EXHIBIT 10.2
THE NEIMAN MARCUS GROUP, INC.
1997 INCENTIVE PLAN
1. DEFINED TERMS
Appendix A, which is incorporated by reference, defines the terms used in
the Plan.
2. IN GENERAL
The Plan has been established to advance the interests of the Company by
giving selected Employees, directors and other persons (including both
individuals and entities) who provide services to the Company or its
Affiliates equity-based or cash incentives through the grant of Awards. No
Award may be granted under the Plan after September 1, 2006, but Awards
previously granted may extend beyond that date.
3. ADMINISTRATION
The Administrator has discretionary authority, subject only to the
express provisions of the Plan, to interpret the Plan; determine eligibility
for and grant Awards; determine, modify or waive the terms and conditions of
any Award; prescribe forms, rules and procedures (which it may modify or
waive); and otherwise do all things necessary to carry out the purposes of the
Plan. Once an Award has been communicated in writing to a Participant, the
Administrator may not, without the Participant's consent, alter the terms of
the Award so as to affect adversely the Participant's rights under the Award,
unless the Administrator expressly reserved the right to do so. In the case of
any Award intended to be eligible for the performance-based compensation
exception under Section 162(m)(4)(C) of the Code, the Committee shall exercise
its discretion consistent with qualifying the Award for such exception.
4. SHARES SUBJECT TO THE PLAN
A. A total of 2,500,000 shares of Stock have been reserved for issuance
under the Plan. The following shares of Stock will also be available for
future grants:
(i) shares remaining under an Award that terminates without having
been exercised in full (in the case of an Award requiring exercise
by a Participant for delivery of Stock);
(ii) shares subject to an Award, where cash is delivered to a
Participant in lieu of such shares;
(iii) shares of Restricted Stock that are forfeited to the Company;
(iv) shares of Stock tendered by a Participant as payment upon
exercise of an Award; and
(v) shares of Stock held back by the Administrator, or tendered by a
Participant, in satisfaction of tax withholding requirements.
Stock delivered under the Plan may be authorized but unissued Stock or
previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
B. The maximum number of shares for which Stock Options may be granted
to any person over the life of the Plan shall be 1,000,000. The maximum number
of shares subject to SARs granted to any person over the life of the Plan
shall likewise be 1,000,000. For purposes of the preceding two sentences, the
repricing of a Stock Option or SAR shall be treated as a new grant to the
extent required under Section 162(m) of the Code. The aggregate maximum number
of shares of Stock delivered to any person over the life of the Plan pursuant
to Awards that are not Stock Options or SARs shall also be 1,000,000. Subject
to these limitations, each person eligible to participate in the Plan shall be
eligible in any year to receive Awards covering up to the full number of
shares then available for Awards under the Plan.
5. ELIGIBILITY AND PARTICIPATION
The Administrator will select Participants from among those key
Employees, directors and other individuals or entities providing services to
the Company or its Affiliates who, in the opinion of the Administrator, are in
a position to make a significant contribution to the success of the Company
and its Affiliates. Eligibility for ISOs is further limited to those
individuals whose employment status would qualify them for the tax treatment
described in Sections 421 and 422 of the Code.
6. RULES APPLICABLE TO AWARDS
a. ALL AWARDS
(1) PERFORMANCE OBJECTIVES. Where rights under an Award depend in
whole or in part on attainment of performance objectives, actions by the
Company that have an effect, however material, on such performance objectives
or on the likelihood that they will be achieved will not be deemed an
amendment or alteration of the Award unless accomplished by a change in the
express terms of the Award or other action that is without substantial
consequence except as it affects the Award.
(2) ALTERNATIVE SETTLEMENT. The Company retains the right at any
time to extinguish rights under an Award in exchange for payment in cash,
Stock (subject to the limitations of Section 4) or other property on such
terms as theAdministrator determines, provided the holder of the Award
consents to such exchange.
(3) TRANSFERABILITY OF AWARDS. Except as the Administrator otherwise
expressly provides, Awards (other than an Award in the form of an outright
transfer of cash or Unrestricted Stock) may not be transferred other than by
will or by the laws of descent and distribution and, during a Participant's
lifetime an Award requiring exercise may be exercised only by the Participant
(or in the event of the Participant's incapacity, the person or persons
legally appointed to act on the Participant's behalf).
(4) VESTING, ETC. The Administrator may determine the time or times
at which an Award will vest (i.e., become free of restrictions) or become
exercisable. Unless the Administrator expressly provides otherwise, an Award
requiring exercise will cease to be exercisable, and all other Awards to the
extent not already fully vested will be forfeited, immediately upon the
cessation (for any reason, including death) of the Participant's employment or
other service relationship with the Company and its Affiliates.
