10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended January 29, 2011

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to

Commission file no. 333-133184-12

Neiman Marcus, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	20-3509435 (I.R.S. Employer Identification No.)
1618 Main Street Dallas, Texas (Address of principal executive offices)	75201 (Zip code)

Registrant’s telephone number, including area code: (214) 743-7600

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer x	Smaller reporting company ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨ No x

There were 1,014,915 shares of the registrant’s common stock, par value $.01 per share, outstanding at January 29, 2011.

NEIMAN MARCUS, INC.

INDEX

		Page
Part I.	Financial Information
Item 1.	Condensed Consolidated Balance Sheets as of January 29, 2011,
	July 31, 2010 and January 30, 2010	1
	Condensed Consolidated Statements of Operations for the Thirteen Weeks Ended
	January 29, 2011 and January 30, 2010	2
	Condensed Consolidated Statements of Operations for the Twenty-Six Weeks Ended
	January 29, 2011 and January 30, 2010	3
	Condensed Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended
	January 29, 2011 and January 30, 2010	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
Item 4.	Controls and Procedures	42
Part II.	Other Information
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	43
Item 6.	Exhibits	51
Signatures		56

NEIMAN MARCUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except shares)	January 29,  2011			July 31, 2010			January 30,  2010
ASSETS
Current assets:
Cash and cash equivalents	$	530,716		$	421,007		$	500,661
Merchandise inventories	772,260			790,516			732,289
Deferred income taxes	21,831			30,755			19,136
Other current assets	86,708			117,844			77,614
Total current assets	1,411,515			1,360,122			1,329,700
Property and equipment, net	882,986			905,826			947,371
Goodwill and intangible assets, net	3,173,293			3,205,688			3,242,317
Other assets	63,411			60,646			80,463
Total assets	$	5,531,205		$	5,532,282		$	5,599,851
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	216,132		$	270,778		$	190,049
Accrued liabilities	389,512			361,456			370,275
Other current liabilities	—			30,309			45,479
Total current liabilities	605,644			662,543			605,803
Long-term liabilities:
Long-term debt	2,879,769			2,879,672			2,972,222
Deferred income taxes	656,356			668,647			684,185
Deferred real estate credits	103,221			96,093			98,493
Other long-term liabilities	294,758			299,954			296,287
Total long-term liabilities	3,934,104			3,944,366			4,051,187
Common stock (par value $0.01 per share, 5,000,000 shares authorized and 1,014,915 shares issued and outstanding at January 29, 2011 and 1,013,082 at July 31, 2010 and January 30, 2010)	10			10			10
Additional paid-in capital	1,434,676			1,434,321			1,428,513
Accumulated other comprehensive loss	(87,313		)	(106,274		)	(97,301		)
Accumulated deficit	(355,916		)	(402,684		)	(388,361		)
Total shareholders’ equity	991,457			925,373			942,861
Total liabilities and shareholders’ equity	$	5,531,205		$	5,532,282		$	5,599,851

See Notes to Condensed Consolidated Financial Statements.

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NEIMAN MARCUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Thirteen weeks ended
(in thousands)	January 29,  2011			January 30, 2010
Revenues	$	1,171,559		$	1,102,361
Cost of goods sold including buying and occupancy costs (excluding depreciation)	793,661			761,485
Selling, general and administrative expenses (excluding depreciation)	253,707			237,581
Income from credit card program, net	(12,195		)	(16,572		)
Depreciation expense	32,145			34,422
Amortization of intangible assets	10,607			13,845
Amortization of favorable lease commitments	4,469			4,469
Operating earnings	89,165			67,131
Interest expense, net	55,248			59,004
Earnings before income taxes	33,917			8,127
Income tax expense	12,890			4,163
Net earnings	$	21,027		$	3,964

See Notes to Condensed Consolidated Financial Statements.

2

NEIMAN MARCUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Twenty-Six weeks ended
(in thousands)	January 29,  2011			January 30, 2010
Revenues	$	2,098,807		$	1,971,261
Cost of goods sold including buying and occupancy costs (excluding depreciation)	1,356,319			1,295,709
Selling, general and administrative expenses (excluding depreciation)	476,694			456,397
Income from credit card program, net	(21,488		)	(29,659		)
Depreciation expense	65,867			70,205
Amortization of intangible assets	23,456			27,691
Amortization of favorable lease commitments	8,939			8,939
Operating earnings	189,020			141,979
Interest expense, net	113,678			118,369
Earnings before income taxes	75,342			23,610
Income tax expense	28,574			11,125
Net earnings	$	46,768		$	12,485

See Notes to Condensed Consolidated Financial Statements.

3

NEIMAN MARCUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Twenty-Six weeks ended
(in thousands)	January 29,  2011			January 30, 2010
CASH FLOWS - OPERATING ACTIVITIES
Net earnings	$	46,768		$	12,485
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization expense	106,891			115,922
Paid-in-kind interest	—			14,362
Deferred income taxes	(15,695		)	(18,318		)
Other, primarily costs related to defined benefit pension and other long-term benefit plans	617			2,568
	138,581			127,019
Changes in operating assets and liabilities:
Merchandise inventories	18,256			34,543
Other current assets	31,136			47,446
Other assets	(6,508		)	3,330
Accounts payable and accrued liabilities	(27,368		)	14,859
Deferred real estate credits	10,402			5,184
Net cash provided by operating activities	164,499			232,381
CASH FLOWS — INVESTING ACTIVITIES
Capital expenditures	(41,235		)	(28,382		)
Net cash used for investing activities	(41,235		)	(28,382		)
CASH FLOWS — FINANCING ACTIVITIES
Repayment of borrowings under senior term loan facility	(7,648		)	(26,617		)
Repayment of borrowings	—			(146		)
Debt issuance costs paid	(5,907		)	—
Net cash used for financing activities	(13,555		)	(26,763		)
CASH AND CASH EQUIVALENTS
Increase during the period	109,709			177,236
Beginning balance	421,007			323,425
Ending balance	$	530,716		$	500,661
Supplemental Schedule of Cash Flow Information
Cash paid (received) during the period for:
Interest	$	108,899		$	90,634
Income taxes	$	580		$	(13,355	)

See Notes to Condensed Consolidated Financial Statements.

4

NEIMAN MARCUS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.Basis of Presentation

We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, these financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  Therefore, these financial statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended July 31, 2010.

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary to present fairly our financial position, results of operations and cash flows for the applicable interim periods.

The specialty retail industry is seasonal in nature, with a higher level of sales typically generated in the fall and holiday selling seasons.  Due to seasonal and other factors, the results of operations for the second quarter of fiscal year 2011 are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year as a whole.

Neiman Marcus, Inc. (the Company) is a wholly-owned subsidiary of and is controlled by Newton Holding, LLC (Holding).  Holding is controlled by investment funds affiliated with TPG Capital and Warburg Pincus (collectively, the Sponsors).  The Company was formed by Holding for the purpose of acquiring The Neiman Marcus Group, Inc. (NMG), which acquisition was completed on October 6, 2005 (the Acquisition).  The accompanying unaudited condensed consolidated financial statements include the amounts of the Company and its subsidiaries.  All significant intercompany accounts and transactions have been eliminated.

Our fiscal year ends on the Saturday closest to July 31.  All references to the second quarter of fiscal year 2011 relate to the thirteen weeks ended January 29, 2011.  All references to the second quarter of fiscal year 2010 relate to the thirteen weeks ended January 30, 2010.  All references to year-to-date fiscal 2011 relate to the twenty-six weeks ended January 29, 2011.  All references to year-to-date fiscal 2010 relate to the twenty-six weeks ended January 30, 2010.

A detailed description of our critical accounting policies is included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2010.

Use of Estimates.We are required to make estimates and assumptions about future events in preparing financial statements in conformity with generally accepted accounting principles.  These estimates and assumptions affect the amounts of assets, liabilities, revenues and expenses and the disclosure of gain and loss contingencies at the date of the unaudited condensed consolidated financial statements.  While we believe that our past estimates and assumptions have been materially accurate, our current estimates are subject to change if different assumptions as to the outcome of future events were made.  We evaluate our estimates and judgments on an ongoing basis and predicate those estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances.  We make adjustments to our assumptions and judgments when facts and circumstances dictate.  Since future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates used in preparing the accompanying unaudited condensed consolidated financial statements.

We believe the following critical accounting policies, among others, encompass the more significant judgments and estimates used in the preparation of our financial statements:

·Recognition of revenues;

·Valuation of merchandise inventories, including determination of original retail values, recognition of markdowns and vendor allowances, estimation of inventory shrinkage, and determination of cost of goods sold;

·Determination of impairment of long-lived assets;

·Recognition of advertising and catalog costs;

·Measurement of liabilities related to our loyalty programs;

·Recognition of income taxes; and

·Measurement of accruals for general liability, workers’ compensation and health insurance claims and pension and postretirement health care benefits.

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Fair Value Measurements.  Under generally accepted accounting principles, we are required 1) to measure certain assets and liabilities at fair value or 2) to disclose the fair value of certain assets and liabilities recorded at cost.  Pursuant to these fair value measurement and disclosure requirements, fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.  The fair value is calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.  In addition, the fair value of liabilities includes consideration of non-performance risk, including our own credit risk and the fair value of assets includes consideration of the counterparty’s non-performance risk.  Each fair value measurement is reported in one of the following three levels:

·Level 1 — valuation inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

·Level 2 — valuation inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

·Level 3 — valuation inputs are unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar techniques.

At January 29, 2011, July 31, 2010 and January 30, 2010, the fair values of cash and cash equivalents, receivables and accounts payable approximated their carrying values due to the short-term nature of these instruments.  See Notes 3 and 4 of the Notes to Condensed Consolidated Financial Statements for the estimated fair values of our long-term debt and derivative financial instruments.

2.Goodwill and Intangible Assets, Net

(in thousands)	January 29, 2011		July 31, 2010		January 30, 2010
Goodwill	$	1,263,433	$	1,263,433	$	1,263,433
Tradenames	1,233,625		1,234,180		1,234,735
Customer lists, net	291,488		314,389		341,524
Favorable lease commitments, net	384,747		393,686		402,625
Goodwill and intangible assets, net	$	3,173,293	$	3,205,688	$	3,242,317

Indefinite-Lived Intangible Assets and Goodwill.  Indefinite-lived intangible assets, such as tradenames and goodwill, are not subject to amortization.  Rather, we assess the recoverability of indefinite-lived intangible assets and goodwill in the fourth quarter of each fiscal year and upon the occurrence of certain events.

Intangible Assets Subject to Amortization.  Customer lists and amortizable tradenames are amortized using the straight-line method over their estimated useful lives, ranging from 4 to 24 years (weighted average life of 13 years).  Favorable lease commitments are amortized straight-line over the remaining lives of the leases, ranging from 9 to 49 years (weighted average life of 33 years).  Total estimated amortization of all Acquisition-related intangible assets for the next five fiscal years is currently estimated as follows (in thousands):

2012	$	50,123
2013	47,436
2014	46,881
2015	46,615
2016	40,484

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3.Long-term Debt

The significant components of our long-term debt are as follows:

(in thousands)	Interest Rate	January 29,  2011		July 31,  2010			January 30, 2010
Senior Secured Term Loan Facility	variable	$	1,505,735	$	1,513,383		$	1,598,383
2028 Debentures	7.125%	121,589		121,492			121,394
Senior Notes	9.0%/9.75%	752,445		752,445			752,445
Senior Subordinated Notes	10.375%	500,000		500,000			500,000
Total debt		2,879,769		2,887,320			2,972,222
Less: current portion of Senior Secured Term Loan Facility		—		(7,648		)	—
Long-term debt		$	2,879,769	$	2,879,672		$	2,972,222

Senior Secured Asset-Based Revolving Credit Facility.  NMG has an asset-based revolving credit facility with a maximum committed borrowing capacity of $600.0 million that matures on January 15, 2013.  The facility also provides an uncommitted accordion feature that allows NMG to request the lenders to provide additional capacity in either the form of increased revolving commitments or incremental term loans, subject to a potential total maximum facility of $800 million.

Availability under the Asset-Based Revolving Credit Facility is subject to a borrowing base.  The Asset-Based Revolving Credit Facility includes borrowing capacity available for letters of credit and for borrowings on same-day notice.  The borrowing base for the Asset-Based Revolving Credit Facility is equal to at any time the sum of (a) the lesser of (i) 80% of eligible inventory (valued at the lower of cost or market value) and (ii) 85% of the net orderly liquidation value of eligible inventory, and (b) 85% of the amounts owed by credit card processors in respect of eligible credit card accounts constituting proceeds arising from the sale or disposition of inventory, less certain reserves.  Through April 30, 2011, NMG is required to maintain excess availability under the terms of the Asset-Based Revolving Credit Facility of at least the greater of (a) 10% of the lesser of (i) the aggregate revolving commitments and (ii) the borrowing base and (b) $50 million.  After April 30, 2011, if at any time, excess availability is less than the greater of (a) 15% of the lesser of (i) the aggregate revolving commitments and (ii) the borrowing base and (b) $60 million, NMG will be required to maintain a pro forma ratio of consolidated EBITDA to consolidated Fixed Charges (as such terms are defined in the credit agreement) of at least 1.1 to 1.0.  On January 29, 2011, NMG had no borrowings outstanding under this facility, $17.0 million of outstanding letters of credit and $500.6 million of unused borrowing availability.

The Asset-Based Revolving Credit Facility provides that NMG has the right at any time to request up to $300 million of additional revolving facility commitments and/or incremental term loans; provided that the aggregate amount of loan commitments under the Asset-Based Revolving Credit Facility may not exceed $800 million.  However, the lenders are under no obligation to provide any such additional commitments or loans, and any increase in commitments or incremental term loans will be subject to customary conditions precedent.  If NMG were to request any such additional commitments and the existing lenders or new lenders were to agree to provide such commitments, the Asset-Based Revolving Credit Facility size could be increased to up to $800 million, but NMG’s ability to borrow would still be limited by the amount of the borrowing base.  Incremental term loans may be exchanged by NMG for any of NMG’s existing senior notes and senior subordinated notes, or the cash proceeds of any incremental term loans may be used to repurchase any of such notes, but neither the incremental term loans nor the proceeds thereof may be used for any other purpose.

Borrowings under the Asset-Based Revolving Credit Facility bear interest at a rate per annum equal to, at NMG’s option, either (a) a base rate determined by reference to the highest of (i) a defined prime rate, (ii) the federal funds effective rate plus 1¤2 of 1% or (iii) a one-month LIBOR rate plus 1% or (b) a LIBOR rate, subject to certain adjustments, in each case plus an applicable margin.  The applicable margin is up to 3.50% with respect to base rate borrowings and up to 4.50% with respect to LIBOR borrowings, provided that until October 1, 2010, the applicable margin was 3.25% with respect to base rate borrowings and 4.25% with respect to LIBOR borrowings.  The applicable margin is subject to adjustment based on the historical availability under the Asset-Based Revolving Credit Facility.  In addition, NMG is required to pay a commitment fee in respect of unused commitments of (a) 0.75% per annum during any applicable period in which the average revolving loan utilization is 50% or more or (b) 1% per annum during any applicable period in which the average revolving loan utilization is less than 50%.  NMG must also pay customary letter of credit fees and agency fees.

7

If at any time the aggregate amount of outstanding revolving loans, unreimbursed letter of credit drawings and undrawn letters of credit under the Asset-Based Revolving Credit Facility exceeds the lesser of (a) the commitment amount and (b) the borrowing base (including as a result of reductions to the borrowing base that would result from certain non-ordinary course sales of inventory with a value in excess of $25 million, if applicable), NMG will be required to repay outstanding loans or cash collateralize letters of credit in an aggregate amount equal to such excess, with no reduction of the commitment amount.  In addition, if at any time the aggregate amount of outstanding revolving loans and incremental term loans, unreimbursed letter of credit drawings and undrawn letters of credit under the Asset-Based Revolving Credit Facility exceeds the reported value of inventory owned by the borrowers and guarantors, NMG will be required to eliminate such excess within the earlier of 30 days from such occurrence or 5 business days from the first date on or after such occurrence at which excess availability is less than $75 million.  If (a) the amount available under the Asset-Based Revolving Credit Facility is less than the greater of (i) 20% of the lesser of (A) the aggregate revolving commitments and (B) the borrowing base and (ii) $75 million or (b) an event of default has occurred, NMG will be required to repay outstanding loans and cash collateralize letters of credit with the cash NMG would then be required to deposit daily in a collection account maintained with the agent under the Asset-Based Revolving Credit Facility.

NMG may voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans at any time without premium or penalty other than customary “breakage” costs with respect to LIBOR loans.  There is no scheduled amortization under the Asset-Based Revolving Credit Facility; the principal amount of the revolving loans outstanding thereunder will be due and payable in full on January 15, 2013.

All obligations under the Asset-Based Revolving Credit Facility are guaranteed by the Company and certain of NMG’s existing and future domestic subsidiaries.  All obligations under NMG’s Asset-Based Revolving Credit Facility, and the guarantees of those obligations, are secured, subject to certain significant exceptions, by substantially all of the assets of the Company, NMG and the subsidiaries that have guaranteed the Asset-Based Revolving Credit Facility (subsidiary guarantors). As of January 29, 2011, there were no assets or liabilities held by non-guarantor subsidiaries.

The Asset-Based Revolving Credit Facility contains covenants, including covenants limiting dividends and other restricted payments; investments, loans, advances and acquisitions; and prepayments or redemptions of other indebtedness.  These covenants permit the restricted actions in an unlimited amount, subject to the satisfaction of certain payment conditions, principally that NMG must have pro forma excess availability under the Asset-Based Revolving Credit Facility equal to at least 25% of the lesser of (a) the revolving commitments under the facility and (b) the borrowing base, NMG delivering projections demonstrating that projected excess availability for the next twelve months will be equal to such thresholds and that NMG have a pro forma ratio of consolidated EBITDA to consolidated Fixed Charges (as such terms are defined in the credit agreement) of at least 1.2 to 1.0 (or 1.1 to 1.0 for prepayments or redemptions of other indebtedness).  The Asset-Based Revolving Credit Facility also contains customary affirmative covenants and events of default, including a cross-default provision in respect of any other indebtedness that has an aggregate principal amount exceeding $50 million.

For a more detailed description of NMG’s Asset-Based Revolving Credit Facility, refer to Note 7 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended July 31, 2010.

Senior Secured Term Loan Facility.  In October 2005, NMG entered into a credit agreement and related security and other agreements for a $1,975.0 million Senior Secured Term Loan Facility.  At January 29, 2011, the outstanding balance under the Senior Secured Term Loan Facility was $1,505.7 million.  In November 2010, NMG entered into an amendment and restatement (the Amendment) of the credit agreement governing NMG’s Senior Secured Term Loan Facility, which included the following: (i) an extension of the maturity of approximately $1,064.2 million principal amount of the existing term loans thereunder, (ii) an increase in the interest rate payable to holders of the extended term loans, (iii) the ability to incur additional debt to refinance the non-extended term loans and (iv) certain other modifications to the Senior Secured Term Loan Facility.

The extended term loans will mature on April 6, 2016, unless $300.0 million or more aggregate principal amount of NMG’s Senior Notes and Senior Subordinated Notes remain outstanding on July 15, 2015, in which case the extended term loans will mature on that date instead.  The approximately $441.5 million principal amount of existing term loans that were not extended continue to have a maturity of April 6, 2013 (as all of the term loans did prior to the Amendment).

In addition to extending the maturity of a portion of the existing term loans under the Senior Secured Term Loan Facility, the Amendment increased the “applicable margin” used in calculating the interest rate payable to holders of the extended term loans (but did not change the applicable margin used in calculating the interest rate payable to holders of term loans that were not extended).  Following the Amendment, term loans under the Senior Secured Term Loan Facility (including both the extended and the non-extended term loans) bear interest at a rate per annum equal to, at NMG’s option, either (a) a base rate determined by

8

reference to the higher of (1) the prime rate of Credit Suisse AG (the administrative agent), (2) the federal funds effective rate plus 1¤2 of 1% and (3) the adjusted one-month LIBOR rate plus 1.00% or (b) a LIBOR rate (for a period equal to the relevant interest period), subject to certain adjustments, in each case plus an applicable margin.

At January 29, 2011, the applicable margin for the extended term loans is 3.00% for alternate base rate loans and 4.00% for LIBOR rate loans (or if NMG’s consolidated leverage ratio as of the relevant date of determination is less than 5.0 to 1.0, 2.75% for alternate base rate loans and 3.75% for LIBOR rate loans).  At January 29, 2011, the applicable margin for the term loans that were not extended remains 1.00% for alternate base rate loans and 2.00% for LIBOR rate loans (or if NMG’s consolidated leverage ratio as of the relevant date of determination is less than 4.5 to 1.0, 0.75% for alternate base rate loans and 1.75% for LIBOR rate loans).  The weighted average interest rate on the outstanding borrowings pursuant to the Senior Secured Term Loan Facility was 3.71% at January 29, 2011.

The Amendment also included provisions permitting NMG (a) to incur debt to refinance the term loans that are not currently being extended (without requiring any further consent under the Senior Secured Term Loan Facility) and (b) to enter into future extensions of any portion of the term loans with the consent of only the lenders electing to extend at that time.

The credit agreement governing the Senior Secured Term Loan Facility requires NMG to prepay outstanding term loans with 50% (which percentage will be reduced to 25% if NMG’s total leverage ratio is less than a specified ratio and will be reduced to 0% if NMG’s total leverage ratio is less than a specified ratio) of its annual excess cash flow (as defined in the credit agreement).  For fiscal year 2010, NMG was required to prepay $92.6 million of outstanding term loans pursuant to the annual excess cash flow requirements.  Of such amount, NMG paid $85.0 million in the fourth quarter of fiscal year 2010 and $7.6 million in the first quarter of fiscal year 2011.  If a change of control (as defined in the credit agreement) occurs, NMG will be required to offer to prepay all outstanding term loans, at a prepayment price equal to 101% of the principal amount to be prepaid, plus accrued and unpaid interest to the date of prepayment.  NMG also must offer to prepay outstanding term loans at 100% of the principal amount to be prepaid, plus accrued and unpaid interest, with the proceeds of certain asset sales under certain circumstances.

NMG may voluntarily prepay outstanding loans under the Senior Secured Term Loan Facility at any time without premium or penalty other than customary “breakage” costs with respect to LIBOR loans.  There is no scheduled amortization under the Senior Secured Term Loan Facility.

All obligations under the Senior Secured Term Loan Facility are unconditionally guaranteed by the Company and each direct and indirect domestic subsidiary of NMG that guarantees the obligations of NMG under its Asset-Based Revolving Credit Facility.  All obligations under the Senior Secured Term Loan Facility, and the guarantees of those obligations, are secured, subject to certain significant exceptions, by substantially all of the assets of the Company, NMG and the subsidiary guarantors.

The credit agreement governing the Senior Secured Term Loan Facility contains a number of negative covenants that are substantially similar to those governing the Senior Notes (as described below) and additional covenants related to the security arrangements for the Senior Secured Term Loan Facility.  The credit agreement also contains customary affirmative covenants and events of default, including a cross-default provision in respect of any other indebtedness that has an aggregate principal amount exceeding $50 million.

For a more detailed description of the Senior Secured Term Loan Facility (prior to the Amendment), refer to Note 7 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended July 31, 2010.

The fair value of the Senior Secured Term Loan Facility was approximately $1,505.7 million at January 29, 2011, $1,426.4 million at July 31, 2010 and $1,454.5 million at January 30, 2010 based on prevailing market rates.

2028 Debentures.  NMG has outstanding $125.0 million aggregate principal amount of its 7.125% 2028 Debentures.  NMG equally and ratably secures its 2028 Debentures by a first lien security interest on certain collateral subject to liens granted under NMG’s Senior Secured Credit Facilities.  The 2028 Debentures are guaranteed on an unsecured, senior basis by the Company.  The guarantee by the Company is full and unconditional and joint and several.  Currently, the Company’s non-guarantor subsidiaries consist principally of Bergdorf Goodman, Inc. through which NMG conducts the operations of its Bergdorf Goodman stores and NM Nevada Trust which holds legal title to certain real property and intangible assets used by NMG in conducting its operations.  The 2028 Debentures include a cross-acceleration provision in respect of any other indebtedness that has an aggregate principal amount exceeding $15 million.  NMG’s 2028 Debentures mature on June 1, 2028.

For a more detailed description of the 2028 Debentures, refer to Note 7 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended July 31, 2010.

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The fair value of the 2028 Debentures was approximately $115.6 million at January 29, 2011, $114.1 million at July 31, 2010 and $109.4 million at January 30, 2010 based on quoted market prices.

Senior Notes.NMG has outstanding $752.5 million aggregate principal amount of 9.0% / 9.75% Senior Notes under a senior indenture (Senior Indenture).  NMG’s Senior Notes mature on October 15, 2015.

Interest on the Senior Notes is payable quarterly in arrears on each January 15, April 15, July 15 and October 15.  Prior to October 15, 2010, NMG could, at its option, elect to pay interest on the Senior Notes entirely in cash (Cash Interest) or entirely by increasing the principal amount of the outstanding Senior Notes by issuing additional Senior Notes (PIK Interest). Cash Interest on the Senior Notes accrues at the rate of 9% per annum.  PIK Interest on the Senior Notes accrues at the rate of 9.75% per annum.  We negotiated for the right to include the PIK feature in our Senior Notes because of our belief that this feature could be a useful tool to enhance liquidity under appropriate circumstances.  In the second quarter of fiscal year 2009, given the dislocation in the financial markets and the uncertainty as to when reasonable conditions would return, we believed that it was appropriate to utilize this feature, even though we had available borrowing capacity under our $600.0 million Asset-Based Revolving Credit Facility.  Accordingly, we elected to pay PIK Interest for the three quarterly interest periods ending October 14, 2009 and to make such interest payments with the issuance of additional Senior Notes at the PIK Interest rate of 9.75% instead of paying interest in cash.  As a result, the original principal amount of Senior Notes of $700.0 million increased by $17.1 million in April 2009, $17.4 million in July 2009 and $17.9 million in October 2009.  We have elected to pay cash interest since the first quarter of fiscal year 2010.  After October 15, 2010, we are required to make all interest payments on the Senior Notes entirely in cash.

The Senior Notes are fully and unconditionally guaranteed, on a joint and several unsecured, senior basis, by each of NMG’s wholly-owned domestic subsidiaries that guarantee NMG’s obligations under its Senior Secured Credit Facilities and by the Company.  The Senior Notes and the guarantees thereof are NMG’s and the guarantors’ unsecured, senior obligations and rank (i) equal in the right of payment with all of NMG’s and the guarantors’ existing and future senior indebtedness, including any borrowings under NMG’s Senior Secured Credit Facilities and the guarantees thereof, and NMG’s 2028 Debentures; and (ii) senior to all of NMG’s and its guarantors’ existing and future subordinated indebtedness, including the Senior Subordinated Notes due 2015 and the guarantees thereof. The Senior Notes also are effectively junior in priority to NMG’s and its guarantors’ obligations under all secured indebtedness, including NMG’s Senior Secured Credit Facilities, the 2028 Debentures, and any other secured obligations of NMG, in each case, to the extent of the value of the assets securing such obligations.  In addition, the Senior Notes are structurally subordinated to all existing and future liabilities, including trade payables, of NMG’s subsidiaries that are not providing guarantees.

NMG is not required to make any mandatory redemption or sinking fund payments with respect to the Senior Notes.  The indenture governing the Senior Notes contains a number of customary negative covenants and events of default, including a cross-default provision in respect of any other indebtedness that has an aggregate principal amount exceeding $50 million, which, if any of them occurs, would permit or require the principal, premium, if any, interest and any other monetary obligations on all outstanding Senior Notes to be due and payable immediately.

For a more detailed description of NMG’s Senior Notes, refer to Note 7 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended July 31, 2010.

The fair value of NMG’s Senior Notes was approximately $789.1 million at January 29, 2011, $767.5 million at July 31, 2010 and $731.8 million at January 30, 2010 based on quoted market prices.

Senior Subordinated Notes.NMG has outstanding $500.0 million aggregate principal amount of 10.375% Senior Subordinated Notes under a senior subordinated indenture (Senior Subordinated Indenture).  NMG’s Senior Subordinated Notes mature on October 15, 2015.

The Senior Subordinated Notes are fully and unconditionally guaranteed, on a joint and several unsecured, senior subordinated basis, by each of NMG’s wholly-owned domestic subsidiaries that guarantee NMG’s obligations under its Senior Secured Credit Facilities and by the Company.  The Senior Subordinated Notes and the guarantees thereof are NMG’s and the guarantors’ unsecured, senior subordinated obligations and rank (i) junior to all of NMG’s and the guarantors’ existing and future senior indebtedness, including the Senior Notes and any borrowings under NMG’s Senior Secured Credit Facilities, and the guarantees thereof, and NMG’s 2028 Debentures; (ii) equally with any of NMG’s and the guarantors’ future senior subordinated indebtedness; and (iii) senior to any of NMG’s and the guarantors’ future subordinated indebtedness. In addition,

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the Senior Subordinated Notes are structurally subordinated to all existing and future liabilities, including trade payables, of NMG’s subsidiaries that are not providing guarantees.

NMG is not required to make any mandatory redemption or sinking fund payments with respect to the Senior Subordinated Notes.  The indenture governing the Senior Subordinated Notes contains a number of customary negative covenants and events of defaults, including a cross-default provision in respect of any other indebtedness that has an aggregate principal amount exceeding $50 million, which, if any of them occurs, would permit or require the principal, premium, if any, interest and any other monetary obligations on all outstanding Senior Subordinated Notes to be due and payable immediately, subject to certain exceptions.

For a more detailed description of NMG’s Senior Subordinated Notes, refer to Note 7 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended July 31, 2010.

The fair value of NMG’s Senior Subordinated Notes was approximately $528.8 million at January 29, 2011, $517.5 million at July 31, 2010 and $491.3 million at January 30, 2010 based on quoted market prices.

Maturities of Long-Term Debt.  At January 29, 2011, annual maturities of long-term debt during the next five fiscal years and thereafter are as follows (in millions):

2012	$	—
2013	441.5
2014	—
2015	—
2016	2,316.7
Thereafter	121.6

The above table does not reflect any future excess cash flow pre-payments, if any, that may be required under the Senior Secured Term Loan Facility.  However, the above table does reflect the extended term loans under the Senior Secured Term Loan Facility maturing on April 6, 2016 pursuant to the terms of the Amendment (unless $300.0 million or more aggregate principal amount of NMG’s Senior Notes and Senior Subordinated Notes remain outstanding on July 15, 2015, in which case the extended term loans will mature on that date instead).

Interest expense.  The significant components of interest expense are as follows:

	Thirteen weeks ended					Twenty-Six weeks ended
(in thousands)	January 29,2011			January 30, 2010		January 29,  2011			January 30,2010
Senior Secured Term Loan Facility	$	17,617		$	20,787	$	38,183		$	41,573
2028 Debentures	2,202			2,207		4,428			4,433
Senior Notes	16,930			16,744		33,674			34,269
Senior Subordinated Notes	12,969			12,969		25,795			25,795
Amortization of debt issue costs	3,956			4,679		8,629			9,340
Other, net	1,661			1,618		3,098			3,152
Capitalized interest	(87		)	—		(129		)	(193		)
Interest expense, net	$	55,248		$	59,004	$	113,678		$	118,369

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4.Derivative Financial Instruments

Interest Rate Swaps.  In connection with the Acquisition, we obtained $2,575.0 million of floating rate debt agreements, of which $2,125.0 million was outstanding at the Acquisition date and $1,505.7 million was outstanding at January 29, 2011.  Effective December 2005, NMG entered into floating to fixed interest rate swap agreements for an aggregate notional amount of $1,000.0 million to limit our exposure to interest rate increases related to a portion of our floating rate indebtedness.  These swap agreements hedged a portion of our contractual floating rate interest commitments through the expiration of the agreements in December 2010.

As of the effective date, NMG designated the interest rate swaps as cash flow hedges.  As cash flow hedges, unrealized gains on our outstanding interest rate swaps are recognized as assets while unrealized losses are recognized as liabilities.  Our interest rate swap agreements were highly, but not perfectly, correlated to the changes in interest rates to which we were exposed.  As a result, unrealized gains and losses on our interest rate swap agreements were designated as effective or ineffective.  The effective portion of such gains or losses were recorded as a component of accumulated other comprehensive loss while the ineffective portion of such gains or losses were recorded as a component of interest expense.

In addition, we realized a gain or loss on our interest rate swap agreements in connection with each required interest payment on our floating rate indebtedness.  These realized gains or losses were reclassified from accumulated other comprehensive loss to interest expense.  The realized gains and losses effectively adjusted the contractual interest requirements pursuant to the terms of our floating rate indebtedness to the interest requirements at the fixed rates established in the interest rate swaps agreements.  The cash flows from our interest rate swaps were recorded in operating activities in the condensed consolidated statements of cash flows.

Interest Rate Caps.  Effective January 2010, NMG entered into interest rate cap agreements for an aggregate notional amount of $500.0 million in order to hedge the variability of our cash flows related to a portion of our floating rate indebtedness once the interest rate swap expired in December 2010.  The interest rate cap agreements commenced in December 2010 and will expire in December 2012.  Pursuant to the interest rate cap agreements, NMG has capped LIBOR at 2.50% through December 2012 with respect to the $500.0 million notional amount of such agreements.  In the event LIBOR is less than 2.50%, NMG will pay interest at the lower LIBOR rate.  In the event LIBOR is higher than 2.50%, NMG will pay interest at the capped rate of 2.50%.

At each balance sheet date, the interest rate caps are recorded at estimated fair value.  Changes in the fair value of the cap are expected to be highly effective in offsetting the unpredictability in expected future cash flows on floating rate indebtedness attributable to fluctuations in LIBOR interest rates above 2.50%.  Unrealized gains and losses on the outstanding balances of the interest rate caps are recorded as a component of accumulated other comprehensive loss.  Gains and losses realized at the time of our quarterly interest payments due to the expiration of applicable portions of the interest rate caps are reclassified to interest expense.

Fair Value.  The fair values of the interest rate swaps and interest rate caps are estimated using industry standard valuation models using market-based observable inputs, including interest rate curves (Level 2).  A summary of the recorded assets (liabilities) with respect to our derivative financial instruments included in our condensed consolidated balance sheets is as follows:

(in thousands)	January 29,  2011		July 31,  2010			January 30, 2010
Interest rate caps (included in other long-term assets)	$	606	$	1,040		$	6,114
Interest rate swaps (included in other current liabilities)	$	—	$	(22,661	)	$	(45,479	)
Accumulated other comprehensive loss, net of taxes	$	3,747	$	17,281		$	28,290

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A summary of the recorded amounts related to our interest rate swaps reflected in our condensed consolidated statements of operations are as follows:

	Thirteen weeks ended				Twenty-Six weeks ended
(in thousands)	January 29,  2011		January 30,  2010		January 29,  2011		January 30, 2010
Realized hedging losses — included in interest expense, net	$	11,675	$	11,422	$	23,249	$	22,520
Ineffective hedging losses — included in interest expense, net	$	140	$	213	$	104	$	429

The amount of losses recorded in other comprehensive loss at January 29, 2011 that is expected to be reclassified into interest expense in the next twelve months, if interest rates remain unchanged, is approximately $2.2 million.

5.Employee Benefit Plans

Description of Benefit Plans.  We maintain defined contribution plans consisting of a retirement savings plan (RSP), a defined contribution supplemental executive retirement plan (Defined Contribution SERP Plan) and a 401(k) Plan.  Effective January 1, 2011, we transferred the remaining participants’ balances in our 401(k) Plan to our RSP as a result of our ongoing efforts to restructure our long-term benefits programs.  As of January 1, 2011, employees make contributions to the RSP and we match an employee’s contribution up to a maximum of 6% of the employee’s compensation subject to statutory limitations for a potential maximum match of 75% of employee contributions.

In addition, we sponsor a defined benefit pension plan (Pension Plan) and an unfunded supplemental executive retirement plan (SERP Plan) which provides certain employees additional pension benefits.  Benefits under both plans are based on the employees’ years of service and compensation over defined periods of employment.  As of the third quarter of fiscal year 2010, benefits offered to all participants in our Pension Plan and SERP Plan have been frozen.  Retirees and active employees hired prior to March 1, 1989 are eligible for certain limited postretirement health care benefits (Postretirement Plan) if they meet certain service and minimum age requirements.  We also sponsor an unfunded key employee deferred compensation plan, which provides certain employees with additional benefits.

Obligations for our employee benefit plans, included in other long-term liabilities, are as follows:

(in thousands)	January 29,  2011			July 31,  2010			January 30, 2010
Pension Plan	$	153,109		$	161,760		$	159,156
SERP Plan	97,485			96,406			94,040
Postretirement Plan	17,058			17,914			17,855
	267,652			276,080			271,051
Less: current portion	(5,568		)	(5,574		)	(5,069		)
Long-term portion of benefit obligations	$	262,084		$	270,506		$	265,982

As of January 29, 2011, we have $83.6 million (net of taxes of $54.3 million) of adjustments to our benefit obligations recorded as increases to accumulated other comprehensive loss.

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Costs of Benefits.  The components of the expenses we incurred under our Pension Plan, SERP Plan and Postretirement Plan are as follows:

	Thirteen weeks ended						Twenty-Six weeks ended
(in thousands)	January 29,  2011			January 30,  2010			January 29,  2011			January 30, 2010
Pension Plan:
Service cost	$	—		$	1,429		$	—		$	2,857
Interest cost	6,054			6,329			12,108			12,659
Expected return on plan assets	(6,553		)	(6,463		)	(13,106		)	(12,925		)
Net amortization of losses	544			282			1,088			564
Pension Plan expense	$	45		$	1,577		$	90		$	3,155
SERP Plan:
Service cost	$	—		$	171		$	—		$	342
Interest cost	1,230			1,377			2,460			2,755
SERP Plan expense	$	1,230		$	1,548		$	2,460		$	3,097
Postretirement Plan:
Service cost	$	15		$	18		$	30		$	36
Interest cost	218			254			436			508
Net amortization of prior service cost	(389		)	(172		)	(778		)	(343		)
Net amortization of losses	172			90			345			179
Postretirement Plan expense	$	16		$	190		$	33		$	380

Funding Policy and Plan Assets.  Our policy is to fund the Pension Plan at or above the minimum required by law.  In fiscal year 2010, we were not required to make contributions to the Pension Plan; however, we made a voluntary contribution to our Pension Plan of $30.0 million in fiscal year 2010.  We do not believe we will be required to make contributions to the Pension Plan for fiscal year 2011.  However, we will continue to evaluate voluntary contributions to our Pension Plan based upon the unfunded position of the Pension Plan, our available liquidity and other factors.

6.Income Taxes

Our effective income tax rate for the second quarter of fiscal year 2011 was 38.0% compared to 51.2% for the second quarter of fiscal year 2010.  Our effective income tax rate for year-to-date fiscal 2011 was 37.9% compared to 47.1% for year-to-date fiscal 2010.  Our effective income tax rates for both the second quarter and year-to-date period of fiscal year 2010 were unfavorably impacted by the relative significance of non-taxable income and non-deductible expenses to our estimated taxable loss for fiscal year 2010.

At January 29, 2011, the gross amount of unrecognized tax benefits was $6.0 million, all of which would impact our effective tax rate, if recognized.  We classify interest and penalties as a component of income tax expense and our liability for accrued interest and penalties was $6.4 million as of January 29, 2011.

We file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions.  During the fourth quarter of fiscal year 2010, the IRS closed their examination of our fiscal year 2007 federal income tax return with no changes or assessments.  The IRS began an examination of our fiscal year 2008 federal income tax return in the second quarter of fiscal year 2011.  With respect to state and local jurisdictions, with limited exceptions, the Company and its subsidiaries are no longer subject to income tax audits for fiscal years before 2006.

We believe our recorded tax liabilities as of January 29, 2011 are sufficient to cover any potential assessments to be made by the IRS or other taxing authorities upon the completion of their examinations and we will continue to review our recorded tax liabilities for potential audit assessments based upon subsequent events, new information and future circumstances.  We believe it is reasonably possible that additional adjustments in the amounts of our unrecognized tax benefits could occur within the next twelve months as a result of settlements with tax authorities or expiration of statutes of limitation.  At this time, we do not believe such adjustments will have a material impact on our condensed consolidated financial statements.

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7.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 87,992 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 earlier 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 in control.  However, in the event the Sponsors 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 Modification.  In the second quarter of fiscal year 2010, the Compensation Committee approved 1) a tender offer for outstanding Accreting Options to purchase 26,614 shares (Eligible Options), 2) the extension of the option term with respect to Fixed Price Options for 25,236 shares to October 6, 2017 and 3) the modification of additional Fixed Price Options to purchase 1,378 shares.  In the third quarter of fiscal year 2010, the Compensation Committee approved 1) the modification of Accreting Options to purchase 8,502 shares and 2) the extension of the option term with respect to Fixed Price Options for 7,269 shares to October 6, 2015.  The stock option modifications effected in both the second and third quarters of fiscal year 2010 are collectively referred to as the Modification Transactions.  The Modification Transactions were taken in response to declines in capital markets and general economic conditions that resulted in the exercise prices for the prior options being in excess of the estimated fair value of our common stock.

