EXHIBIT 10.3
SECOND AMENDMENT TO EMPLOYMENT
AGREEMENT
This Second Amendment to Employment
Agreement (the “Amendment”) is made and entered into
effective as of January 1, 2009, by and between The Neiman
Marcus Group, Inc., a Delaware corporation
(“NMG”), Neiman Marcus, Inc., a Delaware
corporation (formerly known as Newton Acquisition, Inc.)
(“Parent”) and Burton M. Tansky (the
“Executive”).
W I T N E S S E T H
:
WHEREAS, NMG, Parent, the Executive
and Newton Acquisition Merger Sub, Inc., a Delaware
corporation (“Merger Sub”) entered into an Employment
Agreement effective as of October 6, 2005 (the
“Employment Agreement”); and
WHEREAS, Merger Sub merged with and
into NMG on or about October 6, 2005, and as a result of such
merger the separate existence of Merger Sub thereafter ceased and
NMG continued as the surviving corporation; and
WHEREAS, NMG, Parent and the
Executive previously amended the Employment Agreement to revise the
term of the Employment Agreement effective December 21, 2007;
and
WHEREAS, NMG, Parent and the
Executive now desire to amend the Employment Agreement for
compliance with Internal Revenue Code Section 409A and the
Treasury Regulations thereunder, and to make certain other
changes;
NOW, THEREFORE, in consideration of
the premises, the parties do hereby agree as follows:
1.
Paragraph 1(d) of the
Employment Agreement is hereby amended and restated in its entirety
as follows:
(d)
“Change of Control”
shall have the meaning set forth in the Stockholders’
Agreement. For purposes of clarification, the closing of the
transactions contemplated by the Merger Agreement will not
constitute a “Change of Control” for any purpose under
this Agreement.
2.
Paragraph 1(e) of the
Employment Agreement is hereby deleted in its entirety, with such
paragraph reserved for future use.
3.
Paragraph 1(k) of the
Employment Agreement is hereby amended by the addition of the
following sentence:
In addition to the foregoing, if the
Executive experiences a “separation from service” (as
determined in accordance with Treasury Regulation
Section 1.409A-1(h)) prior to his termination of employment as
a result of action taken by NMG without the consent of the
Executive, the separation from service shall constitute “Good
Reason” hereunder; provided that the Executive delivers a
Notice of Termination to NMG within 10 days following such
separation from service.
4.
Paragraph 1(n) of the
Employment Agreement is hereby amended and restated in its entirety
as follows:
(n)
“Management Equity Incentive
Plan” means the Neiman Marcus, Inc. Management Equity
Incentive Plan (formerly known as the Newton Acquisition, Inc.
Management Equity Incentive Plan), adopted November 29,
2005.
5.
Paragraph 2 of the Employment
Agreement is hereby amended and restated in its entirety as
follows:
2.
Employment; Prior
Agreements . NMG
agrees to continue to employ the Executive, and the Executive
agrees to continue to be employed, for the period set forth in
Paragraph 3, in the position and with the duties and
responsibilities set forth in Paragraph 4, and upon the other terms
and conditions set out in this Agreement. The employment
agreement entered into between the Executive and NMG, dated
August 3, 2003, is hereby terminated and replaced in its
entirety by this Agreement without further right or obligation
thereunder on the part of either party thereto (other than to pay
or provide the Executive any unpaid compensation
thereunder).
6.
Paragraph 5(c)(ii) of the
Employment Agreement is hereby amended and restated in its entirety
as follows:
(ii)
Upon the occurrence of the earlier
of a Change of Control or an Initial Public Offering, the Executive
will be paid a cash bonus equal to $3,080,911, provided that no
such bonus will be paid unless (A) the Executive remains
employed with NMG through the earlier of (x) the date of the
Change of Control, (y) the Initial Public Offering or
(z) the fourth anniversary of the Effective Date, and
(B) the internal rate of return to the Majority Stockholder
(as defined in the Stockholders’ Agreement) in respect of
their direct and indirect investment in Parent is positive.
The Majority Stockholder’s internal rate of return shall be
calculated in the case of an Initial Public Offering as if the
Majority Stockholder sold all of its direct and indirect equity
interests in Parent at a per share price equal to the Initial
Public Offering price or, in the case of a Change of Control, based
on the value of its equity interests implied by the transaction
giving rise to the Change of Control, and in each case, taking into
account all
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investments made directly or
indirectly in Parent, all management and transaction fees paid by
Parent or its subsidiaries to the Majority Stockholder and all
expenses incurred by the Majority Stockholder in connection with
the investment. If the Executive’s employment hereunder
terminates for other than Cause prior to the bonus payment becoming
due as described above and, subsequent to such termination, a
Change of Control or Initial Public Offering occurs in which the
Majority Stockholder recognizes a positive internal rate of return
determined in accordance with the foregoing provisions, the
Executive will be entitled to a payment equal to the product of
$3,080,911 and the percentage determined as follows:
(1) if the termination of employment is pursuant to Paragraph
6(a) or 6(b), 100%; (2) if the termination of employment
is by the Executive pursuant to Paragraph 6(e), 25% multiplied by
the number of full years (and not fractions thereof) from the
Effective Date to the Employment Termination Date; and (3) if
the termination is by the Executive pursuant to Paragraph
6(d) or by NMG pursuant to Paragraph 6(e), the sum (not to
exceed 100%) of 25% multiplied by the number of full years and
fractions thereof from the Effective Date to the Employment
Termination Date and 25%.