(5) TAXES. The Administrator will make such provision for the
withholding of taxes as it deems necessary. The Administrator may, but need
not, hold back shares from an Award or permit a Participant to tender
previously owned shares in satisfaction of tax withholding requirements.
(6) DIVIDEND EQUIVALENTS, ETC. The Administrator may provide for the
payment of amounts in lieu of dividends or other distributions with respect to
Stock subject to an Award.
(7) RIGHTS LIMITED. Nothing in the Plan shall be construed as giving
any person the right to continued employment or service with the Company or
its Affiliates, nor any rights as a shareholder except as to shares actually
issued under the Plan. The loss of existing or potential profit in Awards will
not constitute an element of damages in the event of termination of employment
or service for any
reason, even if the termination is in violation of an obligation of the
Company or Affiliate to the Participant.
(8) SECTION 162(m). In the case of an Award intended to be eligible
for the performance-based compensation exception under Section 162(m)(4)(C) of
the Code, the Plan and such Award shall be construed in a manner consistent
with qualifying the Award for such exception.
b. AWARDS REQUIRING EXERCISE
(1) TIME AND MANNER OF EXERCISE. Unless the Administrator expressly
provides otherwise, (a) an Award requiring exercise by the holder will not be
deemed to have been exercised until the Administrator receives a written
notice of exercise (in form acceptable to the Administrator) signed by the
appropriate person and accompanied by any payment required under the Award;
and (b) if the Award is exercised by any person other than the Participant,
the Administrator may require satisfactory evidence that the person exercising
the Award has the right to do so.
(2) PAYMENT OF EXERCISE PRICE, IF ANY. Where the exercise of an
Award is to be accompanied by payment, the Administrator may determine the
required or permitted forms of payment either at or after the time of the
Award, subject to the following: (a) unless the Administrator expressly
provides otherwise, all payments will be by cash or check acceptable to the
Administrator; and (b) where shares issued under an Award are part of an
original issue of shares, the Award shall require an exercise price equal to
at least the par value of such shares.
(3) RELOAD AWARDS. The Administrator may provide that upon the
exercise of an Award through the tender of previously owned shares of Stock,
the Participant or other person exercising the Award will automatically
receive a new Award of like kind covering a number of shares determined by
reference to the number of shares tendered in payment of the exercise price of
the first Award.
c. AWARDS NOT REQUIRING EXERCISE
Awards of Restricted Stock and Unrestricted Stock may be made in return
for either (i) services determined by the Administrator to have a value not
less than the par value of the awarded shares, or (ii) cash or other property
having a value not less than the par value of the awarded shares plus such
additional amounts (if any) as the Administrator may determine payable in such
combination of cash, other property (of any kind) or services as the
Administrator may determine.
7. EFFECT OF CERTAIN TRANSACTIONS
a. MERGERS, ETC.
In the event of a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
the Company's outstanding Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets or a dissolution or
liquidation of the Company (a "covered transaction"), all outstanding Awards
requiring exercise will cease to be exercisable, and all other Awards to the
extent not fully vested (including Awards subject to performance conditions
not yet satisfied or determined) will be forfeited, as of the effective time
of the covered transaction. Prior to such time the Administrator may (but need
not) accelerate the vesting or exercisability of any Award or provide for
substitute or replacement awards from the acquiring entity (if any).
b. CHANGES IN AND DISTRIBUTIONS WITH RESPECT TO THE STOCK
(1) BASIC ANTIDILUTION PROVISIONS. In the event of a stock dividend,
stock split or combination of shares, recapitalization or other change in the
Company's capital structure, the Administrator will make appropriate
adjustments to the maximum number of shares that may be delivered under the
Plan under Section 4.a. and to the maximum share limits described in Section
4.b., and will also make appropriate adjustments to the number and kind of
shares of stock or securities subject to Awards then outstanding or
subsequently granted, any exercise prices relating to Awards and any other
provision of Awards affected by such change.
