Neiman Marcus 2012 Annual Report Download - page 72

Table of Contents
employee upon separation from service, death, unforeseeable emergency, or change of control of us. In the event of separation of service, payment is made in a
lump sum in the calendar quarter following the calendar quarter in which the separation occurs although if the employee is eligible for retirement upon such
separation, payment may be deferred until the following year or the nine subsequent years, and may be made in a lump sum or in installments over a period of
up to ten years, depending upon the distribution form elected by the employee. There is no separate funding for the amounts payable under the KEDC Plan,
rather we make payment from its general assets. The KEDC Plan is designed to comply with the requirements of Section 409A of the Code.
The DC SERP is an unfunded, nonqualified deferred compensation plan under which benefits are paid from our general assets to provide eligible
employees with the opportunity to receive employer contributions on the portion of their eligible compensation that exceeds the IRS Limit. Eligible employees
generally are those employees who have completed one year of service with the Company, who have annual base pay of at least 80% of the IRS Limit (or were
eligible to participate in the SERP Plan as of December 31, 2007 and ceased to be eligible to participate in the SERP Plan as of January 1, 2008), and who are
otherwise designated as eligible by our employee benefits committee. We will make transitional and non-transitional credits to the accounts of eligible
participants each pay period. Transitional credits apply only to participants who were eligible to participate in the SERP Plan as of December 31, 2007 but
ceased participating in the SERP Plan as of that date and became a participant in the DC SERP on January 1, 2008. The amount of a transitional credit is the
product of a participant’s eligible compensation in excess of the IRS Limit and an applicable percentage ranging from 0% to 6% depending upon the age of the
participant. Non-transitional credits apply to all eligible participants. The amount of a non-transitional credit is the product of a participant’s eligible
compensation in excess of the IRS Limit and 10.5%. All transitional and non-transitional credits are credited to a bookkeeping account and vest upon the
earlier of 1) an eligible employee’s attainment of five years of service, 2) an eligible employee’s attainment of age 65, 3) an eligible employee’s death, 4) an
eligible employee’s disability, and 5) a change of control (as defined in the DC SERP) while in our employ. Notwithstanding the preceding, amounts credited
to an account are subject to forfeiture in the event the employee is terminated for cause. Accounts are credited monthly with interest at an annual rate equal to
the prime interest rate published in The Wall Street Journal on the last business day of the preceding calendar quarter. Vested amounts credited to an
employee’s account become payable in the form of five annual installments beginning upon the later of the employee’s separation from service and age 55, or
such later age as the employee may elect. Upon the employee’s death or “disability” or upon a change of control of us, vested amounts credited to an
employee’s account will be paid in a single lump sum. The DC SERP is designed to comply with the requirements of Section 409A of the Code.
Employment and Other Compensation Agreements
As discussed in “Employment Agreements” on page 61, we have entered into employment agreements with Karen W. Katz, James E. Skinner, and
James J. Gold. Each of Messrs. Koryl and Schulman is a party to a confidentiality, non-competition and termination benefits agreement, discussed below.
Employment Agreement with Ms. Katz
In connection with Mr. Tansky’s retirement in October 2010, we entered into an employment agreement with Ms. Katz wherein she succeeded
Mr. Tansky as President and Chief Executive Officer. The employment agreement became effective on October 6, 2010 and will extend until the fourth
anniversary and thereafter be subject to automatic one-year renewals of the term if neither party submits a notice of termination at least three months prior to the
end of the then-current term. The agreement may be terminated by either party on three months’ notice, subject to severance obligations in the event of
termination under certain circumstances described herein. Pursuant to the agreement, her base salary will not be less than $1,050,000 unless the reduction is
pursuant to action taken by our reducing the annual salaries of all senior executives by substantially equal amounts or percentages. The agreement also
provided for an initial bonus of $50,000 payable upon the commencement of her new duties and the grant of a nonqualified stock option under our
Management Equity Incentive Plan with respect to 4,300 shares of our common stock 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.
Ms. Katz’s agreement also provides that she will participate in our annual incentive bonus plan. The actual amounts will be determined according to
the terms of the annual incentive bonus program and will be payable at the discretion of the Compensation Committee. However, Ms. Katz’s agreement
provides that her target bonus may not be reduced below 100% of her base salary. In addition, the agreement provides that during the employment term before
December 31, 2010, Ms. Katz shall continue to accrue benefits under the SERP Plan, provided that 1) the SERP Plan shall not be amended or terminated in
any way that adversely affects her, and 2) after she has reached the 25-year maximum set forth in the SERP Plan, she shall be entitled to an additional one
year of credit for each full year of service thereafter. In addition, if 1) during the term, her employment is terminated by the Company for any reason other
than death, “disability,” or “cause” (as defined in the employment agreement), 2) during the term, she terminates her employment for “good reason” (as
defined in the
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