EXHIBIT 10.3
TERMINATION AND CHANGE OF CONTROL AGREEMENT
1. This Termination and Change of Control Agreement ("Agreement")
is entered into as of October 6, 1999 between Xxxxxx Xxxxxx ("Xx.
Xxxxxx" or the "Executive") and The Neiman Marcus Group, Inc.
("NMG").
2. Xx. Xxxxxx is employed "at-will" as President of NMG, Chairman
and Chief Executive Officer of NM Stores, and Xx. Xxxxxx or NMG may
terminate Xx. Xxxxxx'x employment at any time, with or without
notice, for any reason. Notwithstanding this at-will employment,
NMG wishes to provide some protection to Xx. Xxxxxx if the
Executive's employment ends under certain circumstances.
3. a. While Xx. Xxxxxx is employed at-will, if NMG terminates
Xx. Xxxxxx'x employment other than "for cause" or other than
due to "total disability" or death, NMG agrees to provide Xx.
Xxxxxx with a termination package consisting of (a) an amount
equivalent to 2 times his then-current annual base salary,
less required withholding, which amount would be paid over a
24-month period in regular, bi-weekly installments following
such termination; and (b) continuation of the medical and
dental insurance coverage in which he participates at the time
of such termination (or as such coverage may be changed from
time-to-time for employees generally) for 24 months or until
he starts full-time employment, whichever is sooner. Xx.
Xxxxxx will be responsible for paying his portion of monthly
premiums for the medical and dental insurance coverage at the
same rate paid by active employees, and Xx. Xxxxxx authorizes
NMG to deduct such amounts from the payments it makes to him.
For the purposes of determining whether or not NMG has
terminated the Executive's employment, any material, adverse
change in the terms and conditions of his employment, which
change causes the Executive to resign his employment, will be
deemed a termination.
b. If Xx. Xxxxxx'x services are terminated by a successor to
NMG other than "for cause" or other than due to "total
disability" or death within two years of a change of control
of NMG, as a change of control is defined in Appendix A, or if
the Executive resigns his employment within two years of such
a change of control because he is not permitted to continue in
a position comparable in duties and responsibilities to that
which he held before such a change of control, Xx. Xxxxxx
shall receive the termination package set forth in paragraph
3.a.
4. For the purposes of determining Xx. Xxxxxx'x eligibility for
the termination package set forth in this Agreement:
a. "For cause" means, in NMG's reasonable judgment, a breach
of duty by Xx. Xxxxxx in the course of his employment
involving fraud, acts of dishonesty (other than inadvertent
acts or omissions), or moral turpitude, repeated
insubordination, failure to devote his full working time and
best efforts to the performance of his duties, or conviction
of a felony or other serious criminal offense. Provided that,
with respect to insubordination or devotion of his working
time, Xx. Xxxxxx has been provided prior written notice of the
problem and afforded a reasonable opportunity to correct same.
b. "Total Disability" means that, in NMG's reasonable
judgment, Xx. Xxxxxx is unable to perform his duties for (a)
80% or more of the normal working days during six consecutive
calendar months or (b) 50% or more of the normal working days
during twelve consecutive calendar months.
c. "Change of Control" has the meaning set forth in Appendix
A.
5. Payment by NMG of the termination package set forth in
paragraph 3 constitutes full satisfaction of NMG's obligations to
Xx. Xxxxxx, if any, (including the right to any severance payments)
which arise from or relate in any way to the termination of Xx.
Xxxxxx'x employment. However, nothing in this Agreement is
intended to limit any earned, vested benefits (other than any
entitlement to severance pay) that Xx. Xxxxxx may have under the
applicable provisions of any benefit plan in which Xx. Xxxxxx is
participating at the time of his termination of employment or
resignation.
6. The unenforceability of any provision of this Agreement shall
not affect the enforceability of any other provision of this
Agreement.
