Neiman Marcus 2005 Annual Report Download - page 103

NMG's non-guarantor subsidiaries totaled approximately $21.0 million, or 0.4% of consolidated liabilities, and the assets of NMG's non-
guarantor subsidiaries aggregated approximately $143.3 million, or 2.2% of consolidated total assets. 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 NMG's assets and the assets of NMG and NMG's subsidiaries that have guaranteed the Asset-Based Revolving Credit
Facility (subsidiary guarantors), including:
• a first-priority security interest in personal property consisting of inventory and related accounts, cash, deposit accounts, all
payments received by NMG or the subsidiary guarantors from credit card clearinghouses and processors or otherwise in
respect of all credit card charges for sales of inventory by NMG and the subsidiary guarantors, certain related assets and
proceeds of the foregoing; and
• a second-priority pledge of 100% of NMG's capital stock and certain of the capital stock held by NMG, the Company or
any subsidiary guarantor (which pledge, in the case of any foreign subsidiary is limited to 100% of the non-voting stock (if
any) and 65% of the voting stock of such foreign subsidiary); and
• a second-priority security interest in, and mortgages on, substantially all other tangible and intangible assets of NMG, the
Company and each subsidiary guarantor, including a significant portion of NMG's material owned and leased real property
(which currently consists of approximately half of NMG's full-line retail stores) and equipment.
Capital stock and other securities of a subsidiary of NMG that are owned by NMG or any subsidiary guarantor will not
constitute collateral under NMG's Asset-Based Revolving Credit Facility to the extent that such securities cannot secure NMG's 2028
Debentures or other secured public debt obligations without requiring the preparation and filing of separate financial statements of such
subsidiary in accordance with applicable Securities and Exchange Commission's rules. As a result, the collateral under NMG's Asset-
Based Revolving Credit Facility will include shares of capital stock or other securities of subsidiaries of NMG or any subsidiary guarantor
only to the extent that the applicable value of such securities (on a subsidiary-by-subsidiary basis) is less than 20% of the aggregate
principal amount of the 2028 Debentures or other secured public debt obligations of NMG. Stock of Kate Spade LLC and its assets also
do not constitute collateral under NMG's Asset-Based Revolving Credit Facility.
The Company's Asset-Based Revolving Credit Facility contains a number of covenants that, among other things and subject to
certain significant exceptions, restrict its ability and the ability of its subsidiaries to:
• incur additional indebtedness;
• pay dividends on NMG's capital stock or redeem, repurchase or retire NMG's capital stock or indebtedness;
• make investments, loans, advances and acquisitions;
• create restrictions on the payment of dividends or other amounts to NMG from its subsidiaries that are not guarantors;
• engage in transactions with NMG's affiliates;
• sell assets, including capital stock of NMG's subsidiaries;
• consolidate or merge;
• create liens; and
• enter into sale and lease back transactions.
The covenants limiting dividends and other restricted payments; investments, loans, advances and acquisitions; and prepayments
or redemptions of other indebtedness, each permit the restricted actions in an unlimited amount, subject to the satisfaction of certain
payment conditions, principally that NMG must have at least $75.0 million of pro forma excess availability under the Asset-Based
Revolving Credit Facility and that NMG must be in pro forma compliance with the fixed charge coverage ratio described below.
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