In connection with the Modification Transactions, we incurred additional compensation charges aggregating $1.7 million in the second quarter of fiscal year 2010 and $3.4 million in the third quarter of fiscal year 2010 to recognize the excess of the post-modification fair value of vested options over the pre-modification fair value of such options.

Grant Date Fair Value of Stock Options.  All grants of stock options have an exercise price equaling or exceeding the fair market value of our common stock on the date of grant.  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.

During the year-to-date fiscal 2011 period, we granted 10,000 Fixed Price Options with a weighted average grant date fair value of $807 per option and we granted 650 Accreting Options with a weighted average grant date fair value of $720 per option.  During the year-to-date fiscal 2010 period, we granted 3,395 Accreting Options with a weighted average grant date fair value of $462 per option and we granted 3,395 Fixed Price Options with a weighted average grant date fair value of $541 per option.

We recognize compensation expense for stock options on a straight-line basis over the vesting period.  We recognized non-cash stock compensation expense of $2.0 million in year-to-date fiscal 2011 and $2.4 million in year-to-date fiscal 2010, which is included in selling, general and administrative expenses.

8.Transactions with Sponsors

Pursuant to a management services agreement with affiliates of the Sponsors, and in exchange for ongoing consulting and management advisory services that are provided to us by the Sponsors and their affiliates, affiliates of the Sponsors receive an aggregate annual management fee equal to the lesser of (i) 0.25% of our consolidated annual revenues or (ii) $10 million.  Affiliates of the Sponsors also receive reimbursement for out-of-pocket expenses incurred by them or their affiliates in connection with services provided pursuant to the agreement.  These management fees are payable quarterly in arrears.  We recorded management fees of $5.2 million during year-to-date fiscal 2011 and $4.9 million during year-to-date fiscal 2010, which are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

The management services agreement also provides that affiliates of the Sponsors may receive future fees in connection with certain future financing and acquisition or disposition transactions.  The management services agreement includes customary exculpation and indemnification provisions in favor of the Sponsors and their affiliates.

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9.Income from Credit Card Program, Net

We have a marketing and servicing alliance with HSBC Bank Nevada, N.A. and HSBC Private Label Corporation (collectively referred to as HSBC).  Pursuant to the agreement with HSBC, HSBC offers proprietary credit card accounts to our customers under both the “Neiman Marcus” and “Bergdorf Goodman” brand names.  Our original program agreement with HSBC expired in July 2010.  We have entered into an agreement with HSBC to amend and extend the program to July 2015 (renewable thereafter for three-year terms).  We refer to the agreement with HSBC, including the extension, as the Program Agreement.

Under the terms of the Program Agreement, HSBC offers credit cards and non-card payment plans and bears substantially all credit risk with respect to sales transacted on the cards bearing our brands.  We receive payments from HSBC based on sales transacted on our proprietary credit cards.  Such payments are subject to annual adjustments, both increases and decreases, based upon the overall annual profitability and performance of the proprietary credit card portfolio.  In addition, we receive payments from HSBC for marketing and servicing activities as we continue to handle key customer service functions, primarily customer inquiries and collections, for HSBC.

10.Commitments and Contingencies

Long-term Incentive Plan.  We have a long-term incentive plan (Long-term Incentive Plan) that provides for a cash incentive payable to certain employees upon a change of control, as defined, subject to the attainment of certain performance objectives.  Performance objectives and targets are based on cumulative EBITDA (as defined in the plan) percentages for rolling three year periods beginning in fiscal year 2006.  Earned awards for each completed performance period will be credited to a book account and will earn interest at a contractually defined annual rate until the award is paid.  Awards will be paid upon a change of control, as defined, or an initial public offering, as defined, subject to the requirement that, in each case, the internal rate of return to the Sponsors is positive.  As of January 29, 2011, the vested participant balance in the Long-Term Incentive Plan aggregated $6.4 million.

Cash Incentive Plan.  We also have a cash incentive plan (Cash Incentive Plan) to aid in the retention of certain key executives.  The Cash Incentive Plan provides for the creation of a $14 million cash bonus pool.  Each participant in the Cash Incentive Plan will be entitled to a cash bonus upon the earlier to occur of a change of control, as defined, or an initial public offering, as defined, subject to the requirement that, in each case, the internal rate of return to the Sponsors is positive.

Litigation.  On April 30, 2010, a Class Action Complaint for Injunction and Equitable Relief was filed in the United States District Court for the Central District of California by Sheila Monjazeb, individually and on behalf of other members of the general public similarly situated, against the Company, Newton Holding, LLC, TPG Capital, L.P. and Warburg Pincus, LLC.  On July 12, 2010, all defendants except for the Company were dismissed without prejudice, and on August 20, 2010, this case was refiled in the Superior Court of California for San Francisco County.  This complaint, along with a similar class action lawsuit originally filed by Bernadette Tanguilig in 2007, alleges that the Company has engaged in various violations of the California Labor Code and Business and Professions Code, including without limitation (1) asking employees to work “off the clock,” (2) failing to provide meal and rest breaks to its employees, (3) improperly calculating deductions on paychecks delivered to its employees, and (4) failing to provide a chair or allow employees to sit during shifts.  The plaintiffs in these matters seek certification of their cases as class actions, reimbursement for past wages and temporary, preliminary and permanent injunctive relief preventing defendant from allegedly continuing to violate the laws cited in their complaints.  We intend to vigorously defend our interests in these matters.  Currently, we cannot reasonably estimate the amount of loss, if any, arising from these matters.  However, we do not currently believe the resolution of these matters will have a material adverse impact on our financial position.  We will continue to evaluate these matters based on subsequent events, new information and future circumstances.

We are currently involved in various other legal actions and proceedings that arose in the ordinary course of business.  We believe that any liability arising as a result of these actions and proceedings will not have a material adverse effect on our financial position, results of operations or cash flows.

Other.  We had approximately $17.0 million of outstanding irrevocable letters of credit relating to purchase commitments and insurance and other liabilities at January 29, 2011.  We had approximately $3.2 million in surety bonds at January 29, 2011 relating primarily to merchandise imports and state sales tax and utility requirements.

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11.Accumulated Other Comprehensive Loss

The following table shows the components of accumulated other comprehensive loss, net of taxes:

(in thousands)	January 29,  2011			July 31, 2010			January 30,  2010
Unrealized loss on financial instruments	$	(3,747	)	$	(17,281	)	$	(28,290	)
Change in unfunded benefit obligations	(83,566		)	(88,993		)	(69,011		)
Total accumulated other comprehensive loss	$	(87,313	)	$	(106,274	)	$	(97,301	)

The components of other comprehensive income are:

	Twenty-Six weeks ended
(in thousands)	January 29,  2011		January 30,  2010
Net earnings from condensed consolidated statements of operations	$	46,768	$	12,485
Change in unrealized loss on financial instruments	13,534		7,218
Change in unfunded benefit obligations	5,427		—
Other	—		68
Total comprehensive income for the period	$	65,729	$	19,771

12.Segment Reporting

We have identified two reportable segments: Specialty Retail Stores and Direct Marketing.  The Specialty Retail Stores segment aggregates the activities of our Neiman Marcus and Bergdorf Goodman retail stores, including Neiman Marcus Last Call stores.  The Direct Marketing segment conducts both online and print catalog operations under the Neiman Marcus, Bergdorf Goodman, Last Call and Horchow brand names.  Both the Specialty Retail Stores and Direct Marketing segments derive their revenues from the sales of high-end fashion apparel, accessories, cosmetics and fragrances from leading designers, precious and fashion jewelry and decorative home accessories.

Operating earnings for the segments include 1) revenues, 2) cost of sales, 3) direct selling, general, and administrative expenses, 4) other direct operating expenses, 5) income from credit card program and 6) depreciation expense for the respective segment.  Items not allocated to our operating segments include those items not considered by management in measuring the assets and profitability of our segments.  These amounts include 1) corporate expenses including, but not limited to, treasury, investor relations, legal and finance support services, and general corporate management, 2) charges related to the application of purchase accounting adjustments made in connection with the Acquisition including amortization of intangible assets and favorable lease commitments and other non-cash items and 3) interest expense.  These items, while often related to the operations of a segment, are not considered by segment operating management, corporate operating management and the chief operating decision maker in assessing segment operating performance.  The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies (except with respect to purchase accounting adjustments not allocated to the operating segments).

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The following tables set forth the information for our reportable segments:

	Thirteen weeks ended						Twenty-Six weeks ended
(in thousands)	January 29,  2011			January 30,  2010			January 29,  2011			January 30,  2010
REVENUES
Specialty Retail Stores	$	936,454		$	881,138		$	1,697,633		$	1,602,757
Direct Marketing	235,105			221,223			401,174			368,504
Total	$	1,171,559		$	1,102,361		$	2,098,807		$	1,971,261
OPERATING EARNINGS
Specialty Retail Stores	$	85,133		$	66,485		$	193,114		$	154,907
Direct Marketing	36,168			40,725			61,167			62,434
Corporate expenses	(17,060		)	(15,372		)	(31,109		)	(29,010		)
Other expenses (1)	—			(6,393		)	(1,757		)	(9,722		)
Amortization of intangible assets and favorable lease commitments	(15,076		)	(18,314		)	(32,395		)	(36,630		)
Total	$	89,165		$	67,131		$	189,020		$	141,979
CAPITAL EXPENDITURES
Specialty Retail Stores	$	19,446		$	8,575		$	33,593		$	22,756
Direct Marketing	3,378			2,546			7,642			5,626
Total	$	22,824		$	11,121		$	41,235		$	28,382
DEPRECIATION EXPENSE
Specialty Retail Stores	$	26,428		$	28,921		$	54,115		$	59,116
Direct Marketing	3,949			3,732			8,210			7,598
Other	1,768			1,769			3,542			3,491
Total	$	32,145		$	34,422		$	65,867		$	70,205
	January 29,  2011			January 30,  2010
ASSETS
Tangible assets of Specialty Retail Stores	$	1,605,132		$	1,634,726
Tangible assets of Direct Marketing	162,748			143,966
Corporate assets:
Intangible assets related to Specialty Retail Stores	2,721,803			2,775,749
Intangible assets related to Direct Marketing	451,490			466,568
Other	590,032			578,842
Total	$	5,531,205		$	5,599,851

(1)Other expenses consists primarily of costs (primarily professional fees and severance) incurred in connection with corporate initiatives and cost reductions.

18

13.  Condensed Consolidating Financial Information

2028 Debentures.  All of NMG’s obligations under the 2028 Debentures are guaranteed by the Company.  The guarantee by the Company is full and unconditional and joint and several.  Currently, the Company’s non-guarantor subsidiaries consist principally of Bergdorf Goodman, Inc. through which NMG conducts the operations of its Bergdorf Goodman stores and NM Nevada Trust which holds legal title to certain real property and intangible assets used by NMG in conducting its operations.  Previously, our non-guarantor subsidiaries also included an operating subsidiary domiciled in Canada providing support services to our Direct Marketing operation through January 2009.

The following condensed consolidating financial information represents the financial information of Neiman Marcus, Inc. and its non-guarantor subsidiaries, prepared on the equity basis of accounting.  The information is presented in accordance with the requirements of Rule 3-10 under the Securities and Exchange Commission’s Regulation S-X.  The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the non-guarantor subsidiaries operated as independent entities.

	January 29, 2011
(in thousands)	Company		NMG		Non-GuarantorSubsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	529,996	$	720	$	—		$	530,716
Merchandise inventories	—		683,348		88,912		—			772,260
Other current assets	—		98,430		10,109		—			108,539
Total current assets	—		1,311,774		99,741		—			1,411,515
Property and equipment, net	—		777,364		105,622		—			882,986
Goodwill and intangible assets, net	—		1,449,529		1,723,764		—			3,173,293
Other assets	—		61,682		1,729		—			63,411
Investments in subsidiaries	991,457		1,820,904		—		(2,812,361		)	—
Total assets	$	991,457	$	5,421,253	$	1,930,856	$	(2,812,361	)	$	5,531,205
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	187,812	$	28,320	$	—		$	216,132
Accrued liabilities	—		309,662		79,850		—			389,512
Other current liabilities	—		—		—		—			—
Total current liabilities	—		497,474		108,170		—			605,644
Long-term liabilities:
Long-term debt	—		2,879,769		—		—			2,879,769
Deferred income taxes	—		656,356		—		—			656,356
Other long-term liabilities	—		396,197		1,782		—			397,979
Total long-term liabilities	—		3,932,322		1,782		—			3,934,104
Total shareholders’ equity	991,457		991,457		1,820,904		(2,812,361		)	991,457
Total liabilities and shareholders’ equity	$	991,457	$	5,421,253	$	1,930,856	$	(2,812,361	)	$	5,531,205

19

	July 31, 2010
(in thousands)	Company		NMG		Non-GuarantorSubsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	420,163	$	844	$	—		$	421,007
Merchandise inventories	—		703,448		87,068		—			790,516
Other current assets	—		136,690		11,909		—			148,599
Total current assets	—		1,260,301		99,821		—			1,360,122
Property and equipment, net	—		795,916		109,910		—			905,826
Goodwill and intangible assets, net	—		1,475,475		1,730,213		—			3,205,688
Other assets	—		58,875		1,771		—			60,646
Investments in subsidiaries	925,373		1,846,159		—		(2,771,532		)	—
Total assets	$	925,373	$	5,436,726	$	1,941,715	$	(2,771,532	)	$	5,532,282
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	239,362	$	31,416	$	—		$	270,778
Accrued liabilities	—		298,840		62,616		—			361,456
Other current liabilities	—		30,309		—		—			30,309
Total current liabilities	—		568,511		94,032		—			662,543
Long-term liabilities:
Long-term debt	—		2,879,672		—		—			2,879,672
Deferred income taxes	—		668,647		—		—			668,647
Other long-term liabilities	—		394,523		1,524		—			396,047
Total long-term liabilities	—		3,942,842		1,524		—			3,944,366
Total shareholders’ equity	925,373		925,373		1,846,159		(2,771,532		)	925,373
Total liabilities and shareholders’ equity	$	925,373	$	5,436,726	$	1,941,715	$	(2,771,532	)	$	5,532,282

	January 30, 2010
(in thousands)	Company		NMG		Non- GuarantorSubsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	500,011	$	650	$	—		$	500,661
Merchandise inventories	—		651,279		81,010		—			732,289
Other current assets	—		84,942		11,808		—			96,750
Total current assets	—		1,236,232		93,468		—			1,329,700
Property and equipment, net	—		831,184		116,187		—			947,371
Goodwill and intangible assets, net	—		1,505,654		1,736,663		—			3,242,317
Other assets	—		78,650		1,813		—			80,463
Investments in subsidiaries	942,861		1,834,019		—		(2,776,880		)	—
Total assets	$	942,861	$	5,485,739	$	1,948,131	$	(2,776,880	)	$	5,599,851
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	161,882	$	28,167	$	—		$	190,049
Accrued liabilities	—		285,797		84,478		—			370,275
Other current liabilities	—		45,479		—		—			45,479
Total current liabilities	—		493,158		112,645		—			605,803
Long-term liabilities:
Long-term debt	—		2,972,222		—		—			2,972,222
Deferred income taxes	—		684,185		—		—			684,185
Other long-term liabilities	—		393,313		1,467		—			394,780
Total long-term liabilities	—		4,049,720		1,467		—			4,051,187
Total shareholders’ equity	942,861		942,861		1,834,019		(2,776,880		)	942,861
Total liabilities and shareholders’ equity	$	942,861	$	5,485,739	$	1,948,131	$	(2,776,880	)	$	5,599,851

20

	Thirteen weeks ended January 29, 2011
(in thousands)	Company			NMG			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	978,319		$	193,240		$	—		$	1,171,559
Cost of goods sold including buying and occupancy costs (excluding depreciation)	—			659,780			133,881			—			793,661
Selling, general and administrative expenses (excluding depreciation)	—			223,543			30,164			—			253,707
Income from credit card program, net	—			(11,206		)	(989		)	—			(12,195		)
Depreciation expense	—			28,674			3,471			—			32,145
Amortization of intangible assets and favorable lease commitments	—			11,851			3,225			—			15,076
Operating earnings	—			65,677			23,488			—			89,165
Interest expense, net	—			55,247			1			—			55,248
Intercompany royalty charges (income)	—			55,863			(55,863		)	—			—
Equity in (earnings) loss of subsidiaries	(21,027		)	(79,350		)	—			100,377			—
Earnings (loss) before income taxes	21,027			33,917			79,350			(100,377		)	33,917
Income tax expense	—			12,890			—			—			12,890
Net earnings (loss)	$	21,027		$	21,027		$	79,350		$	(100,377	)	$	21,027

	Thirteen weeks ended January 30, 2010
(in thousands)	Company			NMG			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	931,514		$	170,847		$	—		$	1,102,361
Cost of goods sold including buying and occupancy costs (excluding depreciation)	—			644,390			117,095			—			761,485
Selling, general and administrative expenses (excluding depreciation)	—			208,441			29,140			—			237,581
Income from credit card program, net	—			(15,248		)	(1,324		)	—			(16,572		)
Depreciation expense	—			30,694			3,728			—			34,422
Amortization of intangible assets and favorable lease commitments	—			15,089			3,225			—			18,314
Operating earnings	—			48,148			18,983			—			67,131
Interest expense, net	—			59,003			1			—			59,004
Intercompany royalty charges (income)	—			53,786			(53,786		)	—			—
Equity in (earnings) loss of subsidiaries	(3,964		)	(72,768		)	—			76,732			—
Earnings (loss) before income taxes	3,964			8,127			72,768			(76,732		)	8,127
Income tax expense	—			4,163			—			—			4,163
Net earnings (loss)	$	3,964		$	3,964		$	72,768		$	(76,732	)	$	3,964

21

	Twenty-Six weeks ended January 29, 2011
(in thousands)	Company			NMG			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	1,738,596		$	360,211		$	—		$	2,098,807
Cost of goods sold including buying and occupancy costs (excluding depreciation)	—			1,127,921			228,398			—			1,356,319
Selling, general and administrative expenses (excluding depreciation)	—			417,662			59,032			—			476,694
Income from credit card program, net	—			(19,808		)	(1,680		)	—			(21,488		)
Depreciation expense	—			58,837			7,030			—			65,867
Amortization of intangible assets and favorable lease commitments	—			25,946			6,449			—			32,395
Operating earnings	—			128,038			60,982			—			189,020
Interest expense, net	—			113,676			2			—			113,678
Intercompany royalty charges (income)	—			102,159			(102,159		)	—			—
Equity in (earnings) loss of subsidiaries	(46,768		)	(163,139		)	—			209,907			—
Earnings (loss) before income taxes	46,768			75,342			163,139			(209,907		)	75,342
Income tax expense	—			28,574			—			—			28,574
Net earnings (loss)	$	46,768		$	46,768		$	163,139		$	(209,907	)	$	46,768

	Twenty-Six weeks ended January 30, 2010
(in thousands)	Company			NMG			Non- GuarantorSubsidiaries			Eliminations			Consolidated
Revenues	$	—		$	1,647,431		$	323,830		$	—		$	1,971,261
Cost of goods sold including buying and occupancy costs (excluding depreciation)	—			1,087,945			207,764			—			1,295,709
Selling, general and administrative expenses (excluding depreciation)	—			399,504			56,893			—			456,397
Income from credit card program, net	—			(27,129		)	(2,530		)	—			(29,659		)
Depreciation expense	—			62,528			7,677			—			70,205
Amortization of intangible assets and favorable lease commitments	—			30,180			6,450			—			36,630
Operating earnings	—			94,403			47,576			—			141,979
Interest expense, net	—			118,368			1			—			118,369
Intercompany royalty charges (income)	—			98,057			(98,057		)	—			—
Equity in (earnings) loss of subsidiaries	(12,485		)	(145,632		)	—			158,117			—
Earnings (loss) before income taxes	12,485			23,610			145,632			(158,117		)	23,610
Income tax expense	—			11,125			—			—			11,125
Net earnings (loss)	$	12,485		$	12,485		$	145,632		$	(158,117	)	$	12,485

22

	Twenty-Six weeks ended January 29, 2011
(in thousands)	Company			NMG			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS—OPERATING ACTIVITIES
Net earnings (loss)	$	46,768		$	46,768		$	163,139		$	(209,907	)	$	46,768
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization expense	—			93,412			13,479			—			106,891
Deferred income taxes	—			(15,695		)	—			—			(15,695		)
Other, primarily costs related to defined benefit pension and other long-term benefit plans	—			317			300			—			617
Intercompany royalty income payable (receivable)	—			102,159			(102,159		)	—			—
Equity in (earnings) loss of subsidiaries	(46,768		)	(163,139		)	—			209,907			—
Changes in operating assets and liabilities, net	—			98,001			(72,083		)	—			25,918
Net cash provided by operating activities	—			161,823			2,676			—			164,499
CASH FLOWS—INVESTING ACTIVITIES
Capital expenditures	—			(38,435		)	(2,800		)	—			(41,235		)
Net cash used for investing activities	—			(38,435		)	(2,800		)	—			(41,235		)
CASH FLOWS—FINANCING ACTIVITIES
Repayment of borrowings	—			(7,648		)	—			—			(7,648		)
Debt issuance costs paid	—			(5,907		)	—			—			(5,907		)
Net cash used for financing activities	—			(13,555		)	—			—			(13,555		)
CASH AND CASH EQUIVALENTS
Increase (decrease) during the period	—			109,833			(124		)	—			109,709
Beginning balance	—			420,163			844			—			421,007
Ending balance	$	—		$	529,996		$	720		$	—		$	530,716

	Twenty-Six weeks ended January 30, 2010
(in thousands)	Company			NMG			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS—OPERATING ACTIVITIES
Net earnings (loss)	$	12,485		$	12,485		$	145,632		$	(158,117	)	$	12,485
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization expense	—			101,795			14,127			—			115,922
Paid-in-kind interest	—			14,362			—			—			14,362
Deferred income taxes	—			(18,318		)	—			—			(18,318		)
Other, primarily costs related to defined benefit pension and other long-term benefit plans	—			2,480			88			—			2,568
Intercompany royalty income payable (receivable)	—			98,057			(98,057		)	—			—
Equity in (earnings) loss of subsidiaries	(12,485		)	(145,632		)	—			158,117			—
Changes in operating assets and liabilities, net	—			165,707			(60,345		)	—			105,362
Net cash provided by operating activities	—			230,936			1,445			—			232,381
CASH FLOWS—INVESTING ACTIVITIES
Capital expenditures	—			(26,928		)	(1,454		)	—			(28,382		)
Net cash used for investing activities	—			(26,928		)	(1,454		)	—			(28,382		)
CASH FLOWS—FINANCING ACTIVITIES
Repayment of borrowings	—			(26,763		)	—			—			(26,763		)
Net cash used for financing activities	—			(26,763		)	—			—			(26,763		)
CASH AND CASH EQUIVALENTS
Increase (decrease) during the period	—			177,245			(9		)	—			177,236
Beginning balance	—			322,766			659			—			323,425
Ending balance	$	—		$	500,011		$	650		$	—		$	500,661

23

ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EXECUTIVE OVERVIEW

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended July 31, 2010.  Unless otherwise specified, the meanings of all defined terms in Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) are consistent with the meanings of such terms as defined in the Notes to Condensed Consolidated Financial Statements.  This discussion contains forward-looking statements.  Please see “Other Matters — Factors That May Affect Future Results” for a discussion of the risks, uncertainties and assumptions relating to our forward-looking statements.

Overview

Neiman Marcus, Inc. (the Company) is a wholly-owned subsidiary of and is controlled by Newton Holding, LLC (Holding).  Holding is controlled by investment funds affiliated with TPG Capital and Warburg Pincus (collectively, the Sponsors).  The Company was formed by Holding for the purpose of acquiring The Neiman Marcus Group, Inc. (NMG), which acquisition was completed on October 6, 2005 (the Acquisition).

The Company, together with our operating segments and subsidiaries, is a high-end specialty retailer.  Our operations include the Specialty Retail Stores segment and the Direct Marketing segment.  The Specialty Retail Stores segment consists primarily of Neiman Marcus and Bergdorf Goodman stores.  The Direct Marketing segment conducts both online and print catalog operations under the brand names of Neiman Marcus, Last Call, Bergdorf Goodman and Horchow.

Our fiscal year ends on the Saturday closest to July 31.  All references to the second quarter of fiscal year 2011 relate to the thirteen weeks ended January 29, 2011.  All references to the second quarter of fiscal year 2010 relate to the thirteen weeks ended January 30, 2010.  All references to year-to-date fiscal 2011 relate to the twenty-six weeks ended January 29, 2011.  All references to year-to-date fiscal 2010 relate to the twenty-six weeks ended January 30, 2010.

Fiscal Year 2011 Summary

A summary of our operating results is as follows:

·Revenues—Our revenues in the second quarter and year-to-date period of fiscal year 2011 were positively impacted by a higher level of customer demand.  As a result, our revenues for the second quarter of fiscal year 2011 were $1,171.6 million, an increase of 6.3% compared to the second quarter of fiscal year 2010.  Comparable revenues increased by 6.0% in the second quarter of fiscal year 2011.

Our revenues for year-to-date fiscal 2011 were $2,098.8 million, an increase of 6.5% compared to the prior year reflecting an increase in comparable revenues of 6.2%.

For Specialty Retail Stores, our sales per square foot for the last twelve trailing months were $482 as of January 29, 2011, $472 as of October 30, 2010 and $453 as of January 30, 2010.

·Cost of goods sold including buying and occupancy costs (excluding depreciation) (COGS)—COGS represented 67.7% of revenues in the second quarter of fiscal year 2011, an improvement of 1.4% of revenues compared to the second quarter of fiscal year 2010.  COGS represented 64.6% of revenues in year-to-date fiscal 2011, an improvement of 1.1% of revenues compared to year-to-date fiscal 2010.  This decrease in COGS was primarily due to 1) higher levels of full-price sales and lower promotions costs and 2) the leveraging of buying and occupancy costs on higher revenues.

·Inventories—During the second quarter of fiscal year 2011, we continued to closely manage inventory.  At January 29, 2011, on-hand inventories totaled $772.3 million, a 5.5% increase from the prior year fiscal period in response to growing customer demand and the planned increase in inventories in certain targeted merchandise categories.  Excluding inventories held by new stores, inventories increased by approximately 5.2%.

24

·Selling, general and administrative expenses (excluding depreciation) (SG&A)—SG&A represented 21.7% of revenues in the second quarter of fiscal year 2011, a slight increase of 0.1% of revenues compared to the second quarter of fiscal year 2010.  SG&A represented 22.7% of revenues in year-to-date fiscal 2011, a net improvement of 0.5% of revenues compared to year-to-date fiscal 2010.  The lower level of SG&A expenses in year-to-date fiscal 2011, as a percentage of revenues, primarily reflects 1) lower payroll and related benefits costs and 2) a lower level of aggregate spending on professional fees and corporate initiatives, offset by 3) higher marketing and selling costs.

·Operating earnings—Total operating earnings in the second quarter of fiscal year 2011 were $89.2 million, or 7.6% of revenues.  Total operating earnings in the second quarter of fiscal year 2010 were $67.1 million or 6.1% of revenues.  Our operating earnings margin increased by 1.5% of revenues primarily due to:

·a decrease in COGS by 1.4% of revenues primarily due to higher levels of full-price sales, lower promotions costs and the leveraging of buying and occupancy costs; and

·a decrease in depreciation and amortization expense by 0.8% of revenues reflecting a lower level of capital expenditures in recent years and lower amortization of short-lived intangible assets; offset by

·a decrease in income from our credit card operations by 0.5% of revenues primarily due to the amendment of terms in our amended and extended Program Agreement executed in July 2010.

Total operating earnings in year-to-date fiscal 2011 were $189.0 million, or 9.0% of revenues compared to $142.0 million, or 7.2% in year-to-date fiscal 2010.  Operating earnings margin increased by 1.8% of revenues in year-to-date fiscal 2011 primarily due to:

·a decrease in COGS by 1.1% of revenues primarily due to higher levels of full-price sales, lower promotions costs and the leveraging of buying and occupancy costs;

·a decrease in SG&A expenses by 0.5% of revenues primarily due to lower payroll and related benefits costs, a lower level of aggregate spending on professional fees and corporate initiatives, offset by higher spending on marketing and selling costs; and

·a decrease in depreciation and amortization expense by 0.9% of revenues reflecting a lower level of capital expenditures in recent years and lower amortization of short-lived intangible assets; offset by

·a decrease in income from our credit card operations by 0.5% of revenues primarily due to the amendment of terms in our amended and extended Program Agreement executed in July 2010.

·Liquidity—Net cash provided by our operating activities was $164.5 million in year-to-date fiscal 2011 compared to $232.4 million in year-to-date fiscal 2010.  Cash provided by our operating activities in year-to-date fiscal 2010 was positively impacted by actions taken to align on-hand inventory levels to customer demand.  We held cash balances of $530.7 million at January 29, 2011 compared to $500.7 million at January 30, 2010.  At January 29, 2011, we had no borrowings outstanding under our Asset-Based Revolving Credit Facility, $17.0 million of outstanding letters of credit and $500.6 million of unused borrowing availability.

·Outlook— While economic conditions have continued to improve in recent quarters, we do not anticipate the return of consumer spending to levels achieved in fiscal years 2007 and 2008 in the near-term.  We plan to maintain an appropriate alignment of our inventory levels and purchases with anticipated customer demand.  We believe the cash generated from our operations along with our cash balances and available sources of financing will enable us to meet our cash obligations for the remainder of fiscal year 2011.

25

OPERATING RESULTS

Performance Summary

The following table sets forth certain items expressed as percentages of net revenues for the periods indicated.

	Thirteen weeks ended				Twenty-Six weeks ended
	January 29, 2011		January 30, 2010		January 29, 2011		January 30, 2010
Revenues	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold including buying and occupancy costs (excluding depreciation)	67.7		69.1		64.6		65.7
Selling, general and administrative expenses (excluding depreciation)	21.7		21.6		22.7		23.2
Income from credit card program, net	(1.0	)	(1.5	)	(1.0	)	(1.5	)
Depreciation expense	2.7		3.1		3.1		3.6
Amortization of intangible assets	0.9		1.3		1.1		1.4
Amortization of favorable lease commitments	0.4		0.4		0.4		0.5
Operating earnings	7.6		6.1		9.0		7.2
Interest expense, net	4.7		5.4		5.4		6.0
Earnings before income taxes	2.9		0.7		3.6		1.2
Income tax expense	1.1		0.4		1.4		0.6
Net earnings	1.8	%	0.4	%	2.2	%	0.6	%

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Set forth in the following table is certain summary information with respect to our operations for the periods indicated.

	Thirteen weeks ended						Twenty-Six weeks ended
(in millions, except sales per square foot)	January 29, 2011			January 30, 2010			January 29, 2011			January 30, 2010
REVENUES
Specialty Retail Stores	$	936.5		$	881.2		$	1,697.6		$	1,602.8
Direct Marketing	235.1			221.2			401.2			368.5
Total	$	1,171.6		$	1,102.4		$	2,098.8		$	1,971.3
OPERATING EARNINGS
Specialty Retail Stores	$	85.1		$	66.5		$	193.1		$	154.9
Direct Marketing	36.2			40.7			61.2			62.4
Corporate expenses	(17.0		)	(15.4		)	(31.1		)	(29.0		)
Other expenses (1)	—			(6.4		)	(1.8		)	(9.7		)
Amortization of intangible assets and favorable lease commitments	(15.1		)	(18.3		)	(32.4		)	(36.6		)
Total	$	89.2		$	67.1		$	189.0		$	142.0
OPERATING PROFIT MARGIN
Specialty Retail Stores	9.1		%	7.5		%	11.4		%	9.7		%
Direct Marketing	15.4		%	18.4		%	15.2		%	16.9		%
Total	7.6		%	6.1		%	9.0		%	7.2		%
CHANGE IN COMPARABLE REVENUES (2)
Specialty Retail Stores	6.0		%	(0.6		)%	5.6		%	(7.6		)%
Direct Marketing	6.3		%	5.9		%	8.9		%	0.3		%
Total	6.0		%	0.6		%	6.2		%	(6.2		)%
SALES PER SQUARE FOOT
Specialty Retail Stores	$	146		$	137		$	264		$	249
STORE COUNT
Neiman Marcus and Bergdorf Goodman full-line stores:
Open at beginning of period	43			43			43			42
Opened during the period	—			—			—			1
Open at end of period	43			43			43			43
Neiman Marcus Last Call stores:
Open at beginning of period	28			28			28			27
Opened during the period	2			—			2			1
Open at end of period	30			28			30			28
NON-GAAP FINANCIAL MEASURE EBITDA (3)	$	136.4		$	119.9		$	287.3		$	248.8

(1)Other expenses consists primarily of costs (primarily professional fees and severance) incurred in connection with corporate initiatives and cost reductions.

(2)Comparable revenues include 1) revenues derived from our retail stores open for more than fifty two weeks, including stores that have been relocated or expanded and 2) revenues from our Direct Marketing operation.

(3)For an explanation of EBITDA as a measure of our operating performance, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measure - EBITDA.”

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Factors Affecting Our Results

Revenues.  We generate our revenues from the sale of high-end merchandise through our Specialty Retail Stores and Direct Marketing operation.  Components of our revenues include:

·Sales of merchandise—Revenues from our Specialty Retail Stores are recognized at the later of the point-of-sale or the delivery of goods to the customer.  Revenues from our Direct Marketing operation are recognized when the merchandise is delivered to the customer.  Revenues are reduced when customers return goods previously purchased.  We maintain reserves for anticipated sales returns primarily based on our historical trends related to returns by both our retail and direct marketing customers.  Revenues exclude sales taxes collected from our customers.

·Delivery and processing—We generate revenues from delivery and processing charges related to merchandise delivered to our customers from both our Specialty Retail Stores and Direct Marketing operation.

Our revenues can be affected by the following factors:

·general economic conditions;

·changes in the level of consumer spending generally and, specifically, on luxury goods;

·changes in the level of full-price sales;

·changes in the level of promotional events conducted by our Specialty Retail Stores and Direct Marketing operation;

·our ability to successfully implement our store expansion and remodeling strategies; and

·the rate of growth in internet revenues by our Direct Marketing operation.

In addition, our revenues are seasonal, as discussed below under “Seasonality.”

Cost of goods sold including buying and occupancy costs (excluding depreciation).  COGS consists of the following components:

·Inventory costs—We utilize the retail method of accounting.  Under the retail inventory method, the valuation of inventories at cost and the resulting gross margins are determined by applying a calculated cost-to-retail ratio, for various groupings of similar items, to the retail value of our inventories.  The cost of the inventory reflected on the consolidated balance sheet is decreased by charges to cost of goods sold at the time the retail value of the inventory is lowered through the use of markdowns.  Hence, earnings are negatively impacted when merchandise is marked down.  With the introduction of new fashions in the first and third fiscal quarters and our emphasis on full-price selling in these quarters, a lower level of markdowns and higher margins are characteristic of these quarters.

·Buying costs—Buying costs consist primarily of salaries and expenses incurred by our merchandising and buying operations.

·Occupancy costs—Occupancy costs consist primarily of rent, property taxes and operating costs of our retail, distribution and support facilities.  A significant portion of our buying and occupancy costs are fixed in nature and are not dependent on the revenues we generate.

·Delivery and processing costs—Delivery and processing costs consist primarily of delivery charges we pay to third-party carriers and other costs related to the fulfillment of customer orders not delivered at the point-of-sale.

Consistent with industry business practice, we receive allowances from certain of our vendors in support of the merchandise we purchase for resale.  Certain allowances are received to reimburse us for markdowns taken or to support the gross margins that we earn in connection with the sales of the vendor’s merchandise.  These allowances result in an increase to gross margin when we earn the allowances and they are approved by the vendor.  Other allowances we receive represent reductions to the amounts we pay to acquire the merchandise.  These allowances reduce the cost of the acquired merchandise and are recognized at the time the goods are sold.  We received vendor allowances of $46.2 million, or 2.2% of revenues, in year-to-date fiscal 2011 and

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$40.8 million, or 2.1% of revenues, in year-to-date fiscal 2010.  The amounts of vendor allowances we receive fluctuate based on the level of markdowns taken and did not have a significant impact on the year-over-year change in gross margin during year-to-date fiscal 2011 and 2010.

Changes in our COGS as a percentage of revenues can be affected by the following factors:

·our ability to order an appropriate amount of merchandise to match customer demand and the related impact on the level of net markdowns incurred;

·customer acceptance of and demand for the merchandise we offer in a given season and the related impact of such factors on the level of full-price sales;

·factors affecting revenues generally, including pricing and promotional strategies, product offerings and other actions taken by competitors;

·changes in occupancy costs primarily associated with the opening of new stores or distribution facilities; and

·the amount of vendor reimbursements we receive during the fiscal year.

Selling, general and administrative expenses (excluding depreciation).  SG&A principally consists of costs related to employee compensation and benefits in the selling and administrative support areas, advertising and catalog costs and insurance and long-term benefits expenses.  A significant portion of our selling, general and administrative expenses are variable in nature and are dependent on the revenues we generate.

Advertising costs consist primarily of 1) print media costs for promotional materials mailed to our customers incurred by our Specialty Retail segment, 2) advertising costs incurred by our Direct Marketing operation related to the production, printing and distribution of our print catalogs and the production of the photographic content for our websites and 3) online marketing costs incurred by our Direct Marketing operation.  We receive advertising allowances from certain of our merchandise vendors.  Substantially all the advertising allowances we receive represent reimbursements of direct, specific and incremental costs that we incur to promote the vendor’s merchandise in connection with our various advertising programs, primarily catalogs and other print media.  Advertising allowances fluctuate based on the level of advertising expenses incurred and are recorded as a reduction of our advertising costs when earned.  Advertising allowances aggregated approximately $28.0 million, or 1.3% of revenues, in year-to-date fiscal 2011 and $26.1 million, or 1.3% of revenues, in year-to-date fiscal 2010.

We also receive allowances from certain merchandise vendors in conjunction with compensation programs for employees who sell the vendor’s merchandise.  These allowances are netted against the related compensation expense that we incur.  Amounts received from vendors related to compensation programs were $30.4 million, or 1.5% of revenues, in year-to-date fiscal 2011 and $31.4 million, or 1.6% of revenues, in year-to-date fiscal 2010.

Changes in our selling, general and administrative expenses are affected primarily by the following factors:

·changes in the number of sales associates primarily due to new store openings and expansion of existing stores, including increased health care and related benefits expenses;

·changes in expenses incurred in connection with our advertising and marketing programs; and

·changes in expenses related to employee benefits due to general economic conditions such as rising health care costs.

Income from credit card program, net.  Pursuant to a long-term marketing and servicing alliance with HSBC, HSBC offers credit card and non-card payment plans bearing our brands and we receive 1) ongoing payments from HSBC based on net credit card sales and 2) compensation for marketing and servicing activities (HSBC Program Income).  The HSBC Program Income is subject to annual adjustments, both increases and decreases, based upon the overall annual profitability and performance of the credit card portfolio.  We recognize HSBC Program Income when earned.  In the future, the HSBC Program Income may be:

·increased or decreased based upon the level of utilization of our proprietary credit cards by our customers;

·increased or decreased based upon future changes to our historical credit card program related to, among other things, the interest rates applied to unpaid balances, the assessment of late fees and the level of usage of promotional no-interest credit programs;

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·decreased based upon the level of future services we provide to HSBC; and

·increased or decreased based upon the overall profitability and performance of the credit card portfolio.

Our original program agreement with HSBC expired in July 2010.  We have entered into an agreement with HSBC to amend and extend the program to July 2015 (renewable thereafter for three-year terms).  We refer to the agreement with HSBC, including the extension, as the Program Agreement.  Based upon current market conditions and the terms of the extended Program Agreement, we believe the future income earned by the Company will be lower than the income earned pursuant to the original Program Agreement and that a higher portion of such future income will be based upon the future profitability and performance of the credit card portfolio.

Seasonality

We conduct our selling activities in two primary selling seasons—Fall and Spring.  The Fall season is comprised of our first and second fiscal quarters and the Spring season is comprised of our third and fourth fiscal quarters.

Our first fiscal quarter is generally characterized by a higher level of full-price sales with a focus on the initial introduction of Fall season fashions.  Aggressive in-store marketing activities designed to stimulate customer buying, a lower level of markdowns and higher margins are characteristic of this quarter.  The second fiscal quarter is more focused on promotional activities related to the December holiday season, the early introduction of resort season collections from certain designers and the sale of Fall season goods on a marked down basis.  As a result, margins are typically lower in the second fiscal quarter.  However, due to the seasonal increase in revenues that occurs during the holiday season, the second fiscal quarter is typically the quarter in which our revenues are the highest and in which expenses as a percentage of revenues are the lowest.  Our working capital requirements are also the greatest in the first and second fiscal quarters as a result of higher seasonal requirements.

