Neiman Marcus 2012 Annual Report Download - page 85

Table of Contents
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Our Board of Directors has adopted a written related-person transactions policy that sets forth our policies and procedures regarding the
identification, review, consideration and approval or ratification of “related-person transactions.” For purposes of our policy only, a “related-person
transaction” is any transaction, including any financial transaction, arrangement or relationship (or any series of similar transactions, arrangements or
relationships), in which we and any “related person” are, were or will be participants involving an amount that exceeds $120,000. Certain transactions,
including transactions involving compensation for services provided to us as an employee, director or consultant by a related person and transactions in
which rates or charges are determined by competitive bid, are not covered by this policy. A related person is any executive officer, director or nominee for
director, or stockholders beneficially owning more than 5% of our outstanding common stock, including any of their immediate family members, and any
entity owned or controlled by such persons.
The Board of Directors has determined that the Audit Committee is best suited to review and approve any related-person transaction and any material
amendments thereto, although the Board of Directors may instead determine that a particular transaction (or amendment thereto) should be reviewed and
approved by a majority of directors disinterested from the transaction. In the event a member of the Audit Committee has an interest in the proposed
transaction, the relevant member must recuse himself or herself from the deliberations and approval. The policy requires that, in determining whether to
approve, ratify or reject a related-person transaction, the Audit Committee satisfy itself that it has been fully informed as to the related person’s relationship
and interest in the transaction (or amendment thereto) and the material facts thereof, and must determine, in light of known circumstances, whether the
transaction is, or is not, consistent with our best interests and that of the Principal Stockholders, as the Audit Committee determines in the good faith exercise
of its discretion.
Typically, in considering related-person transactions, the Audit Committee takes into account the relevant available facts and circumstances
including, but not limited to 1) the risks, costs and benefits to us, 2) the terms of the transaction, 3) the availability of other sources for comparable services
or products and 4) 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 designated by a Principal Stockholder (Principal Stockholder Funds) and certain investors who agreed to
co-invest with the Principal Stockholder Funds or through a vehicle jointly controlled by the Principal Stockholders to provide equity financing for the
Acquisition (Co-Investors) entered into a limited liability company operating agreement in respect of our parent company, Newton Holding, LLC (the LLC
Agreement). The LLC Agreement contains agreements among the parties with respect to the election of our directors and the directors of our parent companies,
restrictions on the issuance or transfer of interests in us, including tag-along rights and drag-along rights, and other corporate governance provisions (including
the right to approve various corporate actions).
Pursuant to the LLC Agreement, each of the Principal Stockholders has the right, which is freely assignable to other members or indirect members,
to designate four directors, and the Principal Stockholders are entitled to jointly designate additional directors. In the event another member or indirect member
does not have the right to appoint one of a Principal Stockholder’s designated directors, such Principal Stockholder will only have the right to designate three
directors. The rights of the Principal Stockholders to designate three directors are subject to their ownership percentages in Holding being at least 30% of their
initial ownership percentages, and their rights to designate two directors are subject to their ownership percentages in Holding being at least 10% of their initial
ownership percentages. The Principal Stockholders must have some ownership percentage in Holding to be entitled to designate a director for appointment to
the Board of Directors. Each of the Principal Stockholders has the right to have at least one of its directors sit on each committee of the Board of Directors, to
the extent permitted by applicable laws and regulations.
The Principal Stockholders have assigned the right to appoint one of our directors to investment funds that are affiliates of Credit Suisse Securities
(USA) LLC and the right to appoint one of our directors to investment funds associated with Leonard Green & Partners L.P.
For purposes of any action of the Board of Directors, each director designated by a Principal Stockholder has three votes and each of the other
directors (including any jointly designated directors and the directors designated by investment funds that are affiliates of Credit Suisse Securities (USA) LLC
and Leonard Green & Partners L.P.) has one vote. Certain major decisions or actions of the board of directors of Holding require the approval of each of the
Principal Stockholders,
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