Neiman Marcus 2006 Annual Report Download - page 77

or terminated in any way that adversely affects her, and (ii) after she has reached the 25-year maximum set forth in the SERP, she
shall be entitled to an additional one year of credit for each full year of service thereafter. In addition, if (i) during the term, her
employment is terminated by the Company for any reason other than death, disability (as defined in the employment agreement), or
cause (as defined in the employment agreement), (ii) during the term, she terminates her employment for good reason (as defined in
the employment agreement), or (iii) her employment terminates upon expiration of the term following the provision by the Company
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 benefit
shall not be reduced according to the terms of the SERP solely by reason of her failure to reach age 65 as of the termination date.
This agreement may be terminated by either party on three months' notice, subject to severance obligations in the event of
termination under certain circumstances (as described below). The agreement also provides that payments to Ms. Katz under her
change of control agreement, which is described below, are in lieu of any severance payments provided for in her employment
agreement.
If we terminate Ms. Katz's employment for cause or if she resigns without good reason or following her delivery of a notice
of non-renewal to the Company, Ms. Katz will receive only (i) any unpaid salary through the date of termination or resignation and
any bonus payable for the preceding fiscal year that has otherwise not already been paid, (ii) any accrued but unused vacation days,
and (iii) any reimbursement for business travel and other expenses to which she is entitled.
If , following October 6, 2007, we terminate Ms. Katz's employment without cause or if she resigns for good reason or
following her receipt of a notice of non-renewal from the Company, she will receive (i) any unpaid salary through the date of
termination or resignation and any bonus payable for the preceding fiscal year that has otherwise not already been paid, (ii) any
accrued but unused vacation days, and (iii) any reimbursement for business travel and other expenses to which she is entitled. In
addition, subject to her execution of a release and waiver of claims, she will receive (i) 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, (ii) a lump sum equal to
two times the sum of her base salary and target bonus, at the level in effect as of the employment termination date, and (iii) for the two
year period following such termination, the benefits described in, and subject to the terms of, her change of control agreement (which
is further described below); provided, however, that Ms. Katz shall be required to repay this payment if she violates certain restrictive
covenants in her agreement or if she is found to have engaged in certain acts of wrongdoing, all as further described in the agreement.
If, prior to October 6, 2007, Ms. Katz's employment with the Company is terminated for any reason, her entitlements and
obligations, if any, shall be governed by her change of control agreement.
If Ms. Katz's employment terminates before the end of the term due to her death or disability, we will pay her or her estate, as
applicable, (i) any unpaid salary through the date of termination and any bonus payable for the preceding fiscal year that has otherwise
not already been paid, (ii) any accrued but unused vacation days, (iii) any reimbursement for business travel and other expenses to
which she is entitled, and (iv) 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.
Ms. Katz's agreement also contains a tax gross-up provision whereby if, in the event of a change in control following the
existence of a public market for the Company's stock, she incurs any excise tax by reason of her receipt of any payment that
constitutes an excess parachute payment as defined in Section 280G of the Code, she will receive a gross-up payment in an amount
that would place her in the same after-tax position that she would have been in if no excise tax had applied. However, under certain
conditions, rather than receive a gross-up payment, the payments payable to her will be reduced so that no excise tax is imposed.
Ms. Katz's agreement also contains obligations on her part regarding non-competition and non-solicitation of employees
following the termination of her employment for any reason, confidential information and non-disparagement of the Company and its
business. The non-competition agreement generally prohibits Ms. Katz during employment and for a period of one year from
termination from becoming a director, officer, employee or consultant for any competing business that owns or operates a luxury
specialty retail store located in the geographic areas of the Company's operations. The agreement also requires that she disclose and
assign to the Company any trademarks or inventions developed by her which relate to her employment by the Company or to the
Company's business.
Change of Control Agreements
Each of the named executive officers is a party to a change of control termination protection agreement that will expire on
October 6, 2007. If the named executive officer's employment is terminated by The Neiman Marcus Group, Inc.
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