Neiman Marcus 2008 Annual Report Download - page 16

Table of Contents
• make investments;
• create restrictions on the payment of dividends or other amounts to NMG from NMG's restricted subsidiaries;
• engage in transactions with its affiliates;
• sell assets, including capital stock of NMG's subsidiaries;
• consolidate or merge;
• create liens; and
• enter into sale and lease back transactions.
In addition, NMG's ability to borrow under the Asset-Based Revolving Credit Facility is limited by the conditions described
above.
Moreover, NMG's Asset-Based Revolving Credit Facility provides discretion to the agent bank acting on behalf of the
lenders to impose additional availability restrictions and other reserves, which could materially impair the amount of borrowings that
would otherwise be available to us. There can be no assurance that the agent bank will not impose such reserves or, were it to do so,
that the resulting impact of this action would not materially and adversely impair NMG's liquidity.
A breach of any of the restrictive covenants would result in a default under the Asset-Based Revolving Credit Facility and
Senior Secured Term Loan Facility. If any such default occurs, the lenders under the Asset-Based Revolving Credit Facility and
Senior Secured Term Loan Facility may elect to declare all outstanding borrowings under such facilities, together with accrued
interest and other fees, to be immediately due and payable, or enforce their security interest, any of which would result in an event of
default under NMG's Senior Notes and Senior Subordinated Notes and 2028 Debentures. The lenders would also have the right in
these circumstances to terminate any commitments they have to provide further borrowings.
The operating and financial restrictions and covenants in these debt agreements and any future financing agreements may
adversely affect NMG's ability to finance future operations or capital needs or to engage in other business activities.
Risks Related to Our Business and Industry
The specialty retail industry is highly competitive.
The specialty retail industry is highly competitive and fragmented. Competition is strong both to attract and sell to customers
and to establish relationships with, and obtain merchandise from, key vendors.
A number of different competitive factors could have a material adverse effect on our business, results of operations and
financial condition, including:
• increased operational efficiencies of competitors;
• competitive pricing strategies, including deep discount pricing by a broad range of retailers during periods of poor
consumer confidence or economic instability;
• expansion of product offerings by existing competitors;
• entry by new competitors into markets in which we currently operate; and
• adoption by existing competitors of innovative retail sales methods.
We compete for customers with specialty retailers, traditional and high-end department stores, national apparel chains,
vendor-owned proprietary boutiques, individual specialty apparel stores and direct marketing firms. We compete for customers
principally on the basis of quality and fashion, customer service, value, assortment and presentation of merchandise, marketing and
customer loyalty programs and, in the case of Neiman Marcus and Bergdorf Goodman, store ambiance. In our Specialty Retail
business, merchandise assortment is a critical competitive factor, and retail stores compete for exclusive, preferred and limited
distribution arrangements with key designers. Many of our competitors are larger than we are and have greater financial resources than
we do. In addition, certain designers from whom we source merchandise have established competing free-standing retail stores in the
same vicinity as our stores. If we fail to successfully compete for customers or merchandise, our
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