7.
Paragraph 5(c)(iii) of the
Employment Agreement is hereby amended and restated in its entirety
as follows:
(iii)
If, during the Employment Term and
prior to any Change of Control or Initial Public Offering, Parent
declares and pays an extraordinary dividend, the Parent shall pay
Executive a cash bonus equal to the amount that he would receive if
he owned all the shares initially underlying the Newco Options (as
defined in that certain letter agreement, dated October 4,
2005, by and among NMG, Parent and Executive, the “Letter
Agreement”), whether or not Executive has exercised any of
the Newco Options; provided, however, that the Newco Options which
have expired pursuant to the terms of the Option Grant Agreement
(as defined in the Letter Agreement) shall not be taken into
consideration for purposes of this Paragraph 5(c)(iii). Such
bonus payment shall be made no later than 2 ½ months after
the end of the taxable year in which the extraordinary dividend is
declared.
8.
Paragraph 5(c)(iv) of the
Employment Agreement is hereby amended and restated in its entirety
as follows:
(iv)
SERP Enhancement. At the time
of the Executive’s termination of employment with NMG and all
of its Affiliates, the Executive’s years of service for
purposes of calculating his benefit under The Neiman Marcus
Group, Inc. Supplemental Executive Retirement Plan (the
“SERP”) shall be determined by multiplying his actual
service for purposes of the SERP by 2, subject to the 25-year
maximum set forth in
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the SERP, and by then providing the
Executive with an additional credit for each year of service by the
Executive to NMG following his attainment of age sixty-five (65)
(disregarding the 25-year maximum set forth in the SERP).
During the Employment Term, the SERP shall not be terminated or
amended in any way that adversely affects the Executive without the
consent of the Executive.
9.
Paragraph 7(a) of the
Employment Agreement is hereby amended and restated in its entirety
as follows:
(a)
Death. If the
Executive’s employment is terminated by reason of the
Executive’s death, NMG shall pay to the Executive’s
estate within 60 days of the Employment Termination Date
(i) any unpaid portion of the Executive’s Base Salary
through the Employment Termination Date and any bonus payable for
the preceding fiscal year that has otherwise not already been paid,
provided that the payment of any such bonus may not be delayed past
the date the bonus is payable under the terms of any bonus plan
(together, the “Compensation Payment”), (ii) any
accrued but unused vacation days (the “Vacation
Payment”), (iii) any reimbursement for business travel
and other expenses to which the Executive is entitled (the
“Reimbursement”), and (iv) 85% of the Base Salary
in effect immediately prior to the Employment Termination Date,
multiplied by a fraction, the numerator of which is the number of
days during the fiscal year up to and including the Employment
Termination Date and the denominator of which is 365 (the
“Prorated Bonus”). This Paragraph 7(a) does
not limit the entitlement of the Executive’s estate or
beneficiaries to any death or other vested benefits to which the
Executive may be entitled under any life insurance, stock
ownership, stock options, or other benefit plan or policy that is
maintained by NMG for the Executive’s benefit, including any
amounts Executive is entitled to pursuant to Paragraph
5(c).
10.
Paragraph 7(b) of the
Employment Agreement is hereby amended and restated in its entirety
as follows:
(b)
Inability to Perform. If the
Executive’s employment is terminated by reason of the
Executive’s Inability to Perform, NMG shall pay to the
Executive within 60 days of the Employment Termination Date
(i) the Compensation Payment, provided that the payment of the
bonus portion of the Compensation Payment may not be delayed past
the date the bonus is payable under the terms of any bonus plan,
(ii) the Vacation Payment, (iii) the Reimbursement, and
(iv) the Prorated Bonus. This Paragraph 7(b) does
not limit the entitlement of the Executive to any amounts payable
pursuant to the terms of any applicable disability insurance plan,
policy, or similar arrangement that is maintained by NMG for the
Executive’s benefit. This Paragraph 7(b) does not
limit the entitlement of the Executive’s estate or
beneficiaries to any death or other
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vested benefits to which the
Executive may be entitled under any life insurance, stock
ownership, stock options, or other benefit plan or policy that is
maintained by NMG for the Executive’s benefit, including any
amounts Executive is entitled to pursuant to Paragraph
5(c).
11.
