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Neiman Marcus, Inc.

10-K

Annual report pursuant to section 13 and 15(d)

Filed on 10/20/2009

Filed Period 08/01/2009

Page 1
Neiman Marcus, Inc. 10-K Annual report pursuant to section 13 and 15(d) Filed on 10/20/2009 Filed Period 08/01/2009

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...(State or other jurisdiction of incorporation or organization) 1618 Main Street Dallas, Texas (Address of principal executive offices) 20-3509435 (I.R.S. Employer Identification No.) 75201 (Zip code) Neiman Marcus, Inc. Registrant's telephone number, including area code: (214) 743-7600 Securities...

Page 3
... o No x The aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates of the registrant is zero. The registrant is a privately held corporation. As of October 1, 2009, the registrant had outstanding 1,013,082 shares of its common stock, par value $0.01 per...

Page 4
... Disclosures about Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other information Directors and Executive Officers of the Registrant Executive Compensation Security Ownership of...

Page 5
..., shoes, cosmetics, men's clothing and furnishings, precious and designer jewelry, decorative home accessories, fine china, crystal and silver, children's apparel and gift items. We locate our Neiman Marcus stores at carefully selected venues in major metropolitan markets across the United States...

Page 6
... in Kate Spade LLC, a designer and marketer of high-end accessories. In April 2005, the minority investor in Kate Spade LLC exercised the put option with respect to the sale of the full amount of its 44% stake in such company to NMG. In October 2006, we entered into an agreement to settle the put...

Page 7
... associates; marketing programs designed to promote customer awareness of our offerings of the latest fashion trends; loyalty programs designed to cultivate long-term relationships with our customers; and facilitating the extension of credit to our customers through a proprietary credit card program...

Page 8
... publications include The Book for Men, the Bergdorf Goodman Magazine and specific designer mailers. We also believe that the online and print catalog operations of Direct Marketing promote brand awareness, which benefits the operations of our retail stores. Loyalty Programs. We maintain a loyalty...

Page 9
... connection with promotional events and customer relationship programs targeting specific customers based upon their past spending patterns for certain brands, merchandise categories and store locations. Integrated Multi-Channel Model. We offer products through our complementary Direct Marketing and...

Page 10
... the related compensation expenses that we incur. For more information related to allowances received from vendors, see Note 1 to our audited consolidated financial statements included herein. In order to expand our product assortment, we offer certain merchandise, primarily precious jewelry, which...

Page 11
.... For products stored in locker stock, we can ship replenishment merchandise to the stores that demonstrate the highest customer demand. In addition, our sales associates can use the program to ship items directly to our customers, thereby improving customer service and increasing productivity. This...

Page 12
... 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...

Page 13
... 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...

Page 14
... that are less highly leveraged; limit NMG's ability to obtain credit from our vendors and/or the vendors' factors; 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...

Page 15
... 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...

Page 16
... 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...

Page 17
... 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...

Page 18
... of our full-line Neiman Marcus and Bergdorf Goodman stores. 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, hiring and training...

Page 19
... program agreement with HSBC in June 2005 which provides for a long-term marketing and servicing alliance under which HSBC offers proprietary credit card accounts to our customers under both the "Neiman Marcus" and "Bergdorf Goodman" brand names. Under the terms of this alliance, HSBC offers credit...

Page 20
... 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...

Page 21
...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...

Page 22
... for Neiman Marcus, Bergdorf Goodman and Direct Marketing are located in Dallas, Texas; New York, New York; and Irving, Texas, respectively. Properties that we use in our operations include Neiman Marcus stores, Bergdorf Goodman stores, clearance centers and distribution, support and office...

Page 23
... to secure our senior secured credit facilities and the 2028 Debentures. We recently opened new stores in Charlotte...2008 and Bellevue, Washington (125,000 square feet) in September 2009 and currently plan to open new stores in Walnut Creek, California in 2012 (85,000 square feet planned) and San...

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...forth certain details regarding these stores: Bergdorf Goodman Stores Fiscal Year Operations Began Gross Store Sq. Feet New York City (Main)(1) New York City (Men's)(1)* (1) * Leased. Mortgaged to secure our senior secured credit facilities and the 2028 Debentures. Locations 1901 1991 250,000 66...

Page 25
... buying and occupancy costs (excluding depreciation) Selling, general and administrative expenses (excluding depreciation) Income from credit card program, net Depreciation and amortization Impairment charges Operating (loss) earnings (Loss) earnings from continuing operations before income taxes...

Page 26
... August 1, 2009 Forty-three weeks ended July 29, 2006 OTHER OPERATING DATA Capital expenditures Depreciation expense Rent expense and related occupancy costs Change in comparable revenues (8) Number of stores open at period end Sales per square foot NON-GAAP FINANCIAL MEASURE EBITDA (10) Adjusted...

Page 27
... 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, Bergdorf Goodman and Horchow. The Company acquired The Neiman Marcus Group, Inc. (NMG) on October 6, 2005...

Page 28
... sale of high-end merchandise through our Specialty Retail stores and Direct Marketing operation. Components of our revenues include: â€¢ 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...

Page 29
...to promotional materials mailed to our customers, while advertising costs incurred by our Direct Marketing operation relate to the production, printing and distribution of our print catalogs and the production of the photographic content on our websites, as well as online marketing costs. We receive...

Page 30
... 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...

Page 31
... our customers' buying levels will increase once the economic environment improves. In response to these challenging business conditions, we continue to take the following actions stimulate sales through additional promotional and other events; reduce inventory levels and purchases; implement...

Page 32
... and goodwill to be impaired and recorded non-cash impairment charges aggregating $703.2 million in fiscal year 2009, as more fully described in Note 7 to the consolidated financial statements. Operating (loss) earnings-Total operating losses in fiscal year 2009 were $652.9 million, or 17.9% of...

Page 33
... in the financial markets and the uncertainty as to when reasonable conditions will return, we have 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...

Page 34
... charges (1) Other income (2) Total OPERATING PROFIT (LOSS) MARGIN Specialty Retail stores Direct Marketing Total CHANGE IN COMPARABLE REVENUES (3) Specialty Retail stores Direct Marketing Total SALES PER SQUARE FOOT Specialty Retail stores STORE COUNT Neiman Marcus and Bergdorf Goodman stores: Open...

Page 35
...0M of other income related to aged, nonescheatable gift cards. (3) 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. Comparable revenues...

Page 36
...to a lower level of spending by our Specialty Retail stores. During the first quarter of fiscal year 2008, we incurred incremental advertising and promotions costs in connection with the celebration of the 100th anniversary of Neiman Marcus in October 2007. â€¢ Income from credit card program, net...

Page 37
... components of interest expense are as follows: Fiscal year ended August 2, August 1, 2008 2009 (in thousands) Senior Secured Term Loan Facility 2028 Debentures Senior Notes Senior Subordinated Notes Amortization of debt issue costs Other Total interest expense Less: Interest income Capitalized...

Page 38
...generated a lower level of full-price sales in fiscal year 2008 and incurred higher markdowns and sales promotions costs to liquidate on-hand inventories held in excess of sales trends. In addition, our Direct Marketing operation realized lower margins on delivery and processing revenues as a result...

Page 39
... stores during fiscal year 2008 in connection with 1) the celebration of the 100th anniversary of Neiman Marcus in October 2007 and 2) promotional events and activities conducted to facilitate the sell-through of on-hand inventories held in excess of sales trends. Income from credit card program...

Page 40
... of interest expense are as follows: Fiscal year ended August 2, 2008 Fiscal year ended July 28, 2007 (in thousands) Senior Secured Term Loan Facility 2028 Debentures Senior Notes Senior Subordinated Notes Amortization of debt issue costs Other Total interest expense Less: Interest income...

Page 41
...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 and Adjusted EBITDA...

Page 42
... 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 Pension Plan. Our primary sources of short-term liquidity are...

Page 43
...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...

Page 44
... base rate borrowings was 1.00% and the applicable margin with respect to LIBOR borrowings was 2.00%. See Note 9 of our Notes to Consolidated Financial Statements in Item 15 for a further description of the terms of the Senior Secured Term Loan Facility. 2028 Debentures. In May 1998, NMG issued $125...

Page 45
... would increase annual interest rate requirements by approximately $6.3 million. (3) At July 31, 2009 (the most recent measurement date), our actuarially calculated projected benefit obligation for our Pension Plan was $428.0 million and the fair value of the assets was $272.0 million. Our policy is...

Page 46
... 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; 42

Page 47
... pursuant to our proprietary credit card arrangement or 3) our failure to protect customer data or comply with regulations surrounding information security and privacy; Merchandise Procurement and Supply Chain Considerations changes in our relationships with designers, vendors and other sources...

Page 48
... consolidated financial statements. Revenues. Revenues include sales of merchandise and services and delivery and processing revenues related to merchandise sold. Revenues from our Specialty Retail stores are recognized at the later of the point of sale or the delivery of goods to the customer...

Page 49
... of the carrying values of our store assets, consisting of property and equipment, customer lists and favorable lease commitments, annually and upon the occurrence of certain events (e.g., opening a new store near an existing store or announcing plans for a store closing). The recoverability...

Page 50
...of the goodwill associated with our Neiman Marcus stores, Bergdorf Goodman stores and Direct Marketing reporting units involves a two-step process. The first step requires the comparison of the estimated enterprise fair value of each of our reporting units to its recorded carrying value. We estimate...

Page 51
...points for gifts. Generally, points earned in a given year must be redeemed no later than 90 days subsequent to the end of the annual program period. The estimates of the costs associated with the loyalty programs require us to make assumptions related to customer purchasing levels, redemption rates...

Page 52
...2009, the FASB issued Statement of Financial Accounting Standards No. 165, "Subsequent Events" (SFAS 165), which establishes general standards of accounting and disclosure for events that occur after the balance sheet date but before financial statements are issued, including the required disclosure...

Page 53
... financial statements of the Company and supplementary data are included as pages F-1 through F-46 at the end of this Annual Report on Form 10-K: Index Page Number Management's Report on Internal Control over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated...

Page 54
... Chief Financial Officer President and Chief Executive Officer of Bergdorf Goodman President and Chief Executive Officer of Neiman Marcus Direct Senior Vice President and General Counsel Senior Vice President and Chief Human Resource Officer Senior Vice President and Chief Information Officer Senior...

Page 55
.... He served as Executive Vice President of The Neiman Marcus Group, Inc. from February 1998 until December 1998 and as Chairman and Chief Executive Officer of Neiman Marcus Stores from May 1994 until February 1998. He served as Chairman and Chief Executive Officer of Bergdorf Goodman from 1990 until...

Page 56
... from Chief Information Officer, Director of Management Information Systems for Nissan Motor Acceptance Corporation to Vice President, Chief Information Officer, Information Systems and eBusiness Strategy for Nissan North America. Wayne A. Hussey has been Senior Vice President, Properties and Store...

Page 57
...of our financial goals. Salaries are reviewed before the end of each fiscal year as part of our performance and compensation review process as well as at other times to recognize a promotion or change in job responsibilities. Merit increases are usually awarded to the named executive officers in the...

Page 58
... in order to retain the senior management team and enable them to share in the growth of the Company along with our equity investors. All grants of stock options under the Management Incentive Plan have an exercise price at least equal to the fair market value of our common stock on the date of...

Page 59
... of Contents Role of Management. As part of our annual planning process, the CEO and the Senior Vice President and Chief Human Resource Officer, with the help of our consultants, develop and recommend a compensation program for all executive officers. Based on performance assessments, the CEO and...

Page 60
... on historical company performance and industry and market conditions. Goals are established at the division and business unit levels where appropriate for each of the named executive officers. As it relates to our annual incentive compensation program in particular, this performance assessment is...

Page 61
.... Prior to 2008, most non-union employees over age 21 who had completed one year of service with 1,000 or more hours participated in The Neiman Marcus Group, Inc. Retirement Plan (referred to as the Retirement Plan), which paid benefits upon retirement or termination of employment. Effective as of...

Page 62
... provided under the 401(K) plans are credited to the account balances of each KEDC Plan participant. KEDC Plan benefits are more fully described under "Nonqualified Deferred Compensation" on page 64. Matching Gift Program. All employees, including the named executive officers, may participate in our...

Page 63
... agreements provide for a severance payment equal to one and one-half annual base salary of the named executive officer, payable over an eighteen month period, and reimbursement for COBRA premiums for the same period. â€¢ Other The Company has change in control provisions in its Management Incentive...

Page 64
... Officer Neiman Marcus Stores James E. Skinner Executive Vice President and Chief Financial Officer James J. Gold President and Chief Executive Officer Bergdorf Goodman Gerald A. Barnes President and Chief Executive Officer Neiman Marcus Direct Fiscal Year 2009 2008 2007 2009 2008 2007 Salary...

Page 65
... to the audited consolidated financial statements on page F-31 of this Annual Report on Form 10-K. For fiscal year 2009, no earnings of each of the named executive officers in the KEDC plan exceeded 120 percent of the applicable federal long-term rate. (5) Includes all items listed in the following...

Page 66
...information regarding the total number and aggregate value of stock options held by each of our named executive officers at August 1, 2009. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END Option Awards Stock Awards Equity Incentive Plan Awards: Market Number of Value of Unearned Shares or Shares, Units...

Page 67
... exercise price was above the fair market value. PENSION BENEFITS The following table sets forth certain information with respect to retirement payments and benefits under the Retirement Plan and the SERP for each of our named executive officers. Number of Years Credited Service (#)(1) Present Value...

Page 68
... paid from our general assets to supplement Retirement Plan benefits and Social Security. Prior to 2008, executive, administrative and professional employees (other than those employed as salespersons) with an annual base salary at least equal to a minimum established by the Company were eligible to...

Page 69
... Journal on the last business day of the preceding calendar quarter. Amounts credited to an employee's account become payable to the employee upon separation from service, death, unforeseeable emergency, or change of control of the Company. In the event of separation of service, payment is made in...

Page 70
... before the end of the term due to death or inability to perform (as defined in the employment agreement), we will pay him or his estate, as applicable, 85% of base salary multiplied by a fraction, the numerator of which is the number of days during the fiscal year up to the termination date and the...

Page 71
...by him which relate to his employment by the Company or to the Company's business. Employment Agreement with Ms. Katz The employment agreement with Ms. Katz provides that she will act as Chief Executive Officer and President of Neiman Marcus Stores, a division of The Neiman Marcus Group, Inc., until...

Page 72
... of her employment for any reason, confidential information and non-disparagement of the Company and its business. The non-competition agreement generally prohibits Ms. Katz during employment and for a period of one year from termination from becoming a director, officer, employee or consultant...

Page 73
...Executive Benefits and Payments Upon Separation Retirement ($)(1)(7) Termination due to death ($)(2)(7) Termination due to disability ($)(3)(7) Change in Control ($)(5)(7) Compensation: Severance Bonus Stock Options Benefits & Perquisites: Retirement Plans Cash Incentive Plan Payment Long-Term...

Page 74
... Executive Benefits and Payments Upon Separation Termination due to death ($)(1) Termination due to disability ($)(2) Change in Control ($)(4) Compensation: Severance Bonus Stock Options Benefits & Perquisites: Retirement Plans Deferred Compensation Plan Cash Incentive Plan Payment Long-Term...

Page 75
... good reason ($)(3) Executive Benefits and Payments Upon Separation Change in Control ($)(1)(4) JAMES E. SKINNER Compensation: Severance Benefits & Perquisites: Retirement Plans Deferred Compensation Plan Cash Incentive Plan Payment Long-Term Disability Health and Welfare Benefits Life Insurance...

Page 76
... service as a board member. We offer to each of our directors a discount at our stores at the same rate that is available to our employees. In connection with the Acquisition, affiliates of the Sponsors receive an annual management fee equal to the lesser of (i) 0.25% of consolidated annual revenue...

Page 77
..., each named executive officer listed in the Summary Compensation Table, and all our directors and executive officers as a group. Amount and Nature of Beneficial Ownership (Common Stock) Options Currently Exercisable or Exercisable within 60 days Total Stock and Stock Based Holdings Name of...

Page 78
73

Page 79
... New York, NY10019 Jonathan Coslet(2) 345 California Street Suite 3300 San Francisco, CA94104 John G. Danhakl 11111 Santa Monica Boulevard Suite 2000 Los Angeles, CA90025 Carrie Wheeler(2) 345 California Street Suite 3300 San Francisco, CA94104 All current executive officers and directors as a group...

Page 80
... comparable services or products and (d) the terms available to or from, as the case may be, unrelated third parties or to or from employees generally. Related Person Transactions Newton Holding, LLC Limited Liability Company Operating Agreement The investment funds associated with or designated by...

Page 81
...the Delaware General Corporation Law will not apply to the Company. Section 203 restricts "business combinations" between a corporation and "interested stockholders," generally defined as stockholders owning 15% or more of the voting stock of a corporation. Management Stockholders' Agreement Subject...

Page 82
... scheduled meeting. Principal Accounting Fees and Services Audit Fees. The aggregate fees billed for the audits of the Company's annual financial statements for the fiscal years ended August 1, 2009 and August 2, 2008 and for the reviews of the financial statements included in our Quarterly Reports...

Page 83
... reference to The Neiman Marcus Group, Inc.'s Current Report on Form 8-K dated May 4, 2005. 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...

Page 84
... 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. Employment Agreement dated as of October 6, 2005 by and...

Page 85
... on Form 8-K dated December 5, 2005. Amendment to the Newton Acquisition, 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. Stock Option Grant Agreement...

Page 86
... to The Neiman Marcus Group, Inc.'s Current Report on Form 8-K dated March 29, 2006. Credit Card Program Agreement, dated as of June 8, 2005, by and among The Neiman Marcus Group, Inc., Bergdorf Goodman, Inc., HSBC Bank Nevada, N.A. and Household Corporation. (1) (2) Servicing Agreement by and...

Page 87
... Retirement Plan incorporated herein by reference to Neiman Marcus, Inc.'s Quarterly Report on Form 10-Q for the quarter ended January 31, 2009. First Amendment to Credit Card Program Agreement dated as of April 30, 2006 by and among The Neiman Marcus Group, Inc., Bergdorf Goodman, Inc., HSBC Bank...

Page 88
... Nevada, N.A., and HSBC Private Label Corporation. (1) (2) Ninth Amendment to Credit Card Program Agreement dated as of December 3, 2008 by and among The Neiman Marcus Group, Inc., Bergdorf Goodman, Inc., HSBC Bank Nevada, N.A., and HSBC Private Label Corporation. (1) (2) Form of First Amendment to...

Page 89
... FINANCIAL STATEMENTS Page Management's Report on Internal Control over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Cash Flows Consolidated Statements of Shareholders' Equity...

Page 90
...financial statements included in this Annual Report on Form 10-K, has issued an unqualified attestation report on the effectiveness of our internal controls over financial reporting as of August 1, 2009. BURTON M. TANSKY President and Chief Executive Officer JAMES E. SKINNER Executive Vice President...

Page 91
... financial statements, in fiscal year 2008 the Company changed its method of accounting for income taxes. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Neiman Marcus, Inc.'s internal control over financial reporting...

Page 92
...the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Neiman Marcus, Inc. and subsidiaries as of August 1, 2009 and August 2, 2008, and the related consolidated statements of operations, cash flows, and shareholders' equity for each of the...

Page 93
...2009 and 1,012,919 shares issued and outstanding at August 2, 2008) Additional paid-in capital Accumulated other comprehensive loss Retained (deficit) earnings Total shareholders' equity Total liabilities and shareholders' equity See Notes to Consolidated Financial Statements. F-5 $ $ 323,425 755...

Page 94
... STATEMENTS OF OPERATIONS August 1, 2009 Fiscal year ended August 2, 2008 July 28, 2007 (in thousands) Revenues Cost of goods sold including buying and occupancy costs (excluding depreciation) Selling, general and administrative expenses (excluding depreciation) Income from credit card program...

Page 95
... other long-term benefit plans Changes in operating assets and liabilities: Merchandise inventories Other current assets Other assets Accounts payable and accrued liabilities Deferred real estate credits Funding of defined benefit pension plan Net cash provided by operating activities - continuing...

Page 96
Cash paid (received) during the year for: Interest Income taxes Noncash activities: Additions to property and equipment Adjustments to goodwill related to pre-acquisition tax contingencies See Notes to Consolidated Financial Statements. F-7 $ $ $ $ 188,587 (29,639 ) - (18,049 ) $ $ $ $ 233,055 ...

Page 97
... net of tax of ($214) Change in unfunded benefit obligations, net of tax of ($3,239) Other Total comprehensive income BALANCE AT AUGUST 2, 2008 Stock based compensation expense Comprehensive loss: Net loss Adjustments for fluctuations in fair market value of financial instruments, net of tax of ($19...

Page 98
... all material events occurring subsequent to the date of the financial statements up to the date and time this Annual Report on Form 10-K was filed. The accompanying consolidated financial statements include the amounts of the Company and its subsidiaries. All significant intercompany accounts and...

Page 99
... of the carrying values of our store assets, consisting of property and equipment, customer lists and favorable lease commitments, annually and upon the occurrence of certain events (e.g., opening a new store near an existing store or announcing plans for a store closing). The recoverability...

Page 100
...of the goodwill associated with our Neiman Marcus stores, Bergdorf Goodman stores and Direct Marketing reporting units involves a two-step process. The first step requires the comparison of the estimated enterprise fair value of each of our reporting units to its recorded carrying value. We estimate...

Page 101
... 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 associated with gift cards are recognized at the time of redemption...

Page 102
... 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...

Page 103
...points for gifts. Generally, points earned in a given year must be redeemed no later than 90 days subsequent to the end of the annual program period. The estimates of the costs associated with the loyalty programs require us to make assumptions related to customer purchasing levels, redemption rates...

Page 104
... in Kate Spade LLC, a designer and marketer of high-end accessories. In April 2005, the minority investor in Kate Spade LLC exercised the put option with respect to the sale of the full amount of its 44% stake in such company to NMG. In October 2006, we entered into an agreement to settle the put...

Page 105
...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 ongoing payments from HSBC related to credit card sales and compensation for marketing and servicing activities...

Page 106
... the resolution of tax uncertainties that existed at the time of the Acquisition. In the fourth quarters of fiscal years 2008 and 2007, we recorded $31.3 million and $11.5 million pretax impairment charges related to the writedown to fair value of the Horchow tradename based upon lower revenues and...

Page 107
..., gross margin rates and store expenses. We base these estimates upon our past and expected future performance. We believe our estimates are appropriate in light of current market conditions and the best information available at the assessment date. However, future impairment charges could be...

Page 108
... revenue and profitability projections, market royalty rates decrease or the weighted average cost of capital increases. Goodwill. We assess the recoverability of the goodwill associated with our Neiman Marcus stores, Bergdorf Goodman stores and Direct Marketing reporting units. Such determination...

Page 109
...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...

Page 110
...-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...

Page 111
... years 2008 and 2007, NMG was not required to prepay any outstanding term loans pursuant to the annual excess cash flow requirements. 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...

Page 112
...bullet point; and a second-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...

Page 113
... time to time acquire Senior Notes by means other than a redemption, whether by tender offer, in open market purchases, through negotiated transactions or otherwise, in accordance with applicable securities laws. Except as described below, the Senior Notes are not redeemable at NMG's option prior...

Page 114
... Notes as described below. The Company may from time to time acquire Senior Subordinated Notes by means other than a redemption, whether by tender offer, in open market purchases, through negotiated transactions or otherwise, in accordance with applicable securities laws. Except as described below...

Page 115
... does not expand the use of fair value to any new circumstances. SFAS 157 defines fair value 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...

Page 116
... information about how derivative and hedging activities affect an entity's financial position, financial performance and cash flows. 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...

Page 117
... laws applicable to our operations. NOTE 12. 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 87,992.0 shares of the common stock of the Company. Options generally vest...

Page 118
... of stock options have an exercise price equal to 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...

Page 119
... the benefits of our recorded deferred tax assets. We adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48) in the first quarter of fiscal year 2008. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement...

Page 120
previously recorded. This increase to our accruals was offset by a corresponding increase to goodwill as these uncertainties existed at the time of the Acquisition. At August 1, 2009, the gross amount of unrecognized tax F-30

Page 121
... September 7, 2007, our Board of Directors approved certain changes to our long-term benefits program. Effective January 1, 2008, we offered a new, enhanced retirement savings plan subject to participants' elections to participate (as more fully described below). For associates participating in the...

Page 122
... salary deferral rate of 3% once eligibility requirements have been met. â€¢ â€¢ Concurrent with the implementation of the RSP and the Defined Contribution SERP Plan, we froze benefits offered under our Pension and SERP Plans for most employees. Employees with a minimum of ten years of service and...

