Neiman Marcus 2005 Annual Report Download - page 43

to LIBOR loans. There is no scheduled amortization under the Asset-Based Revolving Credit Facility; the principal amount of the loans
outstanding is due and payable in full on October 6, 2010.
All obligations under the Asset-Based Revolving Credit Facility are guaranteed by the Company and certain of NMG's existing
and future domestic subsidiaries (excluding, among others, Kate Spade LLC). As of July 29, 2006, the liabilities of 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 the
assets of the Company and 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 SEC 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 will not constitute collateral under NMG's
Asset-Based Revolving Credit Facility.
NMG'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
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