7. This Agreement contains the entire agreement between the
parties and supersedes all prior agreements and understandings,
oral or written, with respect to the termination of Xx. Xxxxxx'x
at-will employment and the subject matter of the Agreement. This
Agreement may not be changed orally. It may be changed only by
written agreement signed by the party against whom any waiver,
change amendment, modification or discharge is sought.
8. The validity, performance and enforceability of this Agreement
will be determined and governed by the laws of the Massachusetts
without regard to its conflict of laws principles.
The Neiman Marcus Group, Inc.
s/ Xxxxxx Xxxxxx By: s/ Xxxxxx X. Xxxxxx
Xx. Xxxxxx Xxxxxx
Appendix A
A Change of Control will occur for purposes of this Agreement:
(i) upon the consummation of any transaction or series of
transactions under which the Company is merged or consolidated with
any other company, other than a merger or consolidation which would
result in the shareholders of the Company immediately prior thereto
continuing to own (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than
50% of the combined voting power of the voting securities of the
Company, the acquiring entity or such surviving entity outstanding
immediately after such merger or consolidation in substantially the
same proportion such shareholders held the voting securities of the
company immediately prior to the merger or consolidation;
(ii) if any person or group (as used in section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
company owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of
stock of the Company) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of securities of the Company
representing more than 40% of (a) the shares of the Company's Class
B Common Stock then outstanding or (b) the total voting power
(other than in the election of directors) of all securities of the
Company then outstanding; or
(iii) if, during any period of twenty-four consecutive months,
individuals who at the beginning of such period constitute the
Board of Directors, and any new director whose election or
nomination for election by the Company's shareholders was approved
by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so
approved, cease for any reason (other than death or disability) to
constitute at least a majority thereof; or
(iv) the complete liquidation of the Company or the sale or
disposition by the Company of all or substantially all of the
Company's assets, other than a liquidation of the Company into a
wholly-owned subsidiary.
November 11, 1999
Dear Xxxx:
As we discussed today, I have clarified two items in your
compensation and benefits package. This package and the
Termination and Change of Control Agreement supersede your current
employment agreement which was scheduled to expire on January 31,
2000 and the February 9, 1999 letter I sent to you.
FY2000 Base
Salary
$1,000,000
FY2000 Annual
Bonus
Threshold 15%; Target 60%; Maximum 120%
Long Term
Incentive
30,000 Non-qualified Stock Options (NQSO)
10,000 Performance Accelerated Restricted
Stock
[The annual incentive and PARS targets are
set out in the October 6 memo Rob and
Xxxxx gave you.]
One-time Stock
Grant
110,000 NQSO
20,000 Time Lapse Restricted Stock
Special Stock
Vesting
Any stock options you have been (or will
be) granted will continue to vest and
restrictions on any of your restricted
stock will continue to lapse for up to
five years either after you retire or are
terminated other than "for cause." In
addition, the exercise period for your
options will extend to the lesser of ten
years from the date of the option grant or
five years either after retirement or
after termination other than "for cause."
SERP
Enhancement
You would be eligible for service credit
of two times your actual years of service
with NMG: (a) if you remain employed until
age 65 and agree not to compete with the
company for three years following your
retirement. (You and the company agree to
engage in good faith discussions at the
time of your retirement to define the
scope of the restrictions on competition.
If there is no agreement, on the
restrictions, your service credit would
revert to 5/3 times your actual years of
service); (b) if NMG terminates you other
than "for cause" or you resign your
employment at NMG under specified
circumstances (as set forth in your
Termination and Change of Control
Agreement) before you reach age 65; or (c)
you are terminated other than "for cause"
or resign under specified circumstances
within 24 months following a Change of
Control.
Termination
and Change of
Control
The new Agreement increases your severance
pay to 24 months; modifies the Change of
Control language to reflect NMG's new
ownership structure; removes the offset
provision; and standardizes disability and
"for cause" definitions.
Other Company
Benefits
Financial/Tax Planning - Increase from
$3,000 to $5,000
Sincerely,
s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