Page 123
... benefit payments. The asset allocation for our Pension Plan at the end of fiscal years 2009 and 2008 and the target allocation for fiscal year 2010, by asset category, are as follows: Allocation at July 31, 2009 Pension Plan Allocation at July 31, 2008 2010 Target Allocation Equity securities...

Page 124
... a decrease in our discount rate from 6.75% at August 2, 2008 to 5.90% for the Pension and SERP Plans at August 1, 2009 and 5.8% for the Postretirement Plan at August 1, 2009, which resulted in increases in the obligations related to our employee benefit plans aggregating approximately $57.9 million...

Page 125
... to our employee benefit plans include the discount rate used to calculate the present value of benefit obligations to be paid in the future, the expected long-term rate of return on assets held by the Pension Plan, the average rate of compensation increase by Pension Plan and SERP Plan participants...

Page 126
... 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 within 30 days of a change of control or the first day there is a public market of at least 20% of our total outstanding common stock...

Page 127
... Marcus clearance stores. The Direct Marketing segment conducts both online and print catalog operations under the Neiman Marcus, Bergdorf Goodman and Horchow brand names. Both the Specialty Retail stores and Direct Marketing segments derive their revenues from the sales of high-end fashion apparel...

Page 128
... tables set forth the information for our reportable segments: August 1, 2009 Fiscal year ended August 2, 2008 July 28, 2007 (in thousands) REVENUES Specialty Retail stores Direct Marketing Total OPERATING (LOSS) EARNINGS Specialty Retail stores Direct Marketing Corporate expenses Amortization of...

Page 129
For fiscal year 2007, other income includes 1) $4.2 million of other income we received in connection with the merger of Wedding Channel.com, in which we held a minority interest, and The Knot and 2) $6.0M of other income related to aged, non-escheatable gift cards. F-38

Page 130
... 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...

Page 131
... LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable Accrued liabilities Total current liabilities Long-term liabilities: Long-term debt Deferred income taxes Other long-term liabilities Total long-term liabilities Total shareholders' equity Total liabilities and shareholders...

Page 132
..., general and administrative expenses (excluding depreciation) Income from credit card program, net Depreciation expense Amortization of intangible assets and favorable lease commitments Impairment charges Operating loss Interest expense, net Intercompany royalty charges (income) Equity in loss...

Page 133
...year ended July 28, 2007 NonGuarantor Subsidiaries Eliminations (in thousands) Company NMG Consolidated Revenues Cost of goods sold including buying and occupancy costs (excluding depreciation) Selling, general and administrative expenses (excluding depreciation) Income from credit card program...

Page 134
... expense Deferred income taxes Impairment charges Paid-in-kind interest Other, primarily costs related to defined benefit pension and other long-term benefit plans Intercompany royalty income payable (receivable) Equity in loss (earnings) of subsidiaries Changes in operating assets and liabilities...

Page 135
... royalty income payable (receivable) Equity in (earnings) loss of subsidiaries Changes in operating assets and liabilities, net Net cash provided by operating activities CASH FLOWS-INVESTING ACTIVITIES Capital expenditures Purchases of short-term investments Sales of short-term investments Net cash...

Page 136
... Other, primarily costs related to defined benefit pension and other long-term benefit plans Intercompany royalty income payable (receivable) Equity in (earnings) loss of subsidiaries Changes in operating assets and liabilities, net Net cash provided by continuing operating activities Net cash used...

Page 137
... Asset-Based Revolving Credit Facility and the Senior Secured Term Loan Facility, are guaranteed by the Company and certain of NMG's existing and future domestic subsidiaries (principally, Bergdorf Goodman, Inc. through which NMG conducts the operations of its Bergdorf Goodman stores and NM Nevada...

Page 138
... 142.8 Fiscal year 2008 (1) Gross profit includes revenues less cost of goods sold including buying and occupancy costs (excluding depreciation). (2) For fiscal year 2009, net earnings (loss) include pretax impairment charges related to 1) $291.1 million for the writedown to fair value of goodwill...

Page 139
... Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NEIMAN MARCUS, INC. By: /S/ NELSON A. BANGS Nelson A. Bangs Senior Vice President and General Counsel Dated: October 20, 2009 Pursuant to the requirements of the...

Page 140
...SCHEDULE II Neiman Marcus, Inc. Valuation and Qualifying Accounts and Reserves (in thousands) Three years ended August 1, 2009 Column A Column B Balance at Beginning of Period Column C Additions Charged to Charged to Costs and Other Expenses Accounts Column D Column E Balance at End...sales returns, net ...

Page 141
EXHIBIT 4.1 The Neiman Marcus Group, Inc. and The Bank of New York Trustee INDENTURE Dated as of May 27, 1998 Providing for issuance of Securities in Series

Page 142
...Securities General Title; General Limitations; Issuable in Series; Terms of Particular Series Denominations Execution, Authentication and Delivery and Dating Temporary Securities Registration, Transfer and Exchange Mutilated, Destroyed, Lost and Stolen Securities Payment of Interest; Interest Rights...

Page 143
...' Lists and Reports by Trustee and Company Section 701. Company To Furnish Trustee Names and Addresses of Securityholders Section 702. Preservation of Information; Communications to Securityholders Section 703. Reports by Trustee Section 704. Reports by Company ARTICLE 8. Consolidation...

Page 144
... and Interest Section 1002. Maintenance of Office or Agency Section 1003. Money for Security Payments To Be Held in Trust Section 1004. Statement as to Compliance Section 1005. Legal Existence Section 1006. Limitation on Liens Section 1007. Limitation on Sale and Leasebacks Section 1008. Waiver of...

Page 145
... (a)(2) (b) (c) Section 317(a)(1) (a)(2) (b) Section 318(a) TIA 609 609 Not Applicable Not Applicable 609 608; 610 Not Applicable 613 613 703 701; 702 702 702 703 703 703 703 704 704 704 1004 Not Applicable 102 102 Not Applicable Not Applicable 102 601 602; 703 601 601 601 601 601 514 101 502; 512...

Page 146
THIS INDENTURE between THE NEIMAN MARCUS GROUP, INC., a Delaware corporation (hereinafter called the "Company"), having its principal office at 27 Boylston Street, Box 1000, Chestnut Hill, MA 02167, and THE BANK OF NEW YORK, a New York banking corporation, as trustee (hereinafter called the "Trustee...

Page 147
... or other day on which banking institutions in the pertinent Place or Places of Payment are authorized or required by law or executive order to be closed. "Capital Stock" means, with respect to any corporation, any and all shares, interests, rights to purchase, warrants, options, participations or...

Page 148
...classified as long-term debt under generally accepted accounting principles, in each case ranking in right of payment at least pari passu with the Securities. "Global Security", when used with respect to any series of Securities issued hereunder, means a Security which is executed by the Company and...

Page 149
... or herein provided, whether on a Repayment Date, at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman, the President or a Vice President, and by the Treasurer, an...

Page 150
...request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer assigned to the corporate trust department of the Trustee actually knows to be owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other...

Page 151
... located in the United States of America and that would be reflected on a consolidated balance sheet of such Person provided that the term "Principal Property" shall not include any land, building, machinery, equipment, leasehold interest or improvements which the Board of Directors of the Company...

Page 152
... vice president, any assistant secretary, any assistant treasurer, any senior trust officer or trust officer or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate...

Page 153
...of full years of such term remaining at the time of determination, without regard to any renewal or extension options contained in the lease. "Vice President" when used with respect to the Company or the Trustee means any vice president, whether or not designated by a number or a word or words added...

Page 154
... erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the...

Page 155
... its option, by Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action, but the Company shall have no obligation to do so. Such record date shall be not more than 30 days...

Page 156
... for repayment, as specified in the Security carrying the right to repayment) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument, Attention: General Counsel, or at any other...

Page 157
... Governing Law. This Indenture and the Securities shall be construed in accordance with and governed by the laws of the State of New York, without regard to conflicts of laws principles thereof. Section 1.113. Counterparts. This instrument may be executed in any number of counterparts, each of which...

Page 158
...evidenced by such officer's execution of such Securities, subject, with respect to the Securities of any series, to the rules of any securities exchange on which such Securities are listed. Section 2.12. Forms of Securities. Each Security shall be in one of the forms approved from time to time by or...

Page 159
... to be issued in whole or in part in the form of one or more Global Securities, then the Company shall execute and the Trustee or its agent shall, in accordance with Section 303 and the Company Order delivered to the Trustee or its agent thereunder, authenticate and make available for delivery, such...

Page 160
... terms in definitive form on such terms as are acceptable to the Company and such Depositary. Thereupon the Company shall execute, and the Trustee or its agent shall authenticate and make available for delivery, without service charge, (1) to each Person specified by such Depositary a new Security...

Page 161
... Registrar. The Trustee shall deliver at its Corporate Trust Office such Securities to the Persons in whose names such Securities are so registered. ARTICLE 3. The Securities. Section 3.11. General Title; General Limitations; Issuable in Series; Terms of Particular Series. The aggregate principal...

Page 162
... of such series, if not set forth herein, and any additions, deletions or other changes to the Events of Default set forth herein that shall be applicable to the Securities of such series; (8) any covenant solely for the benefit of the Securities of such series and any additions, deletions or other...

Page 163
... thereof. Section 3.13. Execution, Authentication and Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman, its President or one of its Vice Presidents. The signature of any of these officers on the Securities may be manual or...

Page 164
... laws and legal principles affecting creditors' rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity) and, if the authentication and delivery relates to Securities of a series issued pursuant to Section 311, paragraphs...

Page 165
...such series at the office or agency of the Company in a Place of Payment, without charge to the Holder; and upon surrender for cancellation of any one or more temporary Securities the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a like...

Page 166
... for transfer of any Security of any series at the office or agency of the Company in a Place of Payment, the Company shall execute, and the Trustee shall authenticate and make available for delivery, in the name of the designated transferee or transferees, one or more new Securities of such series...

Page 167
... in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses...

Page 168
... Interest to the Persons in whose names any such Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in...

Page 169
...indenture or Board Resolution, such terms and conditions of said Securities as are specified in such Company Order, Officers' Certificate, supplemental indenture or Board Resolution. Section 3.112. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use...

Page 170
...except as to any surviving rights of conversion or transfer or exchange of Securities of such series expressly provided for herein or in the form of Security for such series), and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction...

Page 171
... to be needed to pay such Securities. Section 4.13. Defeasance Upon Deposit of Funds or Government Obligations. Unless pursuant to Section 301 provision is made that this Section shall not be applicable to the Securities of any series, at the Company's option, either (a) the Company shall be deemed...

Page 172
... under this Indenture relating to the Securities of such series (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except (A) the rights of Holders of Securities to receive, from the trust fund described in clause (1) above, payment of the...

Page 173
... at its (3) default in the payment of any sinking or purchase fund or analogous obligation when the same becomes due by the terms of the Securities of such series; or (4) default in the performance, or breach, of any covenant, warranty or agreement of the Company in this Indenture in respect of...

Page 174
...for the benefit of creditors or the admission by it in writing of its inability to pay its debts generally as they become due; or (8) any other Event of Default provided in or pursuant to the supplemental indenture or Board Resolution under which such series of Securities is issued or in the form of...

Page 175
... installments of interest at the rate or rates prescribed therefor by the terms of the Securities of such series to the extent that payment of such interest is lawful, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of...

Page 176
... or purchase fund or analogous obligation when the same becomes due by the terms of the Securities of any series, and any such default continues for any period of grace provided with respect to the Securities of such series, the Company will, upon demand of the Trustee, pay to it, for the benefit of...

Page 177
...Securities of such series or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall after provision for the payment of the reasonable compensation...

Page 178
... shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities of such series and the notation thereon of the payment if only partially...

Page 179
...this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 307) interest on such Security on the respective Stated Maturities expressed in such Security (or, in the case of...

Page 180
... Section shall not apply to any suit instituted by the Trustee, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the respective Stated Maturities expressed in such Security (or, in the...

Page 181
... by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities of any series relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred...

Page 182
... until at least 90 days after the occurrence thereof. For the purpose of this Section, the term "default", with respect to Securities of any series, means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. Section...

Page 183
...the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. Section 6.15. May Hold Securities. The Trustee, any Paying Agent, the Security Registrar or any other agent of the...

Page 184
... the Company. Section 6.17. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited by...

Page 185
...subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees, in either case having a combined capital and surplus of at least $50,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the...

Page 186
... or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee, with respect to...

Page 187
... such event by firstclass mail, postage prepaid, to the Holders of Securities of that series as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee and the address of its principal Corporate Trust office. Section 6.111. Acceptance of...

Page 188
... series of Securities shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible with respect to that series under this Article. Section 6.112. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the...

Page 189
... holders of other indenture securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law, the same...

Page 190
... 3 months after such resignation or There shall be excluded from the operation of Subsection (a) of this Section a creditor relationship arising (1) the ownership or acquisition of securities issued under any indenture or any security or securities having a maturity of one year or more at the time...

Page 191
... full payment for goods or securities sold is made within 7 days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand. (4) The term "self-liquidating paper" means any draft, bill of exchange, acceptance or obligation...

Page 192
...and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the...

Page 193
The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the ...

Page 194
... is one of the Securities referred to in the within-mentioned Indenture. THE BANK OF NEW YORK as Trustee, By: By: ARTICLE 7. Securityholders' Lists and Reports by Trustee and Company. Section 7.11. Company To Furnish Trustee Names and Addresses of Securityholders. The Company will furnish or cause...

Page 195
... application. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders of Securities...

Page 196
... Trustee. (a) The term "reporting date" as used in this Section means April 1. Within 60 days after the reporting date in each year, beginning in 1999, the Trustee shall transmit by mail to all Securityholders, as their names and addresses appear in the Security Register, a brief report dated as of...

Page 197
...to time by such rules and regulations; and (3) transmit by mail to all Securityholders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company...

Page 198
...than the Company) formed by such consolidation or into which the Company is merged or to which all or substantially all of the properties and assets of the Company are trans- ferred (i) shall be a corporation, partnership or trust organized and validly existing under the laws of the United States or...

Page 199
... forth the terms thereof, and/or to add to the rights of the Holders of the Securities of any series; or (6) to evidence and provide for the acceptance of appointment by another corporation as a successor Trustee hereunder with respect to one or more series of Securities and to add to or change any...

Page 200
... of principal thereof or interest thereon on any date or change any Place of Payment where any Security or any premium or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Maturity or the Stated Maturity, as the case may be...

Page 201
... in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by...

Page 202
..., Attention: Corporate Trust Trustee Administration, and the Company hereby appoints the Trustee its agent to receive all such presentations, surrenders, notices and demands. Section 10.13. Money for Security Payments To Be Held in Trust. If the Company shall at any time act as its own Paying Agent...

Page 203
..., within 120 days of the end of each fiscal year, a written statement signed by the principal executive officer, principal financial officer or principal accounting officer of the Company stating that (1) in the course of the performance of his duties as an officer of the Company he would normally...

Page 204
... stock, property or assets for the purpose of financing all or any part of the purchase price thereof; (6) any Lien to secure any debt incurred prior to, at the time of, or within 180 days after, or pursuant to financing arrangements for which a firm commitment is made by a bank, insurance company...

Page 205
... such business; (12) any Lien which may be deemed to result from an agreement or commitment to exchange securities of a Subsidiary for other securities of the Company, whether or not such securities of a Subsidiary are placed in escrow for such purpose; (13) any Lien in favor of the United States of...

Page 206
... (2) the Company during the 180 days immediately following the effective date of such Sale and Leaseback Transaction causes to be applied to either (i) the voluntary retirement of Funded Debt (whether by redemption, defeasance, repurchase, or otherwise) an amount equal to the Value of such Sale and...

Page 207
... information relating to such original issue discount as may then be relevant under the Internal Revenue Code of 1986, as amended from time to time. ARTICLE 11. Redemption of Securities. Section 11.11. Applicability of Article. The Company may reserve the right to redeem and pay before Stated...

Page 208
...prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (1) (2) (3) the Redemption Date; the Redemption Price; the CUSIP number; (4) if...

Page 209
... in writing) and the Company shall execute and the Trustee shall authenticate and make available for delivery to the Holder of such Security without service charge, a new Security or Securities of the same series and Stated Maturity and of like tenor and terms, of any authorized denomination...

Page 210
...60th day next preceding each sinking fund Redemption Date with respect to such series of Securities, the Company will deliver to the Trustee (A) an Officers' Certificate specifying the portions of such sinking fund payment to be satisfied by payment of cash and by delivery or credit of Securities of...

Page 211
...in a sum equal to all accrued interest, if any, to the date fixed for redemption on Securities to be redeemed on such sinking fund Redemption Date pursuant to this Section 1108; provided that such cash shall be so deposited with the Trustee in time for the Trustee to make the payment of such accrued...

Page 212
... to be duly executed as of the day and year first above written. THE NEIMAN MARCUS GROUP, INC. By: Name: Title: s/ Richard A. Smith Richard A. Smith Chairman and Chief Executive Officer THE BANK OF NEW YORK as Trustee, By: Name: Title: 67 s/ Mary Jane Schmalzel Mary Jane Schmalzel Vice President

Page 213
...,000 at the office or agency of the Company in the Borough of Manhattan, The City of New York, on June 1, 2028 in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on said principal...

Page 214
...means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Debentures that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt...

Page 215
...release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (b) if such release (or any successor release) is not published or does not contain such prices on such business day, (i) the average of the Reference Treasury...

Page 216
... of this Debenture at the office or agency of the Company in the Borough of Manhattan, The City of New York designated for such purpose, a new Debenture or Debentures of authorized denominations for a like aggregate principal amount and Stated maturity will be issued to the transferee in exchange...

Page 217
... be valid or obligatory for any purpose IN WITNESS WHEREOF, THE NEIMAN MARCUS GROUP, INC. has caused this Debenture to be duly executed. Dated: May 27, 1998 By: THE NEIMAN MARCUS GROUP, INC. s/ Richard A. Smith Signature Richard A. Smith, Chairman and Chief Executive Officer (Print name and title)

Page 218
TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities referred to in the within-mentioned Indenture. The Bank of New York, as Trustee, By: Dated: May 27, 1998 s/ Mary Jane Schmalzel Authorized Signatory

Page 219
... documents or information, in whatever form or medium, concerning or evidencing sales; costs; pricing; strategies; forecasts and long range plans; financial and tax information; personnel information; business, marketing and operational projections, plans and opportunities; and customer, vendor, and...

Page 220
... of the Executive as Chief Executive Officer or his reporting relationships, except in accordance with the terms of this Agreement; or (vii) a material breach of this Agreement by NMG; provided that (iii) and (vi) shall not apply after the end of the CEO Term. (l) "Inability to Perform" means and...

Page 221
... that the Executive will not have the right to terminate his employment for "Good Reason" as defined in the Change of Control Agreement under item 5 of such definition. 3. Term. The term of the Agreement shall commence on the Effective Date and extend until the end of the day immediately preceding...

Page 222
...and responsibilities as an executive, or, if applicable, Chairman of the Board, of NMG in accordance with this Agreement. (d) In connection with the Executive's employment by NMG under this Agreement, the Executive shall be based at the principal executive offices of NMG in Dallas, Texas, except for...

Page 223
... Agreement an annual base salary ("Base Salary"). (i) At the commencement of the CEO Term, the Base Salary shall be $1,300,000.00. During the CEO Term, the Base Salary will be reviewed annually and is subject to adjustment at the discretion of the Board, but in no event shall NMG pay the Executive...

Page 224
... the option through net-physical settlement (i.e., by delivery of Shares net of the number of Shares having a value equal to the applicable exercise price and applicable withholding taxes at the minimum statutory rate) if such exercise occurs after termination of the Executive's employment pursuant...

Page 225
...its direct and indirect equity interests in Parent at a per share price equal to the Initial Public Offering price or, in the case of a Change in Control, based on the value of its equity interests implied by the transaction giving rise to the Change of Control, and in each case, taking into account...

Page 226
... affects the Executive. (d) Employee Benefits and Perquisites. During the Employment Term, the Executive will be entitled to (i) participate in all employee benefit plans, programs, and arrangements that are generally made available by NMG to its senior executives, including without limitation NMG...

Page 227
... the Executive's right to terminate his employment for Good Reason must be given no later than 6 months after the later of (i) the first date the Executive knew that Good Reason existed, and (ii) the end of NMG's 30-day cure period, if applicable; otherwise, the Executive is deemed to have accepted...

Page 228
... Executive's Base Salary through the Employment Termination Date and any bonus payable for preceding fiscal year that has otherwise not already been paid (together, the "Compensation Payment"), (ii) any accrued but unused vacation days (the "Vacation Payment"), (iii) any reimbursement for business...

Page 229
...not entitled to receive payments or benefits under the Change of Control Agreement in connection with such termination or (y) the Executive's employment terminates by reason of a Change of Control Resignation, NMG shall pay to the Executive (1) the Compensation Payment, (2) the Vacation Payment, and...

Page 230
... the Effective Date, the Executive's employment with NMG or any Affiliate of NMG ends on account of a termination by NMG for any reason other than for death or Cause, or a termination by the Executive for Good Reason, the Executive will receive the benefits described in Paragraph 3b of the Change of...

Page 231
... in Control Agreement, as applicable, as he would otherwise be entitled to receive had the mutual release been fully executed. 8. Confidential Information. (a) The Executive acknowledges and agrees that (i) NMG is engaged in a highly competitive business; (ii) NMG has expended considerable time and...

Page 232
... him to engage in activities that will create new and additional Confidential Information. (c) NMG and the Executive thus acknowledge and agree that during the Executive's employment with NMG and upon execution and delivery of this Agreement he (i) has received, will receive, and will continue to...

Page 233
... listed on a national securities exchange or actively traded in the over-the-counter market if he and the members of his immediate family do not, directly or indirectly, hold more than a total of one percent of all such shares of stock or other securities issued and outstanding. The Executive...

Page 234
... limiting the foregoing, the Executive acknowledges that all original works of authorship that are made by the Executive, solely or jointly with others, within the scope of his employment and that are protectable by copyright are "works made for hire," as that term is defined in the United States...

Page 235
... such assistance, but shall have no obligation to compensate the Executive for his time in providing information and assistance in accordance with this Paragraph 12. 13. No Obligation to Pay. With regard to any payment due to the Executive under this Agreement, it shall not be a breach of any...

Page 236
... in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of the Executive's residence or place of employment in the calendar year in which any such Gross-Up...

Page 237
...-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise NMG of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay...

Page 238
... of change of address shall be effective only upon receipt): if to NMG, at: The Neiman Marcus Group, Inc. Attn: General Counsel 1618 Main Street Dallas, TX 75201 with a copy to: Cleary Gottlieb Steen & Hamilton LLP Attn: Robert J. Raymond One Liberty Plaza New York, NY 10006 If to the Executive, at...

Page 239
... direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all the business and/or assets of NMG, by agreement in writing in form and substance reasonably satisfactory to the Executive, expressly, absolutely, and unconditionally to assume and agree to perform...

Page 240
... and informs NMG of such determination): (i) any payments in the nature of severance under this Agreement that would be treated as non-qualified deferred compensation under 409A shall not commence until six months after the Executive's Date of Termination (or, if earlier, the date Executive dies...

Page 241
... thereby, shall remain in full force and effect, and shall be enforceable to the fullest extent permitted by applicable law. 29. Counterparts. This Agreement may be executed by the parties in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one...

Page 242
... on its behalf by its duly authorized officer, and the Executive has executed this Agreement, effective as of the Effective Date. THE NEIMAN MARCUS GROUP, INC. By: /s/ Nelson A. Bangs Name: Nelson A. Bangs Title: Senior Vice President and General Counsel NEWTON ACQUISITION, INC. By: /s/ David Spuria...

Page 243
...Equity Investment by Sponsors: Shares Issued to LLC Fair Market Value Per Share of Parent Fair Market Value Per NMG Share Total Management Investment (including Tansky option rollover) Management Invest (excluding Tansky roll) Tansky option roll (spread) Shares Issued to Management at Closing Number...

Page 244
... NMG and the Employee, dated as of (as amended from time to time, the "Employment Agreement"), or the payments and benefits set forth in Section 3(a) of the Change of Control Termination Protection Agreement dated as of April 1, 2005, between the Employee and The Neiman Marcus Group, Inc. (the "CIC...

Page 245
... and officer liability insurance coverage under any of the company's organizational documents or at law under any plan or agreement and applicable to the Employee. In addition, nothing in this Release is intended to interfere with the Employee's right to file a charge with the Equal Employment...

Page 246
... Covenants. The Employee acknowledges that the provisions of Sections 8, 9, 10 and 11 of the Employment Agreement shall continue to apply pursuant to their terms. 8. Governing Law. This Release shall be governed by and construed in accordance with the laws of the State of Texas, without regard...

