Neiman Marcus 2009 Annual Report Download - page 112

Table of Contents
• a second-priority pledge of 100% of NMG's capital stock and certain of the capital stock held by NMG, the Company or
any subsidiary guarantor (which pledge, in the case of any foreign subsidiary is limited to 100% of the non-voting stock (if
any) and 65% of the voting stock of such foreign subsidiary); and
• a second-priority security interest in, and mortgages on, substantially all other tangible and intangible assets of NMG, the
Company and each subsidiary guarantor, including a significant portion of NMG's owned and leased real property (which
currently consists of approximately half of NMG's full-line retail stores) and equipment.
Capital stock and other securities of a subsidiary of NMG that are owned by NMG or any subsidiary guarantor will not
constitute collateral under NMG's Asset-Based Revolving Credit Facility to the extent that such securities cannot secure NMG's 2028
Debentures or other secured public debt obligations without requiring the preparation and filing of separate financial statements of
such subsidiary in accordance with applicable Securities and Exchange Commission's rules. As a result, the collateral under NMG's
Asset-Based Revolving Credit Facility will include shares of capital stock or other securities of subsidiaries of NMG or any subsidiary
guarantor only to the extent that the applicable value of such securities (on a subsidiary-by-subsidiary basis) is less than 20% of the
aggregate principal amount of the 2028 Debentures or other secured public debt obligations of NMG. The Asset-Based Revolving
Credit Facility contains a number of covenants that, among other things and subject to certain significant exceptions, restrict its ability
and the ability of its subsidiaries to:
• incur additional indebtedness;
• pay dividends on NMG's capital stock or redeem, repurchase or retire NMG's capital stock or indebtedness;
• make investments, loans, advances and acquisitions;
• create restrictions on the payment of dividends or other amounts to NMG from its subsidiaries that are not guarantors;
• engage in transactions with NMG's affiliates;
• sell assets, including capital stock of NMG's subsidiaries;
• consolidate or merge;
• create liens; and
• enter into sale and lease back transactions.
The Asset-Based Revolving Credit Facility contains covenants, including covenants limiting dividends and other restricted
payments; investments, loans, advances and acquisitions; and prepayments or redemptions of other indebtedness. These covenants
permit the restricted actions in an unlimited amount, subject to the satisfaction of certain payment conditions, principally that NMG
must have pro forma excess availability under the Asset-Based Revolving Credit Facility equal to at least 25% of the lesser of (a) the
revolving commitments under the facility and (b) the borrowing base, NMG delivering projections demonstrating that projected
excess availability for the next twelve months will be equal to such thresholds and that NMG have a pro forma ratio of consolidated
EBITDA to consolidated Fixed Charges (as such terms are defined in the credit agreement) of at least 1.2 to 1.0 (or 1.1 to 1.0 for
prepayments or redemptions of other indebtedness). The Asset-Based Revolving Credit Facility also contains customary affirmative
covenants and events of default, including a cross-default provision in respect of any other indebtedness that has an aggregate
principal amount exceeding $50 million.
Senior Secured Term Loan Facility. In October 2005, NMG entered into a credit agreement and related security and other
agreements for a $1,975.0 million Senior Secured Term Loan Facility. At July 31, 2010, the outstanding balance under the Senior
Secured Term Loan Facility was $1,513.4 million (including $7.6 million of borrowings classified as current liabilities). The principal
amount of the loans outstanding is due and payable in full on April 6, 2013.
At July 31, 2010, borrowings under the Senior Secured Term Loan Facility bore interest at a rate per annum equal to, at
NMG's option, either (a) a base rate determined by reference to the higher of (1) the prime rate of Credit Suisse and (2) the federal
funds effective rate plus 1/2 of 1% or (b) a LIBOR rate, subject to certain adjustments, in each case plus an applicable margin. The
interest rate on the outstanding borrowings pursuant to the Senior Secured Term Loan Facility was 2.47% at July 31, 2010. The
applicable margin is subject to adjustment based on contractually defined debt coverage ratios.
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