Paragraph 7(c) of the
Employment Agreement is hereby amended and restated in its entirety
as follows:
(c)
Termination by the Executive Without
Good Reason. If the Executive’s employment is
terminated by the Executive pursuant to and in compliance with
Paragraph 6(e) (other than in connection with a Change of
Control Resignation), NMG shall pay to the Executive within 60 days
of the Employment Termination Date (i) the Compensation
Payment, provided that the payment of the bonus portion of the
Compensation Payment may not be delayed past the date the bonus is
payable under the terms of any bonus plan, (ii) the Vacation
Payment, and (iii) the Reimbursement. This Paragraph
7(c) does not limit the entitlement of the Executive’s
estate or beneficiaries to any death or other vested benefits to
which the Executive may be entitled under any life insurance, stock
ownership, stock options, or other benefit plan or policy that is
maintained by NMG for the Executive’s benefit, including any
amounts Executive is entitled to pursuant to Paragraph
5(c).
12.
Paragraph 7(d) of the
Employment Agreement is hereby amended and restated in its entirety
as follows:
(d)
Termination for Cause. If the
Executive’s employment is terminated by NMG for Cause, NMG
shall pay to the Executive within 60 days of the Employment
Termination Date (i) the Compensation Payment, provided that
the payment of the bonus portion of the Compensation Payment may
not be delayed past the date the bonus is payable under the terms
of any bonus plan, (ii) the Vacation Payment, and
(iii) the Reimbursement. This Paragraph 7(d) does
not limit the entitlement of the Executive’s estate or
beneficiaries to any death or other vested benefits to which the
Executive may be entitled under any life insurance, stock
ownership, stock options, or other benefit plan or policy that is
maintained by NMG for the Executive’s benefit, including any
amounts Executive is entitled to pursuant to Paragraph
5(c).
13.
Paragraph 7(e) of the
Employment Agreement is hereby amended and restated in its entirety
as follows:
(e)
Termination without Cause or with
Good Reason; Change of Control Resignation.
(i)
If (x) the Executive’s
employment is terminated by NMG for any reason other than death,
Inability to Perform, or
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Cause, or is terminated by the
Executive for Good Reason or (y) the Executive’s
employment terminates by reason of a Change of Control Resignation,
NMG shall pay to the Executive (1) the Compensation Payment,
provided that the payment of the bonus portion of the Compensation
Payment may not be delayed past the date the bonus is payable under
the terms of any bonus plan, (2) the Vacation Payment, and
(3) the Reimbursement.
(ii)
In addition, subject to the
occurrence of the conditions in subparagraph (i) above, if the
Executive executes a mutual release and waiver of claims against
NMG in the form attached as Exhibit B within 45 days of
the Employment Termination Date and does not revoke such release
and waiver within any revocation period, then NMG shall pay the
Executive a lump-sum payment equal to: the Prorated Bonus,
plus an amount equal to the monthly COBRA premium applicable to
Executive at his Termination Date based upon the coverage in effect
for Executive under NMG’s group medical plan immediately
prior to his Termination Date multiplied by thirty-six (36), as a
supplement for the cost of post-employment welfare benefits, plus
(A) if such termination is not a Change of Control
Resignation, three (3) times the sum of the Executive’s
Base Salary and Target Bonus in effect on the Employment
Termination Date, or (B) if such termination is a Change of
Control Resignation, two (2) times the sum of the
Executive’s Base Salary and Target Bonus in effect on the
Employment Termination Date.
(iii)
The payments provided under
Paragraph 7(e)(i) shall be made within 60 days of the
Employment Termination Date. The payment provided under
Paragraph 7(e)(ii) shall be made (x) in the event the
Executive’s termination of employment constitutes a
“separation from service” under Treasury Regulation
Section 1.409A-1(h), on the 65 th day following the Employment Termination
Date, (y) in the event the Executive does not experience a
separation from service until after his termination of employment,
on the 65 th
day following such separation
from service, or (z) in the event the Executive experiences a
separation from service which constitutes Good Reason under
Paragraph 1(k) prior to his termination of employment, on the
65 th day following such separation from
service. Notwithstanding the foregoing, if the Executive
experiences a separation from service which does not constitute
Good Reason under Paragraph 1(k) prior to his termination of
employment, then the payment due to the Executive under Paragraph
7(e)(ii) shall be forfeited.
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(iv)
Any provision of this Agreement to
the contrary notwithstanding, the Executive shall be required to
repay the amounts described in Paragraph
7(e)(ii) if:
(A)
the Executive receives written
notice from NMG that in the reasonable judgment of NMG, the
Executive engaged or is engaging in any conduct that violates
Paragraph 8 or engaged or is engaging in any of the Restricted
Activities described in Paragraph 9, unless within 30 days of the
date NMG so notifies the Executive in writing, the Executive
provides information to NMG that NMG determines is sufficient to
establish that the Executive did not engage in any conduct that
violated Paragraph 8 or engage in any of the Restricted Activities
described in Paragraph 9; or
(B)
the Executive is arrested or
indicted for any felony, other serious criminal offense, or any
violation of federal or state securities laws, or has any civil
enforcement action brought against him
