Article 2. – PARTICIPATION		12
2.1.	Continued Participation	12
2.2.	Duration of Participation	12
2.3.	Reduction in Participants	12
2.4	Participation After December 31, 2007	12
Article 3. – SOURCE OF BENEFIT PAYMENTS		14
Article 4. - RETIREMENT BENEFITS		15
4.1.	Normal or Late Retirement Benefit	15
4.2.	Early Retirement Benefit	16
4.3.	Vested Termination Benefit	18
4.4.	Other Termination of Employment; Death	21
4.5	Benefit Starting Date	21
4.6.	Optional Forms of Benefits	21
4.7.	Forfeiture of Benefits	23
4.8.	Surviving Spouse Benefit	23
4.9.	Accelerated Payment	24
4.10.	Reemployment After Retirement	24
4.11.	Code Section 409A Transition and Grandfathered Benefits	25
Article 5. - COMMITTEE		29
5.1.	Plan Administration and Interpretation	29
5.2.	Powers, Duties Procedures, etc.	29
5.3.	Information	30
5.4.	Indemnification of Committee	30
Article 6. – AMENDMENT AND TERMINATION		31
6.1.	Amendments	31
6.2.	Termination of Plan	31
Article 7. - MISCELLANEOUS		32
7.1.	Nonassignability	32
7.2.	Limitation on Participant’s Rights	32
7.3.	Participants Bound	32
7.4.	Receipt and Release	32
7.5.	No Guarantee of Tax Consequences	33
7.6.	Governing Law	33
7.7.	Headings and Subheadings	33

 

ii

 

THE NEIMAN MARCUS GROUP, INC.

 

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

(Amended and Restated Effective January 1, 2009)

 

Purpose and History

 

The Company originally adopted this Plan, effective August 7, 1987, for a select group of management personnel in order to

 

(a)                                   attract, retain and motivate qualified management personnel;

 

(b)                                  facilitate the retirement of management personnel; and

 

(c)                                   provide survivor income for the spouses of management personnel.

 

The Company has previously made amendments to the Plan to make certain changes and clarifications.  The Company is hereby amending and restating the Plan to make changes intended to bring the Plan into compliance with the requirements of and thereby avoid the tax imposed pursuant to Section 409A of the Code, and the Plan shall be interpreted and administered in a manner consistent with such intent.

 

The Plan is intended to be “a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of Sections 201(2) and 301(a)(3) of ERISA, and shall be interpreted and administered to the extent possible in a manner consistent with that intent.

 

 

Article 1. - DEFINITIONS

 

Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context:

 

1.1.                               “Actuarial Equivalent” shall have the meaning set forth in the Basic Plan; provided, however, that it is intended that “Actuarial Equivalent” be determined in a manner that does not cause a tax to be applicable to a Plan benefit under Code Section 409A and if application of said meaning set forth in the Basic Plan in a particular circumstance would result in a tax being applicable to a Participant under Code Section 409A, the Committee shall establish such other reasonable actuarial factors for such purpose as it shall determine to be appropriate to avoid such result.

 

1.2.                               “Affiliate” means any corporation or organization that together with the Company is treated as a single employer under Section 414(b) or (c) of the Code.

 

1.3.                               “Basic Plan” means The Neiman Marcus Group, Inc.  Retirement Plan as amended from time to time.  Reference to any Article or Section of the Basic Plan shall include reference to any comparable or successor provisions of the Basic Plan as amended from time to time.

 

1.4.                               “Benefit Starting Date” shall be the date as of which the Participant’s Post-2004 SERP Benefit shall commence in payment and shall have the meaning set forth in Section 4.5.

 

1.5.                               “Board of Directors” means the Board of Directors of the Company.

 

1.6.                               “Code” means the Internal Revenue Code of 1986, as amended from time to time.  Reference to any Section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such Section or subsection.

 

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1.7.                               “Committee” means the Employee Benefits Committee appointed by the Board of Directors or its Executive Committee.