Page 247
IN WITNESS WHEREOF, the parties have executed this Release on the date first set forth above. Burton M. Tansky Newton Acquisition, Inc. By: Title: The Neiman Marcus Group, Inc. By: Title: 4

Page 248
... 4, 2005 Mr. Burton Tansky Chief Executive Officer The Neiman Marcus Group, Inc. 1618 Main Street Dallas, Texas 75201 Re: Opportunity to Acquire Shares and Options Dear Burt, As you know, The Neiman Marcus Group, Inc. ("NMG") is in the process of undergoing a change of control, and following the...

Page 249
... Determination and your agreement not to exercise the Rollover Options. The Rollover Options will be converted into the Newco Options without any payment or distribution thereon. In exchange for the Rollover Shares, you will receive such number of Shares having an aggregate value equal (based on the...

Page 250
... Newco Options through net-physical settlement (i.e., by delivery of Shares net of the number of Shares having a Fair Market Value (as defined in the Stockholders' Agreement, defined below) equal to the applicable exercise price and applicable withholding taxes at the minimum statutory rate), unless...

Page 251
... or (y) a Public Market (as such term is defined in the Stockholders' Agreement) exists for the Shares, to, at any time after delivery of a notice to you or your estate: i. Cancel each Excess Option in exchange for a cash payment for each Share underlying such Excess Option being canceled equal to...

Page 252
... with its terms, except to the extent that such validly binding effect and enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium and other laws relating to or affecting creditors' rights generally; the Shares are being acquired for your own account, for...

Page 253
... to the terms of this Agreement (the "Payment") would result in the imposition of a 20% additional tax pursuant to Section 409A of the Code, Newco shall have the right to make such modifications or amendments to Shares and/or Newco Options as are reasonably necessary to avoid the application of...

Page 254
... event the Internal Revenue Service challenges the structure of the rollover of your Rollover Shares or Rollover Options into Newco Equity,... the application of the laws of any jurisdiction other than the State of Delaware. 13. Counterparts. This Agreement may be executed in any number of counterparts...

Page 255
... to the end of this Agreement. Please return an executed copy of this Agreement and the Acceptance Form in original form or by FAX no later than 1:00 p.m. (Central Daylight Time) on Monday, October 4, 2005 to the attention of Marita O'Dea, The Neiman Marcus Group, 1618 Main Street Dallas, TX 75201...

Page 256
... of Offer to Acquire Shares and Options of Newco (the "Acceptance Form") Pursuant to the terms and conditions set forth in letter to me dated October 4, 2005 (the "Letter"), I, Burton M. Tansky, hereby elect make an investment in Newco in the amount and manner below: 1. I will purchase Shares by...

Page 257
...Equity Investment by Sponsors: Shares Issued to LLC Fair Market Value Per Share of Parent Fair Market Value Per NMG Share Total Management Investment (including Tansky option rollover) Management Invest (excluding Tansky roll) Tansky option roll (spread) Shares Issued to Management at Closing Number...

Page 258
... individuals listed on Schedule A attached hereto (the "Management Stockholder"). WHEREAS, the Management Stockholder may be the owner of shares of common stock of the Company, $0.01 par value per share ("Common Stock") and/or may be granted options to purchase Common Stock (the "Options"), pursuant...

Page 259
... Stock, the value per share of Common Stock as determined in good faith by the Board; or ii. 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...

Page 260
... the fair market value of a share of Common Stock. (k) "Good Reason" shall mean, unless otherwise provided in any stock option grant agreement entered between the Company and the Management Stockholder with respect to any Options that may be granted under the Plan, effective employment agreement or...

Page 261
...exercise of Options and held by the Management Stockholder or Transferee as of the date as of which such right is exercised at a per Share price equal to the Fair Market Value of a share of Common Stock determined as of the date such right is exercised. The Company (or its designated assignee) shall...

Page 262
..., calculated at an annual rate equal to the average annual prime rate charged during the Delay Period by a nationally recognized bank designated by the Board plus two (2) percentage points. In the event that the Company is not able to make payment within two (2) years after the date specified in the...

Page 263
... addition, if the Board receives the advice of counsel selected by the Company and reasonably acceptable to the Management Stockholder or any Transferee that the inclusion of the call right or the put right described in this Section 3 would result in the Option or Shares becoming subject to Section...

Page 264
... apply during the period from the Effective Date through the first anniversary of the Effective Date to any sale or transfer by a Majority Stockholder of its pecuniary interest in any shares of Common Stock for a price that is equal to or less than the Fair Market Value of such share of Common Stock...

Page 265
... interest in any shares of Common Stock is Transferred shall agree to execute this Agreement as a condition to such Transfer. 5. Piggyback Registration Rights. (a) Notice to Management Stockholder. If the Company determines that it will file a registration statement under the Securities Act, other...

Page 266
... With Respect To Shares. As used herein, the term "Shares" includes securities of any kind whatsoever distributed with respect to the Company's Common Stock acquired by the Management Stockholder or his or her Transferee (whether pursuant to the Plan, the letter agreement dated on or about...

Page 267
... Park Avenue New York, NY 10178 Attention: Gary Rothstein or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall only be effective upon receipt. 11. Counterparts. This Agreement may be executed in two...

Page 268
... LLC By: By: By: Name: Title: TPG GenPar IV, L.P., its Managing Member TPG Advisors IV, Inc., its General Partner /s/ David A. Spuria David A. Spuria Vice President WARBURG PINCUS PRIVATE EQUITY VIII, L.P. By: By: By: Name: Title: Warburg Pincus Partners, LLC, its General Partner Warburg Pincus & Co...

Page 269
... PRIVATE EQUITY VIII K.G. By: By: By: Name: Title: Warburg Pincus Partners, LLC, its General Partner Warburg Pincus & Co., its Managing Member /s/ Kewsong Lee Kewsong Lee Managing Director WARBURG PINCUS PRIVATE EQUITY IX, L.P. By: By: Name: Title: Warburg Pincus IX LLC, its General Partner...

Page 270
SCHEDULE A MANAGEMENT STOCKHOLDERS By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: A-1 /s/ Gerald A. Barnes Gerald A. Barnes /s/ Steven P. Dennis Steve P. Dennis /s/ Jeanie ...

Page 271
By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: A-2 /s/ Gregory G. Shields Gregory G. Shields /s/ Stacie Shirley Stacie Shirley /s/ James E. Skinner James E. Skinner /s/ Margaret E. Spaniolo Margaret E. Spaniolo /s/ Thomas P. Stangle Thomas P. Stangle /s/ ...

Page 272
... The Neiman Marcus Group, Inc. ("NMG") is in the process of undergoing a change of control, and following the change of control, 100% of its outstanding shares will be owned by an entity called Newton Acquisition, Inc. ("Newco"). This transaction is pursuant to an Agreement and Plan of Merger, dated...

Page 273
..., you will receive such number of Shares having an aggregate value equal to the amount of your investment as indicated on the Acceptance Form. You will be the holder of record of the Shares as of the Closing, whether or not Newco issues physical certificates to you. This offer is conditioned upon...

Page 274
... with its terms, except to the extent that such validly binding effect and enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium and other laws relating to or affecting creditors' rights generally; (iii) the Shares are being acquired for your own account, for...

Page 275
...expertise, knowledge, and sophistication in financial and business matters generally, and in the type of transaction in which NMG and Newco propose to engage in particular; (vi) you have had access to all of the information and individuals with respect to the Shares and your investment that you deem...

Page 276
12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. * * * * * [Signature Page Follows] 5

Page 277
... to the end of this Agreement. Please return an executed copy of this Agreement and the Acceptance Form in original form or by FAX no later than 1:00 p.m. (Central Daylight Time) on Monday, October 3, 2005 to the attention of Marita O'Dea, The Neiman Marcus Group, 1618 Main Street Dallas, TX 75201...

Page 278
Acceptance of Offer to Acquire Shares of Newco (the "Acceptance Form") Pursuant to the terms and conditions set forth in letter to me dated September 30, 2005, I, make an investment in Newco and purchase Shares in the amount and manner below: 1. $ , which will be satisfied through a contribution of ...

Page 279
ANNEX A [STOCKHOLDERS' AGREEMENT] A-1

Page 280
... individuals listed on Schedule A attached hereto (the "Management Stockholder"). WHEREAS, the Management Stockholder may be the owner of shares of common stock of the Company, $0.01 par value per share ("Common Stock") and/or may be granted options to purchase Common Stock (the "Options"), pursuant...

Page 281
... Stock, the value per share of Common Stock as determined in good faith by the Board; or ii. 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...

Page 282
... the fair market value of a share of Common Stock. (k) "Good Reason" shall mean, unless otherwise provided in any stock option grant agreement entered between the Company and the Management Stockholder with respect to any Options that may be granted under the Plan, effective employment agreement or...

Page 283
...exercise of Options and held by the Management Stockholder or Transferee as of the date as of which such right is exercised at a per Share price equal to the Fair Market Value of a share of Common Stock determined as of the date such right is exercised. The Company (or its designated assignee) shall...

Page 284
..., calculated at an annual rate equal to the average annual prime rate charged during the Delay Period by a nationally recognized bank designated by the Board plus two (2) percentage points. In the event that the Company is not able to make payment within two (2) years after the date specified in the...

Page 285
... addition, if the Board receives the advice of counsel selected by the Company and reasonably acceptable to the Management Stockholder or any Transferee that the inclusion of the call right or the put right described in this Section 3 would result in the Option or Shares becoming subject to Section...

Page 286
... apply during the period from the Effective Date through the first anniversary of the Effective Date to any sale or transfer by a Majority Stockholder of its pecuniary interest in any shares of Common Stock for a price that is equal to or less than the Fair Market Value of such share of Common Stock...

Page 287
... interest in any shares of Common Stock is Transferred shall agree to execute this Agreement as a condition to such Transfer. 5. Piggyback Registration Rights. (a) Notice to Management Stockholder. If the Company determines that it will file a registration statement under the Securities Act, other...

Page 288
... With Respect To Shares. As used herein, the term "Shares" includes securities of any kind whatsoever distributed with respect to the Company's Common Stock acquired by the Management Stockholder or his or her Transferee (whether pursuant to the Plan, the letter agreement dated on or about...

Page 289
... Park Avenue New York, NY 10178 Attention: Gary Rothstein or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall only be effective upon receipt. 11. Counterparts. This Agreement may be executed in two...

Page 290
... LLC By: By: By: Name: Title: TPG GenPar IV, L.P., its Managing Member TPG Advisors IV, Inc., its General Partner /s/ David A. Spuria David A. Spuria Vice President WARBURG PINCUS PRIVATE EQUITY VIII, L.P. By: By: By: Name: Title: Warburg Pincus Partners, LLC, its General Partner Warburg Pincus & Co...

Page 291
... PRIVATE EQUITY VIII K.G. By: By: By: Name: Title: Warburg Pincus Partners, LLC, its General Partner Warburg Pincus & Co., its Managing Member /s/ Kewsong Lee Kewsong Lee Managing Director WARBURG PINCUS PRIVATE EQUITY IX, L.P. By: By: Name: Title: Warburg Pincus IX LLC, its General Partner...

Page 292
SCHEDULE A MANAGEMENT STOCKHOLDERS By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: A-1 /s/ Gerald A. Barnes Gerald A. Barnes /s/ Steven P. Dennis Steve P. Dennis /s/ Jeanie ...

Page 293
By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: By: Name: A-2 /s/ Gregory G. Shields Gregory G. Shields /s/ Stacie Shirley Stacie Shirley /s/ James E. Skinner James E. Skinner /s/ Margaret E. Spaniolo Margaret E. Spaniolo /s/ Thomas P. Stangle Thomas P. Stangle /s/ ...

Page 294
...Neiman Marcus Group, Inc.) and The subsidiaries of The Neiman Marcus Group, Inc. from time to time party hereto CREDIT SUISSE DEUTSCHE BANK SECURITIES INC. as Joint Lead Arrangers BANC OF AMERICA SECURITIES LLC GOLDMAN SACHS CREDIT PARTNERS L.P. as Co-Arrangers CREDIT SUISSE DEUTSCHE BANK SECURITIES...

Page 295
... Increased Costs SECTION 2.14. Break Funding Payments SECTION 2.15. Taxes SECTION 2.16. Payments Generally; Allocation of Proceeds; Sharing of Set-offs SECTION 2.17. Mitigation Obligations; Replacement of Lenders SECTION 2.18. Illegality SECTION 2.19. Change of Control SECTION 2.20. Asset Sale Offer...

Page 296
... 5.01. Financial Statements and Other Information SECTION 5.02. Notices of Material Events SECTION 5.03. Existence; Conduct of Business SECTION 5.04. Payment of Obligations SECTION 5.05. Maintenance of Properties SECTION 5.06. Books and Records; Inspection Rights SECTION 5.07. Maintenance of Ratings...

Page 297
... SECTION 6.09. Limitations on Sale and Lease-Back Transactions SECTION 6.10. Amendments to Subordination Provisions SECTION 6.11. Obligations of the Borrower and the Restricted Subsidiaries Relating to Kate Spade SECTION 6.12. Impairment of Security Interest SECTION 6.13. Business of Borrower and...

Page 298
...(g) Schedule 3.06 Schedule 3.14 Schedule 3.15 Schedule 3.17 Schedule 4.01(b) Schedule 6.01 Schedule 9.01 EXHIBITS: Exhibit A Exhibit B Exhibit C Exhibit D Exhibit E Exhibit F Form of Administrative Questionnaire Form of Assignment and Assumption Form of Compliance Certificate Joinder Agreement Form...

Page 299
... "Merger") with and into Neiman Marcus, with (i) the outstanding capital stock of Neiman Marcus being converted into (and certain outstanding options to purchase, and outstanding stock unit awards representing the right to receive, shares of capital stock of Neiman Marcus being canceled in exchange...

Page 300
... ownership of voting securities, by agreement or otherwise. "Affiliate Transaction" has the meaning assigned to such term in Section 6.05. "Agent" has the meaning assigned to such term in the preamble to this Agreement. "Alternate Base Rate" means, for any day, a rate per annum equal to the greater...

Page 301
"Applicable Rate" means, for any day, (a) with respect to any ABR Loan, 1.50%, or (b) with respect to any LIBOR Rate Loan, 2.50%. "Approved Fund" means any Person (other than an natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit...

Page 302
...commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a LIBOR Rate Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Capital...

Page 303
... (however designated) of corporate stock, (c) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of...

Page 304
... time in the ordinary course of business; (c) securities issued or directly and fully and unconditionally guaranteed or insured by the government of the United States of America or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full faith and credit...

Page 305
...of the Voting Stock of the Borrower or any of its direct or indirect parent companies. "Change of Control Offer" has the meaning assigned to such term in Section 2.19(b). "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law...

Page 306
... to any Person as of any date of determination, means the ratio of (a) Consolidated Total Indebtedness of such Person as of the end of the most recent fiscal quarter for which internal financial statements are available immediately preceding the date on which such event for which such calculation is...

Page 307
..., (g) any increase in amortization or depreciation or other noncash charges resulting from the application of purchase accounting in relation to the Transactions or any acquisition that is consummated after the Closing Date, net of taxes, shall be excluded, (h) any net after-tax income (loss) from...

Page 308
... means the ratio of (a) Consolidated Total Indebtedness of the Borrower and the Restricted Subsidiaries that is secured by Liens as of the end of the most recent fiscal quarter for which internal financial statements are available immediately preceding the date on which such event for which such...

Page 309
... HSBC Bank Nevada, N.A., of the private label credit card accounts of Neiman Marcus and related receivables and other assets, pursuant to the HSBC Agreements (it being understood that such sale was consummated on July 7, 2005). Default. "Default" means any event that is, or with the passage of time...

Page 310
... the terms of any such transactions, including such fees, expenses or charges related to the Transactions and the Credit Card Sale (including any one-time costs associated with entering into any program agreements or servicing agreements directly related to the Credit Card Sale, but not any payments...

Page 311
... application of Statement of Financial Accounting Standards #133, (ii) any net gain or loss resulting in such period from currency translation gains or losses related to currency remeasurements of Indebtedness and (iii) the amount of gain or loss resulting in such period from a sale of receivables...

Page 312
..., options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock. "Equity Offering" means any public or private sale of common stock or Preferred Stock of the Borrower or any of its direct or indirect parent companies...

Page 313
... than sales in the ordinary course of business) to the extent included in arriving at such Consolidated Net Income, (v) increases in Consolidated Working Capital and long-term account receivables for such period (other than any such increases arising from acquisitions of a Person or business unit by...

Page 314
... other management or employee benefit plan or agreement of the Borrower) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Borrower, in each case designated as Excluded Contributions pursuant to an Officers' Certificate executed by an executive vice president and...

Page 315
..., Deutsche Bank Trust Company Americas, Deutsche Bank AG Cayman Islands Branch, Deutsche Bank Securities Inc., Bank of America, N.A., Banc of America Bridge LLC, Banc of America Securities LLC and Goldman Sachs Credit Partners L.P. "Financial Officer" means the chief financial officer, treasurer...

Page 316
... by a responsible financial or accounting officer of the Borrower. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the...

Page 317
... Neiman Marcus and Bergdorf Goodman, Inc., and all material agreements and instruments entered into in connection therewith, including the Credit Card Program Agreement and the related Services Agreement, in each case, as amended from time to time. "HSBC Arrangements" means the private label credit...

Page 318
... a Borrowing in accordance with "Interest Payment Date" means (a) with respect to any ABR Loan, the first Business Day of each January, April, July and October and the Maturity Date and (b) with respect to any LIBOR Rate Loan, the last day of the Interest Period applicable to the Borrowing of which...

Page 319
... or any payment for property or services for the account or use of others, but excluding accounts receivable, trade credit, advances to customers, commission, travel and similar advances to officers and employees, in each case made in the ordinary course of business), purchases or other acquisitions...

Page 320
..." means the members of management of the Borrower (or its direct parent) who are holders of Equity Interests of the Borrower (or any of its direct or indirect parent companies) on the Closing Date. "Margin Stock" shall have the meaning assigned to such term in Regulation U. "Material Adverse...

Page 321
..." has the meaning assigned to such term in the introductory statement to this Agreement. "Merger Agreement" means the Agreement and Plan of Merger dated as of May 1, 2005, among Holdings, Merger Sub and Neiman Marcus, as amended from time to time. "Merger Consideration" has the meaning assigned...

Page 322
... Agent or any indemnified party arising under the Loan Documents. "Officer" means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of the Borrower...

Page 323
...and any successor entity performing similar functions. "Perfection Certificate" shall mean a certificate in the form of Exhibit I to the Security Agreement or any other form approved by the Agent. "Permitted Asset Swap" means the concurrent purchase and sale or exchange of Related Business Assets or...

Page 324
...parent companies (exclusive of Disqualified Stock); provided that such Equity Interests will not increase the amount available for Restricted Payments under Section 6.04(a)(iii); (k) guarantees of Indebtedness permitted under Section 6.01 and performance guarantees in the ordinary course of business...

Page 325
... (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); (o) Investments relating to a Receivables Facility; provided that in the case of Receivables Facilities established after the Closing Date, such Investments are...

Page 326
... granted in the ordinary course of business to the Borrower's client at which such inventory or equipment is located; (p) Liens on accounts receivable and related assets incurred in connection with a Receivables Facility; (q) Liens to secure any refinancing, refunding, extension, renewal or...

Page 327
... of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business; (v) Liens (i) of a collection bank arising under Section 4-210 of the UCC on items in the course of collection, (ii) attaching to commodity trading accounts or other commodity...

Page 328
...Preferred Stock" means any Equity Interest with preferential rights of payment of dividends or upon liquidation, dissolution, or winding up. "Prime Rate" means the rate of interest per annum determined from time to time by Credit Suisse as its prime rate in effect at its principal office in New York...

Page 329
...such term in Section 9.04. "Registration Rights Agreement" means the Registration Rights Agreement relating to the Senior Notes and the Senior Subordinated Notes, dated as of the Closing Date, among the Borrower, each Subsidiary Guarantor, Credit Suisse First Boston LLC, Deutsche Bank Securities Inc...

Page 330
... Person in contemplation of such leasing. "S&P" means Standard & Poor's Ratings Service, a division of the McGraw-Hill Companies, Inc., and any successor to its rating agency business. its functions. "SEC" means the Securities and Exchange Commission, or any Governmental Authority succeeding to any...

Page 331
... to which the Senior Notes are issued. "Senior Secured Asset-Based Revolving Credit Agreement" means the Credit Agreement dated as of the date hereof, among Holdings, Merger Sub, the subsidiaries of the Borrower from time to time party thereto, Deutsche Bank Trust Company Americas, as administrative...

Page 332
... any partnership, joint venture, limited liability company or similar entity of which (i) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such...

Page 333
...New Notes, (d) the execution, delivery and performance of the Senior Secured Asset-Based Revolving Credit Agreement and all other instruments, agreements and other documents evidencing or governing the Senior Secured Asset-Based Revolving Credit Facility or providing for any guarantee or other right...

Page 334
... Officers' Certificate certifying that such designation complied with the foregoing provisions. Notwithstanding the foregoing, as of the Closing Date, all of the subsidiaries of the Borrower will be Restricted Subsidiaries, other than Neiman Marcus Funding Corporation, Kate Spade, Gurwitch Products...

Page 335
.... For purposes of this Agreement, Loans may be classified and referred to by Type (e.g., a "LIBOR Rate Loan" or a "LIBOR Rate Borrowing"). SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context...

Page 336
...such request either in writing by delivery of a Borrowing Request (by hand or facsimile) signed by the Borrower or by telephone not later than 11:00 a.m., New York City time, two (2) Business Days before the proposed Closing Date (or such later time as shall be acceptable to the Agent). A telephonic...

Page 337
... by it hereunder on the Closing Date by wire transfer of immediately available funds by 12:00 (noon), New York City time, to the account of the Agent most recently designated by it for such purpose by notice to the Lenders, in an amount equal to such Lender's Applicable Percentage of the aggregate...

Page 338
... of the Loans on the Closing Date and (ii) 5:00 p.m., New York City time, on the Termination Date (as defined in the Merger Agreement). SECTION 2.07. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to the Agent for the account of each Lender the then...

Page 339
...not be required if the Consolidated Leverage Ratio at the end of such fiscal year shall be equal to or less than 4.50 to 1.00. (b) The Borrower shall deliver to the Agent, at the time of each prepayment required under this Section 2.09, (i) a certificate signed by a Financial Officer of the Borrower...

Page 340
... (iii) in the event of any conversion of any LIBOR Rate Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that...

Page 341
... on the last day of the Interest Period applicable thereof. SECTION 2.13. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any...

Page 342
... or (d) the assignment of any LIBOR Rate Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.17, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such...

Page 343
... completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. In particular, on or prior to the date which is ten (10) Business Days after the Closing Date, each Foreign...

Page 344
.... Any amounts received after such time on any date may, in the discretion of the Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Agent to the applicable account designated to the Borrower...

Page 345
... thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation. (e) If any...

Page 346
...payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control prepayment date; (v) Lenders electing to have any Loans purchased pursuant to a Change of Control Offer will be required to notify the Agent prior to the close of business on the third Business Day...

Page 347
...Control at the time of making of the Change of Control Offer. SECTION 2.20. Asset Sale Offer. (a) Within 450 days after the Agent's receipt of the Net Proceeds of any Asset Sale of Term Loan First Lien Collateral, the Borrower or the applicable Restricted Subsidiary may, at its option, apply the Net...

Page 348
...the date of termination of such agreement). (b) Within 450 days after any of the Borrower's or any Restricted Subsidiary's receipt of the Net Proceeds of any Asset Sale (other than an Asset Sale of Term Loan First Lien Collateral), the Borrower or such Restricted Subsidiary may, at its option, apply...

Page 349
...than sixty (60) days from the date such notice is mailed). (e) On the prepayment date, the Borrower (subject to the proration provisions set forth in paragraph (f) of this Section 2.20) shall prepay the Loans of all Lenders who accept the Asset Sale Offer at a purchase price in cash equal to 100% of...

Page 350
... public accountants, and (ii) to the extent possible in the exercise of the Borrower's commercially reasonable efforts, as of and for each subsequent fiscal month ended at least thirty (30) days before the Closing Date, certified by its chief financial officer. Such financial statements present...

Page 351
...property. Schedule 3.05(a) also identifies the principal place of business and chief executive office of each Loan Party. The books and records of each Loan Party, and all of their respective chattel paper and records of Accounts, are maintained exclusively at such locations. There is no location at...

Page 352
...service marks, trade names and copyrights and all licenses and rights with respect to the foregoing, necessary for the present conduct of its business, without any conflict with the rights...Environmental Liability. (c) Since the date of this Agreement, there has been no change in the status of the ...

Page 353
... for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plans, in the aggregate. SECTION 3.11. Disclosure. (a) All written information (other than...