(2) CERTAIN OTHER ADJUSTMENTS. The Administrator may also make
adjustments of the type described in paragraph (1) above to take into account
distributions to common stockholders other than stock dividends or normal cash
dividends, mergers, consolidations, acquisitions, dispositions or similar
corporate transactions, or any other event, if the Administrator determines
that adjustments are appropriate to avoid distortion in the operation of the
Plan and to preserve the value of Awards made hereunder; provided, that no
such adjustment shall be made to the maximum share limits described in Section
4.b., or otherwise to an Award intended to be eligible for the performance-
based exception under Section 162(m)(4)(C) of the Code, except to the extent
consistent with that exception.
c. CHANGE IN CONTROL
Notwithstanding anything to the contrary in this Plan and unless specifically
provided otherwise in the Award Agreement at the time an Award is granted,
upon any Change of Control of the Company, any time periods, conditions or
contingencies relating to the exercise or realization of, or lapse of
restrictions under, any Award shall be automatically accelerated or waived so
that the Award may be exercised or realized in full; provided that, in the
event of a Change of Control that is intended to qualify for pooling of
interests accounting, the foregoing provisions of this paragraph shall be of
no force and effect if implementation of such provisions would preclude the
Change of Control from so qualifying and, in such event, the Committee shall
take whatever action it deems appropriate to enable holders of Awards to
realize a substantially similar economic result as would have been realized by
acceleration of Awards but without precluding the Change of Control from
qualifying as a pooling of interests.
A Change of Control will occur for purposes of this Plan:
(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.
8. CONDITIONS ON DELIVERY OF STOCK
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove any restriction from shares previously delivered
under the Plan until: the Company's counsel has approved all legal matters in
connection with the issuance and delivery of such shares; if the outstanding
Stock is at the time listed on any stock exchange or national market system,
the shares to be delivered have been listed or authorized to be listed on such
exchange or system upon official notice of notice of issuance; and all
conditions of the Award have been satisfied or waived. If the sale of Stock
has not been registered under the Securities Act of 1933, as amended, the
Company may require, as a condition to exercise of the Award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act. The Company may require that
certificates evidencing Stock issued under the Plan bear an appropriate legend
reflecting any restriction on transfer applicable to such Stock.
9. AMENDMENT AND TERMINATION
Subject to the last sentence of Section 3, the Administrator may at any
time or times amend the Plan or any outstanding Award for any purpose which
may at the time be permitted by law, or may at any time terminate the Plan as
to any further grants of Awards, provided that (except to the extent expressly
required or permitted by the Plan) no such amendment will, without the
approval of the stockholders of the Company, effectuate a change for which
stockholder approval is required in order for the Plan to continue to qualify
under Section 422 of the Code or for Awards to be eligible for the
performance-based exception under Section 162(m)(4)(C) of the Code.
10. NON-LIMITATION OF THE COMPANY'S RIGHTS
The existence of the Plan or the grant of any Award shall not in any way
affect the Company's right to award a person bonuses or other compensation in
addition to Awards under the Plan.
11. GOVERNING LAW
The Plan shall be construed in accordance with the laws of The
Commonwealth of Massachusetts.
APPENDIX A
DEFINITION OF TERMS
The following terms, when used in the Plan, shall have the meanings and
be subject to the provisions set forth below:
"ADMINISTRATOR": The Committee, if one has been appointed; otherwise the
Board.
"AFFILIATE": Any corporation or other entity owning, directly or
indirectly, 50% or more of the outstanding Stock of the Company, or in which
the Company or any such corporation or other entity owns, directly or
indirectly, 50% of the outstanding capital stock (determined by aggregate
voting rights) or other voting interests.
"AWARD": Any of the following:
(i) Options ("Stock Options") entitling the recipient to acquire
shares of Stock upon payment of the exercise price. Each Stock Option
(except as otherwise expressly provided by the Committee consistent with
continued qualification of the Stock Option as a performance-based award
for purposes of Section 162(m) of the Code, or unless the Committee
expressly determines that such Stock Option is not subject to Section
162(m) of the Code or that the Stock Option is not intended to qualify
or the performance-based exception under Section 162(m) of the Code),
will have an exercise price not less than the fair market value of the
Stock subject to the option, determined as of the date of grant, except
that an ISO granted to an Employee described in Section 422(b)(6) of the
Code will have an exercise price not less than 110% of such fair market
value. The Administrator will determine the medium in which the exercise
price is to be paid, the duration of the option, the time or times at
which an option will become exercisable, provisions for continuation (if
any) of option rights following termination of the Participant's
employment with the Company and its Affiliates, and all other terms of
the Option. No Stock Option awarded under the Plan will be an ISO unless
the Administrator expressly provides for ISO treatment.
(ii) Rights ("SARs") entitling the holder upon exercise to receive
cash or Stock, as the Administrator determines, equal to a function
(determined by the Administrator using such factors as it deems
appropriate) of the amount by which the Stock has appreciated in value
since the date of the Award.