 

1.8.                               “Company” means The Neiman Marcus Group, Inc., a Delaware corporation, and any successor, including a successor by purchase of all or substantially all of its assets or business that expressly assumes the obligations of the Company under this Plan.

 

1.9.                               “Compensation” means, with respect to any given period, the aggregate compensation, exclusive of any bonuses, paid to an Eligible Employee by one or more Participating Employers during such period, whether before or after he or she becomes an “Eligible Employee.”  “Compensation” shall be determined before any reduction under Section 125  or 401(k) of the Code or under any deferred compensation plan or arrangement, but shall not otherwise include any Participating Employer contributions under retirement or other benefit plans or arrangements, or any expense reimbursements, imputed compensation, property, payments of compensation previously deferred, or incentive payments earned through a wellness or similar program sponsored by a Participating Employer.

 

1.10.                         “Elected Age” means age 62; provided, however, that (i) prior to January 1, 2009 (or such earlier date as the Committee may prescribe), a Participant who has not had a Termination of Employment prior to December 15, 2008 and who is not entitled to commence receiving his or her Post -2004 SERP Benefit prior to January 1, 2009 shall be permitted to elect an age other than 62 that is not lower than 55 and not greater than 65, in the time and manner prescribed by the Committee for such election and such election shall be irrevocable except as provided in (ii) below; and (ii) on or after January 1, 2009, a Participant shall be permitted to change his or her Elected Age in such manner as the Committee may prescribe provided that any such subsequent election does not take effect for at least 12 months after the date the election is made, such subsequent election is made at least 12 months prior to the date the Participant will

 

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attain his or her Elected Age as currently in effect, and the subsequent election results in a new Elected Age that is at least five years later than the Elected Age in effect at the time of the election, provided that a Participant shall not be permitted to elect an age beyond age 65.  All elections permitted pursuant to this Section shall be made in a manner that complies with the requirements applicable to making payment elections under Code Section 409A.

 

1.11.                         “Eligible Employee” means each employee of a Participating Employer who, on any August 1:

 

(a)                                   is employed in an executive, administrative, or professional capacity as defined in Section 13(a)(1) of the Fair Labor Standards Act, as amended, and the regulations thereunder,

 

(b)                                  participates in the Basic Plan,

 

(c)                                   had a base salary on the immediately preceding December 31 at least equal to the Minimum Salary, and

 

(d)                                  is not employed as a salesperson.

 

1.12.                         “ERISA” means the Employee Retirement Income Security Act of 1974, as from time to time amended.

 

1.13.                         “Grandfathered Rule of 65 Employee” means a Rule of 65 Employee who either:  (i) expressly elected to remain eligible to participate in the Basic Plan in accordance with an election made in 2007, or (ii) implicitly elected to remain eligible to participate in the Basic Plan by failing to make a timely election to the contrary and thereby acquiescing to such an election by default.

 

1.14.                         “Minimum Salary” means:

 

(a)                                   for December 31 of each of the years 1992 through 1995, the amount in effect under Section 414(q)(1)(B) of the Code for the year following such December 31; and

 

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(b)                                  for December 31, 1996, $100,000; and

 

(c)                                   for December 31, 1997, and each December 31 thereafter, $160,000.

 

1.15.                         “Non-409A Participant” means a Participant who, on account of his or her cessation of employment with a Participating Employer before January 1, 2005 or other circumstances that resulted in his or her ceasing to accrue a benefit under the Plan prior to such date, has a total benefit accrued pursuant to the Plan that was fully vested as of December 31, 2004 and has not accrued any increase with respect to such benefit after December 31, 2004 attributable to Compensation or Service after such date or that otherwise would not be treated as an amount deferred before January 1, 2005 pursuant to Treasury Regulation Section 1.409A-6.

 

1.16.                         “Normal Form” means a form of benefit payable monthly to an individual during his or her lifetime, the first payment to be due on the date of the commencement of his or her benefits under the Plan, and the last payment to be due for the calendar month in which his or her death occurs.