Similarly, the third fiscal quarter is generally characterized by a higher level of full-price sales with a focus on the initial introduction of Spring season fashions.  Aggressive in-store marketing activities designed to stimulate customer buying, a lower level of markdowns and higher margins are again characteristic of this quarter.  Revenues are generally the lowest in the fourth fiscal quarter with a focus on promotional activities offering Spring season goods to the customer on a marked down basis, resulting in lower margins during the quarter.  Our working capital requirements are typically lower in the third and fourth fiscal quarters than in the other quarters.

A large percentage of our merchandise assortment, particularly in the apparel, fashion accessories and shoe categories, is ordered months in advance of the introduction of such goods.  For example, women’s apparel, men’s apparel, shoes and handbags are typically ordered six to nine months in advance of the products being offered for sale while jewelry and other categories are typically ordered three to six months in advance.  As a result, inherent in the successful execution of our business plans is our ability both to predict the fashion trends that will be of interest to our customers and to anticipate future spending patterns of our customer base.

We monitor the sales performance of our inventories throughout each season.  We seek to order additional goods to supplement our original purchasing decisions when the level of customer demand is higher than originally anticipated.  However, in certain merchandise categories, particularly fashion apparel, our ability to purchase additional goods can be limited.  This can result in lost sales in the event of higher than anticipated demand for the fashion goods we offer or a higher than anticipated level of consumer spending.  Conversely, in the event we buy fashion goods that are not accepted by the customer or the level of consumer spending is less than we anticipated, we typically incur a higher than anticipated level of markdowns, net of vendor allowances, resulting in lower operating profits.  We believe that the experience of our merchandising and selling organizations helps to minimize the inherent risk in predicting fashion trends.

Thirteen Weeks Ended January 29, 2011 Compared to Thirteen Weeks Ended January 30, 2010

Revenues.Our revenues for the second quarter of fiscal year 2011 of $1,171.6 million increased by $69.2 million, or 6.3%, from $1,102.4 million in the second quarter of fiscal year 2010.  The increase in revenues was due to increases in comparable revenues related to a higher level of customer demand.  New stores generated revenues of $2.7 million in the second quarter of fiscal year 2011.

Comparable revenues for the thirteen weeks ended January 29, 2011 were $1,168.9 million compared to $1,102.4 million in the second quarter of fiscal year 2010, representing an increase of 6.0%.  The increase in comparable revenues for our

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Specialty Retail Stores in the second quarter of fiscal year 2011 of 6.0% represented an improvement to the 5.1% increase generated in the first quarter of fiscal year 2011.  However, revenue growth for Direct Marketing of 6.3% in the second quarter of fiscal year 2011 was below the 12.8% increase generated in the first quarter of fiscal year 2011.

Internet revenues generated by Direct Marketing were $202.9 million for the second quarter of fiscal year 2011, an increase of 7.2% compared to the prior year fiscal period.  Catalog revenues increased 0.9% compared to the prior year fiscal period.

Cost of goods sold including buying and occupancy costs (excluding depreciation).  COGS for the second quarter of fiscal year 2011 were 67.7% of revenues compared to 69.1% of revenues for the second quarter of fiscal year 2010.  The decrease in COGS by 1.4% of revenues in the second quarter of fiscal year 2011 was primarily due to:

·increased product margins of approximately 0.9% of revenues due to higher levels of full-price sales and lower net markdowns and promotions costs in our Specialty Retail Stores; and

·the leveraging of buying and occupancy costs by 0.5% of revenues on higher revenues; partially offset by

·higher markdowns by our Direct Marketing operation in response to lower than anticipated customer demand and lower delivery and processing net revenues.

Selling, general and administrative expenses (excluding depreciation).  SG&A expenses as a percentage of revenues increased to 21.7% of revenues in the second quarter of fiscal year 2011 compared to 21.6% of revenues in the prior year fiscal period.  The net increase in SG&A expenses by 0.1% of revenues in the second quarter of fiscal year 2011 was primarily due to:

·higher marketing and selling costs of approximately 0.3% of revenues; offset by

·lower professional fees and expenses incurred primarily in connection with corporate initiatives of approximately 0.3% of revenues.

Income from credit card program, net.  We earned HSBC Program Income of $12.2 million, or 1.0% of revenues, in the second quarter of fiscal year 2011 compared to $16.6 million, or 1.5% of revenues, in the second quarter of fiscal year 2010.  We amended and extended our Program Agreement in July 2010.  The decrease in HSBC Program Income in the second quarter of fiscal year 2011 compared to the prior year fiscal period is attributable to the impact of the change in the amended contractual terms of our Program Agreement, which became effective July 2010.

Depreciation expense.  Depreciation expense was $32.1 million, or 2.7% of revenues, in the second quarter of fiscal year 2011 compared to $34.4 million, or 3.1% of revenues, in the second quarter of fiscal year 2010.  The decrease in depreciation resulted primarily from recent lower levels of capital spending.

Amortization expense.  Amortization of intangible assets (primarily customer lists and favorable lease commitments) aggregated $15.1 million, or 1.3% of revenues, in the second quarter of fiscal year 2011 compared to $18.3 million, or 1.7% of revenues, in the second quarter of fiscal year 2010.  The decrease in amortization is primarily due to certain short-lived intangible assets becoming fully amortized.

Segment operating earnings.  Segment operating earnings for our Specialty Retail Stores and Direct Marketing segments do not reflect either the impact of adjustments to revalue our assets and liabilities to estimated fair value at the Acquisition date or impairment charges related to declines in fair value subsequent to the Acquisition date.  The reconciliation of segment operating earnings to total operating earnings is as follows:

	Thirteen weeks ended
(in millions)	January 29, 2011			January 30, 2010
Specialty Retail Stores	$	85.1		$	66.5
Direct Marketing	36.2			40.7
Amortization of intangible assets and favorable lease commitments	(15.1		)	(18.3		)
Corporate expenses	(17.0		)	(15.4		)
Other expenses	—			(6.4		)
Total operating earnings	$	89.2		$	67.1

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Operating earnings for our Specialty Retail Stores segment were $85.1 million, or 9.1% of Specialty Retail Stores revenues, for the second quarter of fiscal year 2011 compared to operating earnings of $66.5 million, or 7.5% of Specialty Retail Stores revenues, for the prior year fiscal period.  The increase in operating margin as a percentage of revenues was primarily due to:

·higher levels of full-price sales and lower promotions costs; and

·the leveraging of a significant portion of our expenses on the higher level of revenues; offset by

·a lower level of income from our credit card program.

Operating earnings for Direct Marketing were $36.2 million, or 15.4% of Direct Marketing revenues, in the second quarter of fiscal year 2011 compared to $40.7 million, or 18.4% of Direct Marketing revenues, for the prior year fiscal period.  The decrease in operating margin as a percentage of revenues for Direct Marketing was primarily the result of:

·decreased product margins primarily due to higher net markdowns and lower delivery and processing net revenues;

·higher marketing and advertising costs; and

·a lower level of income from our credit card program.

Other expenses of $6.4 million in the second quarter of fiscal year 2010 consist primarily of costs (professional fees and severance) incurred in connection with corporate initiatives and cost reductions.

Interest expense, net. Net interest expense was $55.2 million, or 4.7% of revenues, in the second quarter of fiscal year 2011 and $59.0 million, or 5.4% of revenues, for the prior year fiscal period. The significant components of interest expense are as follows:

	Thirteen weeks ended
(in thousands)	January 29, 2011			January 30, 2010
Senior Secured Term Loan Facility	$	17,617		$	20,787
2028 Debentures	2,202			2,207
Senior Notes	16,930			16,744
Senior Subordinated Notes	12,969			12,969
Amortization of debt issue costs	3,956			4,679
Other, net	1,661			1,618
Capitalized interest	(87		)	—
Interest expense, net	$	55,248		$	59,004

Income tax expense.  Our effective income tax rate for the second quarter of fiscal year 2011 was 38.0% compared to 51.2% for the second quarter of fiscal year 2010.  Our effective income tax rate for the second quarter of fiscal year 2010 was unfavorably impacted by the relative significance of non-taxable income and non-deductible expenses to our estimated taxable loss for fiscal year 2010.

During the fourth quarter of fiscal year 2010, the Internal Revenue Service (IRS) closed their examination of our fiscal year 2007 federal income tax return with no changes or assessments.  The IRS began an examination of our fiscal year 2008 federal income tax return in the second quarter of fiscal year 2011.  With respect to state and local jurisdictions, with limited exceptions, the Company and its subsidiaries are no longer subject to income tax audits for fiscal years before 2006.  We believe our recorded tax liabilities as of January 29, 2011 are sufficient to cover any potential assessments to be made by the IRS or other taxing authorities upon the completion of their examinations and we will continue to review our recorded tax liabilities for potential audit assessments based upon subsequent events, new information and future circumstances.  We believe it is reasonably possible that additional adjustments in the amounts of our unrecognized tax benefits could occur within the next twelve months as a result of settlements with tax authorities or expiration of statutes of limitation.  At this time, we do not believe such adjustments will have a material impact on our condensed consolidated financial statements.

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Twenty-Six Weeks Ended January 29, 2011 Compared to Twenty-Six Weeks Ended January 30, 2010

Revenues.Our revenues for year-to-date fiscal 2011 of $2,098.8 million increased by $127.5 million, or 6.5%, from $1,971.3 million in year-to-date fiscal 2010.  The increase in revenues was due to increases in comparable revenues related to a higher level of customer demand.  New stores generated revenues of $5.7 million in year-to-date fiscal 2011.

Comparable revenues for the twenty-six weeks ended January 29, 2011 were $2,093.1 million compared to $1,971.3 million in year-to-date fiscal 2010, representing an increase of 6.2%. Changes in comparable revenues, by quarter and by reportable segment, were:

	First Fiscal Quarter		Second Fiscal Quarter		Year-to-Date Fiscal 2011
Specialty Retail Stores	5.1	%	6.0	%	5.6	%
Direct Marketing	12.8	%	6.3	%	8.9	%
Total	6.4	%	6.0	%	6.2	%

Internet revenues generated by Direct Marketing were $341.9 million for year-to-date fiscal 2011, an increase of 10.9% compared to the prior year fiscal period.  Catalog revenues decreased 1.7% compared to the prior year fiscal period as our customers continue to migrate toward on-line retailing in our Direct Marketing operation.

Cost of goods sold including buying and occupancy costs (excluding depreciation).  COGS for year-to-date fiscal 2011 were 64.6% of revenues compared to 65.7% of revenues for year-to-date fiscal 2010.  The decrease in COGS by 1.1% of revenues in year-to-date fiscal 2011 was primarily due to:

·increased product margins of approximately 0.9% of revenues due to higher levels of full-price sales and lower promotions costs in our Specialty Retail Stores; and

·the leveraging of buying and occupancy costs by 0.4% of revenues on higher revenues; partially offset by

·higher markdowns by our Direct Marketing operation in response to lower than anticipated customer demand and lower delivery and processing net revenues of approximately 0.2% of revenues.

Selling, general and administrative expenses (excluding depreciation).  SG&A expenses as a percentage of revenues decreased to 22.7% of revenues in year-to-date fiscal 2011 compared to 23.2% of revenues in the prior year fiscal period.  The net decrease in SG&A expenses of 0.5% of revenues in year-to-date fiscal 2011 was primarily due to:

·favorable payroll and related costs of approximately 0.5% of revenues, primarily due to the leveraging of these expenses on higher revenues and lower benefits costs incurred;

·lower professional fees and expenses incurred primarily in connection with corporate initiatives of approximately 0.3% of revenues; offset by

·higher marketing and selling costs of approximately 0.2% of revenues.

Income from credit card program, net.  We earned HSBC Program Income of $21.5 million, or 1.0% of revenues, in year-to-date fiscal 2011 compared to $29.7 million, or 1.5% of revenues, in year-to-date fiscal 2010.  We amended and extended our Program Agreement in July 2010.  The decrease in HSBC Program Income in year-to-date fiscal 2011 compared to the prior year fiscal period is attributable to the impact of the change in the amended contractual terms of our Program Agreement, which became effective July 2010.

Depreciation expense.  Depreciation expense was $65.9 million, or 3.1% of revenues, in year-to-date fiscal 2011 compared to $70.2 million, or 3.6% of revenues, in year-to-date fiscal 2010.  The decrease in depreciation resulted primarily from recent lower levels of capital spending.

Amortization expense.  Amortization of intangible assets (primarily customer lists and favorable lease commitments) aggregated $32.4 million, or 1.5% of revenues, in year-to-date fiscal 2011 compared to $36.6 million, or 1.9% of revenues, in year-to-date fiscal 2010.  The decrease in amortization is primarily due to certain short-lived intangible assets becoming fully amortized.

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Segment operating earnings.  Segment operating earnings for our Specialty Retail Stores and Direct Marketing segments do not reflect either the impact of adjustments to revalue our assets and liabilities to estimated fair value at the Acquisition date or impairment charges related to declines in fair value subsequent to the Acquisition date.  The reconciliation of segment operating earnings to total operating earnings is as follows:

	Twenty-Six weeks ended
(in millions)	January 29, 2011			January 30, 2010
Specialty Retail Stores	$	193.1		$	154.9
Direct Marketing	61.2			62.4
Amortization of intangible assets and favorable lease commitments	(32.4		)	(36.6		)
Corporate expenses	(31.1		)	(29.0		)
Other expenses	(1.8		)	(9.7		)
Total operating earnings	$	189.0		$	142.0

Operating earnings for our Specialty Retail Stores segment were $193.1 million, or 11.4% of Specialty Retail Stores revenues, year-to-date fiscal 2011 compared to operating earnings of $154.9 million, or 9.7% of Specialty Retail Stores revenues, for the prior year fiscal period.  The increase in operating margin as a percentage of revenues was primarily due to:

·higher levels of full-price sales and lower promotions costs; and

·the leveraging of a significant portion of our expenses on the higher level of revenues; offset by

·a lower level of income from our credit card program.

Operating earnings for Direct Marketing were $61.2 million, or 15.2% of Direct Marketing revenues, in year-to-date fiscal 2011 compared to $62.4 million, or 16.9% of Direct Marketing revenues, for the prior year fiscal period.  The decrease in operating margin as a percentage of revenues for Direct Marketing was primarily the result of:

·decreased product margins primarily due to higher net markdowns and lower delivery and processing net revenues;

·higher marketing and advertising costs; and

·a lower level of income from our credit card program.

Other expenses of $1.8 million in year-to-date fiscal 2011 and $9.7 million in year-to-date fiscal 2010 consist primarily of costs (professional fees and severance) incurred in connection with corporate initiatives and cost reductions.

Interest expense, net. Net interest expense was $113.7 million, or 5.4% of revenues, in year-to-date fiscal year 2011 and $118.4 million, or 6.0% of revenues, for the prior year fiscal period. The significant components of interest expense are as follows:

	Twenty-Six weeks ended
(in thousands)	January 29, 2011			January 30, 2010
Senior Secured Term Loan Facility	$	38,183		$	41,573
2028 Debentures	4,428			4,433
Senior Notes	33,674			34,269
Senior Subordinated Notes	25,795			25,795
Amortization of debt issue costs	8,629			9,340
Other, net	3,098			3,152
Capitalized interest	(129		)	(193		)
Interest expense, net	$	113,678		$	118,369

Income tax expense.  Our effective income tax rate for year-to-date fiscal 2011 was 37.9% compared to 47.1% for year-to-date fiscal 2010.  Our effective income tax rate for year-to-date fiscal 2010 was unfavorably impacted by the relative significance of non-taxable income and non-deductible expenses to our estimated taxable loss for fiscal year 2010.

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Non-GAAP Financial Measure — EBITDA

We present the financial performance measure of earnings before interest, taxes, depreciation and amortization (EBITDA) because we use this measure to monitor and evaluate the performance of our business and believe the presentation of this measure will enhance investors’ ability to analyze trends in our business, evaluate our performance relative to other companies in our industry and evaluate our ability to service our debt.  EBITDA is not a presentation made in accordance with generally accepted accounting principals in the U.S. (GAAP).  Our computation of EBITDA may vary from others in our industry.

The non-GAAP measure of EBITDA contains some, but not all, adjustments that are taken into account in the calculation of the components of various covenants in the indentures governing NMG’s Senior Secured Asset-Based Revolving Credit Facility, Senior Secured Term Loan Facility, Senior Notes and Senior Subordinated Notes.  EBITDA should not be considered as an alternative to operating earnings or net earnings as a measure of operating performance.  In addition, EBITDA is not presented as and should not be considered as an alternative to cash flows as a measure of liquidity.  EBITDA has important limitations as an analytical tool and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.  For example, EBITDA:

·does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

·does not reflect changes in, or cash requirements for, our working capital needs;

·does not reflect our considerable interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

·excludes tax payments that represent a reduction in available cash; and

·does not reflect any cash requirements for assets being depreciated and amortized that may have to be replaced in the future.

The following table reconciles earnings as reflected in our condensed consolidated statements of operations prepared in accordance with GAAP to EBITDA:

	Thirteen weeks ended						Twenty-Six weeks ended
(dollars in millions)	January 29, 2011			January 30, 2010			January 29, 2011			January 30, 2010
Net earnings	$	21.0		$	4.0		$	46.8		$	12.5
Income tax expense	13.0			4.2			28.5			11.1
Interest expense, net	55.2			59.0			113.7			118.4
Depreciation expense	32.1			34.4			65.9			70.2
Amortization of intangible assets and favorable lease commitments	15.1			18.3			32.4			36.6
EBITDA	$	136.4		$	119.9		$	287.3		$	248.8
EBITDA as a percentage of revenues	11.6		%	10.9		%	13.7		%	12.6		%

Inflation and Deflation

We believe changes in revenues and net earnings that have resulted from inflation or deflation have not been material during the periods presented.  In recent years, we have experienced certain inflationary conditions in our cost base due primarily to changes in foreign currency exchange rates that have reduced the purchasing power of the U.S. dollar and, to a lesser extent, to increases in selling, general and administrative expenses, particularly with regard to employee benefits, and increases in fuel prices and costs impacted by increases in fuel prices, such as freight and transportation costs.

We purchase a substantial portion of our inventory from foreign suppliers whose costs are affected by the fluctuation of their local currency against the dollar or who price their merchandise in currencies other than the dollar.  Fluctuations in the Euro-U.S. dollar exchange rate affect us most significantly; however, we source goods from numerous countries and thus are affected by changes in numerous currencies and, generally, by fluctuations in the U.S. dollar relative to such currencies.  Accordingly, changes in the

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value of the dollar relative to foreign currencies may increase the retail prices of goods offered for sale and/or increase our cost of goods sold.  If our customers reduce their levels of spending in response to increases in retail prices and/or we are unable to pass such cost increases to our customers, our revenues, gross margins, and ultimately our earnings, could decrease.  Foreign currency fluctuations could have a material adverse effect on our business, financial condition and results of operations in the future.

LIQUIDITY AND CAPITAL RESOURCES

Our cash requirements consist principally of:

·the funding of our merchandise purchases;

·capital expenditures for new store construction, store renovations and upgrades of our management information systems;

·debt service requirements;

·income tax payments; and

·obligations related to our defined benefit pension plan (Pension Plan).

Our primary sources of short-term liquidity are comprised of cash on hand, availability under our Asset-Based Revolving Credit Facility and vendor financing.  The amounts of cash on hand and borrowings under the Asset-Based Revolving Credit Facility are influenced by a number of factors, including revenues, working capital levels, vendor terms, the level of capital expenditures, cash requirements related to financing instruments and debt service obligations, Pension Plan funding obligations and tax payment obligations, among others.  As to vendor financing, some of our vendors have experienced serious cash flow issues, reductions in available credit from banks, factors or other financial institutions, or increases in the cost of capital as a result of recent economic conditions.  To counteract their cash flow problems, our vendors may attempt to increase their prices, pass through increased costs, alter historical credit and payment terms available to us or seek other relief. Any of these actions could have an adverse impact on our relationship with the vendor or constrain the amounts or timing of our purchases from the vendor and, ultimately, have an adverse impact on our revenues, profitability and liquidity.

Our working capital requirements fluctuate during the fiscal year, increasing substantially during the first and second quarters of each fiscal year as a result of higher seasonal levels of inventories.  We have typically financed the increases in working capital needs during the first and second fiscal quarters with available cash balances, cash flows from operations and, if necessary, with cash provided from borrowings under our credit facilities.  We have made no borrowings under our Asset-Based Revolving Credit Facility during year-to-date fiscal periods 2011 or 2010.

We believe that operating cash flows, cash balances, available vendor financing and amounts available pursuant to our senior secured Asset-Based Revolving Credit Facility will be sufficient to fund our operations, anticipated capital expenditure requirements, debt service obligations, contractual obligations and commitments and Pension Plan funding payments through the remainder of fiscal year 2011.

At January 29, 2011, cash and cash equivalents were $530.7 million compared to $500.7 million at January 30, 2010.  Net cash provided by our operating activities was $164.5 million in year-to-date fiscal 2011 compared to $232.4 million in year-to-date fiscal 2010.  Cash provided by our operating activities in year-to-date fiscal 2010 was positively impacted by actions taken to align on-hand inventory levels to customer demand.

Net cash used for investing activities, representing capital expenditures, was $41.2 million in year-to-date fiscal 2011 and $28.4 million in year-to-date fiscal 2010.  We incurred capital expenditures in year-to-date fiscal 2011 related to the construction of our new store in Walnut Creek, California scheduled to open in March 2012.  We incurred significant capital expenditures in the year-to-date fiscal 2010 related to the construction of our new store in Bellevue (suburban Seattle) which opened in September 2009.  Currently, we project gross capital expenditures for fiscal year 2011 to be approximately $115 to $120 million.  Net of developer contributions, capital expenditures for fiscal year 2011 are projected to be approximately $100 to $110 million.

Net cash used for financing activities was $13.6 million in year-to-date fiscal 2011 as compared to $26.8 million in year-to-date fiscal 2010.  Pursuant to the terms of our Senior Secured Term Loan Facility, in the first quarter of fiscal year 2011, we prepaid $7.6 million of outstanding borrowings under that facility from excess cash flow, as defined in the credit agreement,

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that we generated in fiscal year 2010, and in the first quarter of fiscal year 2010, we prepaid $26.6 million of outstanding borrowings under that facility from excess cash flow that we generated in fiscal year 2009.  In addition, in the second quarter of fiscal year 2011, we incurred $5.9 million of debt issuance costs as a result of amending and restating the terms of our Senior Secured Term Loan Facility.

Financing Structure at January 29, 2011

Our major sources of funds are comprised of vendor financing, a $600.0 million Asset-Based Revolving Credit Facility, a $1,505.7 million Senior Secured Term Loan Facility, $752.5 million Senior Notes, $500.0 million Senior Subordinated Notes, $125.0 million 2028 Debentures and operating leases.

Senior Secured Asset-Based Revolving Credit Facility.  NMG has an asset-based revolving credit facility with a maximum committed borrowing capacity of $600.0 million that matures on January 15, 2013.  The facility also provides an uncommitted accordion feature that allows NMG to request the lenders to provide additional capacity in either the form of increased revolving commitments or incremental term loans, subject to a potential total maximum facility of $800 million.

Availability under the Asset-Based Revolving Credit Facility is subject to a borrowing base.  The Asset-Based Revolving Credit Facility includes borrowing capacity available for letters of credit and for borrowings on same-day notice.  The borrowing base for the Asset-Based Revolving Credit Facility is equal to at any time the sum of (a) the lesser of (i) 80% of eligible inventory (valued at the lower of cost or market value) and (ii) 85% of the net orderly liquidation value of eligible inventory, and (b) 85% of the amounts owed by credit card processors in respect of eligible credit card accounts constituting proceeds arising from the sale or disposition of inventory, less certain reserves.  Through April 30, 2011 NMG is required to maintain excess availability under the terms of the Asset-Based Revolving Credit Facility of at least the greater of (a) 10% of the lesser of (i) the aggregate revolving commitments and (ii) the borrowing base and (b) $50 million.  After April 30, 2011, if at any time, excess availability is less than the greater of (a) 15% of the lesser of (i) the aggregate revolving commitments and (ii) the borrowing base and (b) $60 million, NMG will be required to maintain a pro forma ratio of consolidated EBITDA to consolidated Fixed Charges (as such terms are defined in the credit agreement) of at least 1.1 to 1.0.  On January 29, 2011, NMG had no borrowings outstanding under this facility, $17.0 million of outstanding letters of credit and $500.6 million of unused borrowing availability.

See Note 3 of the Notes to Condensed Consolidated Financial Statements in Part I - Item 1 and Note 7 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended July 31, 2010 for a further description of the terms of the Asset-Based Revolving Credit Facility.

Senior Secured Term Loan Facility.  In October 2005, NMG entered into a credit agreement and related security and other agreements for a $1,975.0 million Senior Secured Term Loan Facility.  At January 29, 2011, the outstanding balance under the Senior Secured Term Loan Facility was $1,505.7 million.  In November 2010, NMG entered into an amendment and restatement (the Amendment) of the credit agreement governing NMG’s Senior Secured Term Loan Facility, which included the following: (i) an extension of the maturity of approximately $1,064.2 million principal amount of the existing term loans thereunder, (ii) an increase in the interest rate payable to holders of the extended term loans, (iii) the ability to incur additional debt to refinance the non-extended term loans and (iv) certain other modifications to the Senior Secured Term Loan Facility.

The extended term loans will mature on April 6, 2016, unless $300.0 million or more aggregate principal amount of NMG’s Senior Notes and Senior Subordinated Notes remain outstanding on July 15, 2015, in which case the extended term loans will mature on that date instead.  The approximately $441.5 million principal amount of existing term loans that were not extended continue to have a maturity of April 6, 2013 (as all of the term loans did prior to the Amendment).

In addition to extending the maturity of a portion of the existing term loans under the Senior Secured Term Loan Facility, the Amendment increased the “applicable margin” used in calculating the interest rate payable to holders of the extended term loans (but did not change the applicable margin used in calculating the interest rate payable to holders of term loans that were not extended).  Following the Amendment, term loans under the Senior Secured Term Loan Facility (including both the extended and the non-extended term loans) bear interest at a rate per annum equal to, at NMG’s option, either (a) a base rate determined by reference to the higher of (1) the prime rate of Credit Suisse AG (the administrative agent), (2) the federal funds effective rate plus 1¤2 of 1% and (3) the adjusted one-month LIBOR rate plus 1.00% or (b) a LIBOR rate (for a period equal to the relevant interest period), subject to certain adjustments, in each case plus an applicable margin.

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At January 29, 2011, the applicable margin for the extended term loans is 3.00% for alternate base rate loans and 4.00% for LIBOR rate loans (or if NMG’s consolidated leverage ratio as of the relevant date of determination is less than 5.0 to 1.0, 2.75% for alternate base rate loans and 3.75% for LIBOR rate loans).  At January 29, 2011, the applicable margin for the term loans that were not extended remains 1.00% for alternate base rate loans and 2.00% for LIBOR rate loans (or if NMG’s consolidated leverage ratio as of the relevant date of determination is less than 4.5 to 1.0, 0.75% for alternate base rate loans and 1.75% for LIBOR rate loans).  The weighted average interest rate on the outstanding borrowings pursuant to the Senior Secured Term Loan Facility was 3.71% at January 29, 2011.

The Amendment also included provisions permitting NMG (a) to incur debt to refinance the term loans that are not currently being extended (without requiring any further consent under the Senior Secured Term Loan Facility) and (b) to enter into future extensions of any portion of the term loans with the consent of only the lenders electing to extend at that time.

The credit agreement governing the Senior Secured Term Loan Facility requires NMG to prepay outstanding term loans with 50% (which percentage will be reduced to 25% if NMG’s total leverage ratio is less than a specified ratio and will be reduced to 0% if NMG’s total leverage ratio is less than a specified ratio) of its annual excess cash flow (as defined in the credit agreement).  For fiscal year 2010, NMG was required to prepay $92.6 million of our outstanding term loans pursuant to the annual excess cash flow requirements.  Of such amount, NMG paid $85.0 million in the fourth quarter of fiscal year 2010 and $7.6 million in the first quarter of fiscal year 2011.

See Note 3 of the Notes to Condensed Consolidated Financial Statements in Part I - Item 1 and Note 7 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended July 31, 2010 for a further description of the terms of the Senior Secured Term Loan Facility.

2028 Debentures.  NMG has outstanding $125.0 million aggregate principal amount of its 7.125% 2028 Debentures.  NMG’s 2028 Debentures mature on June 1, 2028.

See Note 3 of the Notes to Condensed Consolidated Financial Statements in Part I - Item 1 and Note 7 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended July 31, 2010 for a further description of the terms of the 2028 Debentures.

Senior Notes.NMG has outstanding $752.5 million aggregate principal amount of 9.0% / 9.75% Senior Notes under a senior indenture (Senior Indenture).  NMG’s Senior Notes mature on October 15, 2015.  Prior to October 15, 2010, NMG could, at its option, elect to pay interest on the Senior Notes entirely in cash (Cash Interest) or entirely by increasing the principal amount of the outstanding Senior Notes by issuing additional Senior Notes (PIK Interest).  Cash Interest on the Senior Notes accrues at the rate of 9% per annum.  PIK Interest on the Senior Notes accrues at the rate of 9.75% per annum.  We negotiated for the right to include the PIK feature in our Senior Notes because of our belief that this feature could be a useful tool to enhance liquidity under appropriate circumstances.  In the second quarter of fiscal year 2009, given the dislocation in the financial markets and the uncertainty as to when reasonable conditions would return, we believed that it was appropriate to utilize this feature, even though we had unused borrowing capacity under our $600.0 million Asset-Based Revolving Credit Facility.  Accordingly, we elected to pay non-cash interest for the three quarterly interest periods ending on October 14, 2009 and to make such interest payments with the issuance of additional Senior Notes at the non-cash interest rate of 9.75% instead of paying interest in cash.  As a result, the original principal amount of Senior Notes of $700.0 million increased by $17.1 million in April 2009, $17.4 million in July 2009 and $17.9 million in October 2009.  We have elected to pay cash interest since the first quarter of fiscal year 2010.  After October 15, 2010, we are required to make all interest payments on the Senior Notes entirely in cash.

See Note 3 of the Notes to Condensed Consolidated Financial Statements in Part I - Item 1 and Note 7 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended July 31, 2010 for a further description of the terms of the Senior Notes.

Senior Subordinated Notes.NMG has outstanding $500.0 million aggregate principal amount of 10.375% Senior Subordinated Notes under a senior subordinated indenture (Senior Subordinated Indenture).  NMG’s Senior Subordinated Notes mature on October 15, 2015.

See Note 3 of the Notes to Condensed Consolidated Financial Statements in Part I - Item 1 and Note 7 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended July 31, 2010 for a further description of the terms of the Senior Subordinated Notes.

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Interest Rate Swaps.  In connection with the Acquisition, we obtained $2,575.0 million of floating rate debt agreements, of which $2,125.0 million was outstanding at the Acquisition date and $1,505.7 million was outstanding at January 29, 2011.  Effective December 2005, NMG entered into floating to fixed interest rate swap agreements for an aggregate notional amount of $1,000.0 million to limit our exposure to interest rate increases related to a portion of our floating rate indebtedness.  These swap agreements hedged a portion of our contractual floating rate interest commitments through the expiration of the agreements in December 2010.

Interest Rate Caps.  Effective January 2010, NMG entered into interest rate cap agreements for an aggregate notional amount of $500.0 million in order to hedge the variability of our cash flows related to a portion of our floating rate indebtedness once the interest rate swap expired in December 2010.  The interest rate cap agreements commenced in December 2010 and will expire in December 2012.  Pursuant to the interest rate cap agreements, NMG has capped LIBOR at 2.50% through December 2012 with respect to the $500.0 million notional amount of such agreements.  In the event LIBOR is less than 2.50%, NMG will pay interest at the lower LIBOR rate.  In the event LIBOR is higher than 2.50%, NMG will pay interest at the capped rate of 2.50%.

OTHER MATTERS

Factors That May Affect Future Results

Matters discussed in this Quarterly Report on Form 10-Q include forward-looking statements.  Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “plan,” “predict,” “expect,” “estimate,” “intend,” “would,” “could,” “should,” “anticipate,” “believe,” “project” or “continue.”  We make these forward-looking statements based on our expectations and beliefs concerning future events, as well as currently available data.  While we believe there is a reasonable basis for our forward-looking statements, they involve a number of risks and uncertainties.  Therefore, these statements are not guarantees of future performance and you should not place undue reliance on them.  A variety of factors could cause our actual results to differ materially from the anticipated or expected results expressed in our forward-looking statements.  Factors that could affect future performance include, but are not limited, to:

Political and General Economic Conditions

·weakness in domestic and global capital markets and other economic conditions and the impact of such conditions on our ability to obtain credit;

·current political and general economic conditions or changes in such conditions including relationships between the United States and the countries from which we source our merchandise;

·terrorist activities in the United States and elsewhere;

·political, social, economic, or other events resulting in the short- or long-term disruption in business at our stores, distribution centers or offices;

Customer Considerations

·      changes in consumer confidence resulting in a reduction of discretionary spending on goods;

·changes in the demographic or retail environment;

·changes in consumer preferences or fashion trends;

·changes in our relationships with customers due to, among other things, 1) our failure to provide quality service and competitive loyalty programs, 2) our inability to provide credit pursuant to our proprietary credit card arrangement or 3) our failure to protect customer data or comply with regulations surrounding information security and privacy;

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Merchandise Procurement and Supply Chain Considerations

·changes in our relationships with designers, vendors and other sources of merchandise, including adverse changes in their financial viability, cash flows or available sources of funds;

·delays in receipt of merchandise ordered due to work stoppages or other causes of delay in connection with either the manufacture or shipment of such merchandise;

·changes in foreign currency exchange or inflation rates;

·significant increases in paper, printing and postage costs;

Industry and Competitive Factors

·competitive responses to our loyalty programs, marketing, merchandising and promotional efforts or inventory liquidations by vendors or other retailers;

·adverse changes in the financial viability of our competitors;

·seasonality of the retail business;

·adverse weather conditions or natural disasters, particularly during peak selling seasons;

·delays in anticipated store openings and renovations;

·our success in enforcing our intellectual property rights;

Employee Considerations

·changes in key management personnel and our ability to retain key management personnel;

·changes in our relationships with certain of our key sales associates and our ability to retain our key sales associates;

Legal and Regulatory Issues

·changes in government or regulatory requirements increasing our costs of operations;

·litigation that may have an adverse effect on our financial results or reputation;

Leverage Considerations

·the effects of incurring a substantial amount of indebtedness under our Senior Secured Credit Facilities and our Senior Notes and Senior Subordinated Notes;

·the ability to refinance our indebtedness under our Senior Secured Credit Facilities and the effects of any refinancing;

·the effects upon us of complying with the covenants contained in our Senior Secured Credit Facilities and the indentures governing our Senior Notes and Senior Subordinated Notes;

·restrictions on the terms and conditions of the indebtedness under our Senior Secured Credit Facilities may place on our ability to respond to changes in our business or to take certain actions;

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Other Factors

·the impact of funding requirements related to our Pension Plan;

·our ability to provide credit to our customers pursuant to our proprietary credit card program arrangement with HSBC, including any future changes in the terms of the such arrangement and/or legislation impacting the extension of credit to our customers;

·the design and implementation of new information systems as well as enhancements of existing systems; and

·other risks, uncertainties and factors set forth in this Quarterly Report on Form 10-Q, including those set forth in Part II - Item 1A, “Risk Factors.”

The foregoing factors are not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that could impact our business.  Except to the extent required by law, we undertake no obligation to update or revise (publicly or otherwise) any forward-looking statements to reflect subsequent events, new information or future circumstances.

Critical Accounting Policies

The preparation of condensed consolidated financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions about future events.  These estimates and assumptions affect amounts of assets, liabilities, revenues and expenses and the disclosure of gain and loss contingencies at the date of the accompanying Condensed Consolidated Financial Statements.  Our current estimates are subject to change if different assumptions as to the outcome of future events were made.  We evaluate our estimates and judgments on an ongoing basis and predicate those estimates and judgments on historical experience and on various other factors that we believe are reasonable under the circumstances.  We make adjustments to our assumptions and judgments when facts and circumstances dictate.  Since future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates we used in preparing the accompanying Condensed Consolidated Financial Statements.

See Note 1 of the Notes to Condensed Consolidated Financial Statements in Part I - Item 1 for a summary of our critical accounting policies.  A complete description of our critical accounting policies is included in our Annual Report to Shareholders on Form 10-K for the fiscal year ended July 31, 2010.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk inherent in the Company’s financial instruments represents the potential loss arising from adverse changes in interest rates.  The Company does not enter into derivative financial instruments for trading purposes.  The Company seeks to manage exposure to adverse interest rate changes through its normal operating and financing activities.  The Company is exposed to interest rate risk through its borrowing activities, which are described in Note 3 of the Notes to Condensed Consolidated Financial Statements.

In connection with the Acquisition, NMG obtained $2,575.0 million of floating rate debt agreements, of which $2,125.0 million was outstanding at the Acquisition date and $1,505.7 million was outstanding under its Senior Secured Term Loan Facility at January 29, 2011.  In addition, as of January 29, 2011, NMG had no borrowings outstanding under its Asset-Based Revolving Credit Facility.  Future borrowings under NMG’s Asset-Based Revolving Facility, to the extent of outstanding borrowings, would be affected by interest rate changes.

Effective December 2005, NMG entered into floating to fixed interest rate swap agreements for an aggregate notional amount of $1,000.0 million to limit our exposure to interest rate increases related to a portion of our floating rate indebtedness.  These swap agreements hedged a portion of our contractual floating rate interest commitments through the expiration of the agreements in December 2010.

Effective January 2010, NMG entered into interest rate cap agreements for an aggregate notional amount of $500.0 million in order to hedge the variability of our cash flows related to a portion of our floating rate indebtedness once the interest rate swap expired in December 2010.  The interest rate cap agreements commenced in December 2010 and will expire in December 2012.  Pursuant to the interest rate cap agreements, NMG has capped LIBOR at 2.50% through December 2012 with respect to the $500.0 million notional amount of such agreements.  In the event LIBOR is less than 2.50%, NMG will pay interest at the lower

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LIBOR rate.  In the event LIBOR is higher than 2.50%, NMG will pay interest at the capped rate of 2.50%.  As of January 29, 2011, LIBOR was 0.3034%.  We believe that a 1% increase in LIBOR would increase our annual interest expense by approximately $7.5 million during the remainder of fiscal year 2011.

The effects of changes in the U.S. equity and bond markets serve to increase or decrease the value of pension plan assets, resulting in increased or decreased cash funding by the Company.  The Company seeks to manage exposure to adverse equity and bond returns by maintaining diversified investment portfolios and utilizing professional investment managers.

ITEM 4.  CONTROLS AND PROCEDURES

a.  Disclosure Controls and Procedures.

In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we carried out an evaluation as of January 29, 2011, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, as well as other key members of our management, of the design and operating effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, accumulated, processed, summarized, reported and communicated on a timely basis within the time periods specified in the Securities and Exchange Commission’s rules and forms.

b.  Changes in Internal Control over Financial Reporting.

In the ordinary course of business, we routinely enhance our information systems by either upgrading our current systems or implementing new systems. No change occurred in our internal controls over financial reporting during the quarter ended January 29, 2011 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

NEIMAN MARCUS, INC.

PART II

ITEM 1.           LEGAL PROCEEDINGS

On April 30, 2010, a Class Action Complaint for Injunction and Equitable Relief was filed in the United States District Court for the Central District of California by Sheila Monjazeb, individually and on behalf of other members of the general public similarly situated, against the Company, Newton Holding, LLC, TPG Capital, L.P. and Warburg Pincus, LLC.  On July 12, 2010, all defendants except for the Company were dismissed without prejudice, and on August 20, 2010, this case was refiled in the Superior Court of California for San Francisco County.  This complaint, along with a similar class action lawsuit originally filed by Bernadette Tanguilig in 2007, alleges that the Company has engaged in various violations of the California Labor Code and Business and Professions Code, including without limitation (1) asking employees to work “off the clock,” (2) failing to provide meal and rest breaks to its employees, (3) improperly calculating deductions on paychecks delivered to its employees, and (4) failing to provide a chair or allow employees to sit during shifts.  The plaintiffs in these matters seek certification of their cases as class actions, reimbursement for past wages and temporary, preliminary and permanent injunctive relief preventing defendant from allegedly continuing to violate the laws cited in their complaints.  We intend to vigorously defend our interests in these matters.  Currently, we cannot reasonably estimate the amount of loss, if any, arising from these matters.  However, we do not currently believe the resolution of these matters will have a material adverse impact on our financial position.  We will continue to evaluate these matters based on subsequent events, new information and future circumstances.

We are currently involved in various other legal actions and proceedings that arose in the ordinary course of business.  We believe that any liability arising as a result of these actions and proceedings will not have a material adverse effect on our financial position, results of operations or cash flows.

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Note 10 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 is incorporated herein by reference as if fully restated herein.  Note 10 contains forward-looking statements that are subject to the risks and uncertainties discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That May Affect Future Results.”

ITEM 1A.        RISK FACTORS

Risks Related to Recent Economic Conditions

Recent economic conditions have adversely affected, and may continue to adversely affect, our business and results of operations.

