Neiman Marcus 2013 Annual Report Download - page 64

Table of Contents
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Base Salary. Base salary is intended to provide a base level of compensation commensurate with an executive’s job title, role, tenure and
experience. We utilize base salary as a building block of our compensation program, establishing a salary range for particular positions based on survey data
and job responsibilities. Being competitive in base salary is a minimum requirement to recruit and retain skilled executives. Specifically, base salary levels of
the named executive officers are determined based on a combination of factors, including our compensation philosophy, market compensation data,
competition for key executive talent, the named executive officer’s experience, leadership, achievement of specified business objectives, individual
performance, our overall budget for merit increases and attainment of our financial goals. Salaries are reviewed before the end of each fiscal year as part of our
performance and compensation review process as well as at other times to recognize a promotion or change in job responsibilities. Merit increases are usually
awarded to the named executive officers in the same percentage range as all employees and are based on overall performance and competitive market data
except in those situations where individual performance and other factors justify awarding increases above or below this range. Merit increases typically
range between two and eight percent.
In addition, Ms. Katz and Messrs. Skinner and Gold have employment agreements that set a minimum salary, more fully described under the heading
“Employment and Other Compensation Agreements” in this section.
Annual Incentive Bonus. Annual bonus incentives tied to short-term objectives form the second building block of our compensation program and
are designed to provide incentives to achieve certain financial goals of the Company. Financial goals, which are used to determine annual bonus incentives
for all employees, emphasize profitability and asset management. The Compensation Committee believes that a significant portion of annual cash
compensation for the named executive officers should be at risk and tied to our operational and financial results. “Pay for performance” for the named
executive officers has been significantly enhanced in recent years by putting a larger percentage of their potential compensation at risk as part of the annual
bonus incentive program.
All named executive officers are eligible to be considered for annual bonus incentives. Threshold, target and maximum annual performance
incentives, stated as a percentage of base salary, are established for each of the named executive officers at the beginning of each fiscal year. The objectives
set for Ms. Katz and other senior officers with broad corporate responsibilities are based on our overall financial results. When an employee has responsibility
for a particular business unit or division, the performance goals are heavily weighted toward the operational performance of that unit or division. Actual
awards earned by the named executive officers are determined based on an assessment of our overall performance and a review of each named executive
officer’s contribution to our overall performance. Other components may also be considered from time to time at the discretion of the Compensation
Committee.
The employment agreements of Ms. Katz and Messrs. Skinner and Gold contain provisions regarding target levels and the payment of annual
incentives and are described in more detail more fully described under the heading “Employment and Other Compensation Agreements” in this section.
Long-term Incentives. Long-term incentives in the form of stock options are intended to promote sustained high performance and to align our
executives’ interests with those of our equity investors. The Compensation Committee believes that stock options create value for the executives if the value
of our Company increases. This creates a direct correlation between the interests of our executives and the interests of our equity investors.
Equity awards become effective on the date of grant, which typically coincides with the date of approval by the Compensation Committee or the
date of a new hire or a promotion. We have no set practice as to when the Company makes equity grants, and we evaluate from time to time whether grants
should be made.
We made initial stock option grants on November 5, 2013 under the NM Mariposa Holdings, Inc. Management Equity Incentive Plan (the
Management Incentive Plan) to the named executive officers and seventeen (17) other senior officers. The initial stock option grants were made following the
Acquisition to retain the senior management team and enable them to share in our growth along with our equity investors. The initial stock option grants
were awarded at an exercise price of $1,000 per share and consisted of time-vested non-qualified stock options and performance-vested non-qualified stock
options. Each grant of non-qualified stock options consists of options to purchase an equal number of shares of Class A Common Stock and Parent’s Class B
Common Stock, par value $0.001 per share (Class B Common Stock). Twenty percent (20%) of the time-vested non-qualified options vest and become
exercisable on each of the first five anniversaries of the date of the grant becoming fully vested and exercisable on the fifth anniversary date of the grant and
expire on the tenth anniversary date of the grant. The performance-vested non-qualified options vest on the achievement of certain performance hurdles.
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