 

1.17.                         “Normal Retirement Age” means the later of (a) the date on which the Participant attains age 65 or (b) the fifth anniversary of the date he or she first performed an Hour of Service under the Basic Plan.

 

1.18.                         “Normal Retirement Date” means the first day of the calendar month coinciding with or next following the date on which the Participant attains his or her Normal Retirement Age.

 

1.19.                         “Participant” means any individual who participates in the Plan in accordance with Article 2.

 

1.20.                         “Participating Employer” means the Company and any Affiliate of the Company that is a Participating Employer in the Basic Plan.

 

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1.21.                         “Plan” means The Neiman Marcus Group, Inc.  Supplemental Executive Retirement Plan as set forth herein and in all subsequent amendments hereto.

 

1.22.                         “Plan Year” means the 52 or 53 week period ending on the Saturday nearest to July 31 of each year.

 

1.23.                         “Post-2004 SERP Benefit” means a monthly benefit payable in the Normal Form equal to the monthly Total SERP Benefit payable in the Normal Form  minus a monthly benefit derived from the Pre-2005 SERP Benefit converted to an Actuarially Equivalent payment in the Normal Form as determined in accordance with Section 4.1, 4.2 or 4.3, as applicable.  The Post-2004 SERP Benefit shall be subject to the limitations set forth in Section 4.11(d).

 

1.24.                         “Pre-2005 SERP Benefit” means the present value of the amount to which the Participant would have been entitled under the Plan if he or she voluntarily terminated services without cause on December 31, 2004, and received a payment of the benefits available from the Plan on the earliest possible date allowed under the Plan to receive a payment of benefits following the termination of services, and received the benefits in the form with the maximum value, as determined in accordance with Treasury Regulation Section 1.409A-6(a)(3)(i) in a manner that results in the largest possible amount permitted by such provision, increased as permitted in accordance with Treasury Regulation Section 1.409A-6(a)(3)(iv).  The Pre-2005 SERP Benefit is intended to be exempt from the application of Code Section 409A as an amount that was deferred prior to January 1, 2005 pursuant to Treasury Regulation Section 1.409A-6(a) and shall be determined in a manner consistent therewith.  The Pre-2005 SERP Benefit shall be subject to the limitations set forth in Section 4.11(d).

 

1.25.                         “Rule of 65 Employee” means an Eligible Employee as of December 31, 2007 who had at least ten years of Vesting Service under the Basic Plan as of December 31, 2007 and

 

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whose age as of December 31, 2007, when added to the number of his or her years of Vesting Service under the Basic Plan as of December 31, 2007, was equal to or in excess of 65.

 

1.26.                         “Service” means the period measured in years equal to years of Vesting Service determined under the Basic Plan, subject to the following special rules:

 

(a)                                   Years of Vesting Service, if any, prior to August 2, 1987 shall be determined in accordance with the rules of the Pension Plan for Employees of Carter Hawley Hale Stores, Inc.  that applied on August 1, 1987 to employees hired after June 30, 1980; and

 

(b)                                  A Participant shall be credited with a full year of Service for each partial year of Vesting Service interrupted by a Period of Severance, provided that (i) the Participant is credited with at least 1,000 Hours of Service during such partial year of Vesting Service, and (ii) no more than one year of Service shall be credited during any 12-month period.

