Neiman Marcus 2010 Annual Report Download - page 129

Table of Contents
NOTE 12. TRANSACTIONS WITH SPONSORS
Pursuant to a management services agreement with affiliates of the Sponsors, and in exchange for ongoing consulting and
management advisory services that are provided to us by the Sponsors and their affiliates, affiliates of the Sponsors receive an
aggregate annual management fee equal to the lesser of (i) 0.25% of our consolidated annual revenues or (ii) $10 million. Affiliates of
the Sponsors also receive reimbursement for out-of-pocket expenses incurred by them or their affiliates in connection with services
provided pursuant to the agreement. These management fees are payable quarterly in arrears. We recorded management fees of $10.0
million during fiscal year 2011, $9.2 million during fiscal year 2010 and $9.1 million during fiscal year 2009, which are included in
selling, general and administrative expenses in the consolidated statements of operations.
The management services agreement also provides that affiliates of the Sponsors may receive future fees in connection with
certain future financing and acquisition or disposition transactions. The management services agreement includes customary
exculpation and indemnification provisions in favor of the Sponsors and their affiliates.
NOTE 13. INCOME FROM CREDIT CARD PROGRAM
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 Goodman" brand names. Our original program agreement with HSBC
expired in July 2010. Effective July 2010, we amended and extended our agreement with HSBC to July 2015 (renewable thereafter
for three-year terms).
Under the terms of the Program Agreement, HSBC offers credit cards and non-card payment plans and bears substantially all
credit risk with respect to sales transacted on the cards bearing our brands. We receive payments from HSBC based on sales
transacted on our proprietary credit cards. Such payments are subject to annual adjustments, both increases and decreases, based upon
the overall annual profitability and performance of the proprietary credit card portfolio. In addition, we receive payments from HSBC
for marketing and servicing activities we provide to HSBC.
NOTE 14. COMMITMENTS AND CONTINGENCIES
Leases. We lease certain property and equipment under various operating leases. The leases provide for monthly fixed
rentals and/or contingent rentals based upon sales in excess of stated amounts and normally require us to pay real estate taxes,
insurance, common area maintenance costs and other occupancy costs. Generally, the leases have primary terms ranging from three to
99 years and include renewal options ranging from two to 80 years.
Rent expense and related occupancy costs under operating leases is as follows:
Fiscal year ended
(in thousands)
July 30,
2011
July 31,
2010
August 1,
2009
Minimum rent $ 55,800 $ 56,100 $ 55,400
Contingent rent 23,900 20,100 19,600
Other occupancy costs 14,400 15,100 15,700
Amortization of deferred real estate credits (6,500)(6,300)(5,300)
Total rent expense $ 87,600 $ 85,000 $ 85,400
Future minimum rental commitments, excluding renewal options, under non-cancelable leases are as follows: fiscal year
2012—$57.2 million; fiscal year 2013—$56.6 million; fiscal year 2014—$52.9 million; fiscal year 2015—$48.1 million; fiscal year
2016—$45.6 million; all fiscal years thereafter—$602.6 million.
Long-term Incentive Plan. We have a long-term incentive plan (Long-term Incentive Plan) that provides for a cash
incentive payable to certain employees upon a change of control, as defined, subject to the attainment of certain performance
objectives. Performance objectives and targets are based on cumulative EBITDA (as defined in the plan) percentages for rolling three
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 offering, as defined, subject to the requirement that, in each
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