The recent deterioration in economic conditions, both in the domestic and global economies, has had a significant adverse impact on our business.  Instability in the financial markets, tightening of consumer credit and other economic conditions and uncertainties have caused a reduction in consumer spending.  These conditions have had a significant negative impact on our revenues.

The merchandise we sell consists in large part of luxury retail goods.  The purchase of these goods by customers is discretionary, and therefore highly dependent upon the level of consumer spending, particularly among affluent customers.  Accordingly, sales of these products may continue to be adversely affected by a continuation or worsening of recent economic conditions, increases in consumer debt levels, uncertainties regarding future economic prospects or a decline in consumer confidence.  During an actual or perceived economic downturn (as a result of increases in consumer debt levels, increases in interest rates, a tightening of consumer credit, uncertainties regarding future economic performance and tax rates and policies, or a decline in consumer confidence, among other factors), fewer customers may shop our stores and websites and those who do shop may limit the amounts of their purchases.  As a result, we could be required to take significant additional markdowns and/or increase our marketing and promotional expenses in response to the lower than anticipated levels of demand for luxury goods.  In addition, promotional and/or prolonged periods of deep discount pricing by our competitors could have a material adverse effect on our business.

While economic conditions have continued to improve in recent quarters, we do not anticipate the return of consumer spending to levels achieved in fiscal years 2007 and 2008 in the near-term.  We plan to maintain an appropriate alignment of our inventory levels and purchases with anticipated customer demand.  The continuation of uncertain market conditions could have a material adverse effect on our business.

Uncertain economic conditions may constrain our ability to obtain credit.

Uncertain economic conditions may constrain our ability to obtain credit.  Domestic and global credit and equity markets have recently undergone significant disruption, making it difficult for many businesses to obtain financing on acceptable terms or at all. As a result of this disruption, we have experienced an increase in the cost of borrowings necessary to operate our business.  If these conditions continue or become worse, our cost of borrowing could continue to increase.  It may also become more difficult to obtain financing for our operations or to refinance long-term obligations as they become payable.  In addition, our borrowing costs can be affected by independent rating agencies’ short and long-term debt ratings, which are based largely on our performance as measured by credit metrics including interest coverage and leverage ratios.  A decrease in these ratings would likely also increase our cost of borrowing and make it more difficult for us to obtain financing.  A significant increase in the costs we incur in order to finance our operations may have a material adverse impact on our business results and financial condition.

Risks Related to Our Structure and NMG’s Indebtedness

Because our ownership of NMG accounts for substantially all of our assets and operations, we are subject to all risks applicable to NMG.

We are a holding company.  NMG and its subsidiaries conduct substantially all of our consolidated operations and own substantially all of our consolidated assets.  As a result, we are subject to all risks applicable to NMG.  In addition, NMG’s Asset-Based Revolving Credit Facility, NMG’s Senior Secured Term Loan Facility and the indentures governing NMG’s senior notes and senior subordinated notes contain provisions limiting NMG’s ability to distribute earnings to us, in the form of dividends or otherwise.

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NMG has a substantial amount of indebtedness, which may adversely affect NMG’s cash flow and its ability to operate the business, to comply with debt covenants and make payments on its indebtedness.

We are highly leveraged.  As of January 29, 2011, the principal amount of NMG’s total indebtedness was approximately $2,883.2 million, the unused borrowing availability under the $600.0 million Asset-Based Revolving Credit Facility was $500.6 million and the outstanding letters of credit were $17.0 million.  As of January 29, 2011, NMG had no borrowings outstanding under this facility.  NMG’s substantial indebtedness, combined with its lease and other financial obligations and contractual commitments, could have other important consequences.  For example, it could:

·make it more difficult for NMG to satisfy its obligations with respect to its indebtedness and any failure to comply with the obligations of any of its debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing NMG’s indebtedness;

·make NMG more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;

·require NMG to dedicate a substantial portion of its cash flow from operations to payments on its indebtedness, thereby reducing the availability of cash flows to fund working capital, capital expenditures, acquisitions and other general corporate purposes;

·limit NMG’s flexibility in planning for, or reacting to, changes in NMG’s business and the industry in which it operates;

·place NMG at a competitive disadvantage compared to its competitors that are less highly leveraged;

·limit NMG’s ability to obtain credit from our vendors and/or the vendors’ factors and other financing sources; and

·limit NMG’s ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, execution of its business strategy or other purposes.

Any of the above listed factors could materially and adversely affect NMG’s business, financial condition and results of operations.

In addition, NMG’s interest expense could increase if interest rates increase because the entire amount of the indebtedness under the senior secured credit facilities bears interest at floating rates.  As of January 29, 2011, NMG had approximately $1,505.7 million principal amount of floating rate debt, consisting of outstanding borrowings under the Senior Secured Term Loan Facility.

Effective December 2005, NMG entered into floating to fixed interest rate swap agreements for an aggregate notional amount of $1,000.0 million to limit our exposure to interest rate increases related to a portion of our floating rate indebtedness.  The interest rate swap agreements expired in December 2010.

Effective January 2010, NMG entered into interest rate cap agreements for an aggregate notional amount of $500.0 million in order to hedge the variability of our cash flows related to a portion of our floating rate indebtedness once the interest rate swap agreements expired in December 2010.  The interest rate cap agreements commenced in December 2010 and will expire in December 2012.  Pursuant to the interest rate cap agreements, NMG has capped LIBOR at 2.50% through December 2012 with respect to the $500.0 million notional amount of such agreements.  In the event LIBOR is less than 2.50%, NMG will pay interest at the lower LIBOR rate.  In the event LIBOR is higher than 2.50%, NMG will pay interest at the capped rate of 2.50%.

To service NMG’s indebtedness, it will require a significant amount of cash.  NMG’s ability to generate cash depends on many factors beyond its control, and any failure to meet its debt service obligations could harm its business, financial condition and results of operations.

NMG’s ability to pay interest on and principal of the debt obligations will primarily depend upon NMG’s future operating performance.  As a result, prevailing economic conditions and financial, business and other factors, many of which are beyond our control, will affect its ability to make these payments.

If NMG does not generate sufficient cash flow from operations to satisfy the debt service obligations, NMG may have to

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undertake alternative financing plans, such as refinancing or restructuring its indebtedness, selling assets, reducing or delaying capital investments or seeking to raise additional capital.  Our ability to restructure or refinance NMG’s debt will depend on the condition of the capital markets and our financial condition at such time.  Any refinancing of NMG’s debt could be at higher interest rates and may require it to comply with more onerous covenants, which could further restrict its business operations.  The terms of existing or future debt instruments may restrict NMG from adopting some of these alternatives.  In addition, our borrowing costs and ability to refinance may be affected by short-term and long-term debt ratings assigned by independent rating agencies, which are based, in significant part, on NMG’s performance as measured by indicators such as interest coverage and leverage ratios.  Furthermore, any failure to make payments of interest and principal on NMG’s outstanding indebtedness on a timely basis would likely result in a reduction of NMG’s credit rating, which could harm its ability to incur additional indebtedness on acceptable terms.

Contractual limitations on NMG’s ability to execute any necessary alternative financing plans could exacerbate the effects of any failure to generate sufficient cash flow to satisfy its debt service obligations.  The Asset-Based Revolving Credit Facility permits NMG to borrow up to $600.0 million; however, NMG’s ability to borrow and obtain letters of credit (including amendments, renewals and extensions of letters of credit) thereunder is limited by a borrowing base, which at any time will equal the sum of (a) the lesser of (i) 80% of eligible inventory (valued at the lower of cost or market value) and (ii) 85% of the net orderly liquidation value of eligible inventory, and (b) 85% of the amounts owed by credit card processors to the borrowers under the Asset-Based Revolving Credit Facility in respect of eligible credit card accounts constituting proceeds arising from the sale or disposition of inventory, less certain reserves.  In addition, if at any time the aggregate amount of outstanding revolving loans and incremental term loans, unreimbursed letter of credit drawings and undrawn letters of credit under the Asset-Based Revolving Credit Facility exceeds the reported value of inventory as calculated under that facility, NMG will be required to eliminate such excess.  Further, if (a) the amount available under the Asset-Based Revolving Credit Facility is less than the greater of (i) 20% of the lesser of (A) the aggregate revolving commitments and (B) the borrowing base and (ii) $75 million or (b) an event of default has occurred, NMG will be required to repay outstanding loans and cash collateralize letters of credit.  In addition, under the terms of the Asset-Based Revolving Credit Facility, through April 30, 2011 NMG is required to maintain excess availability of at least the greater of (a) 10% of the lesser of (i) the aggregate revolving commitments and (ii) the borrowing base and (b) $50 million.  After April 30, 2011, if at any time, excess availability is less than the greater of (a) 15% of the lesser of (i) the aggregate revolving commitments and (ii) the borrowing base and (b) $60 million, NMG will be required to maintain a pro forma ratio of consolidated EBITDA to consolidated Fixed Charges (as such terms are defined in the credit agreement) of at least 1.1 to 1.0.  Our ability to meet the conditions described in this paragraph may be affected by events beyond our control.

NMG’s inability to generate sufficient cash flow to satisfy its debt service obligations, or to refinance its obligations at all or on commercially reasonable terms, would have an adverse effect, which could be material, on NMG’s business, financial condition and results of operations.

The terms of NMG’s Asset-Based Revolving Credit Facility and Senior Secured Term Loan Facility and the indentures governing the Senior Notes, the Senior Subordinated Notes and the 2028 Debentures may restrict NMG’s current and future operations, particularly its ability to respond to changes in its business or to take certain actions.

The credit agreements governing NMG’s Asset-Based Revolving Credit Facility and Senior Secured Term Loan Facility and the indentures governing the Senior Notes, the Senior Subordinated Notes and the 2028 Debentures contain, and any future indebtedness of NMG would likely contain, a number of restrictive covenants that impose significant operating and financial restrictions, including restrictions on NMG’s ability to engage in acts that may be in its best long-term interests.  The indentures governing the Senior Notes, the Senior Subordinated Notes and the 2028 Debentures and the credit agreements governing the senior secured credit facilities include covenants that, among other things, restrict NMG’s ability to:

·incur additional indebtedness;

·pay dividends on NMG’s capital stock or redeem, repurchase or retire its capital stock or indebtedness;

·make investments;

·create restrictions on the payment of dividends or other amounts to NMG from NMG’s restricted subsidiaries;

·engage in transactions with its affiliates;

·sell assets, including capital stock of NMG’s subsidiaries;

·consolidate or merge;

·create liens; and

·enter into sale and lease back transactions.

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In addition, NMG’s ability to borrow under the Asset-Based Revolving Credit Facility is limited by the conditions described above.

Moreover, NMG’s Asset-Based Revolving Credit Facility provides discretion to the agent bank acting on behalf of the lenders to impose additional availability restrictions and other reserves, which could materially impair the amount of borrowings that would otherwise be available to us.  There can be no assurance that the agent bank will not impose such reserves or, were it to do so, that the resulting impact of this action would not materially and adversely impair NMG’s liquidity.

A breach of any of the restrictive covenants would result in a default under the Asset-Based Revolving Credit Facility and Senior Secured Term Loan Facility.  If any such default occurs, the lenders under the Asset-Based Revolving Credit Facility and Senior Secured Term Loan Facility may elect to declare all outstanding borrowings under such facilities, together with accrued interest and other fees, to be immediately due and payable, or enforce their security interest, any of which would result in an event of default under NMG’s Senior Notes and Senior Subordinated Notes and 2028 Debentures.  The lenders would also have the right in these circumstances to terminate any commitments they have to provide further borrowings.

The operating and financial restrictions and covenants in these debt agreements and any future financing agreements may adversely affect NMG’s ability to finance future operations or capital needs or to engage in other business activities.

Risks Related to Our Business and Industry

The specialty retail industry is highly competitive.

The specialty retail industry is highly competitive and fragmented.  Competition is strong both to attract and sell to customers and to establish relationships with, and obtain merchandise from, key vendors.

A number of different competitive factors could have a material adverse effect on our business, results of operations and financial condition, including:

·increased operational efficiencies of competitors;

·competitive pricing strategies, including deep discount pricing by a broad range of retailers during periods of poor consumer confidence or economic instability;

·expansion of product offerings by existing competitors;

·entry by new competitors into markets in which we currently operate; and

·adoption by existing competitors of innovative retail sales methods.

We compete for customers with specialty retailers, traditional and high-end department stores, national apparel chains, vendor-owned proprietary boutiques, individual specialty apparel stores and direct marketing firms.  We compete for customers principally on the basis of quality and fashion, customer service, value, assortment and presentation of merchandise, marketing and customer loyalty programs and, in the case of Neiman Marcus and Bergdorf Goodman, store ambiance.  In our Specialty Retail business, merchandise assortment is a critical competitive factor, and retail stores compete for exclusive, preferred and limited distribution arrangements with key designers.  Many of our competitors are larger than we are and have greater financial resources than we do.  In addition, certain designers from whom we source merchandise have established competing free-standing retail stores in the same vicinity as our stores.  If we fail to successfully compete for customers or merchandise, our business will suffer.

We are dependent on our relationships with certain designers, vendors and other sources of merchandise.

Our relationships with established and emerging designers are a key factor in our position as a retailer of high-fashion merchandise, and a substantial portion of our revenues is attributable to our sales of designer merchandise.  Many of our key vendors limit the number of retail channels they use to sell their merchandise and competition among luxury retailers to obtain and sell these goods is intense.  Our relationships with our designers have been a significant contributor to our past success.  We have no guaranteed supply arrangements with our principal merchandising sources.  Accordingly, there can be no assurance that such sources will continue to meet our quality, style and volume requirements.

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As a result of recent economic conditions, some of our vendors have experienced serious cash flow issues, reductions in available credit from banks, factors or other financial institutions, or increases in the cost of capital.  To counteract their cash flow problems, our vendors may attempt to increase their prices, pass through increased costs, alter historical credit and payment terms available to us or seek other relief.  Any of these actions could have an adverse impact on our relationship with the vendor or constrain the amounts or timing of our purchases from the vendor and, ultimately, have an adverse impact on our revenues, profitability and liquidity.

Moreover, nearly all of the brands of our top designers are sold by competing retailers, and many of our top designers also have their own dedicated retail stores.  If one or more of our top designers were to cease providing us with adequate supplies of merchandise for purchase or, conversely, were to 1) increase sales of merchandise through their own stores, 2) increase the sales of merchandise to our competitors or 3) alter the form in which their goods were made available to us for resale, our business could be adversely affected.  In addition, any decline in the popularity or quality of any of our designer brands could adversely affect our business.

If we significantly overestimate our future sales, our profitability may be adversely affected.

We make decisions regarding the purchase of our merchandise well in advance of the season in which it will be sold.  For example, women’s apparel, men’s apparel, shoes and handbags are typically ordered six to nine months in advance of the products being offered for sale while jewelry and other categories are typically ordered three to six months in advance.  If our sales during any season, particularly a peak season, are significantly lower than we expect for any reason, we may not be able to adjust our expenditures for inventory and other expenses in a timely fashion and may be left with a substantial amount of unsold inventory.  If that occurs, we may be forced to rely on markdowns or promotional sales to dispose of excess inventory.  This could have an adverse effect on our margins and operating income.  At the same time, if we fail to purchase a sufficient quantity of merchandise, we may not have an adequate supply of products to meet consumer demand.  This may cause us to lose sales or harm our customer relationships.

Our failure to identify changes in consumer preferences or fashion trends may adversely affect our performance.

Our success depends in large part on our ability to identify fashion trends as well as to anticipate, gauge and react to changing consumer demands in a timely manner.  If we fail to adequately match our product mix to prevailing customer tastes, we may be required to sell our merchandise at higher average markdown levels and lower average margins.  Furthermore, the products we sell often require long lead times to order and must appeal to consumers whose preferences cannot be predicted with certainty and often change rapidly.  Consequently, we must stay abreast of emerging lifestyle and consumer trends and anticipate trends and fashions that will appeal to our consumer base.  Any failure on our part to anticipate, identify and respond effectively to changing consumer demands and fashion trends could adversely affect our business.

A breach in information privacy could negatively impact our operations.

The protection of our customer, employee and company data is critically important to us.  We utilize customer data captured through both our proprietary credit card programs and our direct marketing activities.  Our customers have a high expectation that we will adequately safeguard and protect their personal information.  The regulatory environment surrounding information security and privacy is evolving and increasingly demanding, with the frequent imposition of new and constantly changing requirements across all our business units.  A significant breach of customer, employee or company data could damage our reputation and relationships with our customers and result in lost sales, fines and lawsuits.

Our business and performance may be affected by our ability to implement our store expansion and remodeling strategies.

We expect that planned new full-line stores will add over 89,000 square feet of new store space over approximately the next three fiscal years, representing an increase of approximately 1.5% above the current aggregate square footage of our full-line Neiman Marcus and Bergdorf Goodman stores.  In addition, we anticipate opening approximately 3 to 5 new Neiman Marcus Last Call stores annually in each of the next three fiscal years.  New store openings involve certain risks, including constructing, furnishing and supplying a store in a timely and cost effective manner, accurately assessing the demographic or retail environment at a given location, negotiating favorable lease terms, hiring and training quality staff, obtaining necessary permits and zoning approvals, obtaining commitments from a core group of vendors to supply the new store, integrating the new store into our distribution network and building customer awareness and loyalty.

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We routinely evaluate the need to remodel our existing stores.  In undertaking store remodels, we must complete the remodel in a timely, cost effective manner, minimize disruptions to our existing operations, and succeed in creating an improved shopping environment.  If we fail to execute on these or other aspects of our store expansion and remodeling strategy, we could suffer harm to our sales, an increase in costs and expenses and an adverse effect on our business.

We outsource certain business processes to third-party vendors that subject us to risks, including disruptions in business and increased costs.

Some business processes that are dependent on technology are outsourced to third parties.  Such processes include credit card authorization and processing, insurance claims processing, payroll processing, record keeping for retirement and other benefit plans and other accounting processes.  In the second quarter of fiscal year 2010, we entered into agreements to outsource certain information technology functions.  In addition, we review outsourcing alternatives on a routine basis and may decide to outsource additional business processes in the future.  We make a diligent effort to ensure that all providers of outsourced services are observing proper internal control practices, such as redundant processing facilities; however, there are no guarantees that failures will not occur.  Failure of third parties to provide adequate services could have an adverse effect on our results of operations, financial condition or ability to accomplish our financial and management reporting.

Acts of terrorism could adversely affect our business.

The economic downturn that followed the terrorist attacks of September 11, 2001 had a material adverse effect on our business.  Any further acts of terrorism or other future conflicts may disrupt commerce and undermine consumer confidence, cause a downturn in the economy generally, cause consumer spending or shopping center traffic to decline or reduce the desire of our customers to make discretionary purchases.  Any of the foregoing factors could negatively impact our sales revenue, particularly in the case of any terrorist attack targeting retail space, such as a shopping center.  Furthermore, an act of terrorism or war, or the threat thereof, could negatively impact our business by interfering with our ability to obtain merchandise from foreign manufacturers.  Any future inability to obtain merchandise from our foreign manufacturers or to substitute other manufacturers, at similar costs and in a timely manner, could adversely affect our business.

The loss of any of our senior management team or attrition among our buyers or key sales associates could adversely affect our business.

Our success in the specialty retail industry will continue to depend to a significant extent on our senior management team, buyers and key sales associates.  We rely on the experience of our senior management, who have specific knowledge relating to us and our industry that would be difficult to replace.  If we were to lose a portion of our buyers or key sales associates, our ability to benefit from long-standing relationships with key vendors or to provide relationship-based customer service may suffer.  We may not be able to retain our current senior management team, buyers or key sales associates and the loss of any of these individuals could adversely affect our business.

Inflation, including price changes resulting from foreign exchange rate exchanges, may adversely affect our business operations in the future.

In recent years, we have experienced certain inflationary conditions in our cost base due primarily to changes in foreign currency exchange rates that have reduced the purchasing power of the U.S. dollar and, to a lesser extent, to increases in selling, general and administrative expenses, particularly with regard to employee benefits, and increases in fuel prices and costs impacted by increases in fuel prices, such as freight and transportation costs.  Inflation can harm our margins and profitability if we are unable to increase prices or cut costs enough to offset the effects of inflation in our cost base.  If inflation in these or other costs worsens, we may not be able to offset the effects of inflation and cost increases through control of expenses, passing cost increases on to customers or any other method.  Any future inflation could adversely affect our profitability and our business.

Failure to maintain competitive terms under our loyalty programs could adversely affect our business.

We maintain loyalty programs that are designed to cultivate long-term relationships with our customers and enhance the quality of service we provide to our customers.  We must constantly monitor and update the terms of our loyalty programs so that they continue to meet the demands and needs of our customers and remain competitive with loyalty programs offered by other high-end specialty retailers.  Approximately 35% of our total revenues during each of the last two calendar years was generated by our InCircle loyalty program members.  If our InCircle loyalty program were to fail to provide competitive rewards and quality service to our customers, our business could be adversely affected.

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Changes in our credit card arrangements, applicable regulations and consumer credit patterns could adversely impact our ability to facilitate the provision of consumer credit to our customers and adversely affect our business.

We maintain a proprietary credit card program through which credit is extended to customers under the “Neiman Marcus” and “Bergdorf Goodman” names.  Because a majority of our revenues is transacted through our proprietary credit cards, changes in our proprietary credit card arrangement that adversely impact our ability to facilitate the provision of consumer credit may adversely affect our performance.

We have a marketing and servicing alliance with HSBC Bank Nevada, N.A. and HSBC Private Label Corporation (collectively referred to as HSBC).  Pursuant to the agreement with HSBC, HSBC offers proprietary credit card accounts to our customers under both the “Neiman Marcus” and “Bergdorf Goodman” brand names.  Our original program agreement with HSBC expired in July 2010.  We have entered into an agreement with HSBC to amend and extend the program to July 2015 (renewable thereafter for three-year terms).

Under the terms of the Program Agreement, HSBC offers credit cards and non-card payment plans and bears substantially all credit risk with respect to sales transacted on the cards bearing our brands.  We receive payments from HSBC based on sales transacted on our proprietary credit cards.  Such payments are subject to annual adjustments, both increases and decreases, based upon the overall annual profitability and performance of the proprietary credit card portfolio.  Based upon current market conditions and the terms of the extended Program Agreement, we believe the future income earned by the Company will be lower than the income earned pursuant to the original Program Agreement and that a higher portion of such future income will be based upon the future profitability and performance of the credit card portfolio.  In addition, we receive payments from HSBC for marketing and servicing activities as we continue to handle key customer service functions, primarily customer inquiries and collections, for HSBC.

In connection with our Program Agreement, we have changed and may continue to change the terms of credit offered to our customers.  In addition, HSBC has discretion over certain policies and arrangements with credit card customers and may change these policies and arrangements in ways that affect our relationships with these customers.  Any such changes in our credit card arrangements may adversely affect our credit card program and ultimately, our business.

Credit card operations are subject to numerous federal and state laws that impose disclosure and other requirements upon the origination, servicing and enforcement of credit accounts and limitations on the maximum amount of finance charges that may be charged by a credit provider.  Any regulation or change in the regulation of credit arrangements that would materially limit the availability of credit to our customer base could adversely affect our business.  Changes in credit card use, payment patterns, and default rates may result from a variety of economic, legal, social, and other factors that we cannot control or predict with certainty.

Our business can be affected by extreme or unseasonable weather conditions.

Extreme weather conditions in the areas in which our stores are located could adversely affect our business.  For example, heavy snowfall, rainfall or other extreme weather conditions over a prolonged period might make it difficult for our customers to travel to our stores and thereby reduce our sales and profitability.  Our business is also susceptible to unseasonable weather conditions.  For example, extended periods of unseasonably warm temperatures during the winter season or cool weather during the summer season could render a portion of our inventory incompatible with those unseasonable conditions.  Reduced sales from extreme or prolonged unseasonable weather conditions would adversely affect our business.

We are subject to numerous regulations that could affect our operations.

We are subject to customs, truth-in-advertising, labor and other laws, including consumer protection regulations and zoning and occupancy ordinances that regulate retailers generally and/or 1) govern the importation, promotion and sale of merchandise 2) regulate wage and hour matters with respect to our employees and 3) govern the operation of our retail stores and warehouse facilities.  Although we undertake to monitor changes in these laws, if these laws or the interpretations of these laws change without our knowledge, or are violated by importers, designers, manufacturers or distributors, we could experience delays in shipments and receipt of goods, suffer damage to our reputation or be subject to fines or other penalties under the controlling regulations, any of which could adversely affect our business.

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Our revenues and cash requirements are affected by the seasonal nature of our business.

The specialty retail industry is seasonal in nature, with a higher level of sales typically generated in the fall and holiday selling seasons.  We have in the past experienced significant fluctuation in our revenues from quarter to quarter with a disproportionate amount of our revenues falling in our second fiscal quarter, which coincides with the holiday season.  In addition, we have significant additional cash requirements in the period leading up to the months of November and December in anticipation of higher sales volume in those periods, including payments relating to additional inventory, advertising and employees.

Our business is affected by foreign currency fluctuations.

We purchase a substantial portion of our inventory from foreign suppliers whose costs are affected by the fluctuation of their local currency against the dollar or who price their merchandise in currencies other than the dollar.  Fluctuations in the Euro-U.S. dollar exchange rate affect us most significantly; however, we source goods from numerous countries and thus are affected by changes in numerous currencies and, generally, by fluctuations in the U.S. dollar relative to such currencies.  Accordingly, changes in the value of the dollar relative to foreign currencies may increase the retail prices of goods offered for sale and/or increase our cost of goods sold.  If our customers reduce their levels of spending in response to increases in retail prices and/or we are unable to pass such cost increases to our customers, our revenues, gross margins, and ultimately our earnings, could decrease.  Foreign currency fluctuations could have a material adverse effect on our business, financial condition and results of operations in the future.

Conditions in, and the United States’ relationship with, the countries where we source our merchandise could affect our sales.

A substantial majority of our merchandise is manufactured overseas, mostly in Europe.  As a result, political instability or other events resulting in the disruption of trade from other countries or the imposition of additional regulations relating to or duties upon imports could cause significant delays or interruptions in the supply of our merchandise or increase our costs, either of which could have a material adverse effect on our business.  If we are forced to source merchandise from other countries, those goods may be more expensive or of a different or inferior quality from the ones we now sell.  The importance to us of our existing designer relationships could present additional difficulties, as it may not be possible to source merchandise from a given designer from alternative jurisdictions.  If we were unable to adequately replace the merchandise we currently source with merchandise produced elsewhere, our business could be adversely affected.

Significant increases in costs associated with the production of catalogs and other promotional materials may adversely affect our operating income.

We advertise and promote in-store events, new merchandise and fashion trends through print catalogs and other promotional materials mailed on a targeted basis to our customers.  Significant increases in paper, printing and postage costs could affect the cost of producing these materials and as a result, may adversely affect our operating income.

We are indirectly owned and controlled by the Sponsors, and their interests as equity holders may conflict with those of our creditors.

We are indirectly owned and controlled by the Sponsors and certain other equity investors, and the Sponsors have the ability to control our policies and operations.  The interests of the Sponsors may not in all cases be aligned with those of our creditors.  For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of our equity holders might conflict with our creditors’ interests.  In addition, our equity holders may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks to holders of our indebtedness.  Furthermore, the Sponsors may in the future own businesses that directly or indirectly compete with us.  One or more of the Sponsors also may pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us.

If we are unable to enforce our intellectual property rights, or if we are accused of infringing on a third party’s intellectual property rights, our net income may decline.

We and our subsidiaries currently own our tradenames and service marks, including the “Neiman Marcus” and “Bergdorf Goodman” marks.  Our tradenames and service marks are registered in the United States and in various foreign countries, primarily in Europe.  The laws of some foreign countries do not protect proprietary rights to the same extent as do the laws of the United States.  Moreover, we are unable to predict the effect that any future foreign or domestic intellectual property legislation or regulation may have on our existing or future business.  The loss or reduction of any of our significant proprietary rights could have an adverse effect on our business.

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Additionally, third parties may assert claims against us alleging infringement, misappropriation or other violations of their tradename or other proprietary rights, whether or not the claims have merit.  Claims like these may be time consuming and expensive to defend and could result in our being required to cease using the tradename or other rights and selling the allegedly infringing products.  This might have an adverse affect on our sales and cause us to incur significant litigation costs and expenses.

Failure to successfully maintain and update information technology systems and enhance existing systems may adversely affect our business.

To keep pace with changing technology, we must continuously provide for the design and implementation of new information technology systems as well as enhancements of our existing systems. Any failure to adequately maintain and update the information technology systems supporting our online operations, sales operations or inventory control could prevent our customers from purchasing merchandise on our websites or prevent us from processing and delivering merchandise, which could adversely affect our business.

Delays in receipt of merchandise in connection with either the manufacturing or shipment of such merchandise can affect our performance.

Substantially all of our merchandise is delivered to us by our vendors as finished goods and is manufactured in numerous locations, including Europe and the United States and, to a lesser extent, China, Mexico and South America.  Our vendors rely on third party carriers to deliver merchandise to our distribution facilities. In addition, our success depends on our ability to source and distribute merchandise efficiently to our Specialty Retail Stores and Direct Marketing customers.  Events such as U.S. or foreign labor strikes, natural disasters, work stoppages or boycotts affecting the manufacturing or transportation sectors and increases in fuel costs could increase the cost or reduce the supply of merchandise available to us and could adversely affect our results of operations.

ITEM 6.       EXHIBITS

2.1	Agreement and Plan of Merger, dated May 1, 2005, among The Neiman Marcus Group, Inc., Newton Acquisition, Inc., and Newton Merger Sub, Inc., incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2010.
2.2	Purchase, Sale and Servicing Transfer Agreement dated as of June 8, 2005, among The Neiman Marcus Group, Inc., Bergdorf Goodman, Inc., HSBC Bank Nevada, N.A. and HSBC Finance Corporation, incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2010.
3.1	Amended and Restated Certificate of Incorporation of Neiman Marcus, Inc., incorporated herein by reference to The Neiman Marcus Group, Inc.’s Registration Statement on Form S-1 (Registration No. 333-133184) dated April 10, 2006.
3.2	Amended and Restated Bylaws of Neiman Marcus, Inc., incorporated herein by reference to The Neiman Marcus Group, Inc.’s Registration Statement on Form S-1 (Registration No. 333-133184) dated April 10, 2006.
4.1	Indenture, dated as of May 27, 1998, between The Neiman Marcus Group, Inc. and The Bank of New York, as trustee, incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended August 1, 2009.
4.2	Form of 7.125% Senior Notes Due 2028, dated May 27, 1998, incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended August 1, 2009.
4.3	Senior Indenture dated as of October 6, 2005, among Newton Acquisition, Inc., Newton Acquisition Merger Sub, Inc., the Subsidiary Guarantors, and Wells Fargo Bank, National Association, trustee, incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2010.
4.4	Senior Subordinated Indenture dated as of October 6, 2005, among Newton Acquisition, Inc., Newton Acquisition Merger Sub, Inc., the Subsidiary Guarantors, and Wells Fargo Bank, National Association, trustee, incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2010.

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4.5	Form of 9%/9 3/4% Senior Notes due 2015, incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2010.
4.6	Form of 10 3/8% Senior Subordinated Notes due 2015, incorporated herein by reference to the Company’s Quarterly Report on From 10-Q for the quarter ended October 30, 2010.
4.7	Registration Rights Agreement dated October 6, 2005, among Newton Acquisition, Inc., Newton Acquisition Merger Sub, Inc., the Subsidiary Guarantors, The Neiman Marcus Group, Inc., and the Initial Purchasers, incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2010.
4.8	First Supplemental Indenture, dated as of July 11, 2006, to the Indenture, dated as of May 27, 1998, among The Neiman Marcus Group, Inc., Neiman Marcus, Inc., and The Bank of New York Trust Company, N.A., as successor trustee, incorporated herein by reference to The Neiman Marcus Group, Inc.’s Current Report on Form 8-K dated July 11, 2006.
4.9	Second Supplemental Indenture, dated as of August 14, 2006, to the Indenture, dated as of May 27, 1998, among The Neiman Marcus Group, Inc., Neiman Marcus, Inc., and The Bank of New York Trust Company, N.A., as successor trustee, incorporated herein by reference to the Company’s Current Report on Form 8-K dated August 15, 2006.
10.1*	Rollover Agreement dated as of October 4, 2005 by and among The Neiman Marcus Group, Inc., Newton Acquisition, Inc., and Burton M. Tansky, incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended August 1, 2009.
10.2*	Amendment to Letter Agreement effective as of January 1, 2009 by and between Neiman Marcus, Inc., a Delaware corporation, and Burton M. Tansky, incorporated herein by reference to Neiman Marcus, Inc.’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2009.
10.3*	Second Amendment to Letter Agreement dated April 26, 2010 by and between Neiman Marcus, Inc., a Delaware corporation, and Burton M. Tansky incorporated herein by reference to the Company’s Current Report on Form 8-K dated April 28, 2010.
10.4*	Director Services Agreement dated April 26, 2010 by and among Neiman Marcus, Inc., The Neiman Marcus Group, Inc., and Burton M. Tansky, incorporated herein by reference to the Company’s Current Report on Form 8-K dated April 28, 2010.
10.5*	Form of Rollover Agreement by and among The Neiman Marcus Group, Inc., Newton Acquisition, Inc., and certain members of management, incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended August 1, 2009.
10.6	Amended and Restated Credit Agreement dated as of July 15, 2009, among The Neiman Marcus Group, Inc., the Company, the other borrowers and guarantors named therein, Bank of America, N.A., as administrative agent and co-collateral agent, Wells Fargo Retail Finance, LLC as co-collateral agent, Banc of America Securities LLC, Wells Fargo Retail Finance, LLC, J.P. Morgan Securities Inc. and Regions Business Capital Corporation as joint lead arrangers and joint bookrunners, Wells Fargo Retail Finance, LLC as syndication agent, JPMorgan Chase Bank, N.A. and Regions Bank as co-documentation agents and the lenders thereunder, incorporated herein by reference to Neiman Marcus, Inc.’s Current Report on Form 8-K dated July 16, 2009.
10.7	Credit Agreement dated as of October 6, 2005, among Newton Acquisition, Inc., Newton Acquisition Merger Sub, Inc., The Neiman Marcus Group, Inc., the Subsidiary Guarantors, Credit Suisse, as administrative agent and collateral agent, Credit Suisse and Deutsche Bank Securities Inc. as joint lead arrangers, Banc of America Securities LLC and Goldman Sachs Credit Partners L.P. as co-arrangers, Credit Suisse, Deutsche Bank Securities Inc., Banc of America Securities LLC and Goldman Sachs Credit Partners L.P. as joint bookrunners, Deutsche Bank Securities Inc., Banc of America Securities LLC and Goldman Sachs Credit Partners L.P. as co-syndication agents and the lenders thereunder, incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended August 1, 2009. (2)
10.8	Credit Agreement dated as of October 6, 2005 as amended and restated as of November 17, 2010, among the lenders thereunder, Credit Suisse, as administrative agent and as collateral agent for the lenders, Neiman Marcus, Inc., The Neiman Marcus Group, Inc. and each subsidiary of The Neiman Marcus Group, Inc. from time to time party thereto, incorporated herein by reference to the Company’s Current Report on Form 8-K dated November 17, 2010. (3)

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10.9	Amended and Restated Pledge and Security Agreement dated as of July 15, 2009 by and among The Neiman Marcus Group, Inc., the Company, subsidiaries named therein and Bank of America, N.A., as administrative agent and co-collateral agent, incorporated herein by reference to Neiman Marcus, Inc.’s Current Report on Form 8-K dated July 16, 2009.
10.10	Substitution of Agent and Joinder Agreement, dated as of July 15, 2009, among Deutsche Bank Trust Company Americas, Credit Suisse and Bank of America, N.A., incorporated herein by reference to Neiman Marcus, Inc.’s Current Report on Form 8-K dated July 16, 2009.
10.11	Pledge and Security and Intercreditor Agreement dated as of October 6, 2005, among Newton Acquisition Merger Sub, Inc., The Neiman Marcus Group, Inc., Newton Acquisition, Inc., the Subsidiary Guarantors and Credit Suisse, as administrative agent and collateral agent, incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended August 1, 2009.
10.12	Lien Subordination and Intercreditor Agreement dated as of October 6, 2005, among Newton Acquisition, Inc., Newton Acquisition Merger Sub, Inc., the Subsidiary Guarantors, Deutsche Bank Trust Company Americas, as revolving facility agent, and Credit Suisse, as term loan agent, incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2010.
10.13	Form of First Priority Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement from The Neiman Marcus Group, Inc. to Credit Suisse, incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2010.
10.14	Form of First Priority Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement from The Neiman Marcus Group, Inc. to Credit Suisse, incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2010.
10.15	Form of Second Priority Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement from The Neiman Marcus Group, Inc. to Deutsche Bank Trust Company Americas, incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2010.
10.16	Form of Second Priority Leasehold Mortgage, Assignment of Lease and Rents, Security Agreement and Financing Statement from The Neiman Marcus Group, Inc. to Deutsche Bank Trust Company Americas, incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2010.
10.17*	Neiman Marcus, Inc. Management Equity Incentive Plan. (1)
10.18*	Amendment to the Neiman Marcus, Inc. Management Equity Incentive Plan effective as of January 1, 2009, incorporated herein by reference to Neiman Marcus, Inc.’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2009.
10.19*	Amendment No. Three to the Neiman Marcus, Inc. Management Equity Incentive Plan effective as of January 4, 2011. (1)
10.20*	Amended and Restated Stock Option Grant Agreement dated April 2, 2010 between Neiman Marcus, Inc. and Burton M. Tansky incorporated herein by reference to the Company’s Current Report on Form 8-K dated April 28, 2010.
10.21*	Amended and Restated Stock Option Grant Agreement dated December 15, 2009 between Neiman Marcus , Inc. and Karen Katz. (1)
10.22*	Stock Option Grant Agreement dated September 30, 2010 between Neiman Marcus, Inc. and Karen Katz. (1)
10.23*	Amended and Restated Stock Option Agreement dated December 15, 2009 between Neiman Marcus, Inc. and James E. Skinner. (1)
10.24*	Stock Option Grant Agreement dated September 30, 2010 between Neiman Marcus. Inc. and James E. Skinner. (1)
10.25*	Amended and Restated Stock Option Grant Agreement dated December 15, 2009 between Neiman Marcus, Inc. and James J. Gold. (1)
10.26*	Stock Option Grant Agreement dated September 30, 2010 between Neiman Marcus, Inc. and James J. Gold. (1)
10.27*	Amended and Restated Stock Option Grant Agreement dated December 15, 2009 between Neiman Marcus, Inc. and Gerald A. Barnes. (1)

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10.28*	Stock Option Grant Agreement dated October 5, 2009 between Neiman Marcus, Inc. and Gerald A. Barnes. (1)
10.29*	Employment Agreement dated April 26, 2010 by and between The Neiman Marcus Group, Inc. and Karen Katz incorporated herein by reference to the Company’s Current Report on Form 8-K dated April 28, 2010.
10.30*	Amendment to Employment Agreement effective December 31, 2010 by and between the Company, The Neiman Marcus Group, Inc. and Karen Katz, incorporated herein by reference to the Company’s Current Report on Form 8-K dated December 2, 2010.
10.31	Management Services Agreement, dated as of October 6, 2005 among Newton Acquisition Merger Sub, Inc., Newton Acquisition, Inc., TPG GenPar IV, L.P., TPG GenPar III, L.P. and Warburg Pincus LLC, incorporated herein by reference to The Neiman Marcus Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended January 28, 2006.
10.32	Registration Rights Agreement, dated as of October 6, 2005, among Newton Acquisition Merger Sub, Inc., Newton Acquisition, Inc., Newton Holding, LLC and the “Holders” identified therein as parties thereto. (1)
10.33	Amendment No. 1, dated as of March 28, 2006, to the Pledge and Security Intercreditor Agreement dated as of October 6, 2005, among Neiman Marcus, Inc., The Neiman Marcus Group, Inc., the Subsidiaries party thereto and Credit Suisse, as administrative agent and collateral agent. (1)
10.34	Amended and Restated Credit Card Program Agreement, dated as of September 23, 2010, by and among The Neiman Marcus Group, Inc., Bergdorf Goodman, Inc., HSBC Bank Nevada, N.A. and HSB Card Services, Inc., incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2010. (2)
10.35	Amended and Restated Servicing Agreement, dated as of September 23, 2010, by and between The Neiman Marcus Group, Inc. and HSBC Bank Nevada, N.A., incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2010. (2)
10.36*	Form of Amendment to the Confidentiality, Non-Competition and Termination Benefits Agreement effective as of January 1, 2009 by and between The Neiman Marcus Group, Inc., a Delaware corporation, and certain eligible key employees incorporated herein by reference to Neiman Marcus, Inc.’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2009.
10.37	Stockholder Agreement, dated as of May 1, 2005, among Newton Acquisition, Inc., Newton Acquisition Merger Sub, Inc. and the other parties signatory thereto, incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 1, 2010.
10.38*	Neiman Marcus, Inc. Cash Incentive Plan amended as of January 21, 2008, incorporated herein by reference to the Neiman Marcus, Inc. Quarterly Report on Form 10-Q for the quarter ended April 26, 2008.
10.39	Management Stockholders’ Agreement dated as of October 6, 2005 between Newton Acquisition, Inc., Newton Holding, LLC, TPG Newton III, LLC, TPG Partners IV, L.P., TPG Newton Co-Invest I, LLC, Warburg Pincus Private Equity VIII, L.P., Warburg Pincus Netherlands Private Equity VIII C.V. I, Warburg Pincus Germany Private Equity VIII K.G , Warburg Pincus Private Equity IX, L.P., and the other parties signatory thereto, incorporated herein by reference to the Neiman Marcus, Inc. Annual Report on Form 10-K for the fiscal year ended July 29, 2006.
10. 40	Amendment to the Management Stockholders’ Agreement effective as of January 1, 2009 by and between Neiman Marcus, Inc., a Delaware corporation, Newton Holding, LLC, TPG Newton III, LLC, TPG Partners IV, L.P., TPG Newton Co-Invest I, LLC, Warburg Pincus Private Equity VIII, L.P., Warburg Pincus Netherlands Private Equity VIII C.V. I, Warburg Pincus Germany Private Equity VIII K.G., Warburg Pincus Private Equity IX, L.P., and the other parties signatory thereto incorporated herein by reference to Neiman Marcus, Inc.’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2009.
10.41*	The Neiman Marcus Group, Inc. Key Employee Deferred Compensation Plan amended and restated effective January 1, 2008, incorporated herein by reference to the Neiman Marcus, Inc. Quarterly Report on Form 10-Q for the quarter ended April 26, 2008.
10.42*	Amendment No. 1 effective as of January 1, 2009 to The Neiman Marcus Group, Inc. Key Employee Deferred Compensation Plan incorporated herein by reference to Neiman Marcus, Inc.’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2009.