Page 354
...are engaged as such businesses are now conducted and are proposed to be conducted following the Closing Date. (b) The Loan Parties do not intend to incur debts beyond their ability to pay such debts as they mature, taking into account the timing and amounts of cash to be received by the Loan Parties...

Page 355
... satisfactory to the Agent as specified on Schedule 4.01(b), in each case (A) dated the Closing Date, (B) addressed to the Agent and the Lenders and (C) in form and substance reasonably satisfactory to the Agent and covering such other matters relating to the Loan Documents and the Transactions...

Page 356
..., management or partnership agreement, and (ii) a good standing certificate for each Loan Party from its jurisdiction of organization. (e) No Default Certificate. The Agent shall have received a certificate, signed by the chief financial officer of the Borrower, dated the Closing Date (i) stating...

Page 357
...for the benefit of itself and the Lenders; (iii) ALTA or other mortgagee's title policy; (iv) an opinion of counsel in the state in which such parcel of real property is located in form and substance and from counsel reasonably satisfactory to the Agent; and (v) such other information, documentation...

Page 358
... Indebtedness under the Senior Secured Asset-Based Revolving Credit Facility, (c) the New Notes, (d) the 2028 Debentures, (e) preferred Equity Interests issued in connection with the Equity Contribution, if any, (f) the 2008 Notes and (g) Indebtedness set forth on Schedule 6.01. (p) Insurance. The...

Page 359
... balance sheet and related statements of earnings, shareholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Deloitte & Touche LLP or other independent public accountants...

Page 360
..., or, after an initial public offering of shares of Capital Stock of the Borrower, distributed by the Borrower to its shareholders generally, as the case may be; (i) promptly, a copy of any final "management letter" received from the Borrower's independent public accountants to the extent such...

Page 361
... the first fiscal quarter after the Closing Date shall not be required to contain all purchase accounting adjustments relating to the Transactions to the extent it is not practicable to include any such adjustments in such financial statements. SECTION 5.02. Notices of Material Events. The Borrower...

Page 362
...which full, true and correct entries are made of all dealings and transactions in relation to its business and activities and (ii) permit any representatives designated by the Agent (including employees of the Agent or any consultants, accountants, lawyers and appraisers retained by the Agent), upon...

Page 363
... such time party to or benefiting from the Intercreditor Agreement or the Security Agreement (including, if applicable, the holders of the 2028 Debentures or the 2008 Notes), in each case to the extent required by the terms thereof, in any property (subject to the limitations with respect to Equity...

Page 364
...11 shall be limited to real property located in the U.S. that are full-line Neiman Marcus retail stores owned in fee by a Loan Party or leased by a Loan Party pursuant to a financeable lease or other real property owned in fee by a Loan Party having a fair market value at the time of the acquisition...

Page 365
... Disqualified Stock or issue shares of Preferred Stock, if the Fixed Charge Coverage Ratio on a consolidated basis for the Borrower's and its Restricted Subsidiaries' most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on...

Page 366
... represented by the Senior Notes issued on the Closing Date (including any guarantees thereof) and the exchange notes and related exchange guarantees to be issued in exchange for the Senior Notes pursuant to the Registration Rights Agreement (other than any Additional Senior Notes (as defined...

Page 367
...exceed the gross proceeds including noncash proceeds (the fair market value of such noncash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Borrower and the Restricted Subsidiaries in connection with such disposition...

Page 368
...extinguished within two (2) Business Days of its incurrence; (xviii) Indebtedness of the Borrower or any Restricted Subsidiary supported by a letter of credit issued pursuant to the Senior Secured Asset-Based Revolving Credit Facility, in a principal amount not in excess of the stated amount of such...

Page 369
...% of the net cash proceeds received by the Borrower since after the Closing Date from the issue or sale of Equity Interests of the Borrower or cash contributed to the capital of the Borrower (in each case, other than proceeds of Disqualified Stock or sales of Equity Interests to the Borrower or any...

Page 370
... type of such Indebtedness, Disqualified Stock or Preferred Stock in one or more of the above clauses; provided that all Indebtedness outstanding under the Senior Secured Asset-Based Revolving Credit Facility and the term loan facility provided for herein on the Closing Date shall be deemed to have...

Page 371
... surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Borrower) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporationorganized or existing under the laws of the United States...

Page 372
... surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than Holdings) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States of...

Page 373
... or series of securities, (x) purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests of the Borrower or any direct or indirect parent of the Borrower, including in connection with any merger or consolidation, (y) make any principal payment on, or redeem, repurchase...

Page 374
... for the period (taken as one accounting period) from August 1, 2005 to the end of the Borrower's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, or, in the case such Consolidated Net Income for such period is a deficit...

Page 375
... not already included in Consolidated Net Income, 100% of the aggregate amount received in cash and the fair market value, as determined in good faith by the Borrower, of marketable securities or other property received after the Closing Date by means of (1) the sale or other disposition (other...

Page 376
... in the definition of "Fixed Charges"; (vi) the declaration and payment of dividends (A) to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by the Borrower after the Closing Date, (B) to a direct or indirect parent company of the Borrower, the...

Page 377
... of each of (A), (B) and (C) of this clause (vi), that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock or the declaration of such dividends on Refunding Capital...

Page 378
... being measured at the time such Investment is made and without giving effect to subsequent changes in value); (xiv) distributions or payments of Receivables Fees; (xv) the distribution, as a dividend or otherwise (and the declaration of such dividend), of shares of Capital Stock of, or Indebtedness...

Page 379
...other fee payable to the Sponsors upon a change of control or initial public equity offering of the Borrower or any direct or indirect parent company thereof pursuant to the Management Services Agreement as in effect on the Closing Date; (iv) the payment of reasonable and customary fees paid to, and...

Page 380
..., the Credit Card Sale and the payment of all fees and expenses related to the Transactions and the Credit Card Sale, in each case as disclosed in the offering circular relating to the New Notes; (xi) transactions with customers, clients, suppliers, or purchasers or sellers of goods or services, in...

Page 381
... or suffer to exist an Asset Sale (other than an Asset Sale of Term Loan First Lien Collateral), unless: (i) the Borrower or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value (as determined in good faith by...

Page 382
... at the time received and without giving effect to subsequent changes in value, shall be deemed to be cash for purposes of this provision and for no other purpose); and (iii) the Net Proceeds of such Asset Sale are applied in accordance with Section 2.20. SECTION 6.07. Dividends and Other Payment...

Page 383
... by customers under contracts entered into in the ordinary course of business; (ix) other Indebtedness, Disqualified Stock or Preferred Stock of Restricted Subsidiaries permitted to be incurred after the Closing Date pursuant to Section 6.01; (x) customary provisions in joint venture agreements and...

Page 384
... within thirty (30) days executes and delivers a Joinder Agreement providing for a Loan Guaranty by such Restricted Subsidiary, except that with respect to a guarantee of Indebtedness of the Borrower or any Subsidiary Guarantor, that is by its express terms subordinated in right of payment to the...

Page 385
...Borrower and the Restricted Subsidiaries on the date of execution of this Agreement or businesses reasonably related or ancillary thereto. ARTICLE VII Events of Default If any of the following events ("Events of Default") shall occur: (a) the Borrower shall fail to pay any principal of any Loan when...

Page 386
... (60) days after receipt of written notice given by the Agent or the Required Lenders to comply with any of its other agreements in this Agreement or any Loan Document; (e) (i) any Loan Party shall fail to make any payment beyond the applicable grace period (whether by scheduled maturity, required...

Page 387
... of Default and all consequences thereof (excluding any resulting payment default) shall be annulled, waived and rescinded automatically and without any action by the Agent or the Lenders if, within twenty (20) days after such Event of Default arose, (i) the Indebtedness or guarantee that is the...

Page 388
... hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Loan Parties or...

Page 389
... subagent and to the Related Parties of the Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Agent. Subject to the appointment and acceptance of a successor Agent as...

Page 390
... Main Street Dallas, Texas 75201 Attention: General Counsel Facsimile No: (214) 743-7611 (ii) if to the Agent, to Credit Suisse at: Eleven Madison Avenue New York, NY 10010 Attention: Agency Group Facsimile No: (212) 325-8304 (iii) if to any other Lender, to it at its address or facsimile number set...

Page 391
...pay interest at such default rate, (D) change Section 2.16(b) or (c) in a manner that would alter the manner in which payments are shared, without the written consent of each Lender, (E) change...the extent such sale or other disposition is made in compliance with the terms of this Agreement (and the ...

Page 392
... hereunder to and including the date of termination, including without limitation payments due to such Non-Consenting Lender under Sections 2.13, 2.15 and 2.21, and (2) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section...

Page 393
... agrees to pay to the Agent such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, penalty, liability or related expense...

Page 394
... under this Agreement; (C) the parties to each assignment shall execute and deliver to the Agent an Assignment and Assumption via an electronic settlement system acceptable to the Agent (or, if previously agreed with the Agent, manually), and shall pay to the Agent a processing and recordation...

Page 395
...W-8ECI or any successor form adopted by the relevant United States taxing authority) as required by applicable law supporting such assignee's position that no withholding by any Borrower or the Agent for United States income tax payable by such assignee in respect of amounts received by it hereunder...

Page 396
...confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements referred to in Section 3.04(a) or delivered pursuant to Section 5.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision...

Page 397
... financial institutions (consented to by the Borrower and Agent) providing liquidity and/ or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency...

Page 398
... off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower or any Loan Guarantor against any of and all the Secured Obligations...

Page 399
... permitted by law, each party to this Agreement hereby irrevocably waives personal service of any and all process upon it and agrees that all such service of process may be made by registered mail (return receipt requested) directed to it at its address for notices as provided for in Section 9.01...

Page 400
... hereby acknowledges that (i) the Agent or its Affiliate may be a lender under the Senior Secured Asset-Based Revolving Credit Facility and (ii) an Affiliate of the Agent will be an initial purchaser of the New Notes. SECTION 9.16. Appointment for Perfection. Each Lender hereby appoints each other...

Page 401
... be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. SECTION 9.18. Effectiveness of the Merger. Neiman Marcus shall have no rights or...

Page 402
... any agreement relating to the Guaranteed Obligations; (iii) any release, non-perfection, or invalidity of any indirect or direct security for the...payment in full in cash of the Guaranteed Obligations. Without limiting the generality of the foregoing, each Loan Guarantor irrevocably waives acceptance...

Page 403
... or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Agent or Lender (as the case may be) receives an amount equal to the sum it...

Page 404
... respect to any such payment or loss by a Paying Guarantor shall be determined as of the date on which such payment or loss was made by reference to the ratio of (i) such Non-Paying Guarantor's Maximum Liability as of such date (without giving effect to any right to receive, or obligation to make...

Page 405
request to evidence such termination or release. Any execution and delivery of documents pursuant to the preceding sentence of this Section 10.12 shall be without recourse to or warranty by the Agent. 107

Page 406
...and General Counsel THE NEIMAN MARCUS GROUP, INC., By /s/ Nelson A. Bangs Name: Nelson A. Bangs Title: Senior Vice President and General Counsel NEIMAN MARCUS SPECIAL EVENTS, INC. NEMA BEVERAGE CORPORATION NM FINANCIAL SERVICES, INC. NM KITCHENS, INC. BERGDORFGOODMAN.COM, LLC BERGDORF GOODMAN, INC...

Page 407
NM NEVADA TRUST, By /s/ Nelson A. Bangs Name: Nelson A. Bangs Title: Vice President 109

Page 408
CREDIT SUISSE, CAYMAN ISLANDS BRANCH, individually and as Agent, By /s/ Robert Hetu Name: Robert Hetu Title: Director /s/ Vanessa Gomez Name: Vanessa Gomez Title: Vice President By 110

Page 409
COMMITMENT SCHEDULE Lender Credit Suisse Deutsche Bank Trust Company Americas Wachovia Bank, N.A. LaSalle Retail Finance, a Division of LaSalle Business Credit, LLC National City Bank PNC Bank, N.A. The Bank of New York U.S. Bank, National Association Credit Industriel et Commercial Total $ $ $ $ ...

Page 410
SCHEDULE 1.01(a) Immaterial Subsidiaries Willow Bend Beverage Corporation

Page 411
...Properties Store Address County Owned San Francisco Tyson's Corner II Plano Willowbend Orlando San Antonio 150 Stockton Street San Francisco, CA 94108 2255 International Drive McLean, VA 22102 2201 Dallas Pkwy Plano, TX 75093 4170 Conroy Rd Orlando, FL 32839 The Shops at La Cantera 15900 La Cantera...

Page 412
...County Los Angeles County Dallas County Fulton County Westchester County Fashion Island(1) Washington Bergdorf Goodman Men's Store Orange County Washington DC New York County (1) The executed mortgage for this site will be delivered on the Closing Date to First American Title Insurance Company to...

Page 413
SCHEDULE 3.05(a) Properties I. Real Estate Owned or Leased The Neiman Marcus Group, Inc. (or "NMG") ADDRESS CITY STATE ZIP LESSOR(S) (IF APPLICABLE) 1618 Main Street Dallas... Bank N.A. Pacifico Partners, Ltd. Commerce St. 400 North Park Center 2201 Dallas Parkway 2100 Green Oaks Rd. Dallas Dallas ...

Page 414
... Owned Property Rouse-Coral Gables, LLC Fashion Mall Partners, LP Owned by NMG Westland Garden State Plaza, LP King of Prussia Associates Short Hills Associates 7611- Copley Place Associates, LLC TIAA-CREF Somerset Collection Limited Partnership BROAD FRONTENAC ASSOC Brookfield DB Inc. M & J Wilkow...

Page 415
ADDRESS CITY STATE ZIP LESSOR(S) (IF APPLICABLE) 6 Oakbrook Center Oak Brook IL 60523 Urban Investment and Development Company ML Dover Associates 5000 Northbrook Ct. Northbrook IL 60062 General...Camelback Rd. San Francisco Scottsdale CA AZ 94108 85251 Owned by NMG Business Realty of...

Page 416
ADDRESS CITY STATE ZIP LESSOR(S) (IF APPLICABLE) 1450 Ala Moana Blvd. Honolulu HI 96814 D/E Hawaii Joint Venture Hawaii Central Development, Inc. Fujiyama, Duffy & Fujiyama Fashion Valley Center 7027 Friars Road San Diego CA 92108 I.T.C. Fashion Valley Corporation ML Dover Associates ...

Page 417
...-Dolphin Mall Associates, LLC Katy Mills, Limited Partnership PCCP/SB Las Americas, LLC Prime Outlets at San Marcos II Limited Partnership Arundel Mills Limited Partnership Park Cities Village Joint Venture Thames Financial Services, LTD. 754 Fifth Avenue Associates 745 Associates WvF-Paramount...

Page 418
ADDRESS CITY STATE ZIP LESSOR(S) (IF APPLICABLE) Space I-2A, 670 Auahi Street 9701 Wilshire Blvd. 400 E. Royal Lane Suite 112 5044 Sharp Street 2301 Neiman Marcus Pkwy. 5950 Colwell Blvd. 4121 Pinnacle Point Dr. 2784 Executive Way 9501 Winona Honolulu Beverly Hills Irving Dallas Longview ...

Page 419
... Street Investment Corporation Walton Houston Galleria Office, L.P. Warehouse Associates Plaza Vegas Ministorage Keystone-Florida Property Holding Corp. Scottsdale Fashion Square Partnership CITY STATE ZIP LESSORS 3200 Las Vegas Blvd. So. Las Vegas NV 89109 H-S Las Vegas Associates Rouse FS...

Page 420
... and Chief Executive Office of each Loan Party Loan Party Principal place of business Chief executive office Newton Acquisition, Inc. Newton Acquisition Sub, Inc. (2) The Neiman Marcus Group, Inc. Bergdorf Goodman, Inc. Bergdorf Graphics, Inc. BergdorfGoodman.com, LLC NEMA Beverage Corporation NEMA...

Page 421
SCHEDULE 3.05(g) Intellectual Property NONE 12

Page 422
SCHEDULE 3.06 Disclosed Matters NECA-IBEW Pension Fund (The Decatur Plan) v. The Neiman Marcus Group, Inc. et al. (CA No. 3-05 CV-0898B) 13

Page 423
SCHEDULE 3.14 Insurance SEE FOLLOWING PAGES 14

Page 424
...NAME ADDRESS DATE OF ANALYSIS NAME OF ANALYST THE NEIMAN MARCUS GROUP, INC. 1618 Main Street, Dallas, Texas 75201 September 12, 2005 Aon Risk Services Cityplace Center East 2711 N. Haskell Avenue Suite 800 - Lock Box #8 Dallas, Texas 75204-2999 Telephone 214 989-0000 Annie K. McCarley Policy Term...

Page 425
.../Policy Number Policy Term Limits Coins. Premium Coverage Coverage is generally described as your liability arising from: Premises/Operations Acts of Independent Contractors Products/Completed Operations Contractual Liability Personal & Advertising Injury Host Liquor Fire Legal Broad Form...

Page 426
Company/Policy Number Policy Term Limits Coins. Premium Coverage Limits of Liability: $ [***] General Aggregate (at inception) $ [***] Products/Completed Operations Aggregate $ [***] Personal & Advertising Injury $ [***] Each Occurrence $ [***] Fire Damage (any one fire) $ [***] Each ...

Page 427
Company/Policy Number Policy Term Limits Coins. Premium Coverage Contractual Liability Personal & Advertising Injury Premises Medical Payments Host Liquor Fire Legal Broad Form Property Damage Incidental Medical Malpractice Non-Owned Watercraft Limited Worldwide Liability Additional Persons ...

Page 428
.../Policy Number Policy Term Limits Coins. Premium Coverage medical, loss wages, and services for persons occupying automobiles owned by you and subject to No Fault benefits in the state where the automobile is licensed or principally garaged. Drive Other Car Coverage: Provided for all employees...

Page 429
Company/Policy Number Policy Term Limits Coins. Premium Coverage [***] August 1, 2006 to the Workers' Compensation statutory requirement of states scheduled in the policy. declaration. Section C of the policy provid an extension for still other states, except monopolistic state fund states (...

Page 430
Company/Policy Number Policy Term Limits Coins. Premium Coverage August 1, 2006 Policy provides liability limit(s) of $[***] should the public be injured or their property damaged for which the insured is legally liable. The coverage is essentially excess over Employer's, General, Automobile ...

Page 431
Company/Policy Number Policy Term Limits Coins. Premium Coverage PROPERTY COVERAGE: All Risk subject to policy terms, conditions and exclusions. VALUATION BASIS: Replacement Cost - Furniture, Fixtures, Equipment and Building Selling Price - Inventory LIMITS: per occurrence for Real Property, ...

Page 432
Company/Policy Number Policy Term Limits Coins. Premium Coverage With respects to California Earthquake [***] of the 100% Property Damage value of the locations sustaining loss or damage each applied separately: Each Building or Structure,Contents & PP of each building or structure, [***] of ...

Page 433
Company/Policy Number Policy Term Limits Coins. Premium Coverage Underwriters at Lloyds [***] December 1, 2004 to December 1, 2005 See Coverag e [***] DIFFERENCE IN CONDITIONS - 1ST Layer (Excess Flood and Earth Movement) LOCATIONS: Per schedule on file with the insurance company LIMIT: ...

Page 434
Company/Policy Number Policy Term Limits Coins. Premium Coverage [***] December 1, 2005 Coverag e (Excess Flood and Earth Movement) LOCATIONS: Per schedule on file with the insurance company LIMIT: [***] Part of $[***] Excess of $[***] Greenwich Ins. Co. [***] December 1, 2004 to December...

Page 435
Company/Policy Number Policy Term Limits Coins. Premium Coverage Insurance Company of the West [***] December 1, 2004 to December 1, 2005 See Coverag e [***] DIFFERENCE IN CONDITIONS - 1ST Layer (Excess Flood and Earth Movement) LOCATIONS: Per schedule on file with the insurance company ...

Page 436
Company/Policy Number Policy Term Limits Coins. Premium Coverage Westchester Surplus Lines [***] December 1, 2004 to December 1, 2005 See Coverag e [***] DIFFERENCE IN CONDITIONS - 1ST Layer (Excess Flood and Earth Movement) LOCATIONS: Per schedule on file with the insurance company LIMIT...

Page 437
Company/Policy Number Policy Term Limits Coins. Premium Coverage Essex Insurance Company [***] December 1, 2004 to December 1, 2005 See Coverage [***] DIFFERENCE IN CONDITIONS - 1ST Layer (Excess Flood and Earth Movement) LOCATIONS: Per schedule on file with the insurance company LIMIT: ...

Page 438
Company/Policy Number Policy Term Limits Coins. Premium Coverage (GENERAL LIABILITY) Limits of Liability: [***] $ Master Control Program Aggregate [***] $ General Aggregate [***] $ Products Completed Operations Aggregate [***] $ Personal & Advertising Injury [***] $ Each Occurrence [***] $ ...

Page 439
... State of Hire Benefits for U.S. Hired and/or U.S. Citizens Workers' Compensation Limits: Country of Hire for Third Country Nationals Excludes Local Nationals Federal Insurance Company [***] July 31, 2005 to July 31, 2006 See Coverage [***] DIRECTORS & OFFICERS (Claims-Made Policy) Policy provides...

Page 440
Company/Policy Number Policy Term Limits Coins. Premium Coverage Illinois National Insurance Company [***] July 31, 2005 to July 31, 2006 See Coverag e [***] EXCESS DIRECTORS & OFFICERS(Claims-Made Policy) Limits of Liability: $ [***] Each Loss $ [***] Each Policy Period Arch Insurance ...

Page 441
Company/Policy Number Policy Term Limits Coins. Premium Coverage AXIS Reinsurance Compamy [***] July 31, 2005 to July 31, 2006 See Coverag e EXCESS DIRECTORS & OFFICERS(Claims-Made [***] Policy) Limits of Liability: $ [***] Each Loss $ [***] Each Policy Period Federal Insurance Company ...

Page 442
Company/Policy Number Policy Term Limits Coins. Premium Coverage $ [***] Client $ [***] Expense Retention: $ [***] Executive Risk Indemnity Inc. [***] July 1, 2005 to July 1, 2006 See Coverag e $ [***] ERRORS & OMISSIONS Limit of Liability: $ [***] Each Claim or Related Claims $ [***] ...

Page 443
... value 100 shares of Common Stock $1.00 par value 100 shares of Newton Acquisition, Inc. Newton Acquisition, Inc. (3) Neiman Marcus Holdings, Inc. Bergdorf Goodman, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. NEMA Beverage Holding Corporation NEMA...

Page 444
Corporation NM Financial Services, Inc. Corporation Common Stock $1.00 par value 10 shares of Common Stock No par value 100 shares No par value Marcus Group, Inc. The Neiman Marcus Group, Inc. 1. The Neiman Marcus Group, Inc. 2. Bergdorf Goodman, Inc. 100% NM Nevada Trust Business Trust 1. 90% ...

Page 445
... NEMA Beverage Parent Corporation Texas NEMA Beverage Holding Corporation Texas NEMA Beverage Corporation Texas Neiman Marcus Holdings, Inc. California Bergdorf Goodman, Inc. New York Bergdorf Graphics, Inc. New York BergdorfGoodman.com, LLC Delaware Worth Avenue Leasing Company Florida Willow Bend...

Page 446
SCHEDULE 3.17 Labor Disputes NONE 37

Page 447
...10th Floor, Newark, NJ 07102 559 Lexington Ave, New York, NY 10022 Henry W. Oliver Bldg. 535 Smithfield Street, Pittsburgh, PA 15222 2828 North Harwood St., Suite 1800, Dallas, TX 75201 999 Peachtree Street, NE, Atlanta, GA 30309 Street Address Jim Morrow, Partner Contact Tel: (602) 229-5644 Tel...

Page 448
....c om [email protected] m [email protected] m Jeffrey.Hermanson@wilm erhale.com [email protected] m Wilmer Cutler Pickering Hale and Dorr LLP MA 60 State Street Boston, MA 02109 Jeffrey Hermanson, Partner John Sigel, Partner 39

Page 449
SCHEDULE 6.01 Existing Indebtedness 2008 Notes 2028 Debentures $1.4 million of other indebtedness 40

Page 450
SCHEDULE 9.01 Borrower's Website for Electronic Delivery www.neimanmarcusgroup.com 41

Page 451
... A [FORM OF] ADMINISTRATIVE QUESTIONNAIRE NEIMAN MARCUS GROUP, INC. Agent Information Credit Suisse Eleven Madison Avenue New York, NY 10010 Agent Wire Instructions Bank of New York ABA [***] Account Name: [***] Account Number: [***] It is very important that all of the requested information be...

Page 452
...Credit Contact Telephone: Facsimile: E-Mail Address: Primary Operations Contact Name: Company: Title: Address: Secondary Operations Contact Telephone: Facsimile: E-Mail Address: Lender's Domestic Wire Instructions Bank Name: ABA/Routing No.: Account Name: Account No.: FFC Account Name: FFC Account...