 

1.27.                         “Social Security Benefit” means, in the case of each Participant, the estimated amount of the monthly primary old age insurance benefit available to him or her at age 65 under the Social Security Act as in effect on the earliest of his or her Normal Retirement Date, Termination of Employment or death.  The amount shall be computed upon the assumption that the Participant has been continuously covered under said Act since the later of 1951 or his or her 21st birthday, and that his or her remuneration for employment for the calendar year preceding the date of his or her Normal Retirement, Termination of Employment or death, whichever is earliest, was equal to that portion of his or her compensation for such year that would be subject to tax under Section 3101(a) of the Code without the dollar limitation of Code Section 3121(a)(1), and his or her remuneration for each prior calendar year was equal to the assumed remuneration for the subsequent year divided by 1.06.  If a Participant has a Termination of

 

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Employment for any reason, or becomes Totally and Permanently Disabled, prior to his or her Normal Retirement Date, in determining his or her Social Security Benefit, earnings for the calendar year of such termination or disability and each subsequent calendar year prior to his or her Normal Retirement Date shall be assumed to be equal to that portion of his or her compensation for the calendar year prior to the year of termination or disability that would be subject to tax under Section 3101(a) of the Code without the dollar limitation of Code Section 3121(a)(1).

 

1.28.                         “Spouse” means a person of the opposite sex of the Participant who is the lawfully married husband or wife of a Participant at the time of the Participant’s death or, if earlier, as of the first day of the first month for which benefits are payable under the Plan.

 

1.29.                         “Termination of Employment” means a termination of services provided by a Participant to his or her Employer (as defined below), whether voluntarily or involuntarily, as determined by the Company in accordance with the rules for determining when a service provider has incurred a separation from service under Treasury Regulation Section 1.409A-1(h). More specifically and as provided by such regulations, in determining whether a Participant has incurred a Termination of Employment, the following provisions shall apply:

 

(a)                                   Except as otherwise provided in this definition, a Termination of Employment will occur when the Participant has experienced a termination of employment with the Employer. A Participant will be considered to have experienced a termination of employment when the facts and circumstances indicate that the Participant and his or her Employer reasonably anticipate that either (i) no further services will be performed for the Employer after a certain date, or (ii) that the level of bona fide services the Participant will perform for the Employer after such date (whether as an employee or as an independent contractor) will permanently decrease to no more than 20 percent of

 

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the average level of bona fide services performed by the Participant (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the Employer if the Participant has been providing services to the Employer less than 36 months).

 

If a Participant is on military leave, sick leave, or other bona fide leave of absence, the employment relationship between the Participant and the Employer will be treated as continuing, provided that the period of the leave of absence does not exceed 6 months, or if longer, so long as the Participant has a right to reemployment with the Employer under an applicable statute or by contract.  If the period of a military leave, sick leave, or other bona fide leave of absence exceeds 6 months and the Participant does not have a right to reemployment under an applicable statute or by contract, the employment relationship will be considered to be terminated for purposes of this Plan as of the first day immediately following the end of such 6-month period.  In applying the provisions of this paragraph, a leave of absence will be considered a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for the Employer.

 

(b)                                  For a Participant who provides services to an Employer both as an employee and as an independent contractor , a Termination of Employment generally will not occur until the Participant has ceased providing services for the Employer  both as an employee and as an independent contractor.  Except as otherwise provided herein, in the case of an independent contractor a Termination of Employment will occur upon the expiration of the contract (or in the case of more than one contract, all contracts) under which services are performed for the Employer, provided that the expiration of such contract or contracts is determined by the Company to constitute a good-faith and

 

9

 

complete termination of the contractual relationship between the Participant and the Employer.  If a Participant ceases providing services for an Employer as an employee and begins providing services for such Employer as an independent contractor, the Participant will not be considered to have experienced a Termination of Employment until the Participant has ceased providing services for the Employer in both capacities, as determined in accordance with the applicable provisions set forth in subparagraphs (a) and (b) of this definition.

 

Notwithstanding the foregoing provisions in this subparagraph, if a Participant provides services for an Employer as both an employee and as a member of the board of directors of an Employer, to the extent permitted by Treasury Regulation Section 1.409A-1(h)(5), the services provided by the Participant as a director will not be taken into account in determining whether the Participant has experienced a Termination of Employment as an employee.