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10.43	The Neiman Marcus Group, Inc. Supplemental Executive Retirement Plan as amended and restated effective January 1, 2009 incorporated herein by reference to Neiman Marcus, Inc.’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2009.
10. 44	The Neiman Marcus Group, Inc. Defined Contribution Supplemental Executive Retirement Plan, as amended and restated effective as of January 1, 2008, incorporated herein by reference to the Neiman Marcus, Inc. Annual Report on Form 10-K for the fiscal year ended August 2, 2008.
10.45	Amendment No. 1 effective January 1, 2009 to the Amended and Restated Neiman Marcus Group, Inc. Defined Contribution Supplemental Executive Retirement Plan incorporated herein by reference to Neiman Marcus, Inc.’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2009.
10.46	Form of First Amendment to Second Priority Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement from The Neiman Marcus Group, Inc. to Bank of America, N.A., incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended August 1, 2009.
10.47*	Second Amendment to the Neiman Marcus, Inc. Management Equity Incentive Plan effective as of November 16, 2009, incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 31, 2009.
10.48*	Employment Agreement dated July 22, 2010 by and among the Company, The Neiman Marcus Group, Inc., and James E. Skinner, incorporated herein by reference to the Company’s Current Report on Form 8-K dated July 28, 2010.
10.49*	Employment Agreement dated July 22, 2010 by and among the Company, The Neiman Marcus Group, Inc. and James J. Gold, incorporated herein by reference to the Company’s Current Report on Form 8-K dated July 28, 2010.
10.50	Amendment No. 2 to the Amended and Restated Neiman Marcus Group, Inc. Defined Contribution Supplemental Executive Retirement Plan dated July 17, 2010, incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2010.
10.51	Amendment No. 1 to The Neiman Marcus Group, Inc. Defined Contribution Supplemental Executive Retirement Plan dated July 17, 2010, incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2010.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (1)
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (1)
32	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)

(1)	Filed herewith.
(2)	Portions of these exhibits have been omitted pursuant to a request for confidential treatment.
(3)	Exhibits and schedules relating to the agreement that is filed in this exhibit have not been amended and restated and were filed with Exhibit 10.8 to Neiman Marcus, Inc.’s Annual Report on Form 10-K for the fiscal year ended August 1, 2009 (referenced as Exhibit 10.7 above). Portions thereof were omitted pursuant to a request for confidential treatment.
*	Current management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

NEIMAN MARCUS, INC.

(Registrant)

Signature	Title	Date
/s/ T. Dale Stapleton	Senior Vice President and Chief Accounting Officer (on behalf of the registrant and as principal accounting officer)	March 10, 2011
T. Dale Stapleton

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EX-10.17

EXHIBIT 10.17

NEIMAN MARCUS, INC.
MANAGEMENT EQUITY INCENTIVE PLAN

Adopted November 29, 2005 (the “Effective Date”)

1.  Purpose of the Plan

The purpose of the Neiman Marcus, Inc. Management Equity Incentive Plan (the “Plan”) is to promote the interests of the Company and its Affiliates and stockholders by providing the key employees, directors, service providers and consultants of the Company and its Affiliates with an appropriate incentive to encourage them to continue in the employ of the Company or Affiliate and to improve the growth and profitability of the Company.

2.  Definitions

As used in this Plan, the following capitalized terms shall have the following meanings:

(a)   “Accreting Exercise Price” shall mean, with respect to an Option, an Exercise Price that increases at a 10.00% compound rate on each anniversary of the Grant Date of such Option until the earlier to occur of (i) Exercise of such Option, (ii) the fifth anniversary of the Grant Date of such Option, and (iii) the occurrence of a Change of Control of the Company; provided, however, that the Exercise Price shall cease to increase as provided herein on a portion of the outstanding Performance Options following the sale by the Majority Stockholder of shares of Common Stock as follows:  the pro rata portion of the Performance Options held by a Participant with respect to which the Exercise Price shall cease to increase shall be the portion of the Performance Options that bears the same ratio to the total Performance Options held by a Participant as the total number of shares of Common Stock sold by the Majority Stockholder bears to the total number of shares of Common Stock owned by the Majority Stockholder immediately prior to such sale.

(b)  “Affiliate” shall mean the Company and any of its direct or indirect subsidiaries.

(c)  “Board” shall mean the Board of Directors of the Company or any committee appointed by the Board to administer the Plan pursuant to Section 3.

(d)  “Cause” shall mean, when used in connection with the termination of a Participant’s Employment, unless otherwise provided in any stock option grant agreement entered between the Company and the Participant with respect to any Options that may be granted under the Plan, effective employment agreement or other written agreement with respect to the termination of a Participant’s Employment, the termination of the Participant’s Employment with the Company and all Affiliates on account of (i) a failure of the Participant to substantially perform his or her duties (other than as a result of physical or mental illness or injury) that has continued after NMG has provided written notice of such failure and Participant has not cured such failure within 30 days of the date of such written notice; (ii) the Participant’s willful misconduct or gross negligence which is materially injurious to the Company or its Affiliates; (iii) a breach by a Participant of the Participant’s fiduciary duty or duty of loyalty to the Company or its Affiliates; (iv) the Participant’s unauthorized removal from the premises of the Company or an Affiliate of any document (in any medium or form) relating to the Company or an Affiliate or the customers of the Company or an Affiliate; or (v) the commission by the Participant of any felony or other serious crime involving moral turpitude.  Any rights the Company or an Affiliate may have hereunder in respect of the events giving rise to Cause shall be in addition to the rights the Company or Affiliate may have under any other agreement with the Participant or at law or in equity.  If, subsequent to a Participant’s termination of Employment, it is discovered that such Participant’s Employment could have been terminated for Cause, the Participant’s Employment shall, at the election of the Board, in its discretion, be deemed to have been terminated for Cause retroactively to the date the events giving rise to Cause occurred.  Notwithstanding the foregoing, a failure to meet performance expectations shall not, by itself, constitute Cause hereunder where the Board determines that the Participant has performed his duties in good faith.

(e)  “Change of Control” shall mean the occurrence of any of the following events after the Effective Time: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of

the assets of the Company on a consolidated basis to any Person or group of related persons for purposes of Section 13(d) of the Exchange Act (a “Group”), together with any Affiliates thereof other than to a Majority Stockholder; (ii) the approval by the holders of the outstanding voting power of the Company of any plan or proposal for the liquidation or dissolution of the Company; (iii) (A) any Person or Group (other than the Majority Stockholder) shall become the beneficial owner (within the meaning of Section 13 (d) of the Exchange Act), directly or indirectly, of Common Stock representing more than 40% of the aggregate outstanding voting power of the Company and such Person or Group actually has the power to vote such Common Stock in any such election and (B) the Majority Stockholder beneficially owns (within the meaning of Section 13(d) of the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Company than such other Person or Group; (iv) the replacement of a majority of the Board over a two-year period from the directors who constituted the Board at the beginning of such period, and such replacement shall not have been approved by a vote of at least a majority of the Board then still in office who either were members of such Board at the beginning of such period or whose election as a member of such Board was previously so approved or who were nominated by, or designees of, a Majority Stockholder; or (v) consummation of a merger or consolidation of the Company with another entity in which holders of the Common Stock of the Company immediately prior to the consummation of the transaction hold, directly or indirectly, immediately following the consummation of the transaction, less than 50% of the common equity interest in the surviving corporation in such transaction and the Majority Stockholder does not hold a sufficient amount of voting power (or similar securities) to elect a majority of the surviving entity’s board of directors.

Notwithstanding the foregoing, a Change of Control shall not be deemed to occur as a result of any event or transaction to the extent that treating such event or transaction as a Change of Control would cause any tax to become due under Section 409A of the Code.

(f)  “Code” shall mean the Internal Revenue Code of 1986, as amended.

(g)  “Commission” shall mean the U.S. Securities and Exchange Commission.

(h)  “Common Stock” shall mean the common stock of the Company, par value US $0.01 per share.

(i)  “Company” shall mean Neiman Marcus, Inc.

(j)  “Disability” shall mean, unless otherwise provided in any stock option grant agreement entered between the Company and the Participant with respect to any Options that may be granted under the Plan, effective employment agreement or other written agreement, a permanent disability as defined in the Company’s or an Affiliate’s disability plans, or as defined from time to time by the Company, in its discretion.

(k)  “Eligible Employee” shall mean (i) any Employee who is a key executive of the Company or an Affiliate, or (ii) certain other Employees, directors, service providers or consultants who, in the judgment of the Board, should be eligible to participate in the Plan due to the services they perform on behalf of the Company or an Affiliate.

(1)  “Employment” shall mean employment with the Company or any Affiliate and shall include the provision of services as a director or consultant for the Company or any Affiliate. “Employee” and “Employed” shall have correlative meanings.

(m)  “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(n)  “Exercise Date” shall have the meaning set forth in Section 4.10 herein.

(0)  “Exercise Notice” shall have the meaning set forth in Section 4.10 herein.

(p)  “Exercise Price” shall mean the price that the Participant must pay under the Option for each share of Common Stock as determined by the Board for each Grant and initially specified in the Stock Option Grant Agreement, subject to any increase or other adjustment that may be made following the Grant Date.

(q)  “Fair Market Value” shall mean, as of any date:

a.  prior to the existence of a Public Market for the Common Stock, the value per share of Common Stock pursuant to a valuation made reasonably and in good faith by the Board and based upon a reasonable valuation method, consistently applied, and taking into account all available information material to the value of the Company; or

b.  on which a Public Market for the Common Stock exists, (i) closing price on such day of a share of Common Stock as reported on the principal securities exchange on which shares of Common Stock are then listed or admitted to trading or (ii) if not so reported, the average of the closing bid and ask prices on such day as reported on the National Association of Securities Dealers Automated Quotation System or (iii) if not so reported, as furnished by any member of the National Association of Securities Dealers, Inc. (“NASD”) selected by the Board.  The Fair Market Value of a share of Common Stock as of any such date on which the applicable exchange or inter-dealer quotation system through which trading in the Common Stock regularly occurs is closed shall be the Fair Market Value determined pursuant to the preceding sentence as of the immediately preceding date on which the Common Stock is traded, a bid and ask price is reported or a trading price is reported by any member of NASD selected by the Board.  In the event that the price of a share of Common Stock shall not be so reported or furnished, the Fair Market Value shall be determined by the Board in good faith to reflect the fair market value of a share of Common Stock.

(r)  “Fair Value Option” shall mean an Option with a fixed Exercise Price equal to the Fair Market Value of the underlying Common Stock on the Grant Date.

(s)  “Good Reason” shall mean, unless otherwise provided in any stock option grant agreement entered between the Company and the Participant with respect to any Options that may be granted under the Plan, effective employment agreement or other written agreement with respect to the termination of a Participant’s Employment, (i) a material diminution in a Participant’s duties and responsibilities other than a change in such Participant’s duties and responsibilities that results from becoming part of a larger organization following a Change of Control, (ii) a decrease in a Participant’s base salary, bonus opportunity or benefits other than a decrease in bonus opportunity or benefits that applies to all employees of the Company or its Affiliates otherwise eligible to participate in the affected plan or (iii) a relocation of a Participant’s primary work location more than 50 miles from the Participant’s work location on the Grant Date, without the Participant’s prior written consent; provided that, within thirty days following the occurrence of any of the events set forth herein, the Participant shall have delivered written notice to the Company of his or her intention to terminate his or her Employment for Good Reason, which notice specifies in reasonable detail the circumstances claimed to give rise to the Participant’s right to terminate Employment for Good Reason, and the Company shall not have cured such circumstances within thirty days following the Company’s receipt of such notice.

(t)  “Grant” shall mean a grant of an Option under the Plan evidenced by a Stock Option Grant Agreement.

(u)  “Grant Date” shall mean the Grant Date as defined in Section 4.3 herein.

(v)  “Initial Public Offering” shall be deemed to occur on the effective date of the first registration statement (other than a registration on Form S-4 or S-8, or any successor form) filed to register at least 20% of the total then-outstanding equity interests in the Company under the U.S. Securities Act of 1933, as amended.

(w)  “Majority Stockholder” shall mean, collectively or individually as the context requires, Newton Holding, LLC, TPG Newton III, LLC, TPG Partners IV, L.P., TPG Newton Co-Invest I, LLC, Warburg Pincus Private Equity VIII, L.P., Warburg Pincus Netherlands Private Equity VIII C.V. I, Warburg Pincus Germany Private Equity VIII K.G, Warburg Pincus Private Equity IX, L.P and/or their respective Affiliates.

(x)  “Management Stockholders’ Agreement” shall mean the Management Stockholders’ Agreement, dated October 6, 2005, as such may be amended from time to time, or such other stockholders’ agreement as may be entered into between the Company and any Participant.

(y)  “NMG” means The Neiman Marcus Group, Inc.

(z)  “Non-Qualified Stock Option” shall mean an Option that is not intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Code.

(aa)  “Option” shall mean the option to purchase Common Stock granted to any Participant under the Plan.  Each

Option granted under the Plan shall be a Non-Qualified Stock Option.  Any references in the Plan to an “Option” will be deemed to include “Fair Value Options” and “Performance Options” unless specifically noted to the contrary.

(bb)  “Participant” shall mean an Eligible Employee to whom a Grant of an Option under the Plan has been made, and, where applicable, shall include Permitted Transferees.

(cc)  “Performance Option” shall mean an Option with an Accreting Exercise Price that starts at the Fair Market Value of the underlying Common Stock on the Grant Date.

(dd)  “Permitted Transferee” shall have the meaning set forth in Section 4.6.

(ee)  “Person” means an individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof.

(ff)  A “Public Market” for the Common Stock shall be deemed to exist if at least 20% of the total outstanding Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act.

(gg)  “Qualifying Termination” shall mean, with respect to a Participant, a termination of such Participant’s Employment by the Company without Cause or by the Participant for Good Reason, in each case, at any time following a Change of Control of the Company.  For purposes of clarification, a termination of the Participant’s Employment due to death or Disability will not be considered a Qualifying Termination.

(hh)  “Retirement” shall mean, when used in connection with the termination of a Participant’s Employment, a voluntary resignation of Employment by the Participant that occurs on or after (i) the first date on which the Participant has both attained age 60 and completed 10 years of service with the Company or its Affiliates or (ii) the date on which the Participant attains age 65.

(ii)  “Securities Act” shall mean the Securities Act of 1933, as amended.

(jj)  “Sponsor Price” shall mean $1445 per share of Common Stock.

(kk)  “Stock Option Grant Agreement” shall mean an agreement, substantially in the form which is attached hereto as Exhibit A, entered into by each Participant and the Company evidencing the Grant of each Option pursuant to the Plan.

(ll)  “Transfer” shall mean any transfer, sale, assignment, gift, testamentary transfer, pledge, hypothecation or other disposition of any interest.  “Transferee” and “Transferor” shall have correlative meanings.

(mm)  “Vesting Date” shall mean the date an Option becomes exercisable as defined in Section 4.4 herein.

3.  Administration of the Plan

The Board shall administer the Plan, provided that the Board may appoint a committee to administer the Plan.  In the event the Board appoints such a committee, such committee shall have the rights and duties of the Board in respect of the Plan.  No member of the Board shall participate in any decision that specifically affects such member’s interest in the Plan unless such decision also affects the Options of other Participants in the same manner.

3.1  Powers of the Board.  In addition to the other powers granted to the Board under the Plan, the Board shall have the power: (a) to determine the Eligible Employees to whom Grants shall be made; (b) to determine the time or times when Grants shall be made and to determine the number of shares of Common Stock subject to each such Grant; ( c) to prescribe the form of and terms and conditions of any instrument evidencing a Grant; (d) to adopt, amend and rescind such rules and regulations as, in its opinion, may be advisable for the administration of the Plan; (e) to construe and interpret the Plan, such rules and regulations and the instruments evidencing Grants; and (f) to make all other determinations necessary or advisable for the administration of the Plan.

3.2  Determinations of the Board.  Any Grant, determination, prescription or other act of the Board shall be final

and conclusively binding upon all Persons.

3.3  Indemnification of the Board.  No member of the Board shall be liable for any action or determination made in good faith with respect to the Plan or any Grant.  To the full extent permitted by law, the Company shall indemnify and hold harmless each Person made or threatened to be made a party to any civil or criminal action or proceeding by reason of the fact that such Person, or such Person’s testator or intestate, is or was a member of the Board to the extent such criminal or civil action or proceeding relates to the Plan.

3.4  Compliance with Applicable Law; Securities Matters; Effectiveness of Option Exercise.  The Company shall be under no obligation to effect the registration pursuant to the Securities Act of any shares of Common Stock to be issued hereunder or to effect similar compliance under any state laws.  Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing shares of Common Stock pursuant to the exercise of any Options, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Common Stock are listed or traded.  In addition to the terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements and representations as the Board, in its discretion, deems advisable in order to comply with any such laws, regulations or requirements.

The Company may, in its discretion, defer the effectiveness of an exercise of an Option hereunder or the issuance or transfer of Common Stock pursuant to any Grant to ensure compliance under federal or state securities laws, provided that the Company shall take any commercially reasonable steps to reduce or eliminate any restrictions requiring such a period of deferral (it being understood that this proviso shall in no event obligate the Company or its Affiliates to file a registration statement).  The Company shall inform the Participant in writing of its decision to defer the effectiveness of the exercise of an Option or the issuance or transfer of Common Stock pursuant to any Grant.  During the period that the effectiveness of the exercise of an Option has been deferred, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto.

3.5  Inconsistent Terms.  Except as otherwise provided in a Stock Option Grant Agreement, in the event of a conflict between the terms of the Plan and the terms of any Stock Option Grant Agreement, the terms of the Plan shall govern.

3.6  Plan Term.  The Board shall not Grant any Options under this Plan on or after November 29, 2015.  All Options which remain outstanding after such date shall continue to be governed by the Plan.

4.  Options

Subject to adjustment as provided in Section 4.13 hereof, the Board may grant to Participants Options to purchase shares of Common Stock of the Company that, in the aggregate, do not exceed 80,708.7725 shares of Common Stock, of which 41,259.5910 shall be Performance Options and 39,449.1815 shall be Fair Value Options.  To the extent that any Option granted under the Plan terminates, expires or is canceled without having been exercised, the shares of Common Stock covered by such Option shall again be available for Grant under the Plan.

4.1  Identification of Options.  The Options granted under the Plan shall be clearly identified in the Stock Option Grant Agreement as Non-Qualified Stock Options.

4.2  Exercise Price.  The Exercise Price of any Option granted under the Plan shall be such price as the Board shall determine (provided that such Exercise Price must be at least equal to the Fair Market Value of a share of Common Stock on the Grant Date) and which shall be specified in the Stock Option Grant Agreement; provided that such price may not be less than the minimum price required by law.  The initial Exercise Price of each Option which is granted as of the Effective Date will be equal to the Sponsor Price.  With respect to each Grant made to a Participant under the Plan, unless otherwise specified in the Stock Option Grant Agreement evidencing such Grant, 50% of the Option that is part of such Grant will be a Fair Value Option and 50% of the Option that is part of such Grant will be a Performance Option.

4.3  Grant Date.  The Grant Date of the Options shall be the date designated by the Board and specified in the Stock

Option Grant Agreement as of the date the Option is granted.

4.4  Vesting Date of Options.

(a)  Vesting Schedule.  Each Stock Option Grant Agreement shall indicate the date or conditions under which such Option shall become exercisable.  Unless otherwise specified in a Participant’s Grant Agreement, each Option shall vest and become exercisable with respect to twenty percent (20%) of the total number of shares of Common Stock subject to such Option (as such number may be adjusted pursuant to the Plan) on the first anniversary of the Grant Date, and the remaining portion of the Option shall vest and become exercisable in forty-eight equal monthly installments over the forty-eight (48) months following the first anniversary of the Grant Date, beginning on the one-month anniversary of such first anniversary, until 100% of the Option is fully vested and exercisable thereafter, subject in all cases to the Participant’s continued employment through the applicable Vesting Date.  The portion of an Option that vests on any Vesting Date will be allocated equally among the portion of the Option that is a Fair Value Option and the portion of the Option that is a Performance Option.  Unless the Committee provides otherwise, the vesting of an Option granted under this Plan may be suspended during any leave of absence as may be set forth by Company policy, if any.

(b)  Accelerated Vesting on a Qualifying Termination.  In the event that a Participant’s Employment with the Company is terminated by the Company without Cause or by the Participant for Good Reason at any time following a Change of Control of the Company, all outstanding Options held by the Participant shall immediately vest as of such termination of Employment.

4.5  Expiration of Options.  With respect to each Participant, such Participant’s Option(s), or portion thereof, which have not become exercisable shall expire on the date such Participant’s Employment is terminated for any reason unless otherwise specified in the Stock Option Grant Agreement.  With respect to each Participant, each Participant’s Option(s), or any portion thereof, which have become exercisable on or before the date such Participant’s Employment is terminated shall, unless otherwise provided in the Participant’s Stock Option Grant Agreement, expire on the earlier of (i) the commencement of business on the date the Participant’s Employment is terminated for Cause; (ii) 90 days after the date the Participant’s Employment is terminated for any reason other than Cause, death, Disability or Retirement; (iii) one year after the date the Participant’s Employment is terminated by reason of death, Disability or Retirement; or (iv) the 10th anniversary of the Grant Date for such Option(s).  For the avoidance of doubt, any Option, or portion thereof, that has become exercisable by a Permitted Transferee on account of the death of a Participant shall expire one year after the date such deceased Participant’s Employment terminated by reason of death, unless otherwise provided in the Participant’s Stock Option Grant Agreement, and any Option or portion thereof that has been transferred to a Permitted Transferee during the lifetime of a Participant shall expire in connection with the Participant’s termination of Employment at the time set forth under this Section 4.5 as if the Option were held directly by the Participant, unless otherwise provided in the Participant’s Stock Option Grant Agreement.  Notwithstanding the foregoing, the Board may specify in the Stock Option Grant Agreement a different expiration date or period for any Option granted hereunder, and such expiration date or period shall supersede the foregoing expiration period.

4.6  Limitation on Transfer.  Each Option granted to a Participant shall be exercisable only by such Participant, except that a Participant may assign or transfer his or her rights with respect to any or all of the Options held by such Participant to:  i) such Participant’s beneficiaries or estate upon the death of the Participant and (ii) subject to the prior written approval by the Board and compliance with all applicable tax, securities and other laws, any trust or custodianship created by the Participant, the beneficiaries of which may include only the Participant, the Participant’s spouse or the Participant’s lineal descendants (by blood or adoption), (each of (i) and (ii), a “Permitted Transferee”).

4.7  Condition Precedent to Transfer of Any Option.  It shall be a condition precedent to any Transfer of any Option by any Participant that the Transferee, if not already a Participant in the Plan, shall agree prior to the Transfer in writing with the Company to be bound by the terms of the Plan, the Stock Option Grant Agreement and the Management Stockholder’s Agreement as if he had been an original signatory thereto, except that any provisions of the Plan based on the Employment (or termination thereof) of the original Participant shall continue to be based on the Employment (or termination thereof) of the original Participant.

4.8  Effect of Void Transfers.  In the event of any purported Transfer of any Options in violation of the provisions of the Plan, such purported Transfer shall, to the extent permitted by applicable law, be void and of no effect.

4.9  Exercise of Options.  A Participant may exercise any or all of his vested Options by serving an Exercise Notice on the Company as provided in Section 4.10 hereto.

4.10  Method of Exercise.  The Option shall be exercised by delivery of written notice to the Company’s principal office (the “Exercise Notice”), to the attention of its Secretary, no less than two business days in advance of the effective date of the proposed exercise (the “Exercise Date”).  Such notice shall (a) specify the number of shares of Common Stock with respect to which the Option is being exercised, the Grant Date of such Option and the Exercise Date, (b) be signed by the Participant, ( c) prior to the existence of a Public Market for the Common Stock, indicate in writing that the Participant agrees to be bound by the Management Stockholders’ Agreement, and (d) if the Option is being exercised by the Participant’s Permitted Transferee(s), such Permitted Transferee(s) shall indicate in writing that they agree to and shall be bound by the Plan and Stock Option Grant Agreement as if they had been original signatories thereto (as provided in Section 4.7 hereof) and, prior to the existence of a Public Market for the Common Stock, by the Management Stockholders’ Agreement.  The Exercise Notice shall include payment in cash for an amount equal to the Exercise Price multiplied by the number of shares of Common Stock specified in such Exercise Notice or any method otherwise approved by the Board.  In addition, the Participant shall be responsible for the payment of applicable withholding and other taxes in cash (or shares of Common Stock if approved by the Board) that may become due as a result of the exercise of such Option. The Board may, in its discretion, permit Participants to make the above-described payments in forms other than cash.  In addition, in the event that a Participant’s Employment terminates due to death or Disability or is terminated by the Company without Cause or by the Participant for Good Reason or as otherwise provided in a Stock Option Grant Agreement, the Company will permit such Participant to exercise all or any portion of his or her then-exercisable Option through net-physical settlement (to satisfy both the exercise price and applicable withholding taxes (at the minimum statutory withholding rate)); provided that the Company’s Chief Financial Officer makes a good faith determination at such time and after reasonable efforts to consult with the Company’s independent auditors that net physical settlement of any such Options would not produce materially less favorable accounting consequences for the Company than if the exercise price for any such Options were paid in cash.  The partial exercise of the Option, alone, shall not cause the expiration, termination or cancellation of the remaining Options.

4.11  Certificates of Shares.  Subject to Section 3.4 herein, upon the exercise of the Options in accordance with Section 4.10 and, prior to the existence of a Public Market for the Common Stock, upon execution of the Management Stockholders’ Agreement, in the Board’s discretion, certificates of shares of Common Stock shall be issued in the name of the Participant and delivered to such Participant or the ownership of such shares shall be otherwise recorded in a book-entry or similar system utilized by the Company as soon as practicable following the Exercise Date.  Prior to the existence of a Public Market, no shares of Common Stock shall be issued to or recorded in the name of any Participant until such Participant agrees to be bound by and executes the Management Stockholders’ Agreement.

4.12  Amendment of Terms of Options.  The Board may, in its discretion, amend the Plan or terms of any Option, provided, however, that any such amendment shall not impair or adversely affect the Participants’ rights under the Plan or such Option without such Participant’s written consent.

4.13  Adjustment Upon Changes in Company Stock.

(a)  Increase or Decrease in Issued Shares Without Consideration.  Subject to any required action by the stockholders of the Company, in the event of any increase or decrease in the number of issued shares of Common Stock resulting from a subdivision or consolidation of shares of Common Stock or the payment of a stock dividend (but only on the shares of Common Stock), or any other increase or decrease in the number of such shares effected without receipt of consideration by the Company, the Board shall make such adjustments as the Board considers appropriate to prevent the enlargement or dilution of rights with respect to the number of shares of Common Stock subject to grant under this Plan, the number of shares of Common Stock subject to the Options and/or the Exercise Price per share of Common Stock.

(b)  Certain Mergers.  Subject to any required action by the stockholders of the Company, in the event that the Company shall be the surviving corporation in any merger or consolidation (except a merger or consolidation as a result of which the holders of shares of Common Stock receive securities of another corporation), the Options outstanding on the date of such merger or consolidation shall pertain to and apply to the securities that a holder of the number of shares of Common Stock subject to any such Option would have received in such merger or consolidation (it

being understood that if, in connection with such transaction, the stockholders of the Company retain their shares of Common Stock and are not entitled to any additional or other consideration, the Options shall not be affected by such transaction).

(c)  Certain Other Transactions.  In the event of (i) a dissolution or liquidation of the Company, (ii) a sale of all or substantially all of the consolidated Company’s assets, (iii) a merger or consolidation involving the Company that constitutes a Change in Control in which the Company is not the surviving corporation or (iv) a merger or consolidation involving the Company that constitutes a Change in Control in which the Company is the surviving corporation but the holders of shares of Common Stock receive securities of another corporation and/or other property, including cash, the Board shall either provide for the exchange of each Option outstanding immediately prior to such event (whether or not then exercisable) for an option on some or all of the property for which the stock underlying such Options are exchanged and, incident thereto, make an equitable adjustment, as determined by the Board, in the exercise price of the options, or the number or kind of securities or amount of property subject to the options and/or, if appropriate, cancel, effective immediately prior to such event, any outstanding Option (whether or not exercisable or vested) and in full consideration of such cancellation pay to the Participant an amount in cash, with respect to each underlying share of Common Stock, equal to the excess of (1) the value, as determined by the Board in its discretion of securities and/or property (including cash) received by such holders of shares of Common Stock as a result of such event over (2) the Exercise Price, as the Board may consider appropriate to prevent dilution or enlargement of rights.

(d)  Extraordinary Dividends.  In the event the Company declares and pays an extraordinary cash dividend, with respect to Options then outstanding on the date such extraordinary cash dividend is paid, the Company shall, pursuant to a separate arrangement that shall in no way relate to the exercise of any of the Options, pay to the Option holder a cash bonus equal to the amount that he would have received if he owned the Shares underlying the then outstanding vested Options pursuant to such dividend payment and shall pay the amount of such a dividend relating to Shares underlying the then-outstanding unvested Options if and when such unvested Options vest, provided such bonus payment complies with Section 409A of the Code and does not result in any adverse tax treatment in respect of the Options.  In the event it is determined that such payment does not comply with Section 409A or it adversely effects the Options, the Company and such Option holder shall use their reasonable efforts and take reasonable actions necessary to put the Option holder in the same position he would have been in if the payment was permitted under Section 409A to the extent reasonably practicable.

(e)  Other Changes.  In the event of any change in the capitalization of the Company or a corporate change other than those specifically referred to in Sections 4.13(a), (b), (c) or (d) hereof, the Board shall, in its discretion, make such adjustments in the number and kind of shares or securities subject to Options outstanding on the date on which such change occurs and in the per-share Exercise Price of each such Option as the Board may consider appropriate to prevent dilution or enlargement of rights.

(f)  No Other Rights.  Except as expressly provided in the Plan or the Stock Option Grant Agreements evidencing the Options, the Participants shall not have any rights by reason of (i) any subdivision or consolidation of shares of Common Stock or shares of stock of any class, (ii) the payment of any dividend, any increase or decrease in the number of shares of Common Stock, or (iii) any dissolution, liquidation, merger or consolidation of the Company or any other corporation.  Except as expressly provided in the Plan or the Stock Option Grant Agreements evidencing the Options, no issuance by the Company of shares of Common Stock or shares of stock of any class, or securities convertible into shares of Common Stock or shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common Stock subject to the Options or the Exercise Price of such Options.

(g)  Savings Clause.  No provision of this Section 4.13 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code; provided that the Company shall use commercially reasonable efforts to put the Participants in the same position as they would have been in but for the application of this Paragraph (g).

(h)  No Diasdvantage.  The Company acknowledges that the Participants shall not be disadvantaged solely by reason of holding shares or options to purchase shares of the Company’s Common Stock instead of membership interests or options to purchase membership interests in Newton Holdings, LLC.

(i)  Notice of Tag Along Event.  The Company will notify each Participant of any transaction pursuant to which the Participant would be permitted to exercise tag-along rights pursuant Section 4(b) of the Management Stockholders’ Agreement, if he held the Common Stock underlying his Option, in sufficient time to allow the Participant to exercise his Option and participate in such transaction.

5.  Miscellaneous

5.1  Rights as Stockholders.  The Participants shall not have any rights as stockholders with respect to any shares of Common Stock covered by or relating to the Options granted pursuant to the Plan until the date the Participants become the registered owners of such shares.  Except as otherwise expressly provided in Sections 4.12 and 4.13 hereof, no adjustment to the Options shall be made for dividends or other rights for which the record date occurs prior to the date such stock certificate is issued.

5.2  No Special Employment Rights.  Nothing contained in the Plan shall confer upon the Participants any right with respect to the continuation of their Employment or interfere in any way with the right of the Company or an Affiliate, subject to the terms of any separate Employment agreements to the contrary, at any time to terminate such Employment or to increase or decrease the compensation of the Participants from the rate in existence at the time of the grant of any Option.

5.3  No Obligation to Exercise.  The Grant to the Participants of the Options shall impose no obligation upon the Participants to exercise such Options.

5.4  Restrictions on Common Stock.  The rights and obligations of the Participants with respect to Common Stock obtained through the exercise of any Option provided in the Plan shall be governed by the terms and conditions of the Management Stockholders’ Agreement.

5.5  Notices.  Each notice and other communication hereunder shall be in writing and shall be given and shall be deemed to have been duly given on the date it is delivered in person, on the next business day if delivered by overnight mail or other reputable overnight courier, or the third business day if sent by registered mail, return receipt requested, to the parties as follows:

If to the Participant:

To the most recent address shown on records of the Company or its Affiliate.

With a copy to:

Morgan, Lewis & Bockius LLP

101 Park A venue New York, NY 10178

Attention: Gary Rothstein

If to the Company:

Neiman Marcus, Inc..

301 Commerce Street, Suite 3300 Fort Worth, TX 76102

Attention: General Counsel

With a copy to:

Cleary Gottlieb Steen & Hamilton LLP

One Liberty Plaza New York, NY 10006

Attention: Robert J. Raymond

or to such other address as any party may have furnished to the other in writing in accordance herewith.

5.6  Descriptive Headings.  The headings in the Plan are for convenience of reference only and shall not limit or otherwise affect the meaning of the terms contained herein.

5.7  Severability.  In the event that anyone or more of the provisions, subdivisions, words, clauses, phrases or sentences contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision, subdivision, word, clause, phrase or sentence in every other respect and of the remaining provisions, subdivisions, words, clauses, phrases or sentences hereof shall not in any way be impaired, it being intended that all rights, powers and privileges of the Company and Participants shall be enforceable to the fullest extent permitted by law.

5.8  Governing Law.  The Plan shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to the provisions governing conflict of laws.

EX-10.19

Exhibit 10.19

AMENDMENT NUMBER THREE

TO THE NEIMAN MARCUS, INC.

MANAGEMENT EQUITY INCENTIVE PLAN

This Amendment Number Three to the Neiman Marcus, Inc. Management Equity Incentive Plan (the “Amendment”) is made effective as of January 4, 20 11, with respect to all Options outstanding as of such date and granted on or after such date, by Neiman Marcus, Inc., a Delaware corporation (the “Company”).

W I T N E S S E T H:

WHEREAS, the Neiman Marcus, Inc. Management Equity Incentive Plan, as amended (the “Plan”) was established by the Company effective as of November 29, 2005; and

WHEREAS, the Company now desires to amend the Plan to adjust the number of Fair Value Options and Performance Options reserved for issuance thereunder;

NOW, THEREFORE, pursuant to the authority reserved in Section 4.12, the Plan is amended as follows:

1.Section 4 of the Plan is hereby amended and restated in its entirety as follows:

Subject to adjustment as provided in Section 4.13 hereof, the Board may grant to Participants Options to purchase shares of Common Stock of the Company that, in the aggregate, do not exceed 80,708.7725 shares of Common Stock, of which 30,343. 167 shall be Performance Options and 50,365.605 shall be Fair Value Options.  To the extent that any Option granted under the Plan terminates, expires or is cancelled without having been exercised, the shares of Common Stock covered by such Option shall again be available for Grant under the Plan.

2.Except as otherwise specifically set forth herein, all other terms and conditions of the Plan shall remain in full force and effect.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed on its behalf by its duly authorized officer on this the 8th day of January, 2011.

	NEIMAN MARCUS, INC.
By:	/s/  Nelson A. Bangs
	Senior Vice President and General Counsel

EX-10.21

Exhibit 10.21

AMENDED AND RESTATED

STOCK OPTION GRANT AGREEMENT

(Non-Qualified Stock Option)

This Amended and Restated Stock Option Grant Agreement (the “Agreement”) is made effective as of this 15th day of December, 2009 between Neiman Marcus, Inc. (the “Company”) and Karen W. Katz (the “Participant”).

WHEREAS, the Company has adopted and maintains the Neiman Marcus, Inc. Management Equity Incentive Plan, as amended (the “Plan”);

WHEREAS, the Plan provides for the grant to Participants in the Plan of Non-Qualified Stock Options to purchase shares of Common Stock of the Company;

WHEREAS, the Company previously granted a Non-Qualified Stock Option to the Participant pursuant to the Plan evidenced by a Stock Option Grant Agreement dated as of October 6, 2005, that contained both a Performance Option and a Fair Value Option (the “Original Option”);

WHEREAS, the Stock Option Grant Agreement with respect to the Original Option was amended effective January 1, 2009;

WHEREAS, the Fair Market Value of the shares of Common Stock subject to the Original Option is less than the Exercise Price of the Original Option immediately prior to the effectiveness of this Agreement;

WHEREAS, pursuant to an exchange offer accepted by the Participant, the Company and the Participant have cancelled the portion of the Original Option that is a Performance Option as consideration for the grant of a new Performance Option as provided herein;

WHEREAS, the Company has approved the modification of the Expiration Date of the Original Option with respect to both the Performance Option and the Fair Value Option; and

WHEREAS, the portion of the Original Option that is a Fair Value Option shall otherwise remain unchanged;

NOW, THEREFORE, pursuant to the authority reserved in Section 4.12 of the Plan and in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto hereby agree to amend and restate the Stock Option Grant Agreement with respect to the Original Option in its entirety as follows:

1.             Incorporation of Plan.  All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein. All capitalized terms used and not defined herein shall have the meaning given to such terms in the Plan.

2.             Grant of Options.  Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Company hereby restates the prior grant to the Participant of a Fair Value Option with respect to 5,341.03755 shares of Common Stock of the Company and now hereby grants to the Participant a new Performance Option with respect to 3,561 shares of Common Stock of the

Company, such that the total number of shares of Common Stock of the Company granted to the Participant hereunder as a Non-Qualified Stock Option is 8,902.03755 shares (the “Option”).

3.             Grant Date.  The Grant Date of the Performance Option hereby granted is December 15, 2009. The Grant Date of the Fair Value Option shall remain October 6, 2005.

4.             Exercise Price.

(a)           The Exercise Price of each share of Common Stock underlying the portion of the Option that is a Fair Value Option is $1,445.

(b)           The Exercise Price of each share of Common Stock underlying the portion of the Option that is a Performance Option shall be an increasing amount starting with $1,000 on the Grant Date and increasing at a 10.00% compound rate on each anniversary of the Grant Date of such Performance Option until the earlier to occur of (i) the exercise of the Option, (ii) the fourth anniversary of the Grant Date of such Performance Option, or (iii) the occurrence of a Change of Control of the Company; provided, however, that the Exercise Price shall cease to increase as provided herein on a portion of the outstanding Performance Option following the sale by the Majority Stockholder of shares of Common Stock as follows:  the pro rata portion of the Performance Option held by a Participant with respect to which the Exercise Price shall cease to increase shall be the portion of the Performance Option that bears the same ratio to the total Performance Option held by a Participant as the total number of shares of Common Stock sold by the Majority Stockholder bears to the total number of shares of Common Stock owned by the Majority Stockholder immediately prior to such sale.