Page 453
... the United States, you must complete and return Form W-9 (Request for Taxpayer Identification Number and Certification). Please be advised that we request that you submit an original Form W-9. Pursuant to the language contained in the tax section of the Credit Agreement, the applicable tax form for...

Page 454
...Credit Agreement The Credit Agreement dated as of October 6, 2005, among The Neiman Marcus Group, Inc., a Delaware corporation (the "Borrower", formerly known as Newton Acquisition Merger Sub, Inc.), Newton Acquisition, Inc., a Delaware corporation, the Subsidiaries of the Borrower from time to time...

Page 455
... AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.] The terms set forth in this Assignment and Assumption are hereby agreed to: ASSIGNOR [NAME OF ASSIGNOR] by Name: Title: ASSIGNEE [NAME OF ASSIGNEE] by Name: Title: (2) Set forth, to at least 9 decimals...

Page 456
Consented to and Accepted: CREDIT SUISSE, as Agent by: Name: Title: by: Name: Title: [Consented to:](3) [THE NEIMAN MARCUS GROUP, INC.] by: Name: Title: (3) To be added only if the consent of the Borrower is required by the terms of the Credit Agreement. 3

Page 457
...a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements referred to in Section 3.04(a) or delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to...

Page 458
... of any such condition or event and any action taken or proposed to be taken with respect thereto; 4. No Loan Party (a) has changed (i) its name, (ii) the location of its chief executive office or its principal place of business, (iii) its organizational legal entity designation or jurisdiction of...

Page 459
... to each such condition or event: The foregoing certifications, together with the information set forth in the Schedules hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this day of , 20 . THE NEIMAN MARCUS GROUP, INC. by: Name: Title: 2

Page 460
SCHEDULE I Calculations of the Borrower's Excess Cash Flows

Page 461
SCHEDULE II Immaterial Subsidiaries

Page 462
... (the "New Subsidiary") and CREDIT SUISSE, as Agent, under that certain Credit Agreement, dated as of October 6, 2005 (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among The Neiman Marcus Group, Inc., a Delaware corporation (the "Borrower...

Page 463
...caused this Agreement to be duly executed by its authorized officer, and the Agent, for the benefit of the Lenders, has caused the same to be accepted by its authorized officer, as of the day and year first above written. [NEW SUBSIDIARY] by: Name: Title: Acknowledged and accepted: CREDIT SUISSE, as...

Page 464
... day thereof(3) Account Number and Location (1) Must be notified in writing or by telephone (with such telephonic notification to be confirmed promptly in writing) (i) in the case of a LIBOR Rate Borrowing, not later than 11:00 a.m., New York City time, two (2) Business Days before the Closing Date...

Page 465
NEWTON ACQUISITION MERGER SUB, INC. by: Name: Title: 2

Page 466
EXHIBIT F [FORM OF] PROMISSORY NOTE $[ ] New York, New York [â€¢], 200[â€¢] FOR VALUE RECEIVED, the undersigned, THE NEIMAN MARCUS GROUP, INC., a Delaware corporation (the "Borrower"), hereby promises to pay to [ ] (the "Lender") or its registered assigns, at the office of Credit Suisse (the "Agent...

Page 467
Schedule A to Note LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS Amount of ABR Loans Converted to LIBOR Rate Loans Date Amount of ABR Loans Amount Converted to ABR Loans Amount of Principal of ABR Loans Repaid Unpaid Principal Balance of ABR Loans Notation Made By

Page 468
... OF LIBOR RATE LOANS Amount Converted to LIBOR Rate Loans Interest Period and Adjusted LIBOR with Respect Thereto Amount of Principal of LIBOR Rate Loans Repaid Amount of LIBOR Rate Loans Converted to ABR Loans Unpaid Principal Balance of LIBOR Rate Loans Date Amount of LIBOR Rate Loans Notation...

Page 469
...of Neiman Marcus from time to time party thereto and Credit Suisse, as administrative agent, and (b) the Indenture dated as of May 27, 1998 (as amended, restated, supplemented or otherwise modified from time to time, the "Existing Notes Indenture"), between Neiman Marcus and The Bank of New York, as...

Page 470
... meanings: "Account" shall have the meaning set forth in Article 9 of the UCC. "Aggregate Term Loan Credit Exposure" means, at any time, the aggregate principal amount of loans outstanding under the Term Loan Credit Agreement at such time. "Article" means a numbered article of this Agreement, unless...

Page 471
... Agreement Event of Default or an Existing Notes Event of Default. "Excluded Assets" means (a) Credit Card Payments; (b) (c) the Specified Credit Card Receivables, any Specified Credit Card Payments and any Specified In-Store the HSBC Credit Card Receivables Accounts; more than 65% of the issued...

Page 472
... Trustee" means The Bank of New York, in its capacity as trustee under the Existing Notes "Existing Notes Secured Parties" means the 2008 Notes Secured Parties and the 2028 Debentures Secured Parties. "Fixture" shall have the meaning set forth in Article 9 of the UCC. "General Intangible" shall have...

Page 473
...; and (f) all rights corresponding to any of the foregoing throughout the world. "Perfection Certificate" means a certificate substantially in the form of Exhibit I completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Responsible Officer of the...

Page 474
... applicable), whether or not physically delivered to the Agent pursuant to this Agreement. "Receivables" means the Accounts, Chattel Paper, Documents, Investment Property, Instruments and any other rights or claims to receive money (other than the Specified Credit Card Receivables) that are General...

Page 475
... ownership of such account to the applicable third party in connection with the establishment of the applicable Permitted Replacement Credit Card Program. "Specified In-Store Credit Card Payments" means any payments made in-person by customers in respect of private label credit cards subject to the...

Page 476
...obligations of the Borrower or any other Grantor to any of the Term Loan Secured Parties under or pursuant to the Term Loan Credit Agreement and each of the Term Loan Security Documents and (c) the due and punctual payment and performance of all the obligations of the Borrower and each other Grantor...

Page 477
...time in the State of New York. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. ARTICLE II GRANT OF SECURITY INTEREST Each Grantor hereby pledges, assigns and grants to the Agent, on behalf of and for the ratable benefit of the Secured...

Page 478
...and records, customer lists, credit files, computer files, programs, printouts and other computer materials and records related thereto and any General Intangibles at any time evidencing or relating to any of the foregoing; to secure the prompt and complete payment and performance of the Obligations...

Page 479
... Location. Each Grantor's mailing address and the location of its place of business (if it has only one) or its chief executive office (if it has more than one place of business), is disclosed on Exhibit A. Section 3.4. Collateral Locations. Each location where Collateral is located as of the date...

Page 480
... security agreements naming the Agent on behalf of the Secured Parties as the secured party and (b) Permitted Liens. Section 3.11. Pledged Collateral. (a) Exhibit F sets forth a complete and accurate list of all of the Pledged Collateral and the percentage of the total issued and outstanding Equity...

Page 481
... may from time to time be requested by the Agent in order to maintain a first priority (subject to the terms of the Intercreditor Agreement) perfected security interest in and, if applicable, Control of, the Collateral. Any financing statement filed by the Agent may be filed in any filing office in...

Page 482
... Inventory between the applicable Grantor and such Person. (g) Change of Name, Etc. Each Grantor agrees to furnish to the Agent prompt written notice of any change in: (i) such Grantor's name; (ii) the location of such Grantor's chief executive office or its principal place of business; (iii) such...

Page 483
... provided in this Agreement, each Grantor will collect and enforce, in accordance with its present policies and in the ordinary course of business, all amounts due or hereafter due to such Grantor under the Receivables. (c) Electronic Chattel Paper. If any Grantor at any time holds or acquires...

Page 484
...at any time after the occurrence and during the continuance of an Event of Default, without notice, to exercise all voting rights or other rights relating to Pledged Collateral, including, without limitation, exchange, subscription or any other rights, privileges, or options pertaining to any Equity...

Page 485
...same. (c) In no event shall any Grantor, either directly or through any agent, employee, licensee or designee, file an application for the registration of any material Patent, Trademark or Copyright with the United States Patent and Trademark Office, the United States Copyright Office or any similar...

Page 486
... All insurance policies required under Section 5.10 of the Term Loan Credit Agreement shall name the Agent (for the benefit of the Secured Parties) as an additional insured or as loss payee, as applicable, and shall contain loss payable clauses or mortgagee clauses, through endorsements in form and...

Page 487
..., receive, assemble, process, appropriate, sell, lease, assign, grant an option or options to purchase or otherwise dispose of, deliver, or realize upon, the Collateral or any part thereof in one or more parcels at public or private sale or sales (which sales may be adjourned or continued from time...

Page 488
... have the right upon any public sale or sales and, to the extent permitted by law, upon any private sale or sales, to purchase for the benefit of the Agent and the Secured Parties, the whole or any part of the Collateral so sold, free of any right of equity redemption, which equity redemption each...

Page 489
... V at such time as the Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby (a) grants to the Agent, for the benefit of the Agent and the Secured Parties, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to such...

Page 490
... with its terms. Without limiting the foregoing, each of the Existing Notes Trustee and each holder of 2028 Debentures and 2008 Notes, by accepting the benefits of this Agreement, shall be deemed to have waived any right it might have, under applicable law or otherwise, to compel the sale or other...

Page 491
... (and not obtained by it through any sale of or other realization upon Collateral) in accordance with the terms of the Term Loan Credit Agreement or the Existing Notes Indenture, as applicable. (b) Each Secured Party agrees that if it shall through the exercise of a right of banker's lien, setoff or...

Page 492
...to Section 9.08 of the Term Loan Credit Agreement, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Secured Party under any applicable bankruptcy, insolvency or other...

Page 493
...each other upon reasonable request a statement of all payments received in respect of Obligations. Section 8.3. Secured Parties; Other Collateral. The Secured Parties agree that all of the provisions of this Agreement shall apply to any and all properties, assets and rights of the Grantors and their...

Page 494
... and under the other Term Loan Security Documents shall include, but not be limited to, the disposition of the Collateral by foreclosure or other sale and the exercising of all remedies of a secured lender under the UCC, bankruptcy laws or similar laws of any applicable jurisdiction. Section...

Page 495
... of any Grantor: Bankruptcy Proceedings. The following provisions shall apply during any Bankruptcy (a) The Agent shall represent all Secured Parties in connection with all matters directly relating to the Collateral, including, without limitation, any use, sale or lease of Collateral, use of cash...

Page 496
... the Receivables, (9) to change the address for delivery of mail addressed to any Grantor to such address as the Agent may designate and to receive, open and dispose of all mail addressed to such Grantor; and (iii) to do all other acts and things necessary to carry out the terms of this Agreement...

Page 497
... Trustee, to it at The Bank of New York, Plaza of the Americas, Corporate Trust Division, 600 North Pearl Street, Suite 420, Dallas, Texas 75201, Attention of Patrick Giordano (Telecopy No. (214) 880-8234); and (c) if to Grantors, at The Neiman Marcus Group, Inc., One Marcus Square, 1618 Main Street...

Page 498
...also be delivered by e-mail to the e-mail address of a representative of the applicable person provided from time to time by such Person. Section 11.2. Waivers. Each Grantor hereby waives notice of the time and place of any public sale or the time after which any private sale or other disposition of...

Page 499
... faith based on information known to it at the time it takes any such action. Section 11.5. Secured Party Performance of Debtor Obligations. Without having any obligation to do so, the Agent may perform or pay any obligation which any Grantor has agreed to perform or pay under this Agreement and the...

Page 500
... the Secured Parties until the Term Loan Obligations have been paid in full. Section 11.9. Limitation by Law; Severability of Provisions. All rights, remedies and powers provided in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provision...

Page 501
...Agent in connection with the preparation, execution, delivery, administration, collection and enforcement of this Agreement and in the audit, analysis, administration, collection, preservation or sale of the Collateral (including the expenses and charges associated with any periodic or special audit...

Page 502
... are not required to be pledged under this Agreement because Rule 3-10 or Rule 3-16 of Regulation S-X of the Exchange Act would require the filing of separate financial statements of such Subsidiary if its Equity Interests were so pledged, in the event that Rule 3-10 or Rule 3-16 of Regulation...

Page 503
... OF THE AGENT OR ANY SECURED PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY OTHER TERM LOAN/NOTE DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK IN THE BOROUGH OF MANHATTAN. Section 11.20. WAIVER OF...

Page 504
... such Collateral to the Revolving Facility Agent in accordance with the terms of the Revolving Facility Security Documents, such Grantor's obligations hereunder with respect to such delivery shall be deemed satisfied by the delivery to the Revolving Facility Agent, acting as a gratuitous bailee of...

Page 505
... executed this Agreement as of the date first above NEWTON ACQUISITION, INC., By: /s/ Nelson A. Bangs Name: Nelson A. Bangs Title: Senior Vice President and General Counsel NEWTON ACQUISITION MERGER SUB, INC., By: /s/ Kewsong Lee Name: Kewsong Lee Title: Senior Vice President THE NEIMAN MARCUS GROUP...

Page 506
CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as Agent By: /s/ Robert Hetu Name: Robert Hetu Title: Director By: /s/ Vanessa Gomez Name: Vanessa Gomez Title: Vice President

Page 507
... Beverage Parent Corporation NM Financial Services, Inc. NMGP, LLC NM Kitchens, Inc. (f/k/a Chef's Catalog, Inc.) NM Nevada Trust Worth Avenue Leasing Company II. Place of Business Name of Grantor Delaware Delaware Delaware New York New York Delaware California Delaware Texas Texas Texas Delaware...

Page 508
... Dallas, TX 75201 Locations of Collateral (other than Place of Business listed above): Properties Owned by The Neiman Marcus Group, Inc.: Address Type of Property Full Line Stores Willow Bend Orlando Tyson's San Francisco San Antonio Warehouse/Service Center Longview Las Colinas A-2 2201 Dallas...

Page 509
(b) Property Properties Leased by The Neiman Marcus Group, Inc: Address Landlord(s) Name(s) Full Line Stores Downtown Dallas 1618 Main Street Dallas, Texas 75201 Trustees of the Estate of James Charles O'Connor Trustee for S.P.Cimiotti Trust Gregg Edwards Cholly Edwards Carolyn Edwards Kazmann ...

Page 510
... Address King of Prussia Associates Short Hills Associates Landlord(s) Name(s) 7611- Copley Place Associates, LLC TIAA-CREF Somerset Collection Limited Partnership BROAD FRONTENAC ASSOC Brookfield DB Inc. M & J Wilkow, Ltd. Urban Investment and Development Company ML Dover Associates General...

Page 511
... IV Limited Partnership Colorado Mills Limited Partnership Taubman-Dolphin Mall Associates, LLC Katy Mills, Limited Partnership PCCP/SB Las Americas, LLC Prime Outlets at San Marcos II Limited Partnership Arundel Mills Limited Partnership Park Cities Village Joint Venture Thames Financial Services...

Page 512
...Address Landlord(s) Name(s) Bergdorf Goodman Main Store Men's Store Office Long Island Service Center Offices Renaissance Tower 754 5th Avenue New York, New York 10019 745 5th Avenue New York, New York 10022 625 Madison Avenue New York, New York 10022 43-30 24th Street Long Island City, New York...

Page 513
... Investment Corporation Walton Houston Galleria Office, L.P. Warehouse Associates Plaza Vegas Ministorage Keystone-Florida Property Holding Corp. Scottsdale Fashion Square Partnership Properties Leased by NM Nevada Trust: Type of Property Address Landlord's Name Full Line Store Las Vegas 3200 Las...

Page 514
...: Public warehouses/Locations pursuant to Bailment or Consignment Arrangements Warehouse operator or other Bailee or Consignee Name of Grantor The Neiman Marcus Group, Inc The Neiman Marcus Group, Inc East Coast District Center 50 Rte. 46 Gordon Dr. Totowa, New Jersey 7512 New Jersey Fur Service...

Page 515
..., Etc. D & R Management Inc. 50 Route 46, Gordon Drive Totowa, N.J. 07512 David Yurman 24 Vestry St. New York, New York 10013 Exceeds $2,500,000 Value of Inventory Does not exceed $2,500,000 (1) All inventory is owned by either The Neiman Marcus Group, Inc. or Bergdorf Goodman, Inc. B-1

Page 516
EXHIBIT C (See Section 3.7 of Agreement) LETTER OF CREDIT RIGHTS NONE CHATTEL PAPER NONE C-1

Page 517
...Assigned N276 AW 52428-USA UNITED STATES 52429-USA UNITED STATES UTL-ORD Not Assigned NOT MAILED NOT MAILED N276 AW UTL-ORD Not Assigned (2) Per the Credit Agreement and Security Agreement, a security interest is to be granted in all of the scheduled Intellectual Property; however, only the...

Page 518
... REMARKS Filing date obtained from fax of 2/27/03; SCHEDULED ACTIONS INSTRUCTION TO RQST EXAM 02/27/2003 FU: NEXT PTO ACTION ANNUITY DUE N276 MM/AW 45242-CAN CANADA UTL-ORD 09/886806 06/21/2001 The Neiman Marcus Group, Inc. PUBLISHE D Publ. No. 2002-0196333 -A1 OFFICE ACTION [ 3 MON...

Page 519
... DUE RENEWAL DUE 12/03/2005 AMERICAN ARTFORMS BALE OF COTTON DESIGN BERGDORF GOODMAN BERGDORF GOODMAN BERGDORF GOODMAN BERGDORF GOODMAN (stylized) BERGDORF GOODMAN (stylized) BERGDORF MEN REGISTERED 04/28/2011 REGISTERED 02/27/2008 REGISTERED 03/11/2009 REGISTERED 09/03/2014 REGISTERED 02...

Page 520
... Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. NM Nevada Trust NM Nevada Trust NM Nevada Trust NM Nevada Trust NM Nevada Trust NM Nevada Trust STATUS REGISTERED SCHEDULED ACTIONS RENEWAL 08/22/2007 DUE RENEWAL DUE RENEWAL DATE...

Page 521
... 46761-USA UNITED STATES 43910-USA UNITED STATES 45704-USA UNITED STATES 45706-USA UNITED STATES 45705-USA UNITED STATES Mark Type Class SM 35, 36 SERIAL NO. REG. NO. 76/044420 2442806 FILED ISSUED 05/09/2000 04/10/2001 Owner/ Registrant The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc...

Page 522
...Nevada Trust NM Nevada Trust The Neiman Marcus Group, Inc. NM Nevada Trust NM Nevada Trust NM Nevada Trust STATUS LAPSED 06/16/2004 REGISTERED SCHEDULED ACTIONS RENEWAL DUE Sections 8 & 15 Due RENEWAL DUE RENEWAL DUE 07/15/2007 NEW LEVEL OF BEAUTY REGISTERED 02/19/2008 02/19/2012 NM N276 MM...

Page 523
... Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. STATUS LAPSED 03/21/2003 REGISTERED SCHEDULED...

Page 524
.... The Neiman Marcus Group, Inc. NM Nevada Trust REGISTERED 10/20/2012 REGISTERED 10/20/2012 THE ZODIAC REGISTERED 11/30/2012 TRIFLES REGISTERED 09/19/2009 TRIFLES and design REGISTERED 12/12/2008 VERY BERGDORF REGISTERED 06/22/2010 06/22/2014 Foreign Trademarks MARK BERGDORF GOODMAN...

Page 525
..., Inc. NM Nevada Trust NM Nevada Trust NM Nevada Trust The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. NM Nevada Trust NM Nevada Trust NM Nevada Trust STATUS REGISTERED SCHEDULED ACTIONS RENEWAL 01/05/2007 DUE RENEWAL DUE RENEWAL DUE RENEWAL DUE 02/28/2007...

Page 526
.../1976 08/03/1968 10/31/1968 Owner/ Registrant NM Nevada Trust The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. NM Nevada Trust NM Nevada Trust STATUS REGISTERED REGISTERED SCHEDULED ACTIONS RENEWAL 10/24/2007 DUE RENEWAL DUE RENEWAL DUE RENEWAL DUE RENEWAL...

Page 527
...Trust NM Nevada Trust NM Nevada Trust The Neiman Marcus Group, Inc. NM NEVADA TRUST NM Nevada Trust STATUS REGISTERED SCHEDULED ACTIONS RENEWAL 08/12/2008 DUE RENEWAL DUE 06/29/2010 NEIMAN MARCUS NEIMAN MARCUS NEIMAN MARCUS NEIMAN-MARCUS REGISTERED PENDING PENDING REGISTERED RENEWAL DUE RENEWAL...

Page 528
... Trust The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. STATUS REGISTERED REGISTERED REGISTERED REGISTERED SCHEDULED ACTIONS RENEWAL...

Page 529
...-NY NEW YORK 46763-CA CALIFORNIA Mark Type Class SM 42 TM 42 SM 42 SERIAL NO. REG. NO. S-13375 FILED ISSUED 01/21/1993 01/22/1993 02/11/2003 Owner/ Registrant The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. STATUS LAPSED 02/13/2003 REGISTERED SCHEDULED...

Page 530

Page 531
...Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. The Neiman Marcus Group, Inc. Jay Strongwater Christmas Ornament: Red Swirls Jay Strongwater Christmas Ornament: Red Glass Heart Jay Strongwater Christmas Ornament: Red Jeweled Ball Jay Strongwater Christmas Ornament: Jeweled Gift... Date ...

Page 532
... Section 3.12 of Agreement) COMMERCIAL TORT CLAIMS 1. The Neiman Marcus Group, Inc., Bergdorf Goodman, Inc., and NM Nevada Trust, are Plaintiffs in a civil litigation filed against Manila Industries, Inc. and Munish Krishan. The case is presently pending in the United States District Court, Central...

Page 533
... Neiman Marcus Group, Inc. Bergdorf Goodman, Inc. Bergdorf Graphics, Inc. BergdorfGoodman. com, LLC Neiman Marcus Holdings, Inc. Neiman Marcus Special Events, Inc. NEMA Beverage Corporation NEMA Beverage Holding Corporation NEMA Beverage Parent Corporation 900 shares of Common Stock $0.01 par value...

Page 534
NM Financial Services, Inc. NM Nevada Trust 10 shares of Common Stock No par value 100 shares No par value The Neiman Marcus Group, Inc. 1. The Neiman Marcus Group, Inc. 2. Bergdorf Goodman, Inc. 100% 1. 90% 2. 10% NMGP, LLC NM Kitchens, Inc. Worth Avenue Leasing Company Neiman Marcus Funding ...

Page 535
Union Bank of California Securities Intermediary 475 Sansome Street 15th Fl. San Francisco, CA 94111 Address Blackrock MuniCash (Fund #48) Fund Family 6731012500 Account # Taxable JP Morgan Chase Bank Mail Code TX1-2421 1717 Main Street, LL1 Dallas, TX 75201 F-3 JPM Prime Money Market ...

Page 536
..., SECURITY AGREEMENTS) HAVE BEEN FILED UCC Filings and Filing Offices Jurisdiction Grantor New York Delaware Bergdorf Goodman, Inc. Bergdorf Graphics, Inc. Newton Acquisition, Inc. Newton Acquisition Merger Sub, Inc. BergdorfGoodman.com, LLC Neiman Marcus Special Events, Inc. NM Financial Services...

Page 537
..., as the Grantors, and Credit Suisse, as the Agent, (the "Agreement") and that the Collateral listed on Schedule I to this Amendment shall be and become a part of the Collateral referred to in said Agreement and shall secure all Obligations referred to in said Agreement. By: Name: Title: 10

Page 538
SCHEDULE I TO AMENDMENT STOCKS Percentage of Outstanding Shares Holder Issuer Certificate Number(s) Number of Shares Class of Stock BONDS Holder Issuer Number Face Amount Coupon Rate Maturity GOVERNMENT SECURITIES Holder Issuer Number Type Face Amount Coupon Rate Maturity OTHER SECURITIES OR...

Page 539
COMMERCIAL TORT CLAIMS Description of Claim Parties Case Number; Name of Court where Case was Filed 12

Page 540
EXHIBIT I Form of Perfection Certificate I-1

Page 541
EXHIBIT J Subsidiary Parties Bergdorf Goodman, Inc. Bergdorf Graphics, Inc. BergdorfGoodman.com, LLC Neiman Marcus Holdings, Inc. Neiman Marcus Special Events, Inc. NEMA Beverage Corporation NEMA Beverage Holding Corporation NEMA Beverage Parent Corporation NM Financial Services, Inc. NMGP, LLC NM ...

Page 542
... Subsidiary Parties and Credit Suisse, as administrative agent and collateral agent, and (b) the Indenture dated as of May 27, 1998 (as amended, restated supplemented or otherwise modified from time to time, the "Existing Notes Indenture"), between Neiman Marcus and The Bank of New York, as trustee...

Page 543
... of the Term Loan Credit Agreement provide that additional Domestic Subsidiaries of the Borrower may become Subsidiary Parties under the Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the "New Subsidiary") is executing this Supplement...

