Tansky, Ms. Katz, and Mr. Barnes were "Rule of 65" employees as of
December 31, 2007, and elected to continue participation in the Retirement Plan. For Messrs. Skinner and Gold, benefits and accruals
under the Retirement Plan were frozen effective as of December 31, 2007. Effective August 1, 2010, all benefits and accruals under
the Retirement Plan
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