Neiman Marcus 2004 Annual Report Download - page 22

LLC has in turn delivered an equity commitment letter to Merger Sub for $1.55 billion, the aggregate amount of the equity commitments. Each of the
Sponsors may assign its commitment to purchase up to 49% of the equity interests in Newton Holding, LLC to other investors, so long as each such investor
agrees to be bound by the obligations of the applicable Sponsor.
Each of the equity commitment letters provides that the equity funds will be contributed on or prior to the closing of the merger to fund a portion of the
total merger consideration, pursuant to and in accordance with the merger agreement, and to satisfy any liabilities or obligations of Merger Sub's corporate
parent, Newton Acquisition, Inc. (Parent) or Merger Sub arising out of or in connection with any breach by Parent or Merger Sub of their respective
obligations under the merger agreement. Each of the equity commitments is generally subject to the satisfaction of the conditions to Parent and Merger Sub's
obligations to effect the closing under the merger agreement. Each of the equity commitment letters will terminate upon termination of the merger agreement
unless:
the merger agreement is terminated by us due to a breach by either Parent or Merger Sub of any of its respective representations, warranties,
covenants or agreements under the merger agreement such that the conditions to closing would not be satisfied; or
the merger agreement is otherwise terminated pursuant to a breach by Parent or Merger Sub of their respective obligations under the merger
agreement and we are not in breach of our obligations under the merger agreement.
In the event the merger agreement is terminated pursuant to a circumstance described in the foregoing two bullet points, then each of the equity
commitment letters will terminate three months after the termination of the merger agreement except with respect to any claims arising from or in connection
with any lawsuits filed by us against Parent or Merger Sub prior to the expiration of such three-month period. Under certain circumstances, in connection with
the termination of the merger agreement, we will be required to pay Parent $140.3 million in termination fees.
In the event that we terminate the merger agreement because Parent (i) breaches its obligations to effect the closing and satisfy its obligations with
respect to payment of the merger consideration when all conditions to the closing are satisfied and the marketing period has expired and (ii) Parent fails to
effect the closing because of a failure to receive the proceeds of one or more of the debt financings contemplated by the debt financing commitments or
because of its refusal to accept debt financing on terms materially less beneficial to it than the terms set forth in the debt financing commitments, Merger Sub
will be required to pay us a $140.3 million termination fee. This termination fee payable to us is our exclusive remedy unless, in general, Parent is otherwise
in breach of the merger agreement, in which case we may pursue a damages claim. The aggregate liability of Parent and its affiliates arising from any breach
of the merger agreement is in any event capped at $500,000,000.
In connection with the Sponsors' purchase of the Company, the Company will incur significant indebtedness and will be highly leveraged. See "Liquidity
and Capital Resources—Financing Structure Related to the Acquisition." In addition, the Transaction will be accounted for using purchase accounting
whereby the purchase price paid to effect the Transactions will be allocated to state the acquired assets and liabilities at fair value. We believe the purchase
accounting adjustments will increase the carrying value of our property and equipment, establish intangible assets for our tradenames, customer lists and
favorable lease commitments and revalue our long-term benefit plan obligations, among other things. Subsequent to the Transactions, interest expense and
non-cash depreciation and amortization charges will significantly increase. As a result, our financial statements subsequent to the Transactions will not be
comparable to our historical financial statements.
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