Page 544
...Security Agreement shall remain in full SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.... of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. the Agreement. SECTION 8. All communications...

Page 545
IN WITNESS WHEREOF, the New Subsidiary and the Agent have duly executed this Supplement to the Agreement as of the day and year first above written. [NAME OF NEW SUBSIDIARY] by Name: Title: Legal Name: Jurisdiction of Formation: Location of Chief Executive office: CREDIT SUISSE, CAYMAN ISLANDS ...

Page 546
Schedule I to the Supplement No to the Pledge and Security Agreement LOCATION OF COLLATERAL Description Location

Page 547
... and Security Agreement LIST OF PLEDGED COLLATERAL, SECURITIES AND OTHER INVESTMENT PROPERTY STOCKS Percentage of Outstanding Shares Holder Issuer Certificate Number(s) Number of Shares Class of Stock BONDS Holder Issuer Number Face Amount Coupon Rate Maturity GOVERNMENT SECURITIES Holder...

Page 548
[Add description of custody accounts or arrangements with securities intermediary, if applicable] 2

Page 549
Schedule III to the Supplement No to the Pledge and Security Agreement INTELLECTUAL PROPERTY RIGHTS PATENT REGISTRATIONS Patent Description Patent Number Issue Date PATENT APPLICATIONS Patent Application Application Filing Date Application Serial Number TRADEMARK REGISTRATIONS Trademark ...

Page 550
... this document and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. CREDIT CARD PROGRAM AGREEMENT by and among THE NEIMAN MARCUS GROUP, INC. BERGDORF GOODMAN, INC. HSBC BANK NEVADA, N.A. and HOUSEHOLD CORPORATION Dated as of June 8, 2005

Page 551
...of Accounts/Credit Cards/Cardholder Documentation/Solicitation Materials 4.6 Underwriting and Risk Management 4.7 Cardholder Terms. 4.8 Internet Services. 4.9 Sales Taxes 4.10 Participation in Reversals 4.11 Interest Free Accounts ARTICLE V MARKETING 5.1 Promotion of Program 5.2 Marketing Commitment...

Page 552
... 7.3 Service Level Standards 7.4 Credit Systems 7.5 Systems Interface; Technical Support 7.6 Customer Management Systems ARTICLE VIII MERCHANT SERVICES 8.1 Transmittal and Authorization of NMG Charge Transaction Data 8.2 POS Terminals 8.3 In-Store Payments 8.4 Settlement Procedures 8.5 Bank's Right...

Page 553
... to the End of the Initial Term or a Renewal Term 16.4 Automatic Termination ARTICLE XVII EFFECTS OF TERMINATION 17.1 General Effects. 17.2 The NMG Companies' Option to Purchase the Program Assets. 17.3 Fair Market Value 17.4 Dedicated Program Personnel 17.5 Rights of Bank if Purchase Option Not...

Page 554
... 19.26 Coordination of Consents and Approvals Further Assurances No Joint Venture Press Releases No Set-Off Conflict of Interest Third Parties Force Majeure Entire Agreement Binding Effect Counterparts/Facsimiles Survival iv 81 82 82 82 82 82 83 83 83 83 84 84

Page 555
CREDIT CARD PROGRAM AGREEMENT This Credit Card Program Agreement is made as of the 8th day of June, 2005, by and among The Neiman Marcus Group, Inc., a Delaware corporation ("NMG"), Bergdorf Goodman, Inc., a New York corporation ("BG, and together with NMG, the "NMG Companies"), HSBC Bank Nevada, ...

Page 556
... application submitted at the POS, by phone or via the Internet). "Approved Ancillary Products" means any Credit Card enhancement and other products (other than the NMG Credit Cards and the Non-Card Payment Plans) approved by the Management Committee for offering under the Program from time to time...

Page 557
... Ancillary Products, finance charges, NSF fees, late charges, pay-by-phone fees and any other fees and charges), less (ii) the amount of any credit balances owing by Bank to such Cardholders, including in respect of any payments and any credits associated with returns of NMG Goods and Services and...

Page 558
...such agreement). "Cardholder Data" means all personally identifiable information about a Cardholder (A) received by or on behalf of Bank (including by NMG Servicer in its capacity as such) in connection with the Cardholder's application for use of an NMG Credit Card, Non-Card Payment Plan or Account...

Page 559
... proprietary designations of a Card Association, including any Dual-Line Credit Card. "Comparable Partner Programs" means from time to time other major Credit Card programs of Bank designated annually by the Management Committee that are comparable to the Program in terms of program size, public...

Page 560
... the Accounts) and, following the Effective Date, includes all activities relating to the Program established pursuant to this Agreement. "Credit Card Production Services" has the meaning set forth in the Servicing Agreement. "Customer Management System" means the Systems developed by the Bank with...

Page 561
... Date and ending on the Saturday closest to July 31, 2006. "Force Majeure Event" has the meaning set forth in Section 19.22 hereof. "Future Subcontractors" has the meaning set forth in Section 6.2(g)(i) hereof. "GAAP" means United States generally accepted accounting principles, consistently applied...

Page 562
...on Schedule 4.7 in such Fiscal Year shall be excluded from both the numerator and denominator during the period of one hundred twenty (120) days after the effective date of such terms change. "Legal Opinion" means a written opinion of counsel to a Party in form and substance reasonably acceptable to...

Page 563
... Loyalty Program providing for access to an Account, including the Loyalty Cards listed in Section B of Schedule 1.1(c) hereto. "Loyalty Programs" means a points-based system that rewards Credit Card usage or customer spending with points that may be redeemed for goods and/or services. "Management...

Page 564
..., gift cards, shipping and handling, and work or labor to be performed for the benefit of customers of the NMG Channels. "NMG Licensed Marks" means the trademarks, tradenames, service marks, logos and other proprietary designations of the NMG Companies listed on Schedule 1.1(d) and licensed to Bank...

Page 565
... set forth in the Purchase Agreement. "Privacy Policy" means the privacy policy and associated disclosures to be provided by Bank to Cardholders in connection with the Program. "Private Label Accounts" means (i) the Accounts linked to Private Label Credit Cards and (ii) Accounts linked to Dual-Line...

Page 566
... Bergdorf Goodman Rewards Program described in Section A of Schedule 1.1(c) or any other annual points-based loyalty program implemented pursuant to Article III from time to time and tied to the NMG Credit Cards. "Program Objectives" has the meaning set forth in Section 3.1 hereof. "Program Purchase...

Page 567
... Purchaser purchases the Program Assets, or (ii) the date that either (A) the NMG Companies deliver written notice to Bank of their election not to purchase the Program Assets or (B) the right of the NMG Companies to purchase the Program Assets expires in accordance with the terms of this Agreement...

Page 568
... OF THE PROGRAM 2.1 Credit Program. (a) General. Beginning as of the Effective Date, Bank shall offer the NMG Credit Cards and the Non-Card Payment Plans. Bank shall promptly open a new Account and issue a new NMG Credit Card and/or Non-Card Payment Plan with respect to each Application approved in...

Page 569
... NMG Companies in order to facilitate the issuance of Credit Cards or Non-Card Payment Plans, as applicable, to such customers pursuant to such program. (c) Dual-Line/Co-Branded Program. (i) Beginning as of the Effective Date, Bank, at its own expense, shall perform the product design and consumer...

Page 570
...at any time: (i) issue, offer or market any payment products not expressly covered in this Section 2.2 (e.g., NMG and its Affiliates shall not be restricted from issuing, accepting or otherwise taking action with respect to (A) gift cards, pre-paid cards or stored value cards, or (B) debit cards, in...

Page 571
... corporate organization, which in the case of Bank, shall be the Chief Financial Officer or Chief Operating Officer of the private label Credit Card business of Bank. NMG shall designate among its designees to the Management Committee the senior executive of NMG responsible for the Program Loyalty...

Page 572
... (B) (C) (D) (E) offering of new Credit Cards or Approved Ancillary Products, including Co-Branded Credit Cards, Non-Card Payment Plans or other payment products; changes in Account terms, including any of the terms set forth on Schedule 4.7; changes to the Risk Management Policies (which shall be...

Page 573
...Chief Executive Officer of HSBC Retail Services and Senior Vice President, General Counsel and Secretary of NMG (or any other similarly ranking officer of Bank or NMG, as the case may be, who is not a Management Committee member and shall have been designated in writing by NMG or Bank, as applicable...

Page 574
... plan; provided, that in the event that such customer service or other disputes arise from a change in Account terms, NMG may request that any such Account terms be restored to the terms in effect prior to such customer service or other disputes and Bank shall implement such change in Account terms...

Page 575
... terms and compensation arrangements related to such new products or services shall be acceptable to both Parties; (vi) the design, implementation, modification or any changes to any terms of any Program Loyalty Program; provided that NMG shall continue to offer one or more Program Loyalty Programs...

Page 576
... Manager of the NMG Companies is set forth in Schedule 3.3. (c) The initial Manager of Bank is set forth in Schedule 3.3. The Bank's Manager shall report directly to the Bank's Managing Director-Client Relations. The Bank's Manager's performance-based compensation shall be based upon the Program...

Page 577
... this Agreement; (vii) receive In-Store Payments in accordance with procedures that comply with Applicable Law, subject to reimbursement from Bank for the processing of such payments as provided in this Agreement; (viii) pay sales associate compensation relating to the solicitation of new Accounts...

Page 578
... any Account information required for the NMG Companies' administration of any Loyalty Program; (iv) in accordance with Section 7.2, after the Documentation Services Transition Date, prepare, process and mail Cardholder Billing Statements, Inserts, privacy policy notices, change in terms notices...

Page 579
... Bank's shorter requested time frames, but in any event such deliveries will be made no later than the following time frames: (i) for statements, 15 days; (ii) for non-cash payment information, 10 days; (iii) for cash payment information, 5 Business Days, (iv) for application information, 20 days...

Page 580
...the applicable credit criteria set forth in the Risk Management Policies, Bank shall promptly establish a Private Label Credit Account, a Non-Store Account and/or a Non-Card Payment Plan, as applicable. The procedures for determining what type(s) of NMG Credit Cards and Accounts shall be issued upon...

Page 581
... If the approval rate targets and other metrics referred to in Schedule 4.6(c) are not met and the credit profile of Account applicants has not adversely changed from that specified in Schedule 4.6(c), then Bank shall have thirty (30) days to modify the Risk Management Policies or otherwise adjust...

Page 582
... shall pay to Bank an amount equal to recovered sales taxes. To the extent Bank is permitted by Applicable Law to directly recover sales taxes charged to any Account written off by Bank, the NMG Companies shall sign such forms and provide any such other information as reasonably requested by Bank to...

Page 583
... Year-End Settlement Statement with respect to the preceding Fiscal Year is greater than the applicable High Collar, the NMG Companies shall pay Bank an amount equal to (A) the Finance Charge Reversal Percentage with respect to the Private Label Accounts minus the applicable High Collar, multiplied...

Page 584
... other and actively support and promote the Program to both existing and potential Cardholders. 5.2 Marketing Commitment. (a) On the Effective Date and no later than the first (1st) Business Day of each subsequent Fiscal Year, Bank shall pay to NMG an amount equal to the NMG Marketing Commitment for...

Page 585
... about the Program in the Billing Statements as necessary for Bank to comply with its obligations under this Agreement. 5.4 Additional Marketing Support. (a) Upon the request of NMG from time to time, Bank shall perform the following marketing functions at no cost or expense to the NMG Companies...

Page 586
(B) conduct mailings and other related marketing efforts on behalf of NMG and its Affiliates, which may include marketing materials promoting the Program, the NMG Credit Cards and Non-Card Payment Plans, the NMG Channels and/or the NMG Goods and Services at NMG's option, based upon the customer ...

Page 587
...at least the following information for each program: (i) description of offer(s), cost per unit, expected response rate and other performance projections with respect thereto; (ii) description of target audience; (iii) planned budget, specifying Bank's share and the NMG Companies' share, if any; (iv...

Page 588
... of unique collateral materials for the NMG Companies' employees; activation, retention and usage; statement design and messaging; advertising of the Program; and such other marketing matters as the Parties shall agree to. (e) Each Marketing Plan shall specify which Party is responsible for...

Page 589
... with Applicable Law and the Program Privacy Policy solely (i) for purposes of soliciting or marketing (in each case, solely as directed by the NMG Companies or the Management Committee) or servicing customers listed in the Cardholder Data for NMG Credit Cards, Approved Ancillary Products, and...

Page 590
...this Agreement and subject to Applicable Law and the Program Privacy Policy, Bank shall transmit to the NMG Companies at such times as may be requested by NMG and in formats agreed to by the Parties in advance from time to time: (i) for any customer who has applied for an NMG Credit Card, regardless...

Page 591
... case as directed by the NMG Companies. Without limiting the foregoing, NMG and each of its Affiliates may receive, use and disclose the Cardholder Data in compliance with Applicable Law and the Program Privacy Policy (i) for purposes of promoting the Program or promoting NMG Goods and Services, (ii...

Page 592
... Data to the extent available under Applicable Law governing such disclosure, and with respect to clause (B), to the extent permitted by Applicable Law, such NMG Company (1) provides at least ten (10) Business Days' prior notice of such proposed disclosure to Bank if reasonably possible under...

Page 593
... or not the customer has been approved for an NMG Credit Card; and (ii) for any Cardholder, (1) the Cardholder's name, address, email address, telephone number, social security number and Account number; (2) any reported change to any of the foregoing information; and (3) Cardholder transaction...

Page 594
..., and (2) seeks to redact the NMG Shopper Data or NMG Prospect List to the fullest extent possible under Applicable Law governing such disclosure. (e) Upon the termination of this Agreement, without limiting Bank's rights and obligations with respect to the Cardholder Data pursuant to Section 17...

Page 595
... the terms and conditions of this Agreement, the Risk Management Policies and the Operating Procedures. Without limiting the foregoing, Primary Servicer shall service the Accounts in compliance with Applicable Law, in such a way as to not disparage or embarrass the NMG Companies or their names, with...

Page 596
...amended from time to time in accordance with this Agreement). Upon the date of the foregoing transfer, NMG shall be released from any further obligation with respect to the performance of such Services. In the event that customer service is transferred to Primary Servicer as a transferred Service in...

Page 597
... prior to the Systems Transition Date (including data gathering, interface capabilities with the NMG Companies' other Systems, Loyalty Program support and core systems/customer service functionality) are available on the Bank Systems as of the Systems Transition Date to the extent the NMG Systems...

Page 598
... of Account numbers; (vi) without limiting the foregoing, the Bank Systems shall interface with the NMG Systems that are not converted to Bank Systems in a manner reasonably acceptable to NMG; (vii) Bank shall have a disaster recovery and business continuity plan applicable to the Bank Systems...

Page 599
... set forth in Schedule 7.6 by the dates specified in such schedule. The Customer Management System shall be established and maintained by Bank at its own expense in order to support NMG in the marketing of the Program and the Credit Card Business. ARTICLE VIII MERCHANT SERVICES 8.1 Transmittal and...

Page 600
..., Bank shall pay the costs and expenses associated with such changes. 8.3 In-Store Payments. The Retail Merchants may accept In-Store Payments from Cardholders on their Accounts in accordance with the Operating Procedures, the Risk Management Policies and any procedures required under Applicable Law...

Page 601
...in respect of NMG Goods and Services for which a credit was issued), plus (ii) an amount equal to the product of such net amount of Special Discounts and the Program Fee Percentage shall be paid by NMG to Bank within three (3) Business Days of such report. (d) NMG shall be responsible for allocating...

Page 602
... fees. ARTICLE IX PROGRAM ECONOMICS 9.1 NMG Compensation. (a) Payments. (i) Not later than 1:00 pm (Central time) on each Business Day, Bank shall pay to NMG an amount equal to the amount set forth on Schedule 9.1(a)(i) with respect to the Accounts other than the Non-Store Accounts. (ii) Not later...

Page 603
... to Bank a non-exclusive, royalty-free, non-transferable right and license to use the NMG Licensed Marks (i) with respect to the Program in the United States in connection with the creation, establishment, marketing and administration of, and the provision of services related to, the Program and...

Page 604
... grants to the NMG Companies a non-exclusive, royalty-free, non-transferable right and license to use the Bank Licensed Marks in the United States in connection with the creation, establishment, marketing and administration of, and the provision of services related to, the Program. All uses of the...

Page 605
... NMG Credit Cards, Applications, Account Documentation, Solicitation Materials, periodic statements, materials, displays, advertising and sales literature and any other items, in each case, bearing any of the Bank Licensed Marks. (d) Ownership of the Bank Licensed Marks. Each of the NMG Companies...

Page 606
.... Any other Intellectual Property developed by a substantially equal investment of time, human, intellectual and financial resources by each Party during the Term of this Agreement shall be owned jointly by the Parties. By way of example and not of limitation, a Party shall not be a joint owner of...

Page 607
...under the Servicing Agreement, the execution, delivery and performance of this Agreement by each of the NMG Companies, their compliance with the terms hereof, and consummation of the transactions specified herein will not (i) conflict with, violate, result in the breach of, constitute an event which...

Page 608
... relating to the Credit Card Business and neither of the NMG Companies nor any of their Affiliates is subject to any order, directive or restriction of any kind issued by any Governmental Authority that restricts in any respect its ability to perform its obligations under the Program. (f) Servicing...

Page 609
... the rights of creditors generally and by general equity principles including those respecting the availability of specific performance). (c) Conflicts; Defaults; Etc. The execution, delivery and performance of this Agreement by each of the Bank Companies, their compliance with the terms hereof...

Page 610
... issued by any Governmental Authority that restricts in any respect its operation of their Credit Card business; and the Bank Companies are not aware of any fact or circumstance that would in any way delay or impede their ability to perform all of their obligations under the Program. (f) Servicing...

Page 611
..., with respect to the Credit Card Business, the Program, the Bank Companies or the NMG Companies, or as to any other matter whatsoever. 11.4 General Covenants of the NMG Companies. (a) Litigation. Each of the NMG Companies promptly shall notify Bank in writing if it receives written notice of any...

Page 612
...any time during the Term, NMG does not publicly file periodic reports with the Securities and Exchange Commission, NMG shall provide to Bank (i) its audited consolidated annual financial statements within 90 days of the end of each Fiscal Year, and (ii) its unaudited consolidated quarterly financial...

Page 613
... adversely affects the Program or NMG's retail business or relations with its customers in any material respect. (g) Disputes with Cardholders. The Bank Companies shall cooperate with the NMG Companies in a timely manner (but in no event less promptly than required by Applicable Law) to resolve...

Page 614
... budgets, management reviews or employee records, (d) such records relate to other customers of, or credit programs operated by, Bank or the NMG Companies (except as may be necessary or appropriate in connection with any consideration of the terms and conditions of Comparable Partner Programs and...

Page 615
... by Applicable Law, (ii) such records are legally privileged or (iii) such records relate to other customers of, or credit programs operated by, the Party (except as may be necessary or appropriate in connection with any consideration of the terms and conditions of Comparable Partner Programs and...

Page 616
... (5) Business Days, the Management Committee is unable to resolve the dispute to the satisfaction of both the NMG Companies and Bank, each Party shall appoint a designated knowledgeable, responsible representative who is one of the top five highest executives in the Credit Card division of Bank and...

Page 617
...(A) information concerning marketing plans, objectives and financial results; (B) information regarding business systems, methods, processes, financing data, programs and products; (C) information regarding any products offered or proposed to be offered under the Program or the manner of offering of...

Page 618
...access such Confidential Information in connection with the Program, the sale of Program Assets or other assets of NMG and its Affiliates or the establishment of a new Credit Card or other program or arrangement for an NMG Company, in each case in accordance with the terms of this Agreement, and (ii...

Page 619
... store business that directly or through an Affiliate issues a Credit Card in the United States, unless such transaction is one giving right to a termination by NMG pursuant to Section 16.2(c) and as to which NMG has exercised such right, Bank shall have a right of first offer to acquire the related...

Page 620
... Credit Card portfolio at that time; provided, however, that if Bank is unable to agree to the terms of the purchase of such Credit Card portfolio prior to the time that notice of termination or election to extend the term, as applicable, is due under such program agreement, NMG shall have the right...

Page 621
... this Agreement. (iii) If the NMG Companies do not have a Dual-Line Credit Card program with Bank at the time of such purchase, purchased co-branded Credit Card accounts shall continue under the same terms and conditions being offered to the purchased retailer's customers, or such other terms and...

Page 622
...in full of any amount due to NMG pursuant to Schedule 7.3(c) within two (2) Business Days after such payment is due pursuant to Schedule 7.3(c). (d) Bank Parent shall fail to make payment in full of any amount owed under the Bank Guarantee to one or more of the NMG Companies when due and payable. 68

Page 623
... fail generally to pay its debts as they become due or there shall be a substantial cessation of such Bank Company's or Bank Parent's regular course of business. (f) Any regulatory authority having jurisdiction over a Bank Company or Bank Parent shall order the appointment of a custodian, receiver...

Page 624
... a Change of Control of Bank Parent or (ii) one or more Persons that is not an Affiliate of Bank on the date of this Agreement acquires a direct or indirect controlling interest in Bank or any other Person conducting a substantial part of the Credit Card business conducted within the corporate group...

Page 625
...to issue, offer or otherwise provide, any Credit Card in the United States; provided, that if this Agreement is terminated pursuant to this Section 16.2(c), NMG shall pay Bank the amount set forth in Schedule 16.2(c). (d) upon thirty (30) days' prior written notice if there is a change in Applicable...

Page 626
... be the "Program Purchase Date." (d) The purchase price for the Program Assets purchased, payable on the Program Purchase Date, shall be equal to the sum of (i) the par value of the Cardholder Indebtedness related to the Private Label Accounts and Non-Card Payment Plans at the time of repurchase...

Page 627
...the Private Label Accounts and Non-Card Payment Plans at the time of repurchase excluding written-off Cardholder Indebtedness (in accordance with the write-off policy then applicable to the Program), plus (y) the Fair Market Value of the Cardholder Indebtedness related to the Non-Store Accounts plus...

Page 628
...the Non-Store Accounts, provided that the Bank shall receive an amount equal to the purchase price as determined above. 17.4 Dedicated Program Personnel. Upon termination or expiration of the Program for any reason and until the date that is ninety (90) days after Bank ceases to provide any services...

Page 629
... of services performed by the NMG Companies to the Bank. (d) Within sixty (60) days (or one hundred twenty (120) days in the case of Dual-Line Cards) after the NMG Companies give written notice that they shall not exercise their option referred to in Section 17.2 or after the time period...

Page 630
... by the Management Committee and used by any of the NMG Companies in that form and in accordance with Bank's instructions and/or the Operating Procedures that fails to comply with Applicable Law, other than any content in the Solicitation Materials that primarily relates to Loyalty Programs and was...

Page 631
... employed counsel to take charge of the defense within twenty (20) days after delivery of the applicable ...available to the Indemnifying Party (in which case the Indemnifying Party shall not have the right to direct the defense of such action on behalf of the Indemnified Party), in any of which events...

Page 632
...acquired: (i) all Accounts, Cardholder Indebtedness, Account Documentation and NMG Charge Transaction Data, (ii) all deposits, credit balances and reserves on the Bank's books relating to the Program, and (iii) all proceeds of the Cardholder Indebtedness. In addition, the NMG Companies agree to take...

Page 633
... contract for Texas sales and use taxes due on the taxable Texas portion of the Services performed by NMG that benefit Bank in Texas. Bank shall provide to NMG a multi-state benefit exemption certificate and a letter instructing NMG to pay directly to the State of Texas the Texas sales and use...

Page 634
... the laws of the State of New York applicable to contracts made to be performed within such State and applicable federal law. (b) Each Party shall comply in all material respects with Applicable Law in connection with its activities and the exercise of its rights and performance of its obligations...

Page 635
... by United States registered or certified mail, with postage prepaid, or by a nationally recognized overnight delivery service, when received, addressed as follows: If to the NMG Companies: c/o The Neiman Marcus Group, Inc. One Marcus Square 1618 Main Street Dallas, Texas 75201 Attention: General...

Page 636
... releases which announce the execution of this Agreement or the transactions specified herein, which prior approval shall not unreasonably be withheld. At all times thereafter, the NMG Companies and the Bank Companies, prior to issuing any press releases concerning this Agreement or the transactions...

Page 637
...constituting a Force Majeure Event with respect to the Bank Companies, on the one hand, or the NMG Companies, on the other hand, exists for more than thirty (30) consecutive days (or five (5) days in the case of any payment obligation) and such Party is unable to perform a material obligation (which...

Page 638
... expiration or termination, all obligations of the Parties under this Agreement shall cease, except that the obligations of the Parties pursuant to Article VI (Cardholder Information), Section 8.5 (Bank Right to Charge Back), Article X (Intellectual Property), Article XII (Access, Audit and Dispute...

