Neiman Marcus 2014 Annual Report Download - page 66

Table of Contents
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. Grimes, Gold and Skinner have employment agreements that set a minimum salary, more fully described under the
heading “Employment and Other Compensation Agreements” below.
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 placing 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. Grimes, Gold and Skinner 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” below.
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.
The Parent Board 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 (other than Mr. Grimes) and seventeen 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. The Compensation Committee granted stock options to Mr. Grimes on July 21, 2015 in connection with his hiring. These
stock option grants were awarded at an exercise price of $1,205 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). 20% of the time-vested non-qualified stock options vest and
become exercisable on each of the first five anniversaries of the date of the grant, resulting in such stock options becoming fully vested and exercisable on
the fifth anniversary date of the grant. The performance-vested non-qualified stock options vest on the achievement of certain performance hurdles. The stock
options expire on the tenth anniversary date of the grant.
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We have reviewed our compensation policies and programs for all employees, including the named executive officers, and we do not believe that
these policies and practices create risks that are reasonably likely to have a material adverse effect on the Company. The three major components of our
overall compensation program were reviewed and the following conclusions were made:
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