(iii) Stock subject to restrictions ("Restricted Stock") under the
Plan requiring that the Stock be redelivered to the Company if specified
conditions are not satisfied. The conditions to be satisfied in
connection with any Award of Restricted Stock, the terms on which such
Stock must be redelivered to the Company, the purchase price of such Stock,
and all other terms shall be determined by the Administrator.
(iv) Stock not subject to any restrictions under the Plan
("Unrestricted Stock").
(v) A promise to deliver Stock or other securities in the future on
such terms and conditions as the Administrator determines.
(vi) Securities (other than Stock Options) that are convertible
into or exchangeable for Stock on such terms and conditions as the
Administrator determines.
(vii) Cash bonuses tied to performance criteria as described at
(viii) below ("Cash Performance Awards").
(viii) Awards described in any of (i) through (vii) above where the
right to exercisability, vesting or full enjoyment of the Award is
conditioned in whole or in part on the satisfaction of specified
performance criteria ("Performance Awards"). The Committee in its
discretion may grant Performance Awards that are intended to qualify for
the performance-based compensation exception under Section 162(m)(4)(C)
of the Code and Performance Awards that are not intended so to qualify.
No more than $2,000,000 may be paid to any individual with respect to
any Cash Performance Award. In applying the limitation of the preceding
sentence: (A) multiple Cash Performance Awards to the same
individual that are determined by reference to performance periods of
one year or less ending with or within the same fiscal year of the
Company shall be subject in the aggregate to one $2,000,000 limit, and
(B) multiple Cash Performance Awards to the same individual that are
determined by reference to one or more multi-year performance periods
ending in the same fiscal year of the Company shall be subject in the
aggregate to a separate limit of $2,000,000. With respect to any
Performance Award other than a Cash Performance Award, Stock Option or
SAR, the maximum award opportunity shall be 1,000,000 shares or their
equivalent value in cash, subject to the limitations of Section 4.b. For
the avoidance of doubt, any Performance Award of a type described in (i)
through (vi) above shall be treated for purposes of this paragraph as a
Performance Award that is not a Cash Performance Award, even if payment
is made in cash.
In the case of a Performance Award intended to qualify as
performance-based for the purposes of Section 162(m) of the Code, the
Committee shall in writing preestablish a specific performance goal (based
solely on one or more qualified performance criteria) no later than 90
days after the commencement of the period of service to which the
performance relates (or at such earlier time as is required to qualify the
award as performance-based under Code Section 162(m)(4)(C)). For purposes
of the Plan, a qualified performance criterion is any of the following: (1)
earnings or earnings per share (whether on a pre-tax, after-tax,
operational or other basis), (2) return on equity, (3) return on assets,
(4) revenues, (5) sales, (6) expenses, (7) one or more operating ratios,
(8) stock price, (9) stockholder return, (10) market share, (11) cash
flow,(12) inventory levels or inventory turn, (13) capital expenditures,
(14) net borrowing, debt leverage levels or credit quality, (15) the
accomplishment of mergers, acquisitions, dispositions, public offerings
or similar extraordinary business transactions or (16) any combination of
the foregoing. The performance goals selected in any case need not be
applicable across the Company, but may be particular to an individual's
function or business unit. Prior to payment of any Performance Award
intended to qualify as performance-based under Section 162(m)(4)(C) of
the Code, the Committee shall certify whether the performance goal has been
attained and such determination shall be final and conclusive. If the
performance goal is not attained, no other Award shall be provided in
substitution of the Performance Award.
(ix) Grants of cash, or loans, made in connection with other Awards
in order to help defray in whole or in part the economic cost (including
tax cost) of the Award to the Participant. The terms of any such grant or
loan shall be determined by the Administrator.
Awards may be combined in the Administrator's discretion.
"BOARD": The Board of Directors of the Company.
"CODE": The U.S. Internal Revenue Code of 1986, as from time to time
amended and in effect.
"COMMITTEE": A committee of the Board comprised solely of two or more
outside directors within the meaning of Section 162(m) of the Code. The
Committee may delegate ministerial tasks to such persons (including Employees)
as it deems appropriate.
"COMPANY": The Neiman Marcus Group, Inc.
"EMPLOYEE": Any person who is employed by the Company or an Affiliate.
"ISO": A Stock Option intended to be an "incentive stock option" within
the meaning of Section 422 of the Code.
"PARTICIPANT": An Employee, director or other person providing services
to the Company or its Affiliates who is granted an Award under the Plan.
"PLAN": The Neiman Marcus Group, Inc. 1997 Incentive Plan as from time
to time amended and in effect.
"STOCK": Common Stock of the Company, par value $.01 per share.