Neiman Marcus 2008 Annual Report Download - page 224

(c) Long-term Incentives and SERP.
(i) As soon as practicable after the Effective Date, Parent shall grant the Executive an option to
purchase 16,349.1797 shares of common stock of Parent (the "Shares"). As to 7,269.3852 Shares, the option will
have a fixed exercise price per Share equal to $1,445.00, and will vest and become exercisable as to 459.5392
Shares on the first anniversary of the Effective Date, and as to 2269.9487 Shares on each of the second, third and
fourth anniversaries of the Effective Date. As to 9,079.7946 Shares, the option (the "Performance Option") will
have an exercise price per Share that is initially equal to $1,445.00 increasing at a 10.00% compound rate on each
anniversary of the Effective Date until the earlier to occur of (i) exercise of such Option, (ii) the fifth anniversary of
the Effective Date, or (iii) the occurrence of a Change of Control, and will vest and become exercisable as to
2269.9487 Shares on each of the first through fourth anniversaries of the Effective Date. In the event the Majority
Stockholder (as defined in the Stockholders' Agreement) redeems or disposes of a portion of its direct or indirect
equity interests in Parent prior to the fifth anniversary of the Effective Date in a transaction that does not constitute a
Change of Control, the compounding interest rate shall cease as to a proportionate share of the Performance Option
that bears the same ratio as the equity interests redeemed or disposed of by the Majority Stockholder bears to the
total equity interest held by the Majority Stockholder. Vesting of the entire option will accelerate immediately prior
to a Change of Control or upon termination of the Executive's employment pursuant to Paragraph 6(a) or 6(b). In
addition, upon a termination of employment by NMG pursuant to Paragraph 6(e) or by the Executive pursuant to
Paragraph 6(d), the option will vest as to (i) the number of Shares that would have become vested on the next
anniversary of the Effective Date, plus (ii) if the Employment Termination Date occurs prior to the third anniversary
of the Effective Date, the number of Shares that would have become vested on the next anniversary of the Effective
Date, multiplied by a fraction, the numerator of which is the number of days from the preceding anniversary of the
Effective Date (or the Effective date if such termination occurs prior to the first anniversary thereof) and the
denominator of which is 365. The Executive shall be permitted to exercise the vested portion of the option through
net-physical settlement (i.e., by delivery of Shares net of the number of Shares having a value equal to the applicable
exercise price and applicable withholding taxes at the minimum statutory rate) if such exercise occurs after
termination of the Executive's employment pursuant to Paragraph 6(a) or 6(b), by NMG pursuant to Paragraph 6(e),
by the Executive pursuant to Paragraph 6(d), or by the Executive pursuant to Paragraph 6(e) on or after the fifth
anniversary of the Effective Date. The option shall be granted pursuant to and subject to the terms of the
Management Equity Incentive Plan, which shall contain rights to dividend equivalents in a manner intended to
comply with Section 409A of the Code. The numbers of Shares and exercise price per Share set forth above are
based on the capitalization table attached as Exhibit A hereto.
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