Page 639
...of the Parties has caused this Agreement to be duly executed as of the date first above written. THE NEIMAN MARCUS GROUP, INC. By: /s/ Steven P. Dennis Name: Steven P. Dennis Title: Senior Vice President, Strategy, Business Development and Multichannel Marketing BERGDORF GOODMAN, INC. By: /s/ Nelson...

Page 640
SCHEDULE 1.1(a) Bank Licensed Marks Mark Serial/Registration Number HSBC Card Services HSBC Bank Nevada HSBC Finance Corporation HSBC Retail Services HSBC [***] [***] [***] [***] [***]

Page 641
SCHEDULE 1.1(b) Comparable Partner Programs Saks Incorporated Domain Helzberg Diamonds Liz Claiborne

Page 642
...Also cardholders receive advance notice of sales and special events at Neiman Marcus. NMG will periodically have double-point days at Neiman Marcus stores when cardholders can earn two points for every dollar spent on the card, driving more customer traffic into the stores. Once a customer earns 100...

Page 643
... to cash or payment on Neiman Marcus accounts. Customers are responsible for all federal, state, and local taxes; for delivery, processing, and handling fees; and for insurance. NMG also offers special privileges determined by NMG from time to time (such as personal shopper services, invitations to...

Page 644
SCHEDULE 1.1(d) NMG Licensed Marks Mark Serial/Registration Number Applicable Retail Division/NMG Channel BERGDORF GOODMAN BERGDORF GOODMAN IN CIRCLE IN and Design (Circle around IN) INCIRCLE REWARDS NEIMAN MARCUS NEIMAN MARCUS NEIMAN MARCUS NEIMAN MARCUS (stylized) NEIMAN-MARCUS NM PLATINUM ...

Page 645
SCHEDULE 1.1(e) Non-Card Payment Plans and Private Label Credit Cards Section A: Non-Card Payment Plans Signature Accounts Commercial or Corporate Accounts Studio Accounts Club Accounts Section B: Private Label Credit Cards Neiman Marcus Neiman Marcus Card Neiman Marcus Gold Card Bergdorf Goodman ...

Page 646
... a percentage of Average Private Label Receivables, [***]%, or, in each case, such other level as may from time to time be set by the Management Committee. "Low Collar" means (i) with respect to the Finance Charge Reversal Percentage applicable to the Private Label Accounts, [***], (ii) with respect...

Page 647
SCHEDULE 1.1(g) Special Discounts [***]

Page 648
...the appropriate loyalty-level Private Label charge cards and related materials to all cardholders. In addition to the staged mailing process, Bank must work with NMG to ensure that the Private Label Credit Cards and related materials meet NMG standards in order to address the customer service impact...

Page 649
...-Brand Risk Management Policies, Marketing Plan, implementation schedule, look and feel of the Solicitation Material, including Dual-Line/ Co-Brand program collateral (i.e., cards, welcome kit, applications), and Cardholder and store communications. Section B: Dual-Line Credit Card Testing Bank and...

Page 650
... Credit Card Terms [***] branded [***]general-purpose credit line No Merchant Discount in the Retail Merchants Tied to a Program Loyalty Program Economics to be agreed between NMG and Bank, including compensation for Program Loyalty Program points with respect to all spending and marketing outside...

Page 651
...-NMG Credit Cards The NMG Companies shall have the right to accept Credit Cards other than NMG Credit Cards except that, with respect to the Neiman Marcus store line (excluding NM Direct, NM Online, Last Call and Bergdorf Goodman stores), only the NMG Credit Cards and American Express Credit Cards...

Page 652
SCHEDULE 3.2(e) Initial Program Changes Annual Fee Late Payment or Late Fee (at cycle) No annual fee, except for $50 NM Gold Card program membership fee. Based upon two prior month's statement balance: â€¢ $20-$49 Balance = $5 â€¢ $50-$149 Balance = $15 â€¢ $150-$299 Balance = $20 â€¢ $300+ Balance ...

Page 653
SCHEDULE 3.2(g)(i) Private Label Account Profiles Bank may make changes to the Risk Management Policies with respect to a channel in response to changes in the credit profiles for Account applicants in such channel if the Population Stability Index (PSI) based on the Fair, Isaac Score indicates a ...

Page 654
... similar programs. Upon mutual agreement of NMG and Bank, two (2) of the team members, including one of the marketing strategists, would be located at the NMG offices in Dallas. Bank will identify and assign a lead technology and a lead risk management representative to work with the Program team...

Page 655
SCHEDULE 3.3(d) List of Retailers Saks Nordstrom Barney's Coach Jeffrey Tiffany Holt Renfrew Fred Segal Stanley Korshak Scoop LVMH Prada Group PPR Group Federated

Page 656
SCHEDULE 4.1(b) Operating Procedures

Page 657
Schedule 4.1(b) Risk Management Policies and Operating Procedures

Page 658
New Account Risk Management Policies and Operating Procedures A-1

Page 659
[***]

Page 660
Multiple PaySys CDM Screen Prints showing full application flow will be attached. B-1

Page 661
[***]

Page 662
Authorizations Risk Management Policies and Operating Procedures C-1

Page 663
[***]

Page 664
Multiple PaySys Custom Rescore Screen Prints showing rescore matrixes and parameters will be attached. D-1

Page 665
[***]

Page 666
Customer Service/InCircle Risk Management Policies and Operating Procedures E-1

Page 667
[***]

Page 668
Collections Risk Management Policies and Operating Procedures F-1

Page 669
POPULATION STABILITY COMPARISON Benchmark vs Current Month Application Data [***]

Page 670
... Application form and 2) cardholder agreement and disclosures Retention of customer correspondence that is currently required in writing, including name changes, FTC dispute letters, bankruptcy filings and deceased notifications. Other customer correspondence including address changes, credit limit...

Page 671
... Customer Identification Information Customer Identification Program Reporting Cash Payment Reporting Performance Reports [***] Months [***] Months [***] Months [***] Months [***] Months after the account is closed (online) [***] Months after account opening (online) TBD [***] Months [***] Months

Page 672
SCHEDULE 4.6(c) Risk Management Policies Targets [***]

Page 673
SCHEDULE 4.7 Cardholder Terms [***]

Page 674
... NMG's request, Bank shall offer NM Online customers a 6-month, no finance charge Signature Account tender option for those purchases over $600 dollars. The real-time authorization processing for these Accounts must allow for these requests to be sent to NMG Credit Services for manual intervention...

Page 675
...line e-bill functionality with cardholders whenever necessary. E-Service Functionality - The Parties will also cooperate to provide real-time memo and cycle-to-date balance information as well as customer address maintenance and credit card re-ordering capabilities provided these on-line requests do...

Page 676
... Net Credit Sales for NMG's Fiscal Year ended July 31, 2005. Section B: Joint Marketing Commitment The Joint Marketing Commitment for each Fiscal Year shall be equal to (i) [***], plus (ii) in the case of any Fiscal Year following the first Fiscal Year, [***] multiplied by the applicable Program...

Page 677
... affiliated companies. This Privacy Statement describes the collection, use, and protection of information about you and your Neiman Marcus and/or Bergdorf Goodman credit card account. This policy has been in effect as of [date]. [to be updated as appropriate] HSBC is part of a financial services...

Page 678
...Bergdorf Goodman credit card can be used to make purchases at all of these locations. The information we share with Neiman Marcus Group may come from your application, such as your name, address, e-mail address, telephone number, and social security number. Neiman Marcus Group may have also received...

Page 679
... your name, address, phone number, and account experience with us. Finally, we may provide information about you to non-affiliated companies such as credit reporting agencies and companies which provide services related to your account. This information sharing is also permitted by law. Security of...

Page 680
... changes, we will provide our current customers with a revised notice that describes our new practices. The current Privacy Statement applicable to Neiman Marcus and Bergdorf Goodman credit cards will always be available at the neimanmarcus.com web site. The Neiman Marcus Group Privacy Policy Neiman...

Page 681
... Trial Balance By Balance Range Roll Rate Job Performance Summary Monthly Job Performance Summary Monthly System Performance Summary Monthly System Completion Code Summary Monthly Job Completion Code Summary NM Monitoring Form Description Billing Calendar - Dialer Work Schedule Payment Plans CCCS...

Page 682
... Hours Number of Cards Mailed After 48 Hours Postage Reconciliation Total Postage By Card Type Cards & Forms Reconciliation Explanations for Missed SLA's Credit Card Issuance Data Card Audit File Misc. Excel Schedules Note: In the event of a transfer of service, the reports provided by Bank shall...

Page 683
... - Dialer Work Schedule Blocked Account Report No applicable Report Payment Plans CCCS Inventory Refer to Dialer Reports Collector Synopsis Summary Reports (By Team) Credit Application Processing System CAPS Listing New Accounts With Guidelines Exceeding $ Credit Limit Change Report Daily Approval...

Page 684
... Split/Skill Summary Monthly Customer Service Help Dispute Resolution Process Subpoena Log No applicable Report No applicable Report Reporting Monies Received on In-Store Cash Payments Report Distribution Change Request No applicable Report No applicable Report Activity Recap Report (R16) Reject Re...

Page 685
Behavior Score Control Chart FICO Score Control Chart Custom Score Control Chart Account Review Analysis Bankruptcy Analysis Bankruptcy Write-Off Analysis No applicable Report Credit Reclassification Summary Report No applicable Report Population Stability Report Final Scores Quest Totals

Page 686
... forth: (a) (b) the aggregate of all Joint Marketing Commitment Amounts spent by the NMG Companies in such Fiscal Month; the number of In-Store Payments received by any of the NMG Companies in such Fiscal Month; and (c) any other amounts owed to the NMG Companies as explicitly provided herein or as...

Page 687
... Year; (b) the aggregate of all [***] spent by the NMG Companies in the last Fiscal Month of such Fiscal Year; the number of In-Store Payments received by any of the NMG Companies in the last Fiscal Month of such Fiscal the Finance Charge Reversal Percentage for such Fiscal Year and the calculation...

Page 688
... service levels on average each month: 1. Percentage of all billing statements that will be mailed out within 4 days of cycle close date provided that this standard shall not apply if a NMG systems problem prevents communication of the credit input data to Bank's credit operations (monthly reporting...

Page 689
... the collections queue: [***] D. Credit Processing Services & Customer Service Services Bank will meet the following service levels on average each month: 1. 2. Percentage of all customer service inquiry batch-work correspondence (including address or name changes or credit bureau inquiries) that...

Page 690
... sales events and seasonal demands): [***] 5. 6. 7. 8. V. Systems Bank will meet the following service levels on average each month: 1. Percentage of time that all Internet-based system functionality provided and maintained by Bank will be available to cardholders 24 hours a day, 7 days a week...

Page 691
... Months following a Significant Failure or (ii) a second Regulatory Failure of the same Regulatory SLA, NMG shall, in addition to payment as provided in paragraph (c) above, have the right to terminate the Program Agreement by providing thirty (30) days prior written notice to Bank, in which event...

Page 692
... to Bank pursuant to a servicing agreement reasonably satisfactory to Bank. Following the delivery by the applicable Party of written notice of a servicing transfer or termination, NMG shall have reasonable access to Primary Servicer's operations and systems to ensure continuity of business and...

Page 693
... and perform generalized customer service non-financial maintenance and financial adjustments without further screen toggling. All PaySys customization (see attached customized programming and reporting list by sub-system) currently used in the NMG PaySys environment must be converted to the Bank...

Page 694
... of customer bank information and ACH history in order for customers to perform ACH payments. 10. Permanently display new account scorecard, new account score, credit bureau risk score (at time of opening) as well as high activity and updated credit bureau risk scores with dates with semi-annual...

Page 695
...to marketing channels. New e-mail update date and an e-mail share field that is also sent to marketing channels. 13. Store number data contained in the employee code field automatically stops a credit card from being issued and sends a message to the InCircle system to stop employee point redemption...

Page 696
... license information, e-mail address and social security number. POS Express Application process to link POS application input to CDM cradle to grave process. Delivery of either the account number or the application referral number is generated at POS within a 45-second window. On the NM Direct side...

Page 697
... are down, "time out waiting on bureau" applications stored during this downtime are not automatically being processed through when bureaus are back up. 15. Custom Reporting [***] Financial Authorization System (FAS) 1. 2. 3. 4. Authorization credit bureau reports received from TransUnion contain...

Page 698
... are changing their billing address, then ordering a credit card (and vice versa) in the designated period of time. In addition to referring the first purchase after receiving the credit card, the credit card mail-out date may be delayed intentionally until such time that the customer receives and...

Page 699
[***]

Page 700
... or Texas freeze file bureau report provided the customer gives us their PIN number is available. 7. Custom Reporting [***] Account Services Management (ASM) 1. Customized Universal Agent screen to perform authorization referrals and most customer service inquiries from one screen with limited, if...

Page 701
... 3 pm for store 1, referred for HAWK/ADI and OTB, TU score of 712, manager DCV approved). Pending FCRA screens by state that control address change, then credit card reorder requests within a specified period of time. A special ASM queue to manually release credit card requests once the customer has...

Page 702
... to accept full catalog descriptions and purchase order numbers which are passed to CMS, statement history screens and displayed on customer billing statements. 2. Automated $50 annual Gold fee assessment to customers with a plan segment automatically added. 3. Custom Reporting [***] Security...

Page 703
... (catalog) sales/returns financial transactions Feeds NM & BG mailed-in payments Feeds NM & BG ACH payments Feeds NM & BG ACH payments Feeds NM & BG ACH IVR payments Feeds NM employee credit card payments Feeds BG employee credit card payments Feeds NM retired employee credit card customers medical...

Page 704
... [***] Customer Service Feeds Harbor with updated ACH IVR accounts billing balance and minimum payment information. Provide outside P&L collection agencies with new assigned NM & BG P&L accounts for collection recovery. Feeds Harbor with new accounts that applied-for-ACH IVR payment processing...

Page 705
... and financial account information to the credit bureaus for credit reporting update. Create a monthly file with NM & BG customers that'opted-out' from mailing promotion as part of the GLB bill. Send a file to Trans Union with NM & BG customers for credit limit/score review and receive back...

Page 706
...Reward account information based upon selected account numbers provided to us by BG. Provide BG Marketing system with new account information and existing account demographic changes Output/Input Semi- annual Nightly Input Tues-Sat Nightly Output Mon-Fri Nightly Input Input Weekly Monthly...

Page 707
...Provide InCircle with new account information and existing account demographic changes Receives update from InCircle when a customer achieves one of the elite status (InCircle or Platinum), to create a new credit card. The embossing file is sent to InCircle for processing. Receive a file (upload to...

Page 708
...Online Interfaces Internal NMG Interface Systems Credit Application External Interface Systems Output Response Response Time Processing Time-frame ** POS Store System - POS Express (new apps) New Application Receives transaction from the POS store register to process a new application credit card...

Page 709
...System Sales Authorization (NM & BG charge cards) Authorizati on Receives transaction from the POS store register to process a NM or BG purchase/return transaction. Access the Fair Isaac system for credit reporting information if the account exceeds their OTB or had no activity over 12 months for...

Page 710
...BG customer statements online (9 months) and reprint if necessary. Access Systemware using Xnet to view NM & BG customer's credit signature sale slip. Access Systemware using Xnet to view NM & BG customer POS journal tape roll. In-house Credit System Receive from the customer a 3rd party credit card...

Page 711
... any Incircle delinquent accounts and lookup name and address information. Access the Credit database to inquiry on the customer's balance, purchase and payment activity and gift card information. Customer Service Access the BG Sales Check Recon system to look up a customer's credit sales slip. Send...

Page 712
... required for the change of terms are available, the Documentation Services and then the Credit Card Production Services operations, including statement mailing, payment processing and credit card processing activities, may, at NMG's option, be converted to Bank systems. The delivery date depends on...

Page 713
...to Schedules 4.8(b) and 7.4(b) for all functionalities â€¢ "Turbo Charging the Segment of One". â€¢ Ability to create individual customer profiles based upon number and value of purchases, product type, department, manufacturer, etc. â€¢ Ability to drive the "Empowering of the Sales Associate" based...

Page 714
...Account or Non-Card Payment Plan, the product of (A) the sum of (x) the Program Fee Percentage applicable to such Account and (y) the Servicing Fee Percentage and (B) Net Credit Sales under such Account reflected in all NMG Charge Transaction Data required to be paid for by Bank on such Business Day...

Page 715
... acceptable manner as the parties agree if The Wall Street Journal is no longer reporting such rate. In the event that all of the Services set forth below are transferred to Bank and the Servicing Agreement is terminated, the Program Fee Percentage applicable to all Accounts shall be increased...

Page 716
...NMG Compensation Marketing Reimbursement. The aggregate of all Joint Marketing Commitment amounts spent by the NMG (a) Companies in the prior Fiscal Month. (b) In-Store Payment Reimbursement. An amount equal to [***] (which amount shall increase by CPI on each anniversary of the Effective Date, with...

Page 717
SCHEDULE 16.2(c) If this Agreement is terminated pursuant to Section 16.2(c) prior to the end of the Initial Term, NMG shall pay Bank the sum of (i) the NMG Marketing Commitment for the Fiscal Year prior to such termination (or the NMG Marketing Commitment for the first Fiscal Year if this Agreement...

Page 718
...Troy, Michigan Short Hills, New Jersey King of Prussia, Pennsylvania Paramus, New Jersey Honolulu, Hawaii Palm Beach, Florida Plano, Texas (Willow Bend) Tampa, Florida Coral Gables, Florida Orlando, Florida Bergdorf Goodman, New York City (Women's Store) Bergdorf Goodman, New York City (Men's Store)

Page 719
... material (indicated by asterisks) has been omitted from this document and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. SERVICING AGREEMENT between THE NEIMAN MARCUS GROUP, INC. and HSBC BANK NEVADA, N.A. Dated as of July 7, 2005

Page 720
.... Section 4.07. Section 4.08. Further Assurances Modifications Correction of Errors Changes in Law Cooperation Facilities and Equipment Insurance Customer Information ARTICLE V DEFAULT; REMEDIES Section 5.01. Servicer Default Section 5.02. Remedies i 10 11 9 9 9 9 9 9 10 10 6 8 3 3 4 5 5 5 6 6 Page...

Page 721
... 6.04. Term of Agreement Servicer Termination Events Termination by Bank Effect of Termination ARTICLE VII INDEMNIFICATION Section 7.01. Section 7.02. Section 7.03. Section 7.04. Indemnification Procedure for Indemnification Notice and Additional Rights and Limitations. Limits on Indemnification...

Page 722
..., and Bank will purchase, specified assets related to Sellers' consumer private label credit card business; WHEREAS, Servicer and certain of its subsidiaries (together, the "NMG Companies") are entering into a Program Agreement, dated as of June 8, 2005 (as amended from time to time, the "Program...

Page 723
... used in the singular, either Servicer or Bank or, when used in the plural, both Servicer and Bank. "Primary Servicer": As defined in the recitals hereof. "Program Agreement": As defined in the recitals hereof. "Purchase Agreement": As defined in the recitals hereof. "Receiving Party": As defined in...

Page 724
.... Subject to the terms and conditions of this Agreement, Bank hereby appoints Servicer as of the Effective Date as the servicer of the Accounts (excluding Non-Store Accounts associated with Dual-Line Credit Cards) and Cardholder Indebtedness and Servicer hereby accepts such appointment. Section...

Page 725
...; (iii) the Credit Card Production Services; (iv) the Data Processing Services; and (v) the Other Services, in each case in accordance with this Agreement and the Risk Management Policies and Operating Procedures. Servicer shall service the Accounts in compliance with Applicable Law, in such a way...

Page 726
... (15) days after the end of each Fiscal Month, Servicer shall provide to Bank the reports specified in Schedule 2.03(e) and such other reports as are mutually agreed to by the Parties from time to time. (f) Bank shall train personnel of Servicer on Bank's systems and processes that are related to or...

Page 727
... and deliver such reports to HSBC Finance Corporation for the period starting October 31, 2004 and ending on the Closing Date, such reports to be delivered by such independent public accounting firm on or before October 31, 2005. (c) Servicer shall cooperate with Bank and Bank Parent to correct...

Page 728
...other laws affecting the rights of creditors generally and by general equity principles including those respecting the availability of specific performance). (c) Conflicts; Defaults; Etc. The execution, delivery and performance of this Agreement by Servicer, its compliance with the terms hereof, and...

Page 729
... affecting the rights of creditors generally and by general equity principles including those respecting the availability of specific performance). (c) Conflicts; Defaults; Etc. The execution, delivery and performance of this Agreement by Bank, its compliance with the terms hereof, and consummation...

Page 730
... data processing or billing errors of which it receives knowledge that occur in the performance of the Services. Section 4.04. Changes in Law. Bank shall notify Servicer from time to time, in a timely manner, of the expiration, revocation or amendment of, or other material developments relating to...

Page 731
... Servicer to perform its obligations under this Agreement. Section 4.08. Customer Information. Servicer shall maintain an information security program that is designed to meet all requirements of Applicable Law, including, at a minimum, maintenance of an information security program that is designed...

Page 732
... Failure of the same Regulatory SLA, Bank shall, in addition to payment as provided in paragraph (c) above, have the right to terminate the Program Agreement by providing thirty (30) days prior written notice to Servicer, in which event the parties shall have the rights set forth in Article XVII of...

Page 733
... to Servicer pursuant to a servicing agreement reasonably satisfactory to Servicer. Following the delivery by the applicable Party of written notice of a servicing transfer or termination, Bank shall have reasonable access to Servicer's operations and systems to ensure continuity of business and...

Page 734
... by Bank. Bank may terminate this Agreement upon written notice prior to the end of the Term after the occurrence of a Servicer Event of Default. No such termination shall be effective until either assumption by Bank or its Affiliate of the provision of the Services pursuant to the Program Agreement...

Page 735
...expenses of such counsel shall be at Bank's expense, unless (i) the employment of such counsel has been authorized in writing by Servicer, (ii) Servicer has not employed counsel to take charge of the defense within twenty (20) days after delivery of the applicable notice or, having elected to assume...

Page 736
...indemnification under this Section 7.03 may be sought, such failure shall not limit the liability of Servicer; provided, however, that this provision shall not be deemed to limit Servicer's rights to recover from Bank for any loss, cost or expense which it can establish resulted from such failure to...

Page 737
... terms and conditions of this Agreement. (ii) The restrictions on disclosure of Confidential Information under this Section 8.01 shall not apply to information received or obtained by Servicer or the Household Companies, as the case may be, that: (i) is or becomes generally available to the public...

Page 738
... or make use of such Confidential Information for any other purpose. (ii) Each Receiving Party shall: (i) limit access to the Disclosing Party's Confidential Information to those employees, authorized agents, vendors, consultants, service providers, accountants, advisors and subcontractors who have...

Page 739
... in lawful money of the United States, immediately available funds, to such account as the receiving Party shall specify prior to noon, New York time, two Business Days prior to the date payment is required. Any payment required to be made on a day that is not a Business Day shall be made on the...

Page 740
...: General Counsel Facsimile: (214) 573-5354 With a copy to: c/o The Neiman Marcus Group, Inc. One Marcus Square 1618 Main Street Dallas, Texas 75201 Attention: Credit Card Program Manager Facsimile: (214) 743-7646 With a copy to: Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York...

Page 741
... otherwise in this Agreement, the Risk Management Policies, the Operating Procedures or any other Transaction Document, each Party shall bear all costs and expenses incurred by such Party in connection with its performance of its duties hereunder (including, in the case of Servicer, all costs and...

Page 742
... assigns of the Parties. Section 8.17. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within such State, and the obligations, rights and remedies of the parties hereunder shall be...

Page 743
... this Agreement as of the date first written above. THE NEIMAN MARCUS GROUP, INC. By: /s/ Steven P. Dennis Name: Steven P. Dennis Title: Senior Vice President, Strategy & Business Development HSBC BANK NEVADA, N.A. By: /s/ Charles A. Colip Name: Charles A. Colip Title: Executive Vice President 22

Page 744
... new, replacement and reissued credit card plates related to the following credit card programs (Neiman Marcus, Bergdorf Goodman, NM Gold, NM InCircle, NM Platinum). In addition to the embossed credit cards, the production services group generates non-embossed gift cards with the 16-digit gift card...

Page 745
... and store inquiries and handles card program billing-related claims for Neiman Marcus, Bergdorf Goodman and the InCircle loyalty program. Other support groups involved in the customer resolution process include Bill Adjustments, Media Retention and Retrieval, Accounts Receivable reconciliation...

Page 746
... - Dialer Work Schedule Blocked Account Report No applicable Report Payment Plans CCCS Inventory Refer to Dialer Reports Collector Synopsis Summary Reports (By Team) Credit Application Processing System CAPS Listing New Accounts With Guidelines Exceeding $ Credit Limit Change Report Daily Approval...