5.             Vesting Date.

(a)           The Fair Value Option shall become exercisable as follows:  20% of the shares underlying such Fair Value Option shall vest and become exercisable on the first anniversary of the Grant Date of such Fair Value Option and the remaining portion of the Fair Value Option shall vest and become exercisable in forty-eight (48) equal monthly installments over the forty-eight (48) months following the first anniversary of the Grant Date of such Fair Value Option, beginning on the one-month anniversary of such first anniversary, until 100% of the Fair Value Option is fully vested and exercisable thereafter, provided that the Participant is still employed by the Company on each such anniversary.

(b)           The Performance Option shall become exercisable as follows:  25% of the shares underlying such Performance Option shall vest and become exercisable on the first anniversary of the Grant Date of such Performance Option and the remaining portion of the Performance Option shall vest and become exercisable in thirty-six (36) equal monthly installments over the thirty-six (36) months following the first anniversary of the Grant Date of such Performance Option, beginning on the one-month anniversary of such first anniversary, until 100% of the Performance Option is fully vested and exercisable thereafter, provided that the Participant is still employed by the Company on each such anniversary.

6.             Expiration Date.  With respect to the Option or any portion thereof which has not become exercisable, the Option shall expire on the date the Participant’s Employment is terminated for any reason, and with respect to the Option or any portion thereof which has become exercisable, the Option shall expire (i) 90 days after the Participant’s termination of Employment for reasons other than Retirement, Cause, death or Disability; (ii) one year after termination of the Participant’s Employment by reason of Retirement, death or Disability; (iii) as of the commencement of business on

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the date the Participant’s Employment is, or is deemed to have been, terminated for Cause; or (iv) on December 15, 2017, if the Option has not previously expired for any of the reasons specified above in this Section 6.

7.             Certain Rights on a Change of Control.  If (a) a Change of Control occurs, (b) the surviving corporation following such Change of Control is an entity for whose stock there is no Public Market, (c) the surviving corporation assumes the Participant’s outstanding Options in connection with such Change of Control and such Options convert into options to purchase common stock or other equity interests of the surviving corporation (the “Assumed Options”) and (d) the Participant thereafter experiences a Qualifying Termination at any time prior to the occurrence of an Initial Public Offering of the surviving corporation, the Participant will be entitled to sell to the Company or such surviving corporation, within ninety (90) days of such Qualifying Termination, all or any portion of the Assumed Options that the Participant had not exercised at the time of such sale and elects to sell to the Company or such surviving corporation (the “Eligible Assumed Options”), and the Company or such surviving corporation will be obligated to purchase from the Participant, in full satisfaction of the Participant’s rights with respect to such Eligible Assumed Options, all such Eligible Assumed Options, for a price equal to the aggregate fair market value, as determined in accordance with Treas. Reg. § 1.409A-1(b)(5)(iv), of the shares of common stock or other equity interests underlying such Eligible Assumed Options, minus the aggregate exercise price of such Eligible Assumed Options that such Participant would have been required to pay in order to exercise such Eligible Assumed Options.

8.             Construction of Agreement.  Any provision of this Agreement (or portion thereof) which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this section, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions thereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable because its scope is considered excessive, such covenant shall be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable. No waiver of any provision or violation of this Agreement by the Company shall be implied by the Company’s forbearance or failure to take action. It is intended that the Option be exempt from Code Section 409A, and this Agreement shall be administered and construed to the fullest extent possible to reflect and implement such intent.

9.             Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any party hereto upon any breach or default of any party under this Agreement, shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of, or acquiescence in, any such breach or default, or any similar breach or default thereafter occurring nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party or any provisions or conditions of this Agreement, shall be in writing and shall be effective only to the extent specifically set forth in such writing.

10.           Limitation on Transfer.  The Option shall be exercisable only by the Participant or the Participant’s Permitted Transferee(s), as determined in accordance with the terms of the Plan (including without limitation the requirement that the Participant obtain the prior written approval by the Board of any proposed Transfer to a Permitted Transferee during the lifetime of the Participant). Each Permitted Transferee shall be subject to all the restrictions, obligations, and responsibilities as apply to the Participant under the Plan and this Agreement and shall be entitled to all the rights of the Participant under the Plan, provided that in respect of any Permitted Transferee which is a trust or

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custodianship, the Option shall become exercisable and/or expire based on the employment and termination of employment of the Participant. All shares of Common Stock obtained pursuant to the Option granted herein shall not be transferred except as provided in the Plan and, where applicable, the Management Stockholders’ Agreement.

11.           Integration.  This Agreement, and the other documents referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and in the Plan. This Agreement, including without limitation the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter.

12.           Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

13.           Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to the provisions governing conflict of laws.

14.           Participant Acknowledgment.  The Participant hereby acknowledges receipt of a copy of the Plan. The Participant hereby acknowledges that all decisions, determinations and interpretations of the Board in respect of the Plan, this Agreement and the Option shall be final and conclusive. The Participant further acknowledges that, prior to the existence of a Public Market, no exercise of the Option or any portion thereof shall be effective unless and until the Participant has executed the Management Stockholders’ Agreement and the Participant hereby agrees to be bound thereby.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its duly authorized officer and said Participant has hereunto signed this Agreement on his own behalf, thereby representing that he has carefully read and understands this Agreement, the Plan and the Management Stockholders’ Agreement as of the day and year first written above.

	NEIMAN MARCUS, INC.
By:	/s/  Nelson A. Bangs
	Nelson A. Bangs, Senior Vice President and
	General Counsel
	PARTICIPANT
	/s/  Karen W. Katz
	Karen W. Katz

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EX-10.22

Exhibit 10.22

STOCK OPTION GRANT AGREEMENT

(Non-Qualified Stock Options)

THIS AGREEMENT, made as of this 30th day of September, 2010 between Neiman Marcus, Inc. (the “Company”) and Karen Katz (the “Participant”).

WHEREAS, the Company has adopted and maintains the Neiman Marcus, Inc. Management Equity Incentive Plan (the “Plan”) to promote the interests of the Company and its Affiliates and stockholders by providing the Company’s key employees and others with an appropriate incentive to encourage them to continue in the employ of and provide services for the Company or its Affiliates and to improve the growth and profitability of the Company;

WHEREAS, the Plan provides for the Grant to Participants in the Plan of Non-Qualified Stock Options to purchase shares of Common Stock of the Company.

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto hereby agree as follows:

1.             Grant of Options.  Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Participant a NON-QUALIFIED STOCK OPTION (the “Option”) with respect to 4,300 shares of Common Stock of the Company.  100% of the Option will be a Fair Value Option.

2.             Grant Date.  The Grant Date of the Option hereby granted is September 30, 2010.

3.             Incorporation of Plan.  All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein.  All capitalized terms used and not defined herein shall have the meaning given to such terms in the Plan.

4.             Exercise Price.  The exercise price of each share of Common Stock underlying the Option hereby granted is $1,576.

5.             Vesting.  The Option shall become vested and exercisable as follows: twenty-five percent of the shares of Common Stock underlying such Option shall vest and become exercisable on the first anniversary of the Grant Date and the remaining portion of the Option shall vest and become exercisable in thirty-six equal monthly installments over the thirty-six (36) months following the first anniversary of the Grant Date, beginning on the one-month anniversary of such first anniversary, until 100% of the Option is fully vested and exercisable thereafter, provided that the Participant is still employed by the Company on each such anniversary.

6.             Method of Exercise.  Pursuant to and consistent with Section 4.10 of the Plan which provides that in certain stated circumstances or as otherwise provided in a Stock Option Grant Agreement, the Participant shall be allowed to exercise all or any portion of her then-exercisable Option through net-physical settlement to satisfy both the exercise price and applicable withholding taxes (at the minimum statutory withholding rate), Participant shall be allowed to employ such net-physical settlement in all cases and at any time (other than following a termination of the Participant’s Employment for Cause) for all or any portion of her then-exercisable Option, subject however to the further requirements of Section 4.10 of the Plan regarding the determination by the Company’s Chief Financial Officer as to

the absence of less favorable accounting consequences for the Company than if the exercise price were paid in cash.

7.             Expiration Date.  Subject to the provisions of the Plan, with respect to the Option or any portion thereof which has not become exercisable, the Option shall expire on the date the Participant’s Employment is terminated for any reason, and with respect to any Option or any portion thereof which has become vested and exercisable, the Option shall expire on the earlier of:  (i) 90 days after the Participant’s termination of Employment other than for Retirement, Cause, death or Disability; (ii) one year after termination of the Participant’s Employment by reason of Retirement, death or Disability; (iii) the commencement of business on the date the Participant’s Employment is, or is deemed to have been, terminated for Cause; or (iv) the seventh anniversary of the Grant Date.

8.             Certain Rights on a Change of Control.  If (a) a Change of Control occurs, (b) the surviving corporation following such Change of Control is an entity for whose stock there is no Public Market, (c) the surviving corporation assumes the Participant’s outstanding Options in connection with such Change of Control and such Options convert into options to purchase common stock or other equity interests of the surviving corporation (the “Assumed Options”) and (d) the Participant thereafter experiences a Qualifying Termination at any time prior to the occurrence of an Initial Public Offering of the surviving corporation, the Participant will be entitled to sell to the Company or such surviving corporation, within ninety (90) days of such Qualifying Termination, all or any portion of the Assumed Options that the Participant had not exercised at the time of such sale and elects to sell to the Company or such surviving corporation (the “Eligible Assumed Options”), and the Company or such surviving corporation will be obligated to purchase from the Participant, in full satisfaction of the Participant’s rights with respect to such Eligible Assumed Options, all such Eligible Assumed Options, for a price equal to the aggregate fair market value, as determined in accordance with Treas. Reg. § 1.409A-1(b)(5)(iv), of the shares of common stock or other equity interests underlying such Eligible Assumed Options, minus the aggregate exercise price of such Eligible Assumed Options that such Participant would have been required to pay in order to exercise such Eligible Assumed Options.

9.             Construction of Agreement.  Any provision of this Agreement (or portion thereof) which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this section, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions thereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable because its scope is considered excessive, such covenant shall be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable. No waiver of any provision or violation of this Agreement by the Company shall be implied by the Company’s forbearance or failure to take action. It is intended that the Option be exempt from Code Section 409A, and this Agreement shall be administered and construed to the fullest extent possible to reflect and implement such intent.

10.           Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any party hereto upon any breach or default of any party under this Agreement, shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of, or acquiescence in, any such breach or default, or any similar breach or default thereafter occurring nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party or any provisions or conditions of this Agreement, shall be in writing and shall be effective only to the extent specifically set forth in such writing.

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11.           Limitation on Transfer.  The Option shall be exercisable only by the Participant or the Participant’s Permitted Transferee(s), as determined in accordance with the terms of the Plan (including without limitation the requirement that the Participant obtain the prior written approval by the Board of any proposed Transfer to a Permitted Transferee during the lifetime of the Participant). Each Permitted Transferee shall be subject to all the restrictions, obligations, and responsibilities as apply to the Participant under the Plan and this Agreement and shall be entitled to all the rights of the Participant under the Plan, provided that in respect of any Permitted Transferee which is a trust or custodianship, the Option shall become exercisable and/or expire based on the employment and termination of employment of the Participant. All shares of Common Stock obtained pursuant to the Option granted herein shall not be transferred except as provided in the Plan and, where applicable, the Management Stockholders’ Agreement.

12.           Integration.  This Agreement, and the other documents referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and in the Plan. This Agreement, including without limitation the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter.

13.           Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

14.           Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to the provisions governing conflict of laws.

15.           Participant Acknowledgment.  The Participant hereby acknowledges receipt of a copy of the Plan. The Participant hereby acknowledges that all decisions, determinations and interpretations of the Board in respect of the Plan, this Agreement and the Option shall be final and conclusive. The Participant further acknowledges that, prior to the existence of a Public Market, no exercise of the Option or any portion thereof shall be effective unless and until the Participant has executed the Management Stockholders’ Agreement and the Participant hereby agrees to be bound thereby.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its duly authorized officer and said Participant has hereunto signed this Agreement on her own behalf, thereby representing that she has carefully read and understands this Agreement, the Plan and the Management Stockholders’ Agreement as of the day and year first written above.

	NEIMAN MARCUS, INC.
By:	/s/ Nelson A. Bangs
Title:	Nelson A. Bangs
	Senior Vice President
	/s/ Karen Katz
	Karen Katz

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EX-10.23

Exhibit 10.23

AMENDED AND RESTATED

STOCK OPTION GRANT AGREEMENT

(Non-Qualified Stock Option)

This Amended and Restated Stock Option Grant Agreement (the “Agreement”) is made effective as of this 15th day of December, 2009 between Neiman Marcus, Inc. (the “Company”) and James E. Skinner (the “Participant”).

WHEREAS, the Company has adopted and maintains the Neiman Marcus, Inc. Management Equity Incentive Plan, as amended (the “Plan”);

WHEREAS, the Plan provides for the grant to Participants in the Plan of Non-Qualified Stock Options to purchase shares of Common Stock of the Company;

WHEREAS, the Company previously granted a Non-Qualified Stock Option to the Participant pursuant to the Plan evidenced by a Stock Option Grant Agreement dated as of October 6, 2005, that contained both a Performance Option and a Fair Value Option (the “Original Option”);

WHEREAS, the Stock Option Grant Agreement with respect to the Original Option was amended effective January 1, 2009;

WHEREAS, the Fair Market Value of the shares of Common Stock subject to the Original Option is less than the Exercise Price of the Original Option immediately prior to the effectiveness of this Agreement;

WHEREAS, pursuant to an exchange offer accepted by the Participant, the Company and the Participant have cancelled the portion of the Original Option that is a Performance Option as consideration for the grant of a new Performance Option as provided herein;

WHEREAS, the Company has approved the modification of the Expiration Date of the Original Option with respect to both the Performance Option and the Fair Value Option; and

WHEREAS, the portion of the Original Option that is a Fair Value Option shall otherwise remain unchanged;

NOW, THEREFORE, pursuant to the authority reserved in Section 4.12 of the Plan and in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto hereby agree to amend and restate the Stock Option Grant Agreement with respect to the Original Option in its entirety as follows:

1.             Incorporation of Plan.  All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein. All capitalized terms used and not defined herein shall have the meaning given to such terms in the Plan.

2.             Grant of Options.  Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Company hereby restates the prior grant to the Participant of a Fair Value Option with respect to 2,670.51880 shares of Common Stock of the Company and now hereby grants to the Participant a new Performance Option with respect to 1,780 shares of Common Stock of the

Company, such that the total number of shares of Common Stock of the Company granted to the Participant hereunder as a Non-Qualified Stock Option is 4,450.51880 shares (the “Option”).

3.             Grant Date.  The Grant Date of the Performance Option hereby granted is December 15, 2009. The Grant Date of the Fair Value Option shall remain October 6, 2005.

4.             Exercise Price.

(a)           The Exercise Price of each share of Common Stock underlying the portion of the Option that is a Fair Value Option is $1,445.

(b)           The Exercise Price of each share of Common Stock underlying the portion of the Option that is a Performance Option shall be an increasing amount starting with $1,000 on the Grant Date and increasing at a 10.00% compound rate on each anniversary of the Grant Date of such Performance Option until the earlier to occur of (i) the exercise of the Option, (ii) the fourth anniversary of the Grant Date of such Performance Option, or (iii) the occurrence of a Change of Control of the Company; provided, however, that the Exercise Price shall cease to increase as provided herein on a portion of the outstanding Performance Option following the sale by the Majority Stockholder of shares of Common Stock as follows:  the pro rata portion of the Performance Option held by a Participant with respect to which the Exercise Price shall cease to increase shall be the portion of the Performance Option that bears the same ratio to the total Performance Option held by a Participant as the total number of shares of Common Stock sold by the Majority Stockholder bears to the total number of shares of Common Stock owned by the Majority Stockholder immediately prior to such sale.

5.             Vesting Date.

(a)           The Fair Value Option shall become exercisable as follows:  20% of the shares underlying such Fair Value Option shall vest and become exercisable on the first anniversary of the Grant Date of such Fair Value Option and the remaining portion of the Fair Value Option shall vest and become exercisable in forty-eight (48) equal monthly installments over the forty-eight (48) months following the first anniversary of the Grant Date of such Fair Value Option, beginning on the one-month anniversary of such first anniversary, until 100% of the Fair Value Option is fully vested and exercisable thereafter, provided that the Participant is still employed by the Company on each such anniversary.

(b)           The Performance Option shall become exercisable as follows:  25% of the shares underlying such Performance Option shall vest and become exercisable on the first anniversary of the Grant Date of such Performance Option and the remaining portion of the Performance Option shall vest and become exercisable in thirty-six (36) equal monthly installments over the thirty-six (36) months following the first anniversary of the Grant Date of such Performance Option, beginning on the one-month anniversary of such first anniversary, until 100% of the Performance Option is fully vested and exercisable thereafter, provided that the Participant is still employed by the Company on each such anniversary.

6.             Expiration Date.  With respect to the Option or any portion thereof which has not become exercisable, the Option shall expire on the date the Participant’s Employment is terminated for any reason, and with respect to the Option or any portion thereof which has become exercisable, the Option shall expire (i) 90 days after the Participant’s termination of Employment for reasons other than Retirement, Cause, death or Disability; (ii) one year after termination of the Participant’s Employment by reason of Retirement, death or Disability; (iii) as of the commencement of business on

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the date the Participant’s Employment is, or is deemed to have been, terminated for Cause; or (iv) on December 15, 2017, if the Option has not previously expired for any of the reasons specified above in this Section 6.

7.             Certain Rights on a Change of Control.  If (a) a Change of Control occurs, (b) the surviving corporation following such Change of Control is an entity for whose stock there is no Public Market, (c) the surviving corporation assumes the Participant’s outstanding Options in connection with such Change of Control and such Options convert into options to purchase common stock or other equity interests of the surviving corporation (the “Assumed Options”) and (d) the Participant thereafter experiences a Qualifying Termination at any time prior to the occurrence of an Initial Public Offering of the surviving corporation, the Participant will be entitled to sell to the Company or such surviving corporation, within ninety (90) days of such Qualifying Termination, all or any portion of the Assumed Options that the Participant had not exercised at the time of such sale and elects to sell to the Company or such surviving corporation (the “Eligible Assumed Options”), and the Company or such surviving corporation will be obligated to purchase from the Participant, in full satisfaction of the Participant’s rights with respect to such Eligible Assumed Options, all such Eligible Assumed Options, for a price equal to the aggregate fair market value, as determined in accordance with Treas. Reg. § 1.409A-1(b)(5)(iv), of the shares of common stock or other equity interests underlying such Eligible Assumed Options, minus the aggregate exercise price of such Eligible Assumed Options that such Participant would have been required to pay in order to exercise such Eligible Assumed Options.

8.             Construction of Agreement.  Any provision of this Agreement (or portion thereof) which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this section, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions thereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable because its scope is considered excessive, such covenant shall be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable. No waiver of any provision or violation of this Agreement by the Company shall be implied by the Company’s forbearance or failure to take action. It is intended that the Option be exempt from Code Section 409A, and this Agreement shall be administered and construed to the fullest extent possible to reflect and implement such intent.

9.             Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any party hereto upon any breach or default of any party under this Agreement, shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of, or acquiescence in, any such breach or default, or any similar breach or default thereafter occurring nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party or any provisions or conditions of this Agreement, shall be in writing and shall be effective only to the extent specifically set forth in such writing.

10.           Limitation on Transfer.  The Option shall be exercisable only by the Participant or the Participant’s Permitted Transferee(s), as determined in accordance with the terms of the Plan (including without limitation the requirement that the Participant obtain the prior written approval by the Board of any proposed Transfer to a Permitted Transferee during the lifetime of the Participant). Each Permitted Transferee shall be subject to all the restrictions, obligations, and responsibilities as apply to the Participant under the Plan and this Agreement and shall be entitled to all the rights of the Participant under the Plan, provided that in respect of any Permitted Transferee which is a trust or

3

custodianship, the Option shall become exercisable and/or expire based on the employment and termination of employment of the Participant. All shares of Common Stock obtained pursuant to the Option granted herein shall not be transferred except as provided in the Plan and, where applicable, the Management Stockholders’ Agreement.

11.           Integration.  This Agreement, and the other documents referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and in the Plan. This Agreement, including without limitation the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter.

12.           Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

13.           Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to the provisions governing conflict of laws.

14.           Participant Acknowledgment.  The Participant hereby acknowledges receipt of a copy of the Plan. The Participant hereby acknowledges that all decisions, determinations and interpretations of the Board in respect of the Plan, this Agreement and the Option shall be final and conclusive. The Participant further acknowledges that, prior to the existence of a Public Market, no exercise of the Option or any portion thereof shall be effective unless and until the Participant has executed the Management Stockholders’ Agreement and the Participant hereby agrees to be bound thereby.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its duly authorized officer and said Participant has hereunto signed this Agreement on his own behalf, thereby representing that he has carefully read and understands this Agreement, the Plan and the Management Stockholders’ Agreement as of the day and year first written above.

	NEIMAN MARCUS, INC.
By:	/s/  Nelson A. Bangs
	Nelson A. Bangs, Senior Vice President and
	General Counsel
	PARTICIPANT
	/s/  James E. Skinner
	James E. Skinner

4

EX-10.24

Exhibit 10.24

STOCK OPTION GRANT AGREEMENT

(Non-Qualified Stock Options)

THIS AGREEMENT, made as of this 30th day of September, 2010 between Neiman Marcus, Inc., (the “Company”) and James E. Skinner (the “Participant”).

WHEREAS, the Company has adopted and maintains the Neiman Marcus Group, Inc. Management Equity Incentive Plan (the “Plan”) to promote the interests of the Company and its Affiliates and stockholders by providing the Company’s key employees and others with an appropriate incentive to encourage them to continue in the employ of and provide services for the Company or its Affiliates and to improve the growth and profitability of the Company;

WHEREAS, the Plan provides for the Grant to Participant in the Plan of Non-Qualified Stock Options to purchase shares of Common Stock of the Company.

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto hereby agree as follows:

1.             Grant of Options.  Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Participant a NON-QUALIFIED STOCK OPTION (the “Option”) with respect to 2,200 shares of Common Stock of the Company.  100% of the Option will be a Fair Value Option.

2.             Grant Date.  The Grant Date of the Option hereby granted is September 30, 2010.

3.             Incorporation of Plan.  All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein.  All capitalized terms used and not defined herein shall have the meaning given to such terms in the Plan.

4.             Exercise Price.  The exercise price of each share of Common Stock underlying the Option hereby granted is $1,576.00.

5.             Vesting.  The Option shall become vested and exercisable as follows: twenty-five percent of the shares of Common Stock underlying such Option shall vest and become exercisable on the first anniversary of the Grant Date and the remaining portion of the Option shall vest and become exercisable in thirty-six  equal monthly installments over the thirty-six (36) months following the first anniversary of the Grant Date, beginning on the one-month anniversary of such first anniversary, until 100% of the Option is fully vested and exercisable thereafter, provided that the Participant is still employed by the Company on each such anniversary.

6.             Method of Exercise.  Pursuant to and consistent with Section 4.10 of the Plan which provides that in certain stated circumstances or as otherwise provided in a Stock Option Grant Agreement, the Participant shall be allowed to exercise all or any portion of his then-exercisable Option through net-physical settlement to satisfy both the exercise price and applicable withholding taxes (at the minimum statutory withholding rate), Participant shall be allowed to employ such net-physical settlement in all cases and at any time (other than following a termination of the Participant’s Employment for Cause) for all or any portion of his then-exercisable Option, subject however to the further requirements of Section

4.10 of the Plan regarding the determination by the Company’s Chief Financial Officer as to the absence of less favorable accounting consequences for the Company than if the exercise price were paid in cash.

7.             Expiration Date.  Subject to the provisions of the Plan, with respect to the Option or any portion thereof which has not become exercisable, the Option shall expire on the date the Participant’s Employment is terminated for any reason, and with respect to any Option or any portion thereof which has become exercisable, the Option shall expire on the earlier of:  (i) 90 days after the Participant’s termination of Employment other than for Retirement, Cause, death or Disability; (ii) one year after termination of the Participant’s Employment by reason of Retirement, death or Disability; (iii) the commencement of business on the date the Participant’s Employment is, or is deemed to have been, terminated for Cause; or (iv) the seventh anniversary of the Grant Date.

8.             Certain Rights on a Change of Control.  If (a) a Change of Control occurs, (b) the surviving corporation following such Change of Control is an entity for whose stock there is no Public Market, (c) the surviving corporation assumes the Participant’s outstanding Options in connection with such Change of Control and such Options convert into options to purchase common stock or other equity interests of the surviving corporation (the “Assumed Options”) and (d) the Participant thereafter experiences a Qualifying Termination at any time prior to the occurrence of an Initial Public Offering of the surviving corporation, the Participant will be entitled to sell to the Company or such surviving corporation, within ninety (90) days of such Qualifying Termination, all or any portion of the Assumed Options that the Participant had not exercised at the time of such sale and elects to sell to the Company or such surviving corporation (the “Eligible Assumed Options”), and the Company or such surviving corporation will be obligated to purchase from the Participant, in full satisfaction of the Participant’s rights with respect to such Eligible Assumed Options, all such Eligible Assumed Options, for a price equal to the aggregate fair market value, as determined in accordance with Treas. Reg. § 1.409A-1(b)(5)(iv), of the shares of common stock or other equity interests underlying such Eligible Assumed Options, minus the aggregate exercise price of such Eligible Assumed Options that such Participant would have been required to pay in order to exercise such Eligible Assumed Options.

9.             Construction of Agreement.  Any provision of this Agreement (or portion thereof) which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this section, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions thereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction.  If any covenant should be deemed invalid, illegal or unenforceable because its scope is considered excessive, such covenant shall be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable. No waiver of any provision or violation of this Agreement by the Company shall be implied by the Company’s forbearance or failure to take action. It is intended that the Option be exempt from Code Section 409A, and this Agreement shall be administered and construed to the fullest extent possible to reflect and implement such intent.

10.           Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any party hereto upon any breach or default of any party under this Agreement, shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of, or acquiescence in, any such breach or default, or any similar breach or default thereafter occurring nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party or any provisions or conditions of this Agreement, shall be in writing and shall be effective only to the extent specifically set forth in such writing.

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11.           Limitation on Transfer.  The Option shall be exercisable only by the Participant or the Participant’s Permitted Transferee(s), as determined in accordance with the terms of the Plan (including without limitation the requirement that the Participant obtain the prior written approval by the Board of any proposed Transfer to a Permitted Transferee during the lifetime of the Participant). Each Permitted Transferee shall be subject to all the restrictions, obligations, and responsibilities as apply to the Participant under the Plan and this Agreement and shall be entitled to all the rights of the Participant under the Plan, provided that in respect of any Permitted Transferee which is a trust or custodianship, the Option shall become exercisable and/or expire based on the employment and termination of employment of the Participant. All shares of Common Stock obtained pursuant to the Option granted herein shall not be transferred except as provided in the Plan and, where applicable, the Management Stockholders’ Agreement.

12.           Integration.  This Agreement, and the other documents referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and in the Plan. This Agreement, including without limitation the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter.

13.           Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

14.           Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to the provisions governing conflict of laws.

15.           Participant Acknowledgment.  The Participant hereby acknowledges receipt of a copy of the Plan. The Participant hereby acknowledges that all decisions, determinations and interpretations of the Board in respect of the Plan, this Agreement and the Option shall be final and conclusive. The Participant further acknowledges that, prior to the existence of a Public Market, no exercise of the Option or any portion thereof shall be effective unless and until the Participant has executed the Management Stockholders’ Agreement and the Participant hereby agrees to be bound thereby.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its duly authorized officer and said Participant has hereunto signed this Agreement on his own behalf, thereby representing that he has carefully read and understands this Agreement, the Plan and the Management Stockholders’ Agreement as of the day and year first written above.

	NEIMAN MARCUS, INC.
By:	/s/ Nelson A. Bangs
Title:	Nelson A. Bangs
	Senior Vice President
	/s/ James E. Skinner
	James E. Skinner

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EX-10.25

Exhibit 10.25

AMENDED AND RESTATED

STOCK OPTION GRANT AGREEMENT

(Non-Qualified Stock Option)

This Amended and Restated Stock Option Grant Agreement (the “Agreement”) is made effective as of this 15th day of December, 2009 between Neiman Marcus, Inc. (the “Company”) and James J. Gold (the “Participant”).

WHEREAS, the Company has adopted and maintains the Neiman Marcus, Inc. Management Equity Incentive Plan, as amended (the “Plan”);

WHEREAS, the Plan provides for the grant to Participants in the Plan of Non-Qualified Stock Options to purchase shares of Common Stock of the Company;

WHEREAS, the Company previously granted a Non-Qualified Stock Option to the Participant pursuant to the Plan evidenced by a Stock Option Grant Agreement dated as of October 6, 2005, that contained both a Performance Option and a Fair Value Option (the “Original Option”);

WHEREAS, the Stock Option Grant Agreement with respect to the Original Option was amended effective January 1, 2009;

WHEREAS, the Fair Market Value of the shares of Common Stock subject to the Original Option is less than the Exercise Price of the Original Option immediately prior to the effectiveness of this Agreement;

WHEREAS, pursuant to an exchange offer accepted by the Participant, the Company and the Participant have cancelled the portion of the Original Option that is a Performance Option as consideration for the grant of a new Performance Option as provided herein;

WHEREAS, the Company has approved the modification of the Expiration Date of the Original Option with respect to both the Performance Option and the Fair Value Option; and

WHEREAS, the portion of the Original Option that is a Fair Value Option shall otherwise remain unchanged;

NOW, THEREFORE, pursuant to the authority reserved in Section 4.12 of the Plan and in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto hereby agree to amend and restate the Stock Option Grant Agreement with respect to the Original Option in its entirety as follows:

1.             Incorporation of Plan.  All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein. All capitalized terms used and not defined herein shall have the meaning given to such terms in the Plan.

2.             Grant of Options.  Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Company hereby restates the prior grant to the Participant of a Fair Value Option with respect to 2,670.51880 shares of Common Stock of the Company and now hereby grants to the Participant a new Performance Option with respect to 1,780 shares of Common Stock of the

Company, such that the total number of shares of Common Stock of the Company granted to the Participant hereunder as a Non-Qualified Stock Option is 4,450.51880 shares (the “Option”).

3.             Grant Date.  The Grant Date of the Performance Option hereby granted is December 15, 2009. The Grant Date of the Fair Value Option shall remain October 6, 2005.

4.             Exercise Price.

(a)           The Exercise Price of each share of Common Stock underlying the portion of the Option that is a Fair Value Option is $1,445.

(b)           The Exercise Price of each share of Common Stock underlying the portion of the Option that is a Performance Option shall be an increasing amount starting with $1,000 on the Grant Date and increasing at a 10.00% compound rate on each anniversary of the Grant Date of such Performance Option until the earlier to occur of (i) the exercise of the Option, (ii) the fourth anniversary of the Grant Date of such Performance Option, or (iii) the occurrence of a Change of Control of the Company; provided, however, that the Exercise Price shall cease to increase as provided herein on a portion of the outstanding Performance Option following the sale by the Majority Stockholder of shares of Common Stock as follows:  the pro rata portion of the Performance Option held by a Participant with respect to which the Exercise Price shall cease to increase shall be the portion of the Performance Option that bears the same ratio to the total Performance Option held by a Participant as the total number of shares of Common Stock sold by the Majority Stockholder bears to the total number of shares of Common Stock owned by the Majority Stockholder immediately prior to such sale.

5.             Vesting Date.

(a)           The Fair Value Option shall become exercisable as follows:  20% of the shares underlying such Fair Value Option shall vest and become exercisable on the first anniversary of the Grant Date of such Fair Value Option and the remaining portion of the Fair Value Option shall vest and become exercisable in forty-eight (48) equal monthly installments over the forty-eight (48) months following the first anniversary of the Grant Date of such Fair Value Option, beginning on the one-month anniversary of such first anniversary, until 100% of the Fair Value Option is fully vested and exercisable thereafter, provided that the Participant is still employed by the Company on each such anniversary.

(b)           The Performance Option shall become exercisable as follows:  25% of the shares underlying such Performance Option shall vest and become exercisable on the first anniversary of the Grant Date of such Performance Option and the remaining portion of the Performance Option shall vest and become exercisable in thirty-six (36) equal monthly installments over the thirty-six (36) months following the first anniversary of the Grant Date of such Performance Option, beginning on the one-month anniversary of such first anniversary, until 100% of the Performance Option is fully vested and exercisable thereafter, provided that the Participant is still employed by the Company on each such anniversary.

6.             Expiration Date.  With respect to the Option or any portion thereof which has not become exercisable, the Option shall expire on the date the Participant’s Employment is terminated for any reason, and with respect to the Option or any portion thereof which has become exercisable, the Option shall expire (i) 90 days after the Participant’s termination of Employment for reasons other than Retirement, Cause, death or Disability; (ii) one year after termination of the Participant’s Employment by reason of Retirement, death or Disability; (iii) as of the commencement of business on

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the date the Participant’s Employment is, or is deemed to have been, terminated for Cause; or (iv) on December 15, 2017, if the Option has not previously expired for any of the reasons specified above in this Section 6.

7.             Certain Rights on a Change of Control.  If (a) a Change of Control occurs, (b) the surviving corporation following such Change of Control is an entity for whose stock there is no Public Market, (c) the surviving corporation assumes the Participant’s outstanding Options in connection with such Change of Control and such Options convert into options to purchase common stock or other equity interests of the surviving corporation (the “Assumed Options”) and (d) the Participant thereafter experiences a Qualifying Termination at any time prior to the occurrence of an Initial Public Offering of the surviving corporation, the Participant will be entitled to sell to the Company or such surviving corporation, within ninety (90) days of such Qualifying Termination, all or any portion of the Assumed Options that the Participant had not exercised at the time of such sale and elects to sell to the Company or such surviving corporation (the “Eligible Assumed Options”), and the Company or such surviving corporation will be obligated to purchase from the Participant, in full satisfaction of the Participant’s rights with respect to such Eligible Assumed Options, all such Eligible Assumed Options, for a price equal to the aggregate fair market value, as determined in accordance with Treas. Reg. § 1.409A-1(b)(5)(iv), of the shares of common stock or other equity interests underlying such Eligible Assumed Options, minus the aggregate exercise price of such Eligible Assumed Options that such Participant would have been required to pay in order to exercise such Eligible Assumed Options.

8.             Construction of Agreement.  Any provision of this Agreement (or portion thereof) which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this section, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions thereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable because its scope is considered excessive, such covenant shall be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable. No waiver of any provision or violation of this Agreement by the Company shall be implied by the Company’s forbearance or failure to take action. It is intended that the Option be exempt from Code Section 409A, and this Agreement shall be administered and construed to the fullest extent possible to reflect and implement such intent.

9.             Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any party hereto upon any breach or default of any party under this Agreement, shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of, or acquiescence in, any such breach or default, or any similar breach or default thereafter occurring nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party or any provisions or conditions of this Agreement, shall be in writing and shall be effective only to the extent specifically set forth in such writing.

10.           Limitation on Transfer.  The Option shall be exercisable only by the Participant or the Participant’s Permitted Transferee(s), as determined in accordance with the terms of the Plan (including without limitation the requirement that the Participant obtain the prior written approval by the Board of any proposed Transfer to a Permitted Transferee during the lifetime of the Participant). Each Permitted Transferee shall be subject to all the restrictions, obligations, and responsibilities as apply to the Participant under the Plan and this Agreement and shall be entitled to all the rights of the Participant under the Plan, provided that in respect of any Permitted Transferee which is a trust or

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custodianship, the Option shall become exercisable and/or expire based on the employment and termination of employment of the Participant. All shares of Common Stock obtained pursuant to the Option granted herein shall not be transferred except as provided in the Plan and, where applicable, the Management Stockholders’ Agreement.

11.           Integration.  This Agreement, and the other documents referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and in the Plan. This Agreement, including without limitation the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter.

12.           Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

13.           Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to the provisions governing conflict of laws.

14.           Participant Acknowledgment.  The Participant hereby acknowledges receipt of a copy of the Plan. The Participant hereby acknowledges that all decisions, determinations and interpretations of the Board in respect of the Plan, this Agreement and the Option shall be final and conclusive. The Participant further acknowledges that, prior to the existence of a Public Market, no exercise of the Option or any portion thereof shall be effective unless and until the Participant has executed the Management Stockholders’ Agreement and the Participant hereby agrees to be bound thereby.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its duly authorized officer and said Participant has hereunto signed this Agreement on his own behalf, thereby representing that he has carefully read and understands this Agreement, the Plan and the Management Stockholders’ Agreement as of the day and year first written above.

	NEIMAN MARCUS, INC.
By:	/s/ Nelson A. Bangs
	Nelson A. Bangs, Senior Vice President and
	General Counsel
	PARTICIPANT
	/s/ James J. Gold
	James J. Gold

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EX-10.26

Exhibit 10.26

STOCK OPTION GRANT AGREEMENT

(Non-Qualified Stock Options)

THIS AGREEMENT, made as of this 30th day of September, 2010 between Neiman Marcus, Inc., (the “Company”) and James J. Gold (the “Participant”).

WHEREAS, the Company has adopted and maintains the Neiman Marcus Group, Inc. Management Equity Incentive Plan (the “Plan”) to promote the interests of the Company and its Affiliates and stockholders by providing the Company’s key employees and others with an appropriate incentive to encourage them to continue in the employ of and provide services for the Company or its Affiliates and to improve the growth and profitability of the Company;

WHEREAS, the Plan provides for the Grant to Participant in the Plan of Non-Qualified Stock Options to purchase shares of Common Stock of the Company.

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto hereby agree as follows:

1.             Grant of Options.  Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Participant a NON-QUALIFIED STOCK OPTION (the “Option”) with respect to 2,200 shares of Common Stock of the Company.  100% of the Option will be a Fair Value Option.

2.             Grant Date.  The Grant Date of the Option hereby granted is September 30, 2010.

3.             Incorporation of Plan.  All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein.  All capitalized terms used and not defined herein shall have the meaning given to such terms in the Plan.

4.             Exercise Price.  The exercise price of each share of Common Stock underlying the Option hereby granted is $1,576.00.

5.             Vesting.  The Option shall become vested and exercisable as follows: twenty-five percent of the shares of Common Stock underlying such Option shall vest and become exercisable on the first anniversary of the Grant Date and the remaining portion of the Option shall vest and become exercisable in thirty-six equal monthly installments over the thirty-six (36) months following the first anniversary of the Grant Date, beginning on the one-month anniversary of such first anniversary, until 100% of the Option is fully vested and exercisable thereafter, provided that the Participant is still employed by the Company on each such anniversary.

6.             Method of Exercise.  Pursuant to and consistent with Section 4.10 of the Plan which provides that in certain stated circumstances or as otherwise provided in a Stock Option Grant Agreement, the Participant shall be allowed to exercise all or any portion of his then-exercisable Option through net-physical settlement to satisfy both the exercise price and applicable withholding taxes (at the minimum statutory withholding rate), Participant shall be allowed to employ such net-physical settlement in all cases and at any time (other than following a termination of the Participant’s Employment for Cause) for all or any portion of his then-exercisable Option, subject however to the further requirements of Section

4.10 of the Plan regarding the determination by the Company’s Chief Financial Officer as to the absence of less favorable accounting consequences for the Company than if the exercise price were paid in cash.

7.             Expiration Date.  Subject to the provisions of the Plan, with respect to the Option or any portion thereof which has not become exercisable, the Option shall expire on the date the Participant’s Employment is terminated for any reason, and with respect to any Option or any portion thereof which has become exercisable, the Option shall expire on the earlier of:  (i) 90 days after the Participant’s termination of Employment other than for Retirement, Cause, death or Disability; (ii) one year after termination of the Participant’s Employment by reason of Retirement, death or Disability; (iii) the commencement of business on the date the Participant’s Employment is, or is deemed to have been, terminated for Cause; or (iv) the seventh anniversary of the Grant Date.

8.             Certain Rights on a Change of Control.  If (a) a Change of Control occurs, (b) the surviving corporation following such Change of Control is an entity for whose stock there is no Public Market, (c) the surviving corporation assumes the Participant’s outstanding Options in connection with such Change of Control and such Options convert into options to purchase common stock or other equity interests of the surviving corporation (the “Assumed Options”) and (d) the Participant thereafter experiences a Qualifying Termination at any time prior to the occurrence of an Initial Public Offering of the surviving corporation, the Participant will be entitled to sell to the Company or such surviving corporation, within ninety (90) days of such Qualifying Termination, all or any portion of the Assumed Options that the Participant had not exercised at the time of such sale and elects to sell to the Company or such surviving corporation (the “Eligible Assumed Options”), and the Company or such surviving corporation will be obligated to purchase from the Participant, in full satisfaction of the Participant’s rights with respect to such Eligible Assumed Options, all such Eligible Assumed Options, for a price equal to the aggregate fair market value, as determined in accordance with Treas. Reg. § 1.409A-1(b)(5)(iv), of the shares of common stock or other equity interests underlying such Eligible Assumed Options, minus the aggregate exercise price of such Eligible Assumed Options that such Participant would have been required to pay in order to exercise such Eligible Assumed Options.

