Neiman Marcus 2006 Annual Report Download - page 64

and other factors it believes are material to the valuation process.
In addition, following the consummation of the Transactions, the Neiman Marcus, Inc. Cash Incentive Plan (referred to as the
Cash Incentive Plan) was adopted in 2005 to aid in the retention of certain key executives, including our named executive officers.
Under the Cash Incentive Plan, a $14 million cash bonus pool was created to be shared by its participants. In the event of a change in
control or an initial public offering in which the internal rate of return to our investors is positive, each participant in the Cash
Incentive Plan, subject generally to continued employment, will be entitled to a cash bonus based upon the number of options that
were granted to the participant relative to the other participants in the Cash Incentive Plan under the Management Incentive Plan. Mr.
Tansky will be entitled to receive (subject, with certain exceptions, to continued employment) a cash bonus under the Cash Incentive
Plan in the amount of $3,080,911 pursuant to the terms of his employment agreement. If the internal rate of return to the Sponsors is
not positive following a change in control or an initial public offering, no amounts will be paid to those participating in the Cash
Incentive Plan. No amounts have been paid to date under the Cash Incentive Plan.
We believe the compensation objectives described earlier effectively and appropriately compensate our executives by guiding
their activities toward the achievement of targeted performance objectives, both short and long term. The amount of compensation,
both in individual elements and in the aggregate, is targeted between the 50th and 75th percentile levels of a peer group of industry
related companies.
Retirement, termination, and change in control benefits are also part of the compensation package for each named executive
officer. Our defined benefit and deferred compensation plans, as well as our change in control agreements and are described in more
detail below.
Compensation Actions for the Named Executive Officers in fiscal year 2007
--- Market Comparisons
The Compensation Committee requests information from its outside consultants to determine if any element of compensation
needs adjustment, including material change in order to comply with our strategy of targeting executive compensation that is between
the 50th and 75th percentile levels of the compensation packages received by executives at a group of industry related companies.
In fiscal year 2007, the Compensation Committee, on the recommendation of its compensation consultants, referred primarily
to the 16 companies identified below for purposes of benchmarking the compensation of our named executive officers. These
companies are intended to represent our competitors for business and talent. Their executive compensation programs are compared to
ours, as well as the compensation of individual executives if the jobs are sufficiently similar to make the comparison meaningful. The
comparison data is used to ensure that our named executive officer compensation, both individually and as a whole, is appropriately
competitive relative to our Company's performance.
Abercrombie & Fitch Liz Claiborne
Ann Taylor Nordstrom
Coach Polo Ralph Lauren
Macy's Saks
The Gap Talbots
Jones Apparel Tiffany & Co.
Kohl's Tommy Hilfiger
Limited Brands Williams Sonoma
--- Base Salary
For fiscal year 2007, Mr. Tansky was awarded a 5.2% increase from $1,350,000 in fiscal year 2006 to $1,420,000 for fiscal
year 2007. Ms. Katz was also awarded a 5.3% merit increase from $760,000 to $800,000. Mr. Gold was awarded an 8.2% increase
from $425,000 to $460,000 due to the competitive market considerations of the New York metropolitan area. Mr. Hoffman was
awarded an 8.7% increase from $460,000 to $500,000. Mr. Hoffman's higher percentage increase was due to the performance of his
division, his expertise, and the heightened competition for executives in the e-commerce market. Mr. Skinner received an 8.5%
increase from $530,000 to $575,000. Mr. Skinner received a higher percentage increase in his base salary based on the increase in
salaries of chief financial officers in the group of industry related companies due to the added responsibilities of chief financial
officers with respect to regulatory compliance.
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