Neiman Marcus 2013 Annual Report Download - page 79

Table of Contents
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.
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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 the Acquisition, we entered into a new employment agreement with Karen Katz which became effective on October 25, 2013 and
will extend until the fourth anniversary thereof 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 $1,070,000 unless the reduction is pursuant to action taken by our reducing the annual salaries of all senior executives by substantially equal amounts
or percentages.
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 for a minimum bonus of 50% of her base salary if threshold performance targets are achieved. If applicable goals are met at target level she will be
entitled to 125% of base salary while her maximum bonus will be 250% of base salary contingent on the applicable goals being met.
Additionally, Ms. Katz is entitled to receive reimbursement of up to $5,000 for financial and tax planning advice as well as a lump sum cash
payment during each year of the employment term in the amount of $15,000 in lieu of any reimbursement of hotel or other lodging expenses incurred in
connection with business trips to New York, plus an amount necessary to gross-up such payment for income tax purposes and also provides for
reimbursement of liability for any New York state and city taxes, on an after-tax basis.
The agreement provides that Ms. Katz shall be entitled to an additional one year of credit in the SERP Plan for each full year of service. 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” or “retirement” (as defined in the employment agreement), or 3) her
employment terminates upon expiration of the term following the provision by us of a notice of non-renewal, and, in any such case, on the date of such
termination she has not yet reached age 65, her SERP Plan benefit shall not be reduced according to the terms of the SERP Plan solely by reason of her failure
to reach age 65 as of the termination date. During the employment term, she will accrue benefits under DC SERP provided that the amounts credited to her
account as of the last day of her employment term shall not be less than the present value of the additional benefits she would have accrued under the SERP
Plan had it remained in effect.
If we terminate Ms. Katz’s employment without “cause” or if she resigns for “good reason” or due to “retirement” or following her receipt of a notice
of non-renewal from us relating to the employment term, she will be entitled to receive, subject to her execution and non-revocation of a waiver and release
agreement, 1) an amount of annual incentive pay equal to a prorated portion of her target bonus amount for the year in which the employment termination
date occurs, and 2) a lump sum equal to (A) 18 times (or 12 times in the case of non-renewal by us) the monthly COBRA premium applicable to Ms. Katz,
plus (B) six times the monthly premium if Ms. Katz elected coverage as a retiree under our group medical plan for retired employees in effect under our group
medical plan, other than in the case of non-renewal by the us, plus (C) two times (or one
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