9.             Construction of Agreement.  Any provision of this Agreement (or portion thereof) which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this section, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions thereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction.  If any covenant should be deemed invalid, illegal or unenforceable because its scope is considered excessive, such covenant shall be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable. No waiver of any provision or violation of this Agreement by the Company shall be implied by the Company’s forbearance or failure to take action. It is intended that the Option be exempt from Code Section 409A, and this Agreement shall be administered and construed to the fullest extent possible to reflect and implement such intent.

10.           Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any party hereto upon any breach or default of any party under this Agreement, shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of, or acquiescence in, any such breach or default, or any similar breach or default thereafter occurring nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party or any provisions or conditions of this Agreement, shall be in writing and shall be effective only to the extent specifically set forth in such writing.

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11.           Limitation on Transfer.  The Option shall be exercisable only by the Participant or the Participant’s Permitted Transferee(s), as determined in accordance with the terms of the Plan (including without limitation the requirement that the Participant obtain the prior written approval by the Board of any proposed Transfer to a Permitted Transferee during the lifetime of the Participant). Each Permitted Transferee shall be subject to all the restrictions, obligations, and responsibilities as apply to the Participant under the Plan and this Agreement and shall be entitled to all the rights of the Participant under the Plan, provided that in respect of any Permitted Transferee which is a trust or custodianship, the Option shall become exercisable and/or expire based on the employment and termination of employment of the Participant. All shares of Common Stock obtained pursuant to the Option granted herein shall not be transferred except as provided in the Plan and, where applicable, the Management Stockholders’ Agreement.

12.           Integration.  This Agreement, and the other documents referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and in the Plan. This Agreement, including without limitation the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter.

13.           Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

14.           Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to the provisions governing conflict of laws.

15.           Participant Acknowledgment.  The Participant hereby acknowledges receipt of a copy of the Plan. The Participant hereby acknowledges that all decisions, determinations and interpretations of the Board in respect of the Plan, this Agreement and the Option shall be final and conclusive. The Participant further acknowledges that, prior to the existence of a Public Market, no exercise of the Option or any portion thereof shall be effective unless and until the Participant has executed the Management Stockholders’ Agreement and the Participant hereby agrees to be bound thereby.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its duly authorized officer and said Participant has hereunto signed this Agreement on his own behalf, thereby representing that he has carefully read and understands this Agreement, the Plan and the Management Stockholders’ Agreement as of the day and year first written above.

	NEIMAN MARCUS, INC.
By:	/s/ Nelson A. Bangs
Title:	Nelson A. Bangs
	Senior Vice President
	/s/ James J. Gold
	James J. Gold

3

EX-10.27

Exhibit 10.27

AMENDED AND RESTATED

STOCK OPTION GRANT AGREEMENT

(Non-Qualified Stock Option)

This Amended and Restated Stock Option Grant Agreement (the “Agreement”) is made effective as of this 15th day of December, 2009 between Neiman Marcus, Inc. (the “Company”) and Gerald A. Barnes (the “Participant”).

WHEREAS, the Company has adopted and maintains the Neiman Marcus, Inc. Management Equity Incentive Plan, as amended (the “Plan”);

WHEREAS, the Plan provides for the grant to Participants in the Plan of Non-Qualified Stock Options to purchase shares of Common Stock of the Company;

WHEREAS, the Company previously granted a Non-Qualified Stock Option to the Participant pursuant to the Plan evidenced by a Stock Option Grant Agreement dated as of October 6, 2005, that contained both a Performance Option and a Fair Value Option (the “Original Option”);

WHEREAS, the Stock Option Grant Agreement with respect to the Original Option was amended effective January 1, 2009;

WHEREAS, the Fair Market Value of the shares of Common Stock subject to the Original Option is less than the Exercise Price of the Original Option immediately prior to the effectiveness of this Agreement;

WHEREAS, pursuant to an exchange offer accepted by the Participant, the Company and the Participant have cancelled the portion of the Original Option that is a Performance Option as consideration for the grant of a new Performance Option as provided herein;

WHEREAS, the Company has approved the modification of the Expiration Date of the Original Option with respect to both the Performance Option and the Fair Value Option; and

WHEREAS, the portion of the Original Option that is a Fair Value Option shall otherwise remain unchanged;

NOW, THEREFORE, pursuant to the authority reserved in Section 4.12 of the Plan and in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto hereby agree to amend and restate the Stock Option Grant Agreement with respect to the Original Option in its entirety as follows:

1.             Incorporation of Plan.  All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein. All capitalized terms used and not defined herein shall have the meaning given to such terms in the Plan.

2.             Grant of Options.  Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Company hereby restates the prior grant to the Participant of a Fair Value Option with respect to 534.11915 shares of Common Stock of the Company and now hereby grants to the Participant a new Performance Option with respect to 356 shares of Common Stock of the

Company, such that the total number of shares of Common Stock of the Company granted to the Participant hereunder as a Non-Qualified Stock Option is 890.11915 shares (the “Option”).

3.             Grant Date.  The Grant Date of the Performance Option hereby granted is December 15, 2009. The Grant Date of the Fair Value Option shall remain October 6, 2005.

4.             Exercise Price.

(a)           The Exercise Price of each share of Common Stock underlying the portion of the Option that is a Fair Value Option is $1,445.

(b)           The Exercise Price of each share of Common Stock underlying the portion of the Option that is a Performance Option shall be an increasing amount starting with $1,000 on the Grant Date and increasing at a 10.00% compound rate on each anniversary of the Grant Date of such Performance Option until the earlier to occur of (i) the exercise of the Option, (ii) the fourth anniversary of the Grant Date of such Performance Option, or (iii) the occurrence of a Change of Control of the Company; provided, however, that the Exercise Price shall cease to increase as provided herein on a portion of the outstanding Performance Option following the sale by the Majority Stockholder of shares of Common Stock as follows:  the pro rata portion of the Performance Option held by a Participant with respect to which the Exercise Price shall cease to increase shall be the portion of the Performance Option that bears the same ratio to the total Performance Option held by a Participant as the total number of shares of Common Stock sold by the Majority Stockholder bears to the total number of shares of Common Stock owned by the Majority Stockholder immediately prior to such sale.

5.             Vesting Date.

(a)           The Fair Value Option shall become exercisable as follows:  20% of the shares underlying such Fair Value Option shall vest and become exercisable on the first anniversary of the Grant Date of such Fair Value Option and the remaining portion of the Fair Value Option shall vest and become exercisable in forty-eight (48) equal monthly installments over the forty-eight (48) months following the first anniversary of the Grant Date of such Fair Value Option, beginning on the one-month anniversary of such first anniversary, until 100% of the Fair Value Option is fully vested and exercisable thereafter, provided that the Participant is still employed by the Company on each such anniversary.

(b)           The Performance Option shall become exercisable as follows:  25% of the shares underlying such Performance Option shall vest and become exercisable on the first anniversary of the Grant Date of such Performance Option and the remaining portion of the Performance Option shall vest and become exercisable in thirty-six (36) equal monthly installments over the thirty-six (36) months following the first anniversary of the Grant Date of such Performance Option, beginning on the one-month anniversary of such first anniversary, until 100% of the Performance Option is fully vested and exercisable thereafter, provided that the Participant is still employed by the Company on each such anniversary.

6.             Expiration Date.  With respect to the Option or any portion thereof which has not become exercisable, the Option shall expire on the date the Participant’s Employment is terminated for any reason, and with respect to the Option or any portion thereof which has become exercisable, the Option shall expire (i) 90 days after the Participant’s termination of Employment for reasons other than Retirement, Cause, death or Disability; (ii) one year after termination of the Participant’s Employment by reason of Retirement, death or Disability; (iii) as of the commencement of business on

2

the date the Participant’s Employment is, or is deemed to have been, terminated for Cause; or (iv) on December 15, 2017, if the Option has not previously expired for any of the reasons specified above in this Section 6.

7.             Certain Rights on a Change of Control.  If (a) a Change of Control occurs, (b) the surviving corporation following such Change of Control is an entity for whose stock there is no Public Market, (c) the surviving corporation assumes the Participant’s outstanding Options in connection with such Change of Control and such Options convert into options to purchase common stock or other equity interests of the surviving corporation (the “Assumed Options”) and (d) the Participant thereafter experiences a Qualifying Termination at any time prior to the occurrence of an Initial Public Offering of the surviving corporation, the Participant will be entitled to sell to the Company or such surviving corporation, within ninety (90) days of such Qualifying Termination, all or any portion of the Assumed Options that the Participant had not exercised at the time of such sale and elects to sell to the Company or such surviving corporation (the “Eligible Assumed Options”), and the Company or such surviving corporation will be obligated to purchase from the Participant, in full satisfaction of the Participant’s rights with respect to such Eligible Assumed Options, all such Eligible Assumed Options, for a price equal to the aggregate fair market value, as determined in accordance with Treas. Reg. § 1.409A-1(b)(5)(iv), of the shares of common stock or other equity interests underlying such Eligible Assumed Options, minus the aggregate exercise price of such Eligible Assumed Options that such Participant would have been required to pay in order to exercise such Eligible Assumed Options.

8.             Construction of Agreement.  Any provision of this Agreement (or portion thereof) which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this section, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions thereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable because its scope is considered excessive, such covenant shall be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable. No waiver of any provision or violation of this Agreement by the Company shall be implied by the Company’s forbearance or failure to take action. It is intended that the Option be exempt from Code Section 409A, and this Agreement shall be administered and construed to the fullest extent possible to reflect and implement such intent.

9.             Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any party hereto upon any breach or default of any party under this Agreement, shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of, or acquiescence in, any such breach or default, or any similar breach or default thereafter occurring nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party or any provisions or conditions of this Agreement, shall be in writing and shall be effective only to the extent specifically set forth in such writing.

10.           Limitation on Transfer.  The Option shall be exercisable only by the Participant or the Participant’s Permitted Transferee(s), as determined in accordance with the terms of the Plan (including without limitation the requirement that the Participant obtain the prior written approval by the Board of any proposed Transfer to a Permitted Transferee during the lifetime of the Participant). Each Permitted Transferee shall be subject to all the restrictions, obligations, and responsibilities as apply to the Participant under the Plan and this Agreement and shall be entitled to all the rights of the Participant under the Plan, provided that in respect of any Permitted Transferee which is a trust or

3

custodianship, the Option shall become exercisable and/or expire based on the employment and termination of employment of the Participant. All shares of Common Stock obtained pursuant to the Option granted herein shall not be transferred except as provided in the Plan and, where applicable, the Management Stockholders’ Agreement.

11.           Integration.  This Agreement, and the other documents referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and in the Plan. This Agreement, including without limitation the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter.

12.           Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

13.           Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to the provisions governing conflict of laws.

14.           Participant Acknowledgment.  The Participant hereby acknowledges receipt of a copy of the Plan. The Participant hereby acknowledges that all decisions, determinations and interpretations of the Board in respect of the Plan, this Agreement and the Option shall be final and conclusive. The Participant further acknowledges that, prior to the existence of a Public Market, no exercise of the Option or any portion thereof shall be effective unless and until the Participant has executed the Management Stockholders’ Agreement and the Participant hereby agrees to be bound thereby.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its duly authorized officer and said Participant has hereunto signed this Agreement on his own behalf, thereby representing that he has carefully read and understands this Agreement, the Plan and the Management Stockholders’ Agreement as of the day and year first written above.

	NEIMAN MARCUS, INC.
By:	/s/ Nelson A. Bangs
	Nelson A. Bangs, Senior Vice President and
	General Counsel
	PARTICIPANT
	/s/ Gerald A. Barnes
	Gerald A. Barnes

4

EX-10.28

Exhibit 10.28

STOCK OPTION GRANT AGREEMENT

(Non-Qualified Stock Options)

THIS AGREEMENT, made as of this 5th day of October 2009 between Neiman Marcus, Inc. (the “Company”) and Gerald A. Barnes (the “Participant”).

WHEREAS, the Company has adopted and maintains the Neiman Marcus, Inc. Management Equity Incentive Plan (the “Plan”) to promote the interests of the Company and its Affiliates and stockholders by providing the Company’s key employees and others with an appropriate incentive to encourage them to continue in the employ of and provide services for the Company or its Affiliates and to improve the growth and profitability of the Company;

WHEREAS, the Plan provides for the Grant to Participants in the Plan of Non-Qualified Stock Options to purchase shares of Common Stock of the Company.

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto hereby agree as follows:

1.     Grant of Options.  Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Participant a NON-QUALIFIED STOCK OPTION (the “Option”) with respect to 2,800 shares of Common Stock of the Company. 50% of the Option will be a Fair Value Option and 50% of the Option will be a Performance Option.

2.     Grant Date.  The Grant Date of the Option hereby granted is October 5, 2009.

3.     Incorporation of Plan.  All terms, conditions and restrictions of the Plan are incorporated herein and made part hereof as if stated herein. All capitalized terms used and not defined herein shall have the meaning given to such terms in the Plan.

4.     Exercise Price.  The exercise price of each share of Common Stock underlying the Option hereby granted is $1,000. The portion of the Option that is a Performance Option will have an Accreting Exercise Price in accordance with the Plan.

5.     Vesting Date.  The Option shall become exercisable as follows: twenty percent of the shares underlying such Option shall vest and become exercisable on the first anniversary of the Grant Date and the remaining portion of the Option shall vest and become exercisable in forty-eight equal monthly installments over the forty-eight (48) months following the first anniversary of the Grant Date, beginning on the one-month anniversary of such first anniversary, until 100% of the Option is fully vested and exercisable thereafter, provided that the Participant is still employed by the Company on each such anniversary. On each Vesting Date, an equal portion of the Option that is a Fair Value Option and a Performance Option will become vested.

6.     Expiration Date.  Subject to the provisions of the Plan, with respect to the Option or any portion thereof which has not become exercisable, the Option shall expire on the date the Participant’s Employment is terminated for any reason, and with respect to any Option or any portion thereof which has become exercisable, the Option shall expire on the earlier of: (i) 90 days after the Participant’s termination of Employment other than for Retirement, Cause, death or Disability; (ii) one year after termination of the Participant’s Employment by reason of Retirement, death or Disability; (iii) the commencement of business on the date the Participant’s Employment is, or is deemed to have been, terminated for Cause; or (iv) the eighth anniversary of the Grant Date.

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7.     Certain Rights on a Change of Control.  If (a) a Change of Control occurs, (b) the surviving corporation following such Change of Control is an entity for whose stock there is no Public Market, (c) the surviving corporation assumes the Participant’s outstanding Options in connection with such Change of Control and such Options convert into options to purchase common stock or other equity interests of the surviving corporation (the “Assumed Options”) and (d) the Participant thereafter experiences a Qualifying Termination at any time prior to the occurrence of an Initial Public Offering of the surviving corporation, the Participant will be entitled to sell to the Company or such surviving corporation, within ninety (90) days of such Qualifying Termination, all or any portion of the Assumed Options that the Participant had not exercised at the time of such sale and elects to sell to the Company or such surviving corporation (the “Eligible Assumed Options”), and the Company or such surviving corporation will be obligated to purchase from the Participant, in full satisfaction of the Participant’s rights with respect to such Eligible Assumed Options, all such Eligible Assumed Options, for a price equal to the aggregate fair market value, as determined in accordance with Treas. Reg. § 1.409A-1(b)(5)(iv), of the shares of common stock or other equity interests underlying such Eligible Assumed Options, minus the aggregate exercise price of such Eligible Assumed Options that such Participant would have been required to pay in order to exercise such Eligible Assumed Options.

8.     Construction of Agreement.  Any provision of this Agreement (or portion thereof) which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this section, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions thereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable because its scope is considered excessive, such covenant shall be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable. No waiver of any provision or violation of this Agreement by the Company shall be implied by the Company’s forbearance or failure to take action. It is intended that the Option be exempt from Code Section 409A, and this Agreement shall be administered and construed to the fullest extent possible to reflect and implement such intent.

9.     Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to any party hereto upon any breach or default of any party under this Agreement, shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of, or acquiescence in, any such breach or default, or any similar breach or default thereafter occurring nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party or any provisions or conditions of this Agreement, shall be in writing and shall be effective only to the extent specifically set forth in such writing.

10.   Limitation on Transfer.  The Option shall be exercisable only by the Participant or the Participant’s Permitted Transferee(s), as determined in accordance with the terms of the Plan (including without limitation the requirement that the Participant obtain the prior written approval by the Board of any proposed Transfer to a Permitted Transferee during the lifetime of the Participant). Each Permitted Transferee shall be subject to all the restrictions, obligations, and responsibilities as apply to the Participant under the Plan and this Agreement and shall be entitled to all the rights of the Participant under the Plan, provided that in respect of any Permitted Transferee which is a trust or custodianship, the Option shall become exercisable and/or expire based on the employment and termination of employment of the Participant. All shares of Common Stock obtained pursuant to the Option granted herein shall not be transferred except as provided in the Plan and, where applicable, the Management Stockholders’ Agreement.

11.   Integration.  This Agreement, and the other documents referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and in the Plan. This Agreement, including without limitation the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter.

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12.   Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

13.   Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to the provisions governing conflict of laws.

14.   Participant Acknowledgment.  The Participant hereby acknowledges receipt of a copy of the Plan. The Participant hereby acknowledges that all decisions, determinations and interpretations of the Board in respect of the Plan, this Agreement and the Option shall be final and conclusive. The Participant further acknowledges that, prior to the existence of a Public Market, no exercise of the Option or any portion thereof shall be effective unless and until the Participant has executed the Management Stockholders’ Agreement and the Participant hereby agrees to be bound thereby.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its duly authorized officer and said Participant has hereunto signed this Agreement on his own behalf, thereby representing that he has carefully read and understands this Agreement, the Plan and the Management Stockholders’ Agreement as of the day and year first written above.

	NEIMAN MARCUS, INC.
By:	/s/ Nelson A. Bangs
Title:	Nelson A. Bangs
	Senior Vice President
	/s/ Gerald A. Barnes
	Gerald A. Barnes

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EX-10.32

Exhibit 10.32

REGISTRATION RIGHTS AGREEMENT

BY AND AMONG

NEWTON ACQUISITION MERGER SUB, INC.,

NEWTON ACQUISITION, INC.,

NEWTON HOLDING, INC.

TPG PARTNERS IV, L.P.,

TPG NEWTON III LLC,

TPG NEWTON CO-INVEST I LLC,

DLJ MERCHANT BANKING PARTNERS III, L.P.,

DLJ OFFSHORE PARTNERS III-1, C.V.,

DLJ OFFSHORE PARTNERS III-2, C.V.,

DLJ OFFSHORE PARTNERS III, C.V.,

DLJ MB PARTNERS III GMBH & CO. KG,

MILLENNIUM PARTNERS II, L.P.,

MBP III PLAN INVESTORS, L.P.,

WARBURG PINCUS PRIVATE EQUITY VIII, L.P.,

WARBURG PINCUS PRIVATE EQUITY IX, L.P.,

WARBURG PINCUS NETHERLANDS PRIVATE EQUITY VIII, C.V. I,

WARBURG PINCUS GERMANY PRIVATE EQUITY VIII K.G.,

NEWTON CO-INVEST I LLC

AND

NEWTON CO-INVEST II LLC

DATED as of OCTOBER 6, 2005

TABLE OF CONTENTS

		Page
ARTICLE I
DEFINITIONS
Section 1.01.	Defined Terms	1
Section 1.02.	Other Interpretive Provisions	5
ARTICLE II
REGISTRATION RIGHTS
Section 2.01.	Demand Registration	5
Section 2.02.	Shelf Registration	8
Section 2.03.	Piggyback Registration	9
Section 2.04.	Black-out Periods	11
Section 2.05.	Registration Procedures	12
Section 2.06.	Underwritten Offerings	16
Section 2.07.	No Inconsistent Agreements; Additional Rights	18
Section 2.08.	Registration Expenses	18
Section 2.09.	Indemnification	18
Section 2.10.	Rules 144 and 144A and Regulation S	21
ARTICLE III
MISCELLANEOUS
Section 3.01.	Term	22
Section 3.02.	Injunctive Relief	22
Section 3.03.	Attorneys’ Fees	22
Section 3.04.	Notices	22
Section 3.05.	Amendment	24
Section 3.06.	Successors, Assigns and Transferees	24
Section 3.07.	Binding Effect	24
Section 3.08.	Third Parties	24
Section 3.09.	Governing Law; Jurisdiction	25
Section 3.10.	Severability	25
Section 3.11.	Counterparts	25
Section 3.12.	Headings	25

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REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (the “Agreement”), dated as of October 6, 2005, by and among Newton Holding, LLC, a Delaware limited liability company (“Holding”), Newton Acquisition Inc., a Delaware corporation (“Newton”), Newton Acquisition Merger Sub, Inc., a Delaware corporation (together with its successors, “MergerSub”, and, collectively with Holding, Newton, and any of their respective successors, the “Company”) and TPG Partners IV, L.P., TPG Newton III LLC, TPG Newton Co-Invest I LLC, DLJ Merchant Banking Partners III, L.P., DLJ Offshore Partners III-1, C.V., DLJ Offshore Partners III-2, C.V., DLJ Offshore Partners III, C.V., DLJ MB Partners III GmbH & Co. KG, Millennium Partners II, L.P., MBP III Plan Investors, L.P., Warburg Pincus Private Equity VIII, L.P., Warburg Pincus Private Equity IX, L.P., Warburg Pincus Netherlands Private Equity VIII, C.V. I, Warburg Pincus Germany Private Equity VIII K.G., Newton Co-Invest I LLC and Newton Co-Invest II LLC.

WITNESSETH:

WHEREAS, as of the date hereof, the Holders (as defined below) own Registrable Securities (as defined below) of the Company; and

WHEREAS, the parties desire to set forth certain registration rights applicable to the Registrable Securities of the Company.

NOW, THEREFORE, in consideration of the foregoing and the mutual promises, covenants and agreements of the parties hereto, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01.      Defined Terms.  As used in this Agreement, the following terms shall have the following meanings:

“Adverse Disclosure” means public disclosure of material non-public information that, in the Board of Directors’ good faith judgment, after consultation with independent outside counsel to the Company, (i) would be required to be made in any Registration Statement filed with the SEC by the Company so that such Registration Statement would not be materially misleading; (ii) would not be required to be made at such time but for the filing of such Registration Statement; and (iii) the Company has a bona fide business purpose for not disclosing publicly.

“Agreement” has the meaning set forth in the preamble.

“Affiliate” has the meaning specified in Rule 12b-2 under the Exchange Act.  The term “Affiliated” has a correlative meaning.

“Board of Directors” means the board of directors of the Company.

“Business Day” means any day other than a Saturday, Sunday or a day on which commercial banks located in New York, New York or Fort Worth, Texas are required or authorized by law to be closed.

“Common Share Equivalents” means securities (including, without limitation, warrants) exercisable, exchangeable or convertible into Common Shares.

“Common Shares” means the shares of common stock, par value $.01 per share, of the Company, any securities into which such shares of common stock shall have been changed or any securities resulting from any reclassification or recapitalization of such shares of common stock.

“Company” has the meaning set forth in the preamble and shall include the Company’s successors by merger, acquisition, reorganization, conversion or otherwise.

“Company Public Sale” has the meaning set forth in Section 2.03(a).

“Company Shares” means Common Shares and Common Share Equivalents.

“Demand Notice” has the meaning set forth in Section 2.01(e).

“Demand Period” has the meaning set forth in Section 2.01(d).

“Demand Registration” has the meaning set forth in Section 2.01(a).

“Demand Registration Statement” has the meaning set forth in Section 2.01(a).

“Demand Suspension” has the meaning set forth in Section 2.01(g).

“Demanding Sponsor” has the meaning set forth in Section 2.01(a).

“Effectiveness Date” means the date on which Holders are no longer subject to any underwriter’s lock-up or other contractual restriction on the sale of Registrable Securities in connection with the Company’s QPO.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor thereto, and any rules and regulations promulgated thereunder, all as the same shall be in effect from time to time.

“Holder” means any holder of Registrable Securities who is a party hereto or who succeeds to rights hereunder pursuant to Section 4.06.

“Holding” has the meaning set forth in the preamble and shall include Holding’s successors by merger, acquisition, reorganization, conversion or otherwise.

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“Holding LLC Agreement” means the Amended and Restated Limited Liability Company Operating Agreement of Holding, dated as of the date hereof, as amended, modified or supplemented from time to time.

“Long-Form Registration Statement” has the meaning set forth in Section 2.01(a).

“Material Adverse Change” means (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States; (ii) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States; (iii) a material outbreak or escalation of armed hostilities or other international or national calamity involving the United States or the declaration by the United States of a national emergency or war or a change in national or international financial, political or economic conditions; and (iv) any event, change, circumstance or effect that is or is reasonably likely to be materially adverse to the business, properties, assets, liabilities, condition (financial or otherwise), operations, results of operations or prospects of the Company and its subsidiaries taken as a whole.

“MergerSub” has the meaning set forth in the preamble.

“NASD” means the National Association of Securities Dealers, Inc.

“Newton” has the meaning set forth in preamble.

“Participating Holder” means, with respect to any Registration, any Holder of Registrable Securities covered by the applicable Registration Statement.

“Permitted Transferee” has the meaning set forth in Section 4.06.

“Person” means any individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof.

“Piggyback Registration” has the meaning set forth in Section 2.03(a).

“Preemption Notice” has the meaning set forth in Section 2.01(f).

“Prospectus” means the prospectus included in any Registration Statement, all amendments and supplements to such prospectus, including pre- and post-effective amendments to such Registration Statement, and all other material incorporated by reference in such prospectus.

“Qualified Public Offering” or “QPO” means the first underwritten public offering and sale of equity securities of the Company or its successor for cash pursuant to an effective registration statement (other than on Form S-4, S-8 or a comparable form) under the Securities Act with the aggregate net proceeds to the Company or its successor under such offering or sale, in combination with any previous underwritten public offering or sale of equity securities of the Company or its successor for cash pursuant to an effective registration statement

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(other than on Form S-4, S-8 or a comparable form) under the Securities Act, in excess of $300,000,000.

“Registrable Securities” means any Company Shares and any securities that may be issued or distributed or be issuable in respect of any Company Shares by way of conversion, dividend, stock split or other distribution, merger, consolidation, exchange, recapitalization or reclassification or similar transaction; provided, however, that any such Registrable Securities shall cease to be Registrable Securities to the extent (i) a Registration Statement with respect to the sale of such Registrable Securities has been declared effective under the Securities Act and such Registrable Securities have been disposed of in accordance with the plan of distribution set forth in such Registration Statement, (ii) such Registrable Securities have been distributed pursuant to Rule 144 (or any similar provisions then in force) under the Securities Act or (iii) such Registrable Securities shall have been otherwise transferred and new certificates for them not bearing a legend restricting transfer under the Securities Act shall have been delivered by the Company and such securities may be publicly resold without Registration under the Securities Act.

“Registration” means a registration with the SEC of the Company’s securities for offer and sale to the public under a Registration Statement.  The term “Register” shall have a correlative meaning.

“Registration Expenses” has the meaning set forth in Section 2.08.

“Registration Statement” means any registration statement of the Company filed with, or to be filed with, the SEC under the rules and regulations promulgated under the Securities Act, including the related Prospectus, amendments and supplements to such registration statement, including pre- and post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement.

“Representatives” means, with respect to any Person, any of such Person’s officers, directors, employees, agents, attorneys, accountants, actuaries, consultants, equity financing partners or financial advisors or other Person associated with, or acting on behalf of, such Person.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and any successor thereto, and any rules and regulations promulgated thereunder, all as the same shall be in effect from time to time.

“Shelf Period” has the meaning set forth in Section 2.02(b).

“Shelf Registration” means a Registration effected pursuant to Section 2.02.

“Shelf Registration Statement” means a Registration Statement of the Company filed with the SEC on either (i) Form S-3 (or any successor form or other appropriate form under the Securities Act) or (ii) if the Company is not permitted to file a Registration Statement on Form S-3, an evergreen Registration Statement on Form S-1 (or any successor form or other

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appropriate form under the Securities Act), in each case for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act (or any similar rule that may be adopted by the SEC) covering the Registrable Securities, as applicable.

“Shelf Suspension” has the meaning set forth in Section 2.02(d).

“Short-Form Registration Statement” has the meaning set forth in Section 2.01(a).

“Sponsors” means each of TPG and WP.

“TPG” means, collectively, TPG Partners IV, L.P., TPG Newton III LLC, TPG Newton Co-Invest I LLC and their respective Affiliates and permitted assignees hereunder.

“Underwritten Offering” means a Registration in which securities of the Company are sold to an underwriter or underwriters on a firm commitment basis for reoffering to the public.

“WP” means, collectively, Warburg Pincus Private Equity VIII, L.P., Warburg Pincus Netherlands Private Equity VIII, C.V. I, Warburg Pincus Germany Private Equity VIII K.G., Warburg Pincus Private Equity IX, L.P. and their respective Affiliates and permitted assignees hereunder.

SECTION 1.02.      Other Interpretive Provisions.  (a)  The meanings of defined terms are equally applicable to the singular and plural forms thereof.

(b)           The words “hereof”, “herein”, “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and any subsection, Section, Exhibit, Schedule and Annex references are to this Agreement unless otherwise specified.

(c)           The term “including” is not limiting and means “including without limitation.”

(d)           The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.

(e)           Whenever the context requires, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms.

ARTICLE II

REGISTRATION RIGHTS

SECTION 2.01.      Demand Registration.

(a)           Demand by the Sponsors.  If, after the Effectiveness Date, there is no currently effective Shelf Registration Statement on file with the SEC, a Sponsor holding, directly or indirectly, in the aggregate, not less than five percent (5%) of the Registrable Securities then

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outstanding may make a written request to the Company for Registration of all or part of the Registrable Securities held by such Sponsor (a “Demanding Sponsor”) (i) on Form S-1 or any similar long-form registration statement (a “Long-Form Registration”) or (ii) on Form S-3 or any similar short-form registration statement (a “Short-Form Registration Statement”) if the Company qualifies to use such short form.  Any such requested Long-Form Registration or Short-Form Registration shall hereinafter be referred to as a “Demand Registration.”  Each request for a Demand Registration shall specify the kind and aggregate amount of Registrable Securities to be Registered and the intended methods of disposition thereof.  Within thirty (30) days of a request for a Demand Registration, the Company shall file a Registration Statement relating to such Demand Registration (a “Demand Registration Statement”), and shall use its reasonable best efforts to cause such Demand Registration Statement to promptly be declared effective under (x) the Securities Act and (y) the “Blue Sky” laws of such jurisdictions as any Participating Holder or any underwriter, if any, reasonably requests.

(b)           Limitation on Demand Registrations.  Each Sponsor shall have the right to request up to three (3) Long-Form Registrations and an unlimited number of Short-Form Registrations.  Notwithstanding the foregoing, (i) each Sponsor may request no more than two (2) Demand Registration in any twelve (12) - month period and (ii) in no event shall the Company be required to effect more than three (3) Demand Registrations in any twelve (12) - month period.

(c)           Demand Withdrawal.  A Demanding Sponsor and any other Holder that has requested its Registrable Securities be included in a Demand Registration pursuant to Section 2.01(e) may withdraw its Registrable Securities from a Demand Registration at any time prior to the effectiveness of the applicable Demand Registration Statement.  Upon receipt of a notice to such effect from the Demanding Sponsor, the Company shall cease all efforts to secure effectiveness of the applicable Demand Registration Statement and such Registration nonetheless shall be deemed a Demand Registration with respect to the Demanding Sponsor for purposes of Section 2.01(b) unless (i) the withdrawing Demanding Sponsor shall have paid or reimbursed the Company for its pro rata share of all reasonable and documented out-of-pocket fees and expenses incurred by the Company in connection with the Registration of such Demanding Sponsor’s withdrawn Registrable Securities (based on the number of securities the Demanding Sponsor sought to register, as compared to the total number of securities included on such Demand Registration Statement) or (ii) the withdrawal is made following the occurrence of a Material Adverse Change or because the Registration would require the Company to make an Adverse Disclosure.

(d)           Effective Registration.  The Company shall be deemed to have effected a Demand Registration if the Demand Registration Statement is declared effective by the SEC and remains effective for not less than one hundred eighty (180) days (or such shorter period as shall terminate when all Registrable Securities covered by such Demand Registration Statement have been sold or withdrawn), or if such Registration Statement relates to an Underwritten Offering, such longer period as, in the opinion of counsel for the underwriter or underwriters, a Prospectus is required by law to be delivered in connection with sales of Registrable Securities by an underwriter or dealer (the applicable period, the “Demand Period”).  No Demand Registration shall be deemed to have been effected if (i) during the Demand Period such Registration is interfered with by any stop order, injunction or other order or requirement of the SEC or other

6

governmental agency or court or (ii) the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such Registration are not satisfied other than by reason of a wrongful act, misrepresentation or breach of such applicable underwriting agreement by the Demanding Sponsor.

(e)           Demand Notice.  Promptly upon receipt of any request for a Demand Registration pursuant to Section 2.01(a) (but in no event more than five (5) Business Days thereafter), the Company shall deliver a written notice (a “Demand Notice”) of any such Registration request to all other Holders, and the Company shall include in such Demand Registration all such Registrable Securities with respect to which the Company has received written requests for inclusion therein within ten (10) Business Days after the date that the Demand Notice has been delivered.  All requests made pursuant to this Section 2.01(e) shall specify the aggregate amount of Registrable Securities to be registered and the intended method of distribution of such securities.

(f)            Delay in Filing; Suspension of Registration.  If the filing, initial effectiveness or continued use of a Demand Registration Statement at any time would require the Company to make an Adverse Disclosure, the Company may, upon giving prompt written notice of such action to the Holders, delay the filing or initial effectiveness of, or suspend use of, the Demand Registration Statement (a “Demand Suspension”); provided, however, that the Company shall not be permitted to exercise a Demand Suspension (i) more than once during any twelve (12)-month period, or (ii) for a period exceeding thirty (30) days on any one occasion.  In the case of a Demand Suspension, the Holders agree to suspend use of the applicable Prospectus in connection with any sale or purchase, or offer to sell or purchase, Registrable Securities, upon receipt of the notice referred to above.  The Company shall immediately notify the Holders upon the termination of any Demand Suspension, amend or supplement the Prospectus, if necessary, so it does not contain any untrue statement or omission and furnish to the Holders such numbers of copies of the Prospectus as so amended or supplemented as the Holders may reasonably request.  The Company agrees, if necessary, to supplement or make amendments to the Demand Registration Statement, if required by the registration form used by the Company for the Demand Registration or by the instructions applicable to such registration form or by the Securities Act or the rules or regulations promulgated thereunder or as may reasonably be requested by the Demanding Sponsor.

(g)           Underwritten Offering.  If a Demanding Sponsor so requests, an offering of Registrable Securities pursuant to a Demand Registration shall be in the form of an Underwritten Offering, and such Demanding Sponsor shall have the right to select the managing underwriter or underwriters to administer the offering; provided that such managing underwriter or underwriters shall be reasonably acceptable to the Company and the other Sponsor.

(h)           Priority of Securities Registered Pursuant to Demand Registrations.  If the managing underwriter or underwriters of a proposed Underwritten Offering of the Registrable Securities included in a Demand Registration (or, in the case of a Demand Registration not being underwritten, the Sponsors), advise the Board of Directors in writing that, in its or their opinion, the number of securities requested to be included in such Demand Registration exceeds the number which can be sold in such offering without being likely to have a significant adverse effect on the price, timing or distribution of the securities offered or the market for the securities

7

offered, the securities to be included in such Demand Registration (i) first, shall be allocated pro rata among the Holders that have requested to participate in such Demand Registration based on the relative number of Registrable Securities then held by each such Holder (provided that any securities thereby allocated to a Holder that exceed such Holder’s request shall be reallocated among the remaining requesting Holders in like manner) and (ii) next, and only if all the securities referred to in clause (i) have been included, the number of securities that the Company proposes to include in such Registration that, in the opinion of the managing underwriter or underwriters (or the Sponsors, as the case may be) can be sold without having such adverse effect.

(i)            In the event any Holder requests to participate in a registration pursuant to this Section 2.01 in connection with a distribution of Registrable Securities to its partners or members, the registration shall provide for resale by such partners or members, if requested by the Holder.

SECTION 2.02.      Shelf Registration.

(a)           Filing.  After the Effectiveness Date, as promptly as practicable following a request by a Sponsor holding, directly or indirectly, in the aggregate, not less than five percent (5%) of the Registrable Securities then outstanding, the Company shall file with the SEC a Shelf Registration Statement relating to the offer and sale of all Registrable Securities by the Holders from time to time in accordance with the methods of distribution elected by such Holders and set forth in the Shelf Registration Statement and, as promptly as practicable thereafter, shall use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective under the Securities Act.  If, on the date of any such request, the Company does not qualify to file a Shelf Registration Statement under the Securities Act, the provisions of this Section 2.02 shall not apply, and the provisions of Section 2.01 shall apply instead.

(b)           Continued Effectiveness.  The Company shall use its reasonable best efforts to keep such Shelf Registration Statement continuously effective under the Securities Act in order to permit the Prospectus forming a part thereof to be usable by Holders until the earlier of (i) the date as of which all Registrable Securities have been sold pursuant to the Shelf Registration Statement or another registration statement filed under the Securities Act (but in no event prior to the applicable period referred to in Section 4(3) of the Securities Act and Rule 174 thereunder) and (ii) the date as of which each of the Holders is permitted to sell its Registrable Securities without Registration pursuant to Rule 144 under the Securities Act without volume limitation or other restrictions on transfer thereunder (such period of effectiveness, the “Shelf Period”).  Subject to Section 2.02(d), the Company shall not be deemed to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the Shelf Period if the Company voluntarily takes any action or omits to take any action that would result in Holders of Registrable Securities covered thereby not being able to offer and sell any Registrable Securities pursuant to such Shelf Registration Statement during the Shelf Period, unless such action or omission is required by applicable law.

(c)           Shelf Notice.  Promptly upon receipt of any request to file a Shelf Registration Statement pursuant to Section 2.02(a) (but in no event more than five (5) Business

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Days thereafter), the Company shall deliver a written notice of any such request to all other Holders specifying the amount of Registrable Securities to be registered.

(d)           Suspension of Registration.  If the continued use of such Shelf Registration Statement at any time would require the Company to make an Adverse Disclosure, the Company may, upon giving at least ten days’ prior written notice of such action to the Holders, suspend use of the Shelf Registration Statement (a “Shelf Suspension”); provided that the Company shall not be permitted to exercise a Shelf Suspension (i) more than one time during any twelve (12)-month period, or (ii) for a period exceeding thirty (30) days on any one occasion.  In the case of a Shelf Suspension, the Holders agree to suspend use of the applicable Prospectus in connection with any sale or purchase of, or offer to sell or purchase, Registrable Securities, upon receipt of the notice referred to above.  The Company shall immediately notify the Holders upon the termination of any Shelf Suspension, amend or supplement the Prospectus, if necessary, so it does not contain any untrue statement or omission and furnish to the Holders such numbers of copies of the Prospectus as so amended or supplemented as the Holders may reasonably request.  The Company agrees, if necessary, to supplement or make amendments to the Shelf Registration Statement, if required by the registration form used by the Company for the Shelf Registration or by the instructions applicable to such registration form or by the Securities Act or the rules or regulations promulgated thereunder or as may reasonably be requested by the Sponsors.

(e)           Underwritten Offering.  If a Sponsor holding, directly or indirectly, in the aggregate, not less than five percent (5 %) of the Registrable Securities then outstanding so elects, an offering of Registrable Securities pursuant to the Shelf Registration Statement shall be in the form of an Underwritten Offering, and the Company shall amend or supplement the Shelf Registration Statement for such purpose, such Sponsor shall have the right to select the managing underwriter or underwriters to administer such offering; provided that such managing underwriter or underwriters shall be reasonably acceptable to the Company and the other Sponsor.

SECTION 2.03.      Piggyback Registration.

(a)           Participation.  If the Company at any time proposes to file a Registration Statement under the Securities Act with respect to any offering of its securities for its own account or for the account of any other Persons (other than (i) a Registration under Section 2.01 or 2.02, (ii) a Registration on Form S-4 or S-8 or any successor form to such Forms or (iii) a Registration of securities solely relating to an offering and sale to employees or directors of the Company pursuant to any employee stock plan or other employee benefit plan arrangement) (a “Company Public Sale”), then, as soon as practicable (but in no event less than forty-five (45) days prior to the proposed date of filing of such Registration Statement), the Company shall give written notice of such proposed filing to the Holders, and such notice shall offer the Holders the opportunity to Register under such Registration Statement such number of Registrable Securities as each such Holder may request in writing (a “Piggyback Registration”).  Subject to Section 2.03(b), the Company shall include in such Registration Statement all such Registrable Securities that are requested to be included therein within fifteen (15) days after the receipt by such Holders of any such notice; provided that if at any time after giving written notice of its intention to Register any securities and prior to the effective date of the Registration Statement filed in

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connection with such Registration, the Company shall determine for any reason not to Register or to delay Registration of such securities, the Company shall give written notice of such determination to each Holder and, thereupon, (i) in the case of a determination not to Register, shall be relieved of its obligation to Register any Registrable Securities in connection with such Registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of the Sponsors to request that such Registration be effected as a Demand Registration under Section 2.01, and (ii) in the case of a determination to delay Registering, in the absence of a request for a Demand Registration, shall be permitted to delay Registering any Registrable Securities, for the same period as the delay in Registering such other securities.  If the offering pursuant to such Registration Statement is to be underwritten, then each Holder making a request for a Piggyback Registration pursuant to this Section 2.03(a) must, and the Company shall make such arrangements with the managing underwriter or underwriters so that each such Holder may, participate in such Underwritten Offering.  If the offering pursuant to such Registration Statement is to be on any other basis, then each Holder making a request for a Piggyback Registration pursuant to this Section 2.03(a) must, and the Company shall make such arrangements so that each such Holder may, participate in such offering on such basis.  Each Holder shall be permitted to withdraw all or part of its Registrable Securities from a Piggyback Registration at any time prior to the effectiveness of such Registration Statement.