Page 747
... Split/Skill Summary Monthly Customer Service Help Dispute Resolution Process Subpoena Log No applicable Report No applicable Report Reporting Monies Received on In-Store Cash Payments Report Distribution Change Request No applicable Report No applicable Report Activity Recap Report (R16) Reject Re...

Page 748
... Custom Score Control Chart Account Review Analysis 3 Bad Debt Provision Primary Collection Agency Performance Report Secondary Agency & Bankruptcy Performance Report Bankruptcy Analysis Bankruptcy Write-Off Analysis No applicable Report Credit Reclassification Summary Report No applicable Report...

Page 749
...days of cycle close date provided that this standard shall not apply if a systems problem prevents communication of the credit input data to Servicer's credit operations (monthly reporting will be completed on an Excel spreadsheet): [***] * [Regulatory SLA] Statement Mailing Services and Credit Card...

Page 750
... annual InCircle, Platinum and Gold charge card re-issuance (and the Management Committee has been notified of such promotion, sale event or special event). If more than half of all Accounts receive a Change of Terms, then these standards will not be applied for the months during which the Change...

Page 751
...a Cardholder or upon the end of the fourth cycle for any Account with a Credit Balance up to $[***], the percentage of Credit Balance refunds requested by mail correspondence that will be sent out within 9 days of such request or cycle end date provided that no Credit Balance refund will be sent out...

Page 752
SCHEDULE 5.02 Remedies "Initial Penalty Amount": [***]. "Subsequent Penalty Amount": [***]. 4

Page 753
SCHEDULE 7.04 Indemnity Matters "Deductible Amount": [***]. 5

Page 754
... Neiman Marcus Group, Inc. ("NMG"), Bergdorf Goodman, Inc. ("BG, and together with NMG, the "NMG Companies"), HSBC Bank Nevada, N.A., a national credit card bank ("Bank"), and Household Corporation, a Delaware corporation ("Primary Servicer") to that certain Credit Card Program Agreement ("Agreement...

Page 755
... new Recourse Accounts. In any event Bank and NMG will work together cooperatively to manage the Recourse Accounts to maintain reasonable risk for both parties and to accommodate the NMG Companies and the relationship between the NMG Companies and their customers. Recourse Accounts will be serviced...

Page 756
... remain at the initial credit limit extended at the time the Recourse Account is opened. (h) All Recourse Amounts must be approved by the NMG Companies' Vice President of Credit. As of the date of the First Amendment to the Agreement, the NMG Companies' current Vice President of Credit is Bill Hough...

Page 757
... duly executed as of the date first above THE NEIMAN MARCUS GROUP, INC. By: /s/ William S. Hough Title: VP Credit Services BERGDORF GOODMAN, INC. By: /s/ William S. Hough Title: VP Credit Services HSBC BANK NEVADA, N.A. By: /s/ Charles A. Colp Title: Executive Vice President HOUSEHOLD CORPORATION By...

Page 758
... among The Neiman Marcus Group, Inc. ("NMG"), Bergdorf Goodman, Inc. ("BG", and together with NMG, the "NMG Companies"), HSBC Bank Nevada, N.A., a national credit card bank ("Bank"), and Household Corporation, a Delaware corporation ("Primary Servicer"), to that certain Credit Card Program Agreement...

Page 759
... service and related activities Bank is collecting balances which are less than [***] days past their due date Bank is staffing the call center and resolving customer and store inquiries Bank if processing and decisioning new applications and pending sale transactions Bank is processing all Account...

Page 760
... Neiman Marcus Group, Inc. ("NMG"), Bergdorf Goodman, Inc. ("BG, and together with NMG, the "NMG Companies"), HSBC Bank Nevada, N.A., a national credit card bank ("Bank"), and Household Corporation, a Delaware corporation ("Primary Servicer") to that certain Credit Card Program Agreement ("Agreement...

Page 761
THE NEIMAN MARCUS GROUP, INC. By: /s/ William S. Hough Title: VP Credit Services BERGDORF GOODMAN, INC. By: /s/ William S. Hough Title: VP Credit Services HSBC BANK NEVADA, N.A. By: /s/ Brian D. Hughes Title: Executive Vice President HOUSEHOLD CORPORATION By: /s/ Brian D. Hughes Title: Managing ...

Page 762
... Card Program Agreement ("First Amendment") is made effective as of the 3 day of April, 2007, by and among The Neiman Marcus Group, Inc. ("NMG"), Bergdorf Goodman, Inc. ("BG, and together with NMG, the "NMG Companies"), HSBC Bank Nevada, N.A., a national credit card bank ("Bank"), and HSBC Private...

Page 763
... CARD AGREEMENT ARTICLE XX RECOURSE CREDIT PROGRAM 20.1 Recourse Credit Program (a) Overview. From time to time, NMG may request that the Bank approve an Application that Bank would otherwise decline under the Program ("Recourse Application Request"), or increase the credit limit on an Account...

Page 764
..., if, and from time to time, any such Recourse Account is removed from the Recourse Portfolio, the Account shall no longer be deemed a Recourse Account or subject to the terms of this Article XX. (c) Annual Review. At the end of each Program Year, Bank will review the performance of the Recourse...

Page 765
...Card Program Agreement ("Fifth Amendment") is made effective as of the 13th day of March, 2007, by and among The Neiman Marcus Group, Inc. ("NMG"), Bergdorf Goodman, Inc. ("BG, and together with NMG, the "NMG Companies"), HSBC Bank Nevada, N.A., a national credit card bank ("Bank"), and HSBC Private...

Page 766
... date first above written. THE NEIMAN MARCUS GROUP, INC. By: /s/ William S. Hough Title: VP Credit Services THE NEIMAN MARCUS GROUP, INC. By: /s/ William S. Hough Title: VP Credit Services HSBC BANK NEVADA, N.A. By: /s/ Brian D. Hughes Title: Executive Vice President HSBC PRIVATE LABEL CORPORATION...

Page 767
... Card Program Agreement ("Sixth Amendment") is made effective as of the 17th day of July, 2007, by and among The Neiman Marcus Group, Inc. ("NMG"), Bergdorf Goodman, Inc. ("BG, and together with NMG, the "NMG Companies"), HSBC Bank Nevada, N.A., a national credit card bank ("Bank"), and HSBC Private...

Page 768
... CREDIT CARD PROGRAM AGREEMENT 4.7 Cardholder Terms. (a) The terms and conditions of all Accounts shall be the terms and conditions specified in Schedule 4.7(a). Additional changes to the terms and conditions of the Accounts may be made only in accordance with Article III. (b) The account numbers...

Page 769
... THE SIXTH AMENDMENT TO THE CREDIT CARD PROGRAM AGREEMENT SCHEDULE 4.7(a) - Cardholder Terms Annual Fee Late Payment or Late Fee (at cycle) No annual fee, except for $50 NM Gold Card program membership fee. Based upon two prior month's statement balance: â€¢ $20-$49.99 Balance = $10.00 â€¢ $50-$149...

Page 770
... TO THE CREDIT CARD PROGRAM AGREEMENT SCHEDULE 1.1(f) "High Collar" means (i) with respect to the Finance Charge Reversal Percentage applicable to the Private Label Accounts, [***], (ii) with respect to the Late Fee Reversal Percentage applicable to the Private Label Accounts, [***], (iii) with...

Page 771
... TO THE CREDIT CARD PROGRAM AGREEMENT 9.1 (a) NMG Compensation. Payments. (i) Not later than 1:00 pm (Central time) on each Business Day, Bank shall pay to NMG an amount equal to the amount set forth on Schedule 9.1(a)(i) with respect to the Accounts other than the Non-Store Accounts. (ii) Not...

Page 772
...CREDIT CARD PROGRAM AGREEMENT SCHEDULE 9.1(a)(iii) Bi-Annual NMG Compensation Late Fee Income Participation Payment. An amount equal to the Actual Late Fee Net Income for the prior six calendar months, minus the Base Late Fee Net Income for the prior six calendar months, multiplied by the applicable...

Page 773
... [***] by the number of days between October 1st and the effective date of termination. B. If the cumulative difference between the Actual Late Fee Net Income and the Base Late Fee Net Income is less than or equal to the Adjusted Income Differential Amount, then the applicable Late Fee Income...

Page 774
...into this 21st day of April 2008 by and among The Neiman Marcus Group, Inc. and Bergdorf Goodman, Inc. on the one hand, and HSBC Private Label Corporation (formerly, Household Corporation) and HSBC Bank Nevada, N.A. on the other hand, to that certain Credit Card Program Agreement, dated June 8, 2005...

Page 775
... Financial Markets plus [***], times (B) the average of [***]of the Gross Receivables for each day during such calendar month. (iii) "Net Write-Offs" means, with respect to Accounts that have been written off in a particular period in accordance with the credit and collection policies contained...

Page 776
... (y) the total blended rate of Net Credit Sales lost to Net Write Offs reduced does not exceed [***]for the combined groups. Notwithstanding the foregoing, Bank may implement changes to Risk Management Policies in respect of a subgroup of Accounts within an individual ten (10) point Next Gen score...

Page 777
... allowed to accept the credit risk for any Account affected by the actions taken pursuant to these as well as any other future Risk Management Policy changes pursuant to the existing recourse programs between the parties, as set forth in Article XX of this Agreement, and via the process outlined in...

Page 778
...its General Ledger (GL) and/or its supporting financial accounting subsystems. 10. The following shall be added as new Sections 9,1 (a) (vii), (viii) and (ix) of the Agreement: "(vii) Bank will pay to NMG the following amounts in respect of the RAM Measurement Period, with interim annual payments in...

Page 779
...13. 14. AGREED TO AND EXECUTED on this the 21st day of April, 2008. HSBC BANK NEVADA, N.A. By: Its: /s/ Eliabeth F. McCombe EVP HSBC PRIVATE LABEL CORPORATION By: Its: /s/ Elizabeth F. McCombe VP THE NEIMAN MARCUS GROUP, INC. By: Its: /s/ James E. Skinner EVP & CFO BERGDORF GOODMAN, INC. By: Its...

Page 780
... the credit line to the balance .on all accounts that are authorizations ([***] implementation). Close all accounts that are implementation) Increase POS cut .off to [***] In Store, and [***] Neiman Marcus Direct and Neiman Marcus/Bergdorf Goodman Online ([***] implementation). All accounts that...

Page 781
... Management Policy changes. Process Owner Bank Will provide a report of Accounts (inactive and active) that would be affected by impending Risk Management Policy changes. The report will include Account number, block code(s), Account open date, LTD purchases, YTD purchases, current balance, credit...

Page 782
...aggregate of all Joint Marketing Commitment Amounts spent by the NMG Companies in the last Fiscal Month of such Fiscal Year; and Year; (b) the number of In-Store Payments received by any of the NMG Companies in the last Fiscal Month of such Fiscal (c) the Finance Charge Reversal Percentage for such...

Page 783
... of the foregoing will begin on [***] and will be measured quarterly (through the end of the RAM Measurement Period) and the payments contemplated by Sections 9.1(a)(vii) and (viii) shall be settled annually based on the below Measurement Period Report Date Payment Date [***] [***] [***]

Page 784
... service and related activities Bank is collecting balances which are less than [***] days past their due date Bank is staffing the call center and resolving customer and store inquiries Bank is processing and decisioning new applications and pending sale transaction Definition During the Term...

Page 785
Schedule 9.1(a)(ix) Illustrative Calculations [***] Average Gross Receivables Net Credit Sales Number of Average Active Accounts Gross Finance Income Less Cost of Funds (actual internal charge) Less Net Write-Offs Increased late fee due to 6th amendment Adjust Risk Adjusted Margin Variable Margin...

Page 786
... End Settlement Assumptions for Calculations Average Gross Receivables Net Credit Sales Number of Average Active Accounts Gross Finance Income 1-Month-LIBOR Net Write-Offs at [***] of Net Credit Sales Recoveries Fraud Loss Marketing Expense Payment to NMG for Processing In-Store Payments Schedule...

Page 787
(2) [***] NMG Program Fee [***] Servicing Fee Payment to NMG for Processing In-Store Payments Bank Payable to NMG of [***] RAM Sharing (3) Number of Average Active Accounts [***] cost per average account

Page 788
EXHIBIT B Authorization 12 Month On Book (MOB) Report - Next Gen Score [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] ...

Page 789
EXHIBIT C Authorizations 12 Months On Book (MOB) Report-Next Gen Score 600-609 (EXAMPLE ONLY [***] [***] [***] [***] Sample Attribute **Sample Band [***] $ $ [***] [***] [***]

Page 790
...this 17th day of October, 2008, by and among The Neiman Marcus Group, Inc. and Bergdorf Goodman, Inc. on the one hand, and HSBC Private Label Corporation (formerly, Household Corporation) and HSBC Bank Nevada, N.A., on the other hand, to that certain Credit Card Program Agreement, dated June 8, 2005...

Page 791
... this 30th day of December 2008 by and among The Neiman Marcus Group, Inc. and Bergdorf Goodman, Inc. on the one hand, and HSBC Private Label Corporation (formerly, Household Corporation) and HSBC Bank Nevada, N.A. on the other hand, to that certain Credit Card Program Agreement, dated June 8, 2005...

Page 792
... the 30th day of December 2008. HSBC BANK NEVADA, N.A. By: /s/ Brian D. Hughes Title: Executive Vice President THE NEIMAN MARCUS GROUP, INC. By: /s/ William S. Hough Title: VP Credit Services HSBC PRIVATE LABEL CORPORATION By: /s/ Brian D. Hughes Title: Executive Vice President BERGDORF GOODMAN, INC...

Page 793
... by and between THE NEIMAN MARCUS GROUP, INC., a Delaware corporation ("Mortgagor"), whose address is One Marcus Square, 1618 Main Street, Dallas, Texas 75201 and BANK OF AMERICA, N.A., a national association, whose address is 1455 Market Street, 5th Floor, San Francisco, California 94103, as agent...

Page 794
...such (b) The phrase "(vi) the Lien Subordination and Intercreditor Agreement, dated as of even date hereof, among the Collateral Agent, Credit Suisse, Merger Sub, Neiman Marcus, Holdings and the subsidiaries of Neiman Marcus from time to time party thereto as attached hereto as Exhibit C" is hereby...

Page 795
...shall pay to Mortgagee all expenses incurred by Mortgagee in connection with the preparation, execution, filing and recordation of this Instrument, including, without limitation, attorneys' fees, filing and recording fees, documentary stamp, mortgage and intangible taxes and title search charges and...

Page 796
... hereto, effective as of the date first above written, caused this Instrument to be duly EXECUTED AND DELIVERED by authority duly given. Mortgagor: THE NEIMAN MARCUS GROUP, INC., a Delaware corporation By: Name: Title: STATE OF COUNTY OF ) ) ss.: ) On this day of September, 2009, in the...

Page 797
... this day of September, 2009, in the County and State aforesaid, before me, the subscriber, a Notary Public authorized to take acknowledgements and proofs in said County and State, personally appeared , the of Bank of America, N.A., who, I am satisfied, is the person who, as such officer, signed the...

Page 798
EXHIBIT A LEGAL DESCRIPTION The Neiman Marcus Group, Inc. is a record owner of a leasehold interest in the property located at 503 Garden State Plaza, Paramus, NJ and described on this Exhibit A. [See Attached Pages for Legal Description] A-1

Page 799
...in thousands, except ratios) (Predecessor) Nine weeks Fiscal ye ended ended October 1, July 30 2005(a) 2005(a Fixed Charges: Interest on debt Amortization of debt discount and expense Interest element of rentals Total fixed charges (Loss) earnings: (Loss) earnings from continuing operations before...

Page 800
Exhibit 14.1 CODE of ETHICS and CONDUCT THE NEIMAN MARCUS GROUP, INC.

Page 801
... TO EMPLOYEES OF THE NEIMAN MARCUS GROUP, INC. THE CODE CONSEQUENCES OF NON-COMPLIANCE DUTY TO REPORT COMPLIANCE WITH LAWS AND RELATED POLICIES GENERAL OBLIGATION TO DEAL FAIRLY ANTITRUST LAWS INSIDER TRADING EMPLOYMENT LAWS Equal Employment Opportunity Sexual Harassment Reporting Discrimination...

Page 802
... of Records E-MAIL, VOICE MAIL AND THE INTERNET Appropriate Use Privacy Creation and Retention of Messages CONFLICTS OF INTEREST Gifts Entertainment DRUG AND ALCOHOL USE AND TESTING ENVIRONMENTAL COMPLIANCE IMPLEMENTATION OF THE CODE THE COMPLIANCE COMMITTEE DISSEMINATION OF INFORMATION TRAINING AND...

Page 803
... high standards, and each of us shares responsibility for maintaining them. Through its operating units, NMG does business in many communities throughout the United States. All employees are ambassadors of the Company, whose conduct, both within and outside their employment context, has a direct...

Page 804
... in being part of an organization that is second to none in its pursuit of excellence through commitment to the highest legal and ethical values. Richard A. Smith Chairman of the Board Brian J. Knez Vice-Chairman Robert A. Smith Vice-Chairman Burton M. Tansky President and Chief Executive Officer 5

Page 805
... to the employees of The Neiman Marcus Group, Inc. or the "Company" shall also include all employees of Neiman Marcus Stores, Neiman Marcus Direct, Neiman Marcus Online, Bergdorf Goodman, Inc., Bergdorf Graphics, Inc., Kate Spade LLP, Gurwitch Products, L.L.C., Horchow, and Chef's Catalog, and (ii...

Page 806
... reference. GENERAL OBLIGATION TO DEAL FAIRLY Employees shall endeavor to deal fairly with the Company's customers, suppliers, competitors, and other employees. No employee shall take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation...

Page 807
... as value to the customer, costs and competitive pressure in the marketplace. Employees must not communicate either directly or indirectly with competitors concerning sensitive information such as prices charged, sale dates or percentages, business or marketing strategies, profit margins or credit...

Page 808
...or sell shares of stock or other securities of the Company (or puts, calls, options or other rights to buy or sell such securities) until a reasonable time after public disclosure of such inside information. Employees also shall not disclose such inside information to individuals not employed by the...

Page 809
... can be made beginning two (2) business days after the release. For information disclosed in a report mailed to stockholders, purchases and sales should not be made until one (1) week after the date of mailing. The purpose of this discussion is not to present an exhaustive statement of the law with...

Page 810
..., the Human Resources Department, Associate Relations, his or her designated Compliance Officer, the Compliance Committee, or the Legal Department. Any manager or executive to whom discrimination or harassment is reported must immediately forward that information to the Human Resources Department...

Page 811
... in public services and activities on an equal basis with other individuals. The Company is committed to compliance with the ADA. As noted in the discussion of equal employment opportunities, and consistent with the ADA, the Company prohibits discrimination on the basis of an applicant's or employee...

Page 812
... the Company's reputation and customer relationships, and limit the risk of potential legal liability. While not an exhaustive list, some of the most pertinent requirements to ensure product safety include: FLAMMABILITY STANDARDS Textiles used to manufacture clothing sold in the United States must...

Page 813
... of these things used to identify a product or line of products or services and to distinguish them from the products and services of other companies. The Company owns a number of trademarks which are well recognized by the public and are extremely valuable. Employees must be vigilant to protect the...

Page 814
...or non-public information concerning or relating to the business of the Company, including the names of any of its customers, the prices at which it sells its services, or any other information of, about, or concerning the Company or its manner of operation, strategies, practices, business plans, or...

Page 815
... payment an employee believes is "facilitating" or otherwise exempt from the law. IMPORT AND CUSTOMS CONTROLS It is the express policy of the Company to comply fully with the laws of the United States and regulations of the United States Customs Service ("Customs") and those of any other applicable...

Page 816
...person believed to be restricted from doing business in the boycotting countries; or (v) utilizing letters of credit containing boycott provisions. As the Company is required to report boycott requests, employees must inform their designated Compliance Officer, the Compliance Committee, or the Legal...

Page 817
... that benefits the Company. IMPROPER OR UNRECORDED PAYMENTS; EXCESSIVE GIFTS Employees shall not make, facilitate or accept bribes, kickbacks or other improper payments, loans or gifts to or from government officials, customers, vendors, suppliers or other business contacts. Employees also must...

Page 818
...the Company comply with the laws that the states have put into place. An employee shall never offer a customer the option or opportunity to ship a purchase in order to avoid paying sales tax. The Point of Sale (POS) system has been programmed to collect the proper sales tax in each store and account...

Page 819
... for information. REQUESTS BY ATTORNEYS AND GOVERNMENT AGENTS Employees who are contacted by attorneys, government agents (e.g., from the Department of Justice, the Federal Trade Commission, the Equal Employment Opportunity Commission, the Securities Exchange Commission, or other federal, state or...

Page 820
...release to the general, financial or trade media without the approval of the Vice President of Finance. Officers and employees who are authorized to discuss matters disclosed in the Company's published statements or publicly filed reports should limit their discussion to the information contained in...

Page 821
... and reputation with its customers and the general public. Federal and state laws, Federal Trade Commission regulations, and Company policy prohibit false, misleading or deceptive advertising and related activities in the promotion and sale of products sold or offered by the Company. Therefore, all...

Page 822
... has issued a notice of a pending matter requiring the continued retention of certain documents, all records in any form are to be permanently discarded at the end of the period set forth in the record retention policy applicable to the relevant subsidiary or business unit of the Company. E-MAIL...

Page 823
... Internet must responsibly represent the Company. Employees must not post confidential or sensitive Company information on the Internet, including websites, news groups, chat rooms, and other similar locations. Employees shall not develop or establish websites using the Company's name or any of it...

Page 824
... Board of Directors. In general, no employee should: (a) accept a gift from; (b) be employed by, consult, serve as a director, volunteer or otherwise render services to; (c) own or have an ownership interest in; (d) be a creditor of; or (e) obtain confidential information for personal benefit from...

Page 825
... ($150.00 or less in aggregate retail value); or (2) they are product samples, clearly marked with company or brand names, and distributed to a large group of our employees on an equal basis. Any gift of more than nominal intrinsic value must be reported to Marita O'Dea, Lee Roever or Nina Fabian...

Page 826
... personal problems. Information regarding the EAP is available from the Human Resources Department. An employee whose job performance or behavior indicates that he or she may be unfit for duty shall not be permitted to work. If allowed under applicable state laws, the Company may require a medical...

Page 827
... file. The Company retains the right to update, amend, or modify the Code at any time without prior notice. The Compliance Committee and Compliance Officers are available to answer all employee questions concerning the meaning and application of the Code and its related policies. Employees also may...

Page 828
...Employees who submit reports of violations or suspected violations which the employees know or should know are false. INVESTIGATING AND RESPONDING TO ALLEGATIONS OF VIOLATIONS All reported... and confers with Company management regarding any recommended corrective action. Employees are expected to ...

Page 829
... to my supervisor, any attorney in the Legal Department, my designated Compliance Officer, the Compliance Committee, or Associate Relations. The Company reserves the right to update, amend or modify the Code at any time without prior notice. Signature Print name Associate # Title Company Date 30

Page 830
Please return this form to your Department Manager or Human Resources Department. 31

Page 831
... Executive Officer and Chief Financial Officer, Financial and Accounting Officers at all NMG divisions and subsidiaries, and all professionals serving in a finance, accounting, treasury, tax or investor relations role throughout the NMG organization. All financial associates of The Neiman Marcus...

Page 832
...the financial statements of NMG or its subsidiaries. You understand that you will be held accountable for your adherence to this Code of Ethics for Financial Professionals. Your failure to observe the terms of this Code may result in disciplinary action, up to and including termination of employment...

Page 833
... Neiman Marcus Group, Inc. Worth Avenue Leasing Company New York New York Delaware Texas Texas Texas Delaware Virginia Massachusetts California Ontario, Canada Delaware Florida Neiman Marcus Holdings, Inc. Bergdorf Goodman, Inc. The Neiman Marcus Group, Inc. NEMA Beverage Holding Corporation NEMA...

Page 834
... No. 333-136297 on Form S-1 of Neiman Marcus, Inc. and subsidiaries and in the related Prospectus Supplements filed pursuant to Rule 424(b) of our reports dated October 20, 2009, with respect to the consolidated financial statements and schedule of Neiman Marcus, Inc. and subsidiaries and the...

Page 835
... information; and 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. b) Date: October 20, 2009 /s/ BURTON M. TANSKY Burton M. Tansky President and Chief Executive Officer

Page 836
... and report financial information; and 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. b) Date: October 20, 2009 /s/ JAMES E. SKINNER James E. Skinner Executive Vice President...

Page 837
... and results of operations of the Company. Dated: October 20, 2009 /s/ JAMES E. SKINNER James E. Skinner Executive Vice President and Chief Financial Officer (1) A signed original of this written statement required by Section 906 has been provided to Neiman Marcus, Inc. and will be retained by...

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