Neiman Marcus 2009 Annual Report Download - page 77

Table of Contents
Confidentiality, Non-Competition and Termination Benefits Agreements
Each of the named executive officers and certain other officers, except for Mr. Tansky and Ms. Katz, are party to a
confidentiality, non-competition and termination benefits agreement that will provide for severance benefits if the employment of the
affected individual is terminated by the Company other than in the event of death, disability or termination for cause. These
agreements provide for a severance payment equal to one and one-half annual base salary payable over an eighteen-month period, and
reimbursement for COBRA premiums for the same period. Each confidentiality, non-competition and termination benefits agreement
contains restrictive covenants as a condition to receipt of any payments payable thereunder.
Cash Incentive Plan
Following the consummation of the Acquisition, the Neiman Marcus, Inc. Cash Incentive Plan (referred to as the Cash
Incentive Plan) was adopted to aid in the retention of certain key executives, including the named executive officers. The Cash
Incentive Plan provides for the creation of a $14 million cash bonus pool to be shared by the participants based on the number of stock
options that were granted to each such participant pursuant to the Management Incentive Plan in October 2005. Each participant in
the Cash Incentive Plan will be entitled to a cash bonus upon the earlier to occur of a change of control or an initial public offering,
provided that, in each case, the internal rate of return to certain of our investors is positive. If the internal rate of return to certain of
our investors is not positive, no amounts will be paid under the Cash Incentive Plan. The Cash Incentive Plan was adopted in
connection with the acquisition of NMG by the Sponsors, and was intended to align the interests of certain key executives with those
of the Sponsors. Furthermore, it has been our experience that it often takes a long period of time to consummate a change in control
transaction with a large retail company. As a result, it was our view and the view of the Sponsors that a "single trigger" payment upon
an "initial public offering" or "change in control" of the Company (as those terms are defined under the Cash Incentive Plan) correctly
aligns the interests of management, on the one hand, and the Company and its shareholders, on the other hand, and also provides the
Company with an effective and durable retention mechanism that incentivizes each named executive officer to remain with us prior to
the consummation of such an event.
Based on the foregoing, each of the named executive officers would be entitled to receive the following percentages of the
$14 million cash bonus pool on July 31, 2010, assuming there was a "change in control" or an "initial public offering" on that date,
and the rate of return to the Sponsors was positive:
Percentage of
Name Cash Bonus Pool
Burton M. Tansky 22.00%
Karen W. Katz 17.01%
James E. Skinner 8.51%
James J. Gold 8.51%
Gerald A. Barnes 1.70%
All required federal, state, or local government tax will be withheld from all payments made to participants under the Cash
Incentive Plan. No payments have been made or are currently anticipated under the Cash Incentive Plan.
Potential Payments Upon Termination or Change-in-Control
The tables below show certain potential payments that would have been made to a named executive officer if the named
executive officer's employment had terminated on July 31, 2010 under various scenarios, including a change in control. Because the
payments to be made to a named executive officer depend on several factors, the actual amounts to be paid out upon a named
executive officer's termination of employment can only be determined at the time of an executive's separation from the Company.
73