(b)           Priority of Piggyback Registration.  If the managing underwriter or underwriters of any proposed Underwritten Offering of Registrable Securities included in a Piggyback Registration informs the Company and the Holders of Registrable Securities in writing that, in its or their opinion, the number of securities which such Holders and any other Persons intend to include in such offering exceeds the number which can be sold in such offering without being likely to have a significant adverse effect on the price, timing or distribution of the securities offered or the market for the securities offered, then the securities to be included in such Registration shall be (i) first, 100% of the securities that the Company or (subject to Section 2.07) any Person (other than a Holder) exercising a contractual right to demand Registration, as the case may be, proposes to sell, and (ii) second, and only if all the securities referred to in clause (i) have been included, the number of Registrable Securities that, in the opinion of such managing underwriter or underwriters, can be sold without having such adverse effect, with such number to be allocated pro rata among the Holders that have requested to participate in such Registration based on the relative number of Registrable Securities then held by each such Holder (provided that any securities thereby allocated to a Holder that exceed such Holder’s request shall be reallocated among the remaining requesting Holders in like manner) and (iii) third, and only if all of the Registrable Securities referred to in clause (ii) have been included in such Registration, any other securities eligible for inclusion in such Registration.

(c)           No Effect on Demand Registrations.  No Registration of Registrable Securities effected pursuant to a request under this Section 2.03 shall be deemed to have been effected pursuant to Sections 2.01 and 2.02 or shall relieve the Company of its obligations under Sections 2.01 or 2.02.

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SECTION 2.04.      Black-out Periods.

(a)           Black-out Periods for Holders.  In the event of a Company Public Sale of the Company’s equity securities in an Underwritten Offering, the Holders agree, if requested by the managing underwriter or underwriters in such Underwritten Offering, not to effect any public sale or distribution of any securities (except, in each case, as part of the applicable Registration, if permitted) that are the same as or similar to those being Registered in connection with such Company Public Sale, or any securities convertible into or exchangeable or exercisable for such securities, during the period beginning seven (7) days before and ending one hundred eighty (180) days (in the event of the Company’s initial public offering) or ninety (90) days (in the event of any other Company Public Sale) (or, in either case, such lesser period as may be permitted by the Company or such managing underwriter or underwriters) after, the effective date of the Registration Statement filed in connection with such Registration, to the extent timely notified in writing by the Company or the managing underwriter or underwriters; provided, however, such restrictions shall not apply to (i) securities acquired in the public market subsequent to the initial public offering, (ii) distributions-in-kind to a Holder’s limited partners and (iii) transfers to Affiliates but only if such Affiliates agree to be bound by the restrictions herein..

(b)           Black-out Period for the Company and Others.  In the case of a Registration of Registrable Securities pursuant to Section 2.01 or 2.02 for an Underwritten Offering, the Company and the Holders agree, if requested by the Sponsors or the managing underwriter or underwriters, not to effect any public sale or distribution of any securities that are the same as or similar to those being Registered, or any securities convertible into or exchangeable or exercisable for such securities, during the period beginning seven (7) days before, and ending ninety (90) days (or such lesser period as may be permitted by the Sponsors or such managing underwriter or underwriters) after, the effective date of the Registration Statement filed in connection with such Registration (or, in the case of an offering under a Shelf Registration Statement, the date of the closing under the underwriting agreement in connection therewith), to the extent timely notified in writing by the Sponsors or the managing underwriter or underwriters.  Notwithstanding the foregoing, the Company may effect a public sale or distribution of securities of the type described above and during the periods described above if such sale or distribution is made pursuant to Registrations on Form S-4 or S-8 or any successor form to such Forms or as part of any Registration of securities for offering and sale to employees or directors of the Company pursuant to any employee stock plan or other employee benefit plan arrangement. The Company agrees to use its reasonable best efforts to obtain from each holder of restricted securities of the Company which securities are the same as or similar to the Registrable Securities being Registered, or any restricted securities convertible into or exchangeable or exercisable for any of such securities, an agreement not to effect any public sale or distribution of such securities during any such period referred to in this paragraph, except as part of any such Registration, if permitted.  Without limiting the foregoing (but subject to Section 2.07), if after the date hereof the Company grants any Person (other than a Holder) any rights to demand or participate in a Registration, the Company agrees that the agreement with respect thereto shall include such Person’s agreement to comply with any black-out period required by this Section as if it were the Company hereunder.

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SECTION 2.05.      Registration Procedures.

(a)           In connection with the Company’s Registration obligations under Sections 2.01, 2.02 and 2.03, the Company shall use its reasonable best efforts to effect such Registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of distribution thereof as expeditiously as reasonably practicable, and in connection therewith the Company shall:

(i)            prepare the required Registration Statement including all exhibits and financial statements required under the Securities Act to be filed therewith, and before filing a Registration Statement or Prospectus, or any amendments or supplements thereto, (x) furnish to the underwriters, if any, and to Participating Holders, copies of all documents prepared to be filed, which documents shall be subject to the review of such underwriters and such Holders and their respective counsel and (y) except in the case of a Registration under Section 2.03, not file any Registration Statement or Prospectus or amendments or supplements thereto to which the Sponsors or the underwriters, if any, shall reasonably object;

(ii)           as soon as possible (in the case of a Demand Registration, no later than thirty (30) days after a request for a Demand Registration) file with the SEC a Registration Statement relating to the Registrable Securities including all exhibits and financial statements required by the SEC to be filed therewith, and use its reasonable best efforts to cause such Registration Statement to become effective under the Securities Act as soon as practicable;

(iii)          prepare and file with the SEC such pre- and post-effective amendments to such Registration Statement and supplements to the Prospectus as may be (x) reasonably requested by a Sponsor, (y) reasonably requested by any other Participating Holder (to the extent such request relates to information relating to such Holder), or (z) necessary to keep such Registration effective for the period of time required by this Agreement, and comply with provisions of the applicable securities laws with respect to the sale or other disposition of all securities covered by such Registration Statement during such period in accordance with the intended method or methods of disposition by the sellers thereof set forth in such Registration Statement;

(iv)          notify the Participating Holders and the managing underwriter or underwriters, if any, and (if requested) confirm such advice in writing and provide copies of the relevant documents, as soon as reasonably practicable after notice thereof is received by the Company (a) when the applicable Registration Statement or any amendment thereto has been filed or becomes effective, and when the applicable Prospectus or any amendment or supplement to such Prospectus has been filed, (b) of any written comments by the SEC or any request by the SEC or any other federal or state governmental authority for amendments or supplements to such Registration Statement or such Prospectus or for additional information, (c) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or any order by the SEC or any other regulatory authority preventing or suspending the use of any preliminary or final Prospectus or the initiation or threatening of any proceedings for

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such purposes, (d) if, at any time, the representations and warranties of the Company in any applicable underwriting agreement cease to be true and correct in all material respects, and (e) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for offering or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose;

(v)           promptly notify the Participating Holders and the managing underwriter or underwriters, if any, when the Company becomes aware of the happening of any event as a result of which the applicable Registration Statement or the Prospectus included in such Registration Statement (as then in effect) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein (in the case of such Prospectus and any preliminary Prospectus, in light of the circumstances under which they were made) not misleading or, if for any other reason it shall be necessary during such time period to amend or supplement such Registration Statement or Prospectus in order to comply with the Securities Act and, in either case as promptly as reasonably practicable thereafter, prepare and file with the SEC, and furnish without charge to the Participating Holders and the managing underwriter or underwriters, if any, an amendment or supplement to such Registration Statement or Prospectus which shall correct such misstatement or omission or effect such compliance;

(vi)          use its reasonable best efforts to prevent, or obtain the withdrawal of, any stop order or other order suspending the use of any preliminary or final Prospectus;

(vii)         promptly incorporate in a Prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters and the Sponsors agree should be included therein relating to the plan of distribution with respect to such Registrable Securities; and make all required filings of such Prospectus supplement or post-effective amendment as soon as reasonably practicable after being notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment;

(viii)        furnish to each Participating Holder and each underwriter, if any, without charge, as many conformed copies as such Holder or underwriter may reasonably request of the applicable Registration Statement and any amendment or post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference);

(ix)           deliver to each Participating Holder and each underwriter, if any, without charge, as many copies of the applicable Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Holder or underwriter may reasonably request (it being understood that the Company consents to the use of such Prospectus or any amendment or supplement thereto by such Holder and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus or any amendment or supplement thereto) and such other documents as such Holder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities by such Holder or underwriter;

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(x)            on or prior to the date on which the applicable Registration Statement is declared effective, use its reasonable best efforts to register or qualify, and cooperate with the Participating Holders, the managing underwriter or underwriters, if any, and their respective counsel, in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or “Blue Sky” laws of each state and other jurisdiction of the United States as any Participating Holder or managing underwriter or underwriters, if any, or their respective counsel reasonably request in writing and do any and all other acts or things reasonably necessary or advisable to keep such registration or qualification in effect for such period as required by Section 2.01(d) or Section 2.02(b), whichever is applicable, provided that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to taxation or general service of process in any such jurisdiction where it is not then so subject;

(xi)           cooperate with the Participating Holders and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least two business days prior to any sale of Registrable Securities to the underwriters;

(xii)          use its reasonable best efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter or underwriters, if any, to consummate the disposition of such Registrable Securities;

(xiii)         not later than the effective date of the applicable Registration Statement, provide a CUSIP number for all Registrable Securities and provide the applicable transfer agent with printed certificates for the Registrable Securities which are in a form eligible for deposit with The Depository Trust Company;

(xiv)        make such representations and warranties to the Participating Holders and the underwriters or agents, if any, in form, substance and scope as are customarily made by issuers in secondary underwritten public offerings;

(xv)         enter into such customary agreements (including underwriting and indemnification agreements) and take all such other actions as the Sponsors or the managing underwriter or underwriters, if any, reasonably request in order to expedite or facilitate the registration and disposition of such Registrable Securities;

(xvi)        obtain for delivery to the Participating Holders and to the underwriter or underwriters, if any, an opinion or opinions from counsel for the Company dated the effective date of the Registration Statement or, in the event of an Underwritten Offering, the date of the closing under the underwriting agreement, in customary form, scope and substance, which opinions shall be reasonably satisfactory to such Holders or underwriters, as the case may be, and their respective counsel;

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(xvii)       in the case of an Underwritten Offering, obtain for delivery to the Company and the managing underwriter or underwriters, with copies to the Participating Holders, a cold comfort letter from the Company’s independent certified public accountants in customary form and covering such matters of the type customarily covered by cold comfort letters as the managing underwriter or underwriters reasonably request, dated the date of execution of the underwriting agreement and brought down to the closing under the underwriting agreement;

(xviii)      cooperate with each Participating Holder and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD;

(xix)         use its reasonable best efforts to comply with all applicable securities laws and make available to its security holders, as soon as reasonably practicable, an earnings statement satisfying the provisions of Section 11(a) of the Securities Act and the rules and regulations promulgated thereunder;

(xx)          provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by the applicable Registration Statement from and after a date not later than the effective date of such Registration Statement;

(xxi)         use its best efforts to cause all Registrable Securities covered by the applicable Registration Statement to be listed on each securities exchange on which any of the Company’s securities are then listed or quoted and on each inter-dealer quotation system on which any of the Company’s securities are then quoted;

(xxii)        make available upon reasonable notice at reasonable times and for reasonable periods for inspection by the Sponsors, by any underwriter participating in any disposition to be effected pursuant to such Registration Statement and by any attorney, accountant or other agent retained by the Sponsors or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company’s officers, directors and employees and the independent public accountants who have certified its financial statements to make themselves available to discuss the business of the Company and to supply all information reasonably requested by any such Person in connection with such Registration Statement as shall be necessary to enable them to exercise their due diligence responsibility; provided that any such Person gaining access to information regarding the Company pursuant to this Section 2.05(a)(xxii) shall agree to hold in strict confidence and shall not make any disclosure or use any information regarding the Company that the Company determines in good faith to be confidential, and of which determination such Person is notified, unless (w) the release of such information is requested or required (by deposition, interrogatory, requests for information or documents by a governmental entity, subpoena or similar process), (x) such information is or becomes publicly known other than through a breach of this or any other agreement of which such Person has knowledge, (y) such information is or becomes available to such Person on a non-confidential basis from a source other than the Company or (z) such information is independently developed by such Person; and

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(xxiii)       in the case of an Underwritten Offering, cause the senior executive officers of the Company to participate in the customary “road show” presentations that may be reasonably requested by the managing underwriter or underwriters in any such Underwritten Offering and otherwise to facilitate, cooperate with, and participate in each proposed offering contemplated herein and customary selling efforts related thereto.

(b)           The Company may require each Participating Holder to furnish to the Company such information regarding the distribution of such securities and such other information relating to such Holder and its ownership of Registrable Securities as the Company may from time to time reasonably request in writing.  Each Participating Holder agrees to furnish such information to the Company and to cooperate with the Company as reasonably necessary to enable the Company to comply with the provisions of this Agreement.

(c)           Each Participating Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2.05(a)(v), such Holder will forthwith discontinue disposition of Registrable Securities pursuant to such Registration Statement until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 2.05(a)(v), or until such Holder is advised in writing by the Company that the use of the Prospectus may be resumed, and if so directed by the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice.  In the event the Company shall give any such notice, the period during which the applicable Registration Statement is required to be maintained effective shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each seller of Registrable Securities covered by such Registration Statement either receives the copies of the supplemented or amended Prospectus contemplated by Section 2.05(a)(v) or is advised in writing by the Company that the use of the Prospectus may be resumed.

(d)           Holders may seek to register different types of Registrable Securities simultaneously, and the Company shall use its reasonable best efforts to effect such Registration and sale in accordance with the intended method or methods of disposition specified by such Holders.

SECTION 2.06.      Underwritten Offerings.

(a)           Demand and Shelf Registrations.  If requested by the underwriters for any Underwritten Offering requested by the Sponsors pursuant to a Registration under Section 2.01 or Section 2.02, the Company shall enter into an underwriting agreement with such underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Company, the Sponsors and the underwriters, and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of that type, including indemnities no less favorable to the recipient thereof than those provided in Section 2.09.  The Participating Holders shall cooperate with the Company in the negotiation of such underwriting agreement and shall give consideration to the reasonable suggestions of the Company regarding the form thereof.  Such Holders shall be parties to such underwriting agreement, which underwriting agreement shall (i) contain such representations and warranties

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by, and the other agreements on the part of, the Company to and for the benefit of such Holders as are customarily made by issuers to selling stockholders in secondary underwritten public offerings and (ii) provide that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also shall be conditions precedent to the obligations of such Holders.  Such Holders shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Holders, such Holder’s title to the Registrable Securities, such Holder’s intended method of distribution and any other representations required to be made by such Holder under applicable law, and the aggregate amount of the liability of such Holder shall not exceed such Holder’s net proceeds from such Underwritten Offering.

(b)           Piggyback Registrations.  If the Company proposes to register any of its securities under the Securities Act as contemplated by Section 2.03 and such securities are to be distributed in an Underwritten Offering through one or more underwriters, the Company shall, if requested by any Holder pursuant to Section 2.03 and subject to the provisions of Section 2.03(b), use its reasonable best efforts to arrange for such underwriters to include on the same terms and conditions that apply to the other sellers in such Registration all the Registrable Securities to be offered and sold by such Holder among the securities of the Company to be distributed by such underwriters in such Registration.  The Participating Holders shall be parties to the underwriting agreement between the Company and such underwriters, which underwriting agreement shall (i) contain such representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such Holders as are customarily made by issuers to selling stockholders in secondary underwritten public offerings and (ii) provide that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also shall be conditions precedent to the obligations of such Holders.  Any such Holder shall not be required to make any representations or warranties to, or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Holder; such Holder’s title to the Registrable Securities and such Holder’s intended method of distribution or any other representations required to be made by such Holder under applicable law, and the aggregate amount of the liability of such Holder shall not exceed such Holder’s net proceeds from such Underwritten Offering.

(c)           Participation in Underwritten Registrations.  Subject to provisions of Sections 2.06(a) and (b) above, no Person may participate in any Underwritten Offering hereunder unless such Person (i) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Persons entitled to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

(d)           Price and Underwriting Discounts.  In the case of an Underwritten Offering under Section 2.01 or 2.02, the price, underwriting discount and other financial terms for the Registrable Securities shall be determined by the Demanding Sponsor  (or, in the case of a Shelf Registration, the Sponsor selling Registrable Securities under the Shelf Registration Statement).  In addition, in the case of any Underwritten Offering, each of the Holders may withdraw their request to participate in the registration pursuant to Section 2.01, 2.02 or 2.03 after being advised of such price, discount and other terms and shall not be required to enter into any agreements or documentation that would require otherwise.

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SECTION 2.07.      No Inconsistent Agreements; Additional Rights.  The Company shall not hereafter enter into, and is not currently a party to, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders by this Agreement.  Without the consent of the Sponsors, the Company shall not enter into any agreement granting registration or similar rights to any Person.

SECTION 2.08.      Registration Expenses.  All expenses incident to the Company’s performance of or compliance with this Agreement shall be paid by the Company, including (i) all registration and filing fees, and any other fees and expenses associated with filings required to be made with the SEC or the NASD, (ii) all fees and expenses in connection with compliance with any securities or “Blue Sky” laws, (iii) all printing, duplicating, word processing, messenger, telephone, facsimile and delivery expenses (including expenses of printing certificates for the Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing prospectuses), (iv) all fees and disbursements of counsel for the Company and of all independent certified public accountants of the Company (including the expenses of any special audit and cold comfort letters required by or incident to such performance), (v) Securities Act liability insurance or similar insurance if the Company so desires or the underwriters so require in accordance with then-customary underwriting practice, (vi) all fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange or quotation of the Registrable Securities on any inter-dealer quotation system, (vii) all applicable rating agency fees with respect to the Registrable Securities, (viii) all reasonable fees and disbursements of legal counsel selected by the Demanding Sponsor  (or, in the case of a Shelf Registration, the Sponsor selling Registrable Securities under the Shelf Registration Statement), (ix) all fees and expenses of accountants selected by the Demanding Sponsor  (or, in the case of a Shelf Registration, the Investor selling Registrable Securities under the Shelf Registration Statement), (x) any reasonable fees and disbursements of underwriters customarily paid by issuers or sellers of securities, (xi) all fees and expenses of any special experts or other Persons retained by the Company in connection with any Registration, (xii) all of the Company’s internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties) and (xiii) all expenses related to the “road-show” for any underwritten offering, including all travel, meals and lodging.  All such expenses are referred to herein as “Registration Expenses.”  The Company shall not be required to pay any fees and disbursements to underwriters not customarily paid by the issuers of securities in a secondary offering, including underwriting discounts and commissions and transfer taxes, if any, attributable to the sale of Registrable Securities.

SECTION 2.09.      Indemnification.

(a)           Indemnification by the Company.  The Company agrees to indemnify and hold harmless, to the full extent permitted by law, each Holder, each member, limited or general partner thereof, each member, limited or general partner of each such member, limited or general partner, each of their respective Affiliates, officers, directors, shareholders, employees, advisors, and agents and each Person who controls (within the meaning of the Securities Act or the Exchange Act) such Persons and each of their respective Representatives from and against any and all losses, penalties, judgments, suits, costs, claims, damages, liabilities and expenses, joint or several (including reasonable costs of investigation and legal expenses) (each, a “Loss” and collectively “Losses”) arising out of or based upon (i) any untrue or alleged untrue statement of a

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material fact contained in any Registration Statement under which such Registrable Securities were Registered under the Securities Act (including any final, preliminary or summary Prospectus contained therein or any amendment thereof or supplement thereto or any documents incorporated by reference therein) or any other disclosure document produced by or on behalf of the Company or any of its subsidiaries including, without limitation, reports and other documents filed under the Exchange Act, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus or preliminary Prospectus, in light of the circumstances under which they were made) not misleading or (iii) any actions or inactions or proceedings in respect of the foregoing whether or not such indemnified party is a party thereto; provided, that the Company shall not be liable to any particular indemnified party (A) to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any such Registration Statement or other document in reliance upon and in conformity with written information furnished to the Company by such indemnified party expressly for use in the preparation thereof or (B) to the extent that any such Loss arises out of or is based upon an untrue statement or omission in a preliminary Prospectus relating to Registrable Securities, if a Prospectus (as then amended or supplemented) that would have cured the defect was furnished to the indemnified party from whom the Person asserting the claim giving rise to such Loss purchased Registrable Securities at least five (5) days prior to the written confirmation of the sale of the Registrable Securities to such Person and a copy of such Prospectus (as amended and supplemented) was not sent or given by or on behalf of such indemnified party to such Person at or prior to the written confirmation of the sale of the Registrable Securities to such Person.  This indemnity shall be in addition to any liability the Company may otherwise have.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder or any indemnified party and shall survive the transfer of such securities by such Holder.  The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of the Securities Act and the Exchange Act) to the same extent as provided above with respect to the indemnification of the indemnified parties.

(b)           Indemnification by the Participating Holders.  Each Participating Holder agrees (severally and not jointly) to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act or the Exchange Act) from and against any Losses resulting from (i) any untrue statement of a material fact in any Registration Statement under which such Registrable Securities were Registered under the Securities Act (including any final, preliminary or summary Prospectus contained therein or any amendment thereof or supplement thereto or any documents incorporated by reference therein), or (ii) any omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus or preliminary Prospectus, in light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information furnished in writing by such Holder to the Company specifically for inclusion in such Registration Statement and has not been corrected in a subsequent writing prior to or concurrently with the sale of the Registrable Securities to the Person asserting the claim.  In no event shall the liability of such Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder under the sale of

19

Registrable Securities giving rise to such indemnification obligation.  The Company shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above (with appropriate modification) with respect to information furnished in writing by such Persons specifically for inclusion in any Prospectus or Registration Statement.

(c)           Conduct of Indemnification Proceedings.  Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that any delay or failure to so notify the indemnifying party shall relieve the indemnifying party of its obligations hereunder only to the extent, if at all, that it is actually and materially prejudiced by reason of such delay or failure) and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any Person entitled to indemnification hereunder shall have the right to select and employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (A) the indemnifying party has agreed in writing to pay such fees or expenses, (B) the indemnifying party shall have failed to assume the defense of such claim within a reasonable time after receipt of notice of such claim from the Person entitled to indemnification hereunder and employ counsel reasonably satisfactory to such Person, (C) the indemnified party has reasonably concluded (based upon advice of its counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, or (D) in the reasonable judgment of any such Person (based upon advice of its counsel) a conflict of interest may exist between such Person and the indemnifying party with respect to such claims (in which case, if the Person notifies the indemnifying party in writing that such Person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such Person).  If the indemnifying party assumes the defense, the indemnifying party shall not have the right to settle such action without the consent of the indemnified party.  No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of an unconditional release from all liability in respect to such claim or litigation without the prior written consent of such indemnified party.  If such defense is not assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its prior written consent, but such consent may not be unreasonably withheld.  It is understood that the indemnifying party or parties shall not, except as specifically set forth in this Section 2.09(c), in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements or other charges of more than one separate firm admitted to practice in such jurisdiction at any one time unless (x) the employment of more than one counsel has been authorized in writing by the indemnifying party or parties, (y) an indemnified party has reasonably concluded (based on the advice of counsel) that there may be legal defenses available to it that are different from or in addition to those available to the other indemnified parties or (z) a conflict or potential conflict exists or may exist (based upon advice of counsel to an indemnified party) between such indemnified party and the other indemnified parties, in each of which cases the indemnifying party shall be obligated to pay the reasonable fees and expenses of such additional counsel or counsels.

20

(d)           Contribution.        If for any reason the indemnification provided for in paragraphs (a) and (b) of this Section 2.09 is unavailable to an indemnified party or insufficient in respect of any Losses referred to therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such Loss (i) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party or parties on the other hand in connection with the acts, statements or omissions that resulted in such losses, as well as any other relevant equitable considerations.  In connection with any Registration Statement filed with the SEC by the Company, the relative fault of the indemnifying party on the one hand and the indemnified party on the other hand shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The parties hereto agree that it would not be just or equitable if contribution pursuant to this Section 2.09(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in this Section 2.09(d).  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.  The amount paid or payable by an indemnified party as a result of the Losses referred to in Sections 2.09(a) and 2.09(b) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 2.09(d), in connection with any Registration Statement filed by the Company, a Participating Holder shall not be required to contribute any amount in excess of the dollar amount of the net proceeds received by such Holder under the sale of Registrable Securities giving rise to such contribution obligation.  If indemnification is available under this Section 2.09, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Sections 2.09(a) and 2.09(b) hereof without regard to the provisions of this Section 2.09(d).  The remedies provided for in this Section 2.09 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.

SECTION 2.10.      Rules 144 and 144A and Regulation S.  The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, it will, upon the reasonable request of the Sponsors, make publicly available such necessary information for so long as necessary to permit sales pursuant to Rules 144, 144A or Regulation S under the Securities Act), and it will take such further action as the Sponsors may reasonably request, all to the extent required from time to time to enable the Sponsors to sell Registrable Securities without Registration under the Securities Act within the limitation of the exemptions provided by (i) Rules 144, 144A or Regulation S under the Securities Act, as such Rules may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC.  Upon the reasonable request of a Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements and, if not, the specifics thereof.

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ARTICLE III

MISCELLANEOUS

SECTION 3.01.      Term.  This Agreement shall terminate upon the later of the expiration of the Shelf Period and such time as there are no Registrable Securities, except for the provisions of Sections 2.09 and 2.10 and all of this Article III, which shall survive any such termination.

SECTION 3.02.      Injunctive Relief.  It is hereby agreed and acknowledged that it will be impossible to measure in money the damage that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved Person will be irreparably damaged and will not have an adequate remedy at law.  Any such Person shall, therefore, be entitled (in addition to any other remedy to which it may be entitled in law or in equity) to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law.

SECTION 3.03.      Attorneys’ Fees.  In any action or proceeding brought to enforce any provision of this Agreement or where any provision hereof is validly asserted as a defense, the successful party shall, to the extent permitted by applicable law, be entitled to recover reasonable attorneys’ fees in addition to any other available remedy.

SECTION 3.04.      Notices.  Unless otherwise specified herein, all notices and other communications authorized or required to be given pursuant to this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by personal hand-delivery, by facsimile transmission, by electronic mail, by mailing the same in a sealed envelope, registered first-class mail, postage prepaid, return receipt requested, or by air courier guaranteeing overnight delivery, sent to the Person at the address given for such Person below or such other address as such Person may specify by notice to the Company:

To the Company with a copy (which shall not constitute notice) to the Sponsors:

Newton Acquisition, Inc.
One Marcus Square

1618 Main Street

Dallas, TX 75201

Telephone: 214.741.6911

To the Sponsors:

Texas Pacific Group
301 Commerce Street
Suite 3300
Fort Worth, Texas 76102
Attention:  David A. Spuria
Telephone:  817.871.4000
Fax:  817.871.4088

22

Warburg Pincus LLC

466 Lexington Avenue

New York, NY 10017

Attention: Kewsong Lee and Scott A. Arenare

Telephone: 212.878.0600

Fax: 212.878.9100

with a copy (which shall not constitute notice) to:

Cleary, Gottlieb, Steen & Hamilton LLP
One Liberty Plaza
New York, NY 10006
Attention:  David Leinwand, Esq.
Telephone:  212.225.2000
Fax:  212.225.3999

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, NY 10019-6099

Attention: Holly K. Youngwood, Esq. and Steven J. Gartner, Esq.

Telephone:  212.728.8000

Fax: 212.728.8111

To the Holders:

Texas Pacific Group
301 Commerce Street
Suite 3300
Fort Worth, Texas 76102
Attention:  David A. Spuria
Telephone:  817.871.4000
Fax:  817.871.4088

Warburg Pincus LLC

466 Lexington Avenue

New York, NY 10017

Attention: Kewsong Lee and Scott A. Arenare

Telephone: 212.878.0600

Fax: 212.878.9100

23

DLJ Merchant Banking III, Inc.

Eleven Madison Avenue

New York, NY 10010

Attention: Steven Rattner and Mark Edwards

Telephone:  212.325.2000

with a copy (which shall not constitute notice) to:

Cleary, Gottlieb, Steen & Hamilton LLP
One Liberty Plaza
New York, NY 10006
Attention:  David Leinwand, Esq.
Telephone:  212.225.2000
Fax:  212.225.3999

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, NY 10019-6099

Attention: Holly K. Youngwood, Esq. and Steven J. Gartner, Esq.

Telephone:  212.728.8000

Fax: 212.728.8111

Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention:  Douglas P. Warner, Esq.
Telephone:  212.310.8000
Fax:  212.310.8007

SECTION 3.05.      Amendment.  Any provision of this Agreement may be amended if, and only if, such amendment is in writing and signed by the Sponsors; provided that (a) any amendment that would have a material adverse effect on a Holder shall require the written consent of that Holder and (b) this Section 3.05 may not be amended without the prior written consent of all of the Holders.

SECTION 3.06.      Successors, Assigns and Transferees.  Each party may assign all or a portion of its rights hereunder to any Person to which such party transfers its ownership of all or any of its Registrable Securities and any Person that acquires Registrable Securities pursuant to the terms of the Holding LLC Agreement (collectively, “Permitted Transferees”).

SECTION 3.07.      Binding Effect.  Except as otherwise provided in this Agreement, the terms and provisions of this Agreement shall be binding on and inure to the benefit of each of the parties hereto and their respective successors.

SECTION 3.08.      Third Parties.  Nothing in this Agreement, express or implied, is intended or shall be construed to confer upon any Person not a party hereto (other

24

than each other Person entitled to indemnity or contribution under Section 2.09) any right, remedy or claim under or by virtue of this Agreement.

SECTION 3.09.      Governing Law; Jurisdiction.  THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.  ANY ACTION OR PROCEEDING AGAINST THE PARTIES RELATING IN ANY WAY TO THIS AGREEMENT MAY BE BROUGHT AND ENFORCED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR (TO THE EXTENT SUBJECT MATTER JURISDICTION EXISTS THEREFOR) THE U.S. DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND THE PARTIES IRREVOCABLY SUBMIT TO THE JURISDICTION OF BOTH SUCH COURTS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING.

SECTION 3.10.      Severability.  If any provision of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 3.11.      Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same agreement.

SECTION 3.12.      Headings.  The heading references herein and in the table of contents hereto are for convenience purposes only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

25

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

NEWTON ACQUISITION, INC.
By:	/s/ David A. Spuria
Name:	David A. Spuria
Title:	Vice President
NEWTON ACQUISITION MERGER SUB, INC.
By:	/s/ David A. Spuria
Name:	David A. Spuria
Title:	Vice President

[Registration Rights Agreement]

TPG PARTNERS IV, L.P.
By:	TPG GenPar IV, L.P., its General Partner
By:	TPG Advisors IV, Inc., its General Partner
By:	/s/ David A. Spuria
	Name:	David A. Spuria
	Title:	Vice President
TPG NEWTON III LLC
By:	TPG Partners III, L.P., its Managing Member
By:	TPG GenPar III, L.P., its General Partner
By:	TPG Advisors III, Inc., its General Partner
By:	/s/ David A. Spuria
	Name:	David A. Spuria
	Title:	Vice President
TPG NEWTON CO-INVEST I LLC
By:	TPG GenPar IV, L.P., its Managing Member
By:	TPG Advisors IV, Inc., its General Partner
By:	/s/ David A. Spuria
	Name:	David A. Spuria
	Title:	Vice President

[Registration Rights Agreement]

WARBURG PINCUS PRIVATE EQUITY VIII, L.P.
By:	Warburg Pincus Partners, LLC, its General Partner
By:	Warburg Pincus & Co., its Managing Member
By:	/s/ Kewsong Lee
	Name:	Kewsong Lee
	Title:	Partner
WARBURG PINCUS NETHERLANDS PRIVATE EQUITY VIII C.V. I
By:	Warburg Pincus Partners, LLC, its General Partner
By:	Warburg Pincus & Co., its Managing Member
By:	/s/ Kewsong Lee
	Name:	Kewsong Lee
	Title:	Partner
WARBURG PINCUS GERMANY PRIVATE EQUITY VIII, K.G.
By:	Warburg Pincus Partners, LLC, its General Partner
By:	Warburg Pincus & Co., its Managing Member
By:	/s/ Kewsong Lee
	Name:	Kewsong Lee
	Title:	Partner

[Registration Rights Agreement]

WARBURG PINCUS PRIVATE EQUITY IX, L.P.
By: Warburg Pincus IX LLC, its General Partner
By:	/s/ Kewsong Lee
	Name:	Kewsong Lee
	Title:	Managing Director

[Registration Rights Agreement]

DLJ MERCHANT BANKING PARTNERS III, L.P.
By: DLJ Merchant Banking III, Inc., its Managing General
Partner
By:	/s/ George R. Hornig
	Name: George R. Hornig
	Title: Managing Director
DLJ MERCHANT BANKING III, INC., as Advisory General Partner on behalf of
DLJ OFFSHORE PARTNERS III-1, C.V. and as attorney-in-fact for DLJ Merchant Banking III, L.P., as
Associate General Partner of DLJ Offshore Partners III-1,
C.V.
By:	/s/ George R. Hornig
	Name: George R. Hornig
	Title: Managing Director
DLJ MERCHANT BANKING III, INC., as Advisory General Partner on behalf of
DLJ OFFSHORE PARTNERS III-2, C.V. and as attorney-in-fact for DLJ Merchant Banking III, L.P., as
Associate General Partner of DLJ Offshore Partners III-2,
C.V.
By:	/s/ George R. Hornig
	Name: George R. Hornig
	Title: Managing Director
DLJ MERCHANT BANKING III, INC., as Advisory General Partner on behalf of
DLJ OFFSHORE PARTNERS III, C.V.
By:	/s/ George R. Hornig
	Name: George R. Hornig
	Title: Managing Director

[Registration Rights Agreement]

DLJ MB PARTNERS III GmbH & Co. KG
By: DLJ Merchant Banking III, Inc., the General Partner of
DLJ Merchant Banking III, L.P., its Managing Limited Partner
By:	/s/ George R. Hornig
	Name: George R. Hornig
	Title: Managing Director
By: DLJ MB GmbH, as General Partner
	By:	/s/ Michael Isikow
		Name: Michael Isikow
		Title: Managing Director
	By:	/s/ Edward S. Nadel
		Name: Edward S. Nadel
		Title: Managing Director
MILLENNIUM PARTNERS II, L.P.
By: DLJ Merchant Banking III, Inc., its Managing
General Partner
By:	/s/ George R. Hornig
	Name: George R. Hornig
	Title: Managing Director
MBP III PLAN INVESTORS, L.P.
By: DLJ LBO Plans Management Corporation II, its
General Partner
By:	/s/ George R. Hornig
	Name: George R. Hornig
	Title: President

[Registration Rights Agreement]

NEWTON CO-INVEST I LLC
By: Newton Manager Co-Invest, LLC, its Managing
Member
By:	/s/ David A. Spuria
	Name:	David A. Spuria
	Title:	Vice President and Secretary
NEWTON CO-INVEST II LLC
By: Newton Manager Co-Invest, LLC, its Managing
Member
By:	/s/ David A. Spuria
	Name:	David A. Spuria
	Title:	Vice President and Secretary

[Registration Rights Agreement]

NEWTON HOLDINGS, LLC
By:	/s/ David A. Spuria
	Name:	David A. Spuria
	Title:	Vice President and Secretary

[Registration Rights Agreement]

EX-10.33

EXHIBIT 10.33

AMENDMENT NO. 1 dated as of March 28, 2006 (this “Amendment”), to the Pledge and Security and Intercreditor Agreement dated as of October 6, 2005 (the “Security Agreement”), among NEIMAN MARCUS, INC. (formerly Newton Acquisition, Inc.), a Delaware corporation, THE NEIMAN MARCUS GROUP, INC., a Delaware corporation, each Subsidiary Party from time to time party thereto, and CREDIT SUISSE, as administrative agent and as collateral agent for the Secured Parties.

A.     In accordance with the terms of the Existing Notes Indenture, the Borrower is required to equally and ratably secure the 2028 Debentures with that portion of the Collateral that constitutes Existing Notes Designated Collateral.

B.     In furtherance of the parties’ original intention to limit the Collateral that secures the 2028 Debentures to the Existing Notes Designated Collateral, the Borrower has requested certain amendments to the Security Agreement as set forth herein.

C.     The Required Lenders concur with, and consent to, such amendments and, accordingly, the Agent is willing to enter into this Amendment to effectuate such amendments.

D.     Capitalized terms used but not defined herein shall have the meanings assigned to them in the Security Agreement.

E.     Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1.  Amendments.  (a)  The second paragraph of Article II of the Security Agreement is hereby amended by:

(i)    inserting the following immediately prior to the period at the end of the second line thereof:

(ii)   inserting the following immediately prior to the period at the end of the second line thereof:

“, and (B) with respect to the Existing Notes Secured Parties and Existing Notes Obligations, (i) in no event shall the Existing Notes Secured Parties have any rights in or with respect to any Collateral, or proceeds from Collateral, that is not Existing Notes Designated Collateral, (ii) the “Collateral” shall not include, nor shall the security interest attach to, any asset that does not constitute Existing Notes Designated Collateral and (iii) all references to “Collateral” when used in connection with the Existing Notes Secured Parties or the Existing Notes Obligations shall be limited to the Existing Notes Designated Collateral, and where applicable, proceeds of such Existing Notes Designated Collateral”

(b)Section 7.1 of the Security Agreement is hereby amended by inserting the words “and subject in all respects to the last paragraph of Article II” immediately after the words “Section 5.4” in the fifth line thereof.

(c)Section 11.8 of the Security Agreement is hereby amended by deleting the words “Section 10.02 of the Credit Agreement” in the seventh and eighth lines thereof and substituting therefor the words “Section 9.02 of the Term Loan Credit Agreement”.

Section 2.    Effectiveness. This Amendment shall become effective as of the date set forth above on the date on which the Agent shall have received counterparts of this Amendment that, when taken together, bear the signatures of each of the parties hereto.

Section 3.     Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof.

Section 4.     Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

Section 5.     Headings. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

[Remainder of this page intentionally left blank]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their duly authorized officers, all as of the date and year first above written.

	NEIMAN MARCUS, INC.
By:		/s/ Nelson A. Bangs
Name:		Nelson A. Bangs
Title:		Senior Vice President and General Counsel
	THE NEIMAN MARCUS GROUP, INC.
By:		/s/ Nelson A. Bangs
Name:		Nelson A. Bangs
Title:		Senior Vice President and General Counsel
			EACH OF THE SUBSIDIARY PARTIES LISTED ON
			EXHIBIT A HERETO,
By:		/s/ Nelson A. Bangs
Name:		Nelson A. Bangs
Title:		Vice President

	NM NEVADA TRUST,
By:	/s/ Nelson A. Bangs
Name:	Nelson A. Bangs
Title:	Vice President
	CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as
	Agent
By:	/s/ Robert Hetu
Name:	Robert Hetu
Title:	Managing Director
By:	/s/ Cassandra Droogan
Name:	Cassandra Droogan
Title:	Vice President

Exhibit a

Subsidiary Parties

Bergdorf Goodman, Inc.

Bergdorf Graphics, Inc.

BergdorfGoodman.com, LLC

Neiman Marcus Holdings, Inc.

NEMA Beverage Corporation

NEMA Beverage Holding Corporation

NEMA Beverage Parent Corporation

NM Financial Services, Inc.

NMGP, LLC

Worth Avenue Leasing Company

EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Karen W. Katz, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Neiman Marcus, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 10, 2011

/s/ KAREN W. KATZ

Karen W. Katz

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, James E. Skinner, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Neiman Marcus, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 10, 2011

/s/ JAMES E. SKINNER

James E. Skinner

Executive Vice President, Chief Operating Officer and Chief Financial Officer

EX-32

EXHIBIT 32

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Neiman Marcus, Inc. (the Company) hereby certifies, to such officer’s knowledge, that:

(i) the Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended January 29, 2011 (the Report) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 10, 2011	/s/ KAREN W. KATZ
	Karen W. Katz
	President and Chief Executive Officer

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Neiman Marcus, Inc. (the Company) hereby certifies, to such officer’s knowledge, that:

(i) the Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended January 29, 2011 (the Report) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 10, 2011	/s/ JAMES E. SKINNER
	James E. Skinner
	Executive Vice President, Chief Operating Officer and Chief Financial Officer