Neiman Marcus 2012 Annual Report Download - page 125

Table of Contents
NOTE 11. DISTRIBUTIONS TO STOCKHOLDERS
On March 28, 2012, the Board of Directors of NMG declared a cash dividend (the 2012 Dividend) of $435 per share of its outstanding common
stock resulting in total distributions to our stockholders and certain option holders (including related expenses) of $449.3 million. The 2012 Dividend was
paid on March 30, 2012 to stockholders of record at the close of business on March 28, 2012.
NOTE 12. STOCK-BASED COMPENSATION
The Company has approved equity-based management arrangements, which authorize equity awards to be granted to certain management employees
for up to 115,792 shares of the common stock of the Company. Options generally vest over four to five years and expire six to eight years from the date of
grant.
The exercise prices of certain of our options escalate at a 10% compound rate per year (Accreting Options) until the earliest to occur of (i) exercise,
(ii) a defined anniversary of the date of grant (four to five years) or (iii) the occurrence of a change of control. However, in the event the Principal Stockholders
cause the sale of shares of the Company to an unaffiliated entity, the exercise price will cease to accrete at the time of the sale with respect to a pro rata portion
of the Accreting Options. The exercise price with respect to all other options (Fixed Price Options) is fixed at the grant date.
Stock Option Modifications. In connection with the payment of the 2012 Dividend in the third quarter of fiscal year 2012, the Company adjusted
the exercise price of 45,812 unvested options outstanding on the payment date by the per share amount of the 2012 Dividend of $435 per share. Holders of
47,055 vested options received a cash payment in respect of their vested options equal to 50% of the per share amount of the 2012 Dividend ($217.50 per
share) and a decrease in the exercise price of their vested options for the remaining 50% of the per share amount of the 2012 Dividend. There was no expense
to the Company as a result of the stock option modification triggered by the payment of the 2012 Dividend as the post-modification fair values of both vested
and unvested options outstanding were less than the pre-modification fair values.
Outstanding Stock Options. A summary of the stock option activity for fiscal year 2013 is as follows:
Fiscal year ended August 3, 2013
Weighted Weighted Average
Average Remaining
Exercise Contractual Life
Shares Price (years)
Outstanding at beginning of fiscal year 96,180 $ 1,214
Granted 12,400 1,987
Exercised (4,288) 1,064
Forfeited (1,272) 1,363
Expired (894)1,228
Outstanding at end of fiscal year 102,126 $1,344 4.6
Options exercisable at end of fiscal year 64,173 $1,200 4.2
At August 3, 2013, Accreting Options were outstanding for 30,550 shares and Fixed Price Options were outstanding for 71,576 shares. The total
grant date fair value of stock options that vested during the year was $13.8 million in fiscal year 2013, $6.4 million in fiscal year 2012 and $5.7 million in
fiscal year 2011. The total intrinsic value of stock options exercised during the year was $3.6 million in fiscal year 2013 and $7.5 million in fiscal year
2012.
Grant Date Fair Value of Stock Options. At the date of grant, the stock option exercise price equals or exceeds the fair market value of our
common stock. Because we are privately held and there is no public market for our common stock, the fair market value of our common stock is determined
by our Compensation Committee at the time option grants are awarded (Level 3 determination of fair value). In determining the fair value of our common
stock, the Compensation Committee considers such factors as the Company’s actual and projected financial results, the principal amount of the Company’s
indebtedness, valuations of the Company performed by third parties and other factors it believes are material to the valuation process.
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