 

(c)                                   In addition, notwithstanding the provisions of this definition, where as part of a sale or other disposition of substantial assets by an Employer to an unrelated buyer, a Participant would otherwise experience a Termination of Employment as defined above, the Employer and the buyer shall retain the discretion to specify, and may specify, that a Participant performing services for an Employer immediately before the asset purchase transaction and providing services to the buyer after and in connection with the asset purchase transaction shall not experience a Termination of Employment for purposes of this Plan and the Participant shall be bound by same, provided that such transaction and the specification meet the requirements of Code Section 409A.

 

(d)                                  For purposes of this definition, “Employer” means:

 

(i)                                      The Company; and

 

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(ii)                                   All other entities with which the Company would be aggregated and treated as a single employer under Code Section 414(b) (controlled group of corporations) and Code Section 414(c) (group of trades or businesses under common control), as applicable.  To identify the group of entities described in the preceding sentence, an ownership threshold of 50% shall be used as a substitute for the 80% minimum ownership threshold that appears in, and otherwise must be used when applying, the applicable provisions of (A) Code Section 1563 and the regulations thereunder for determining a controlled group of corporations under Code Section 414(b), and (B) Treasury Regulation § 1.414(c)-2 for determining the trades or businesses that are under common control under Code Section 414(c).

 

1.30.                         “Total SERP Accrued Benefit” means the amount determined under the provisions of Section 4.1, Section 4.2 or Section 4.3, as applicable to the Participant as of the date such amount is being determined.

 

Unless defined herein, any capitalized word, phrase or term used in this Plan shall have the meaning given to it in the Basic Plan.

 

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Article 2.  — PARTICIPATION

 

2.1.                               Continued Participation .  Any individual who was a Participant in the Plan on December 31, 2008 will, subject to Sections 2.2, 2.3, and 2.4, continue to be a Participant under the Plan after such date.

 

2.2.                               Duration of Participation .  Subject to Section 2.3, an individual who has become a Participant in the Plan shall continue to be a Participant as long as he or she remains an employee of a Participating Employer or is entitled to a benefit under the Plan, even though his or her base salary after becoming a Participant later falls below the then applicable Minimum Salary level specified in Section 1.14.  A Participant will cease to be a Participant when he or she is neither employed by a Participating Employer nor entitled to receive a benefit under the Plan.

 

2.3.                               Reduction in Participants .  Notwithstanding any other provision of the Plan to the contrary, the Committee may terminate the right of any Participant or Eligible Employee to participate in the Plan if the Committee deems such action to be necessary to preserve the status of the Plan as “a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of Sections 201(2) and 301(a)(3) of ERISA.  In the event a Participant’s participation is terminated under this Section 2.3, the Participant shall not be entitled to any benefits under the Plan except to the extent such benefits would be protected under Section 6.2 if the Plan were then terminated.

 

2.4                                  Participation After December 31, 2007 .  A Participant who is a Grandfathered Rule of 65 Employee as of December 31, 2007 shall continue to be a Participant under the Plan thereafter, subject to and in accordance with the terms of the Plan; provided, however, that if a Grandfathered Rule of 65 Employee has a Termination of Employment after December 31, 2007,

 

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such employee shall not be treated as a Grandfathered Rule of 65 Employee upon any later reemployment by a Participating Employer.  Any provision of the Plan to the contrary notwithstanding, no individual shall become an Eligible Employee on or after January 1, 2008 who was not an Eligible Employee on December 31, 2007 and, thus, there shall be no new Participants in the Plan on and after such date, and a Participant who is not a Grandfathered Rule of 65 Employee shall remain a Participant in the Plan after December 31, 2007 as provided in Section 2.2 as long as he or she is entitled to receive a benefit under the Plan, but no additional benefit shall accrue for any Participant who is not a Grandfathered Rule of 65 Employee under the Plan after December 31, 2007, subject to the following:

 

(i)                                      the amount of benefit payable under the Plan after December 31, 2007 with respect to a Participant who is an Eligible Employee as of such date bu