Neiman Marcus 2009 Annual Report Download - page 113

Table of Contents
At July 31, 2010, the applicable margin with respect to base rate borrowings was 1.00% and the applicable margin with respect to
LIBOR borrowings was 2.00%.
The credit agreement governing the Senior Secured Term Loan Facility requires NMG to prepay outstanding term loans with
50% (which percentage will be reduced to 25% if NMG's total leverage ratio is less than a specified ratio and will be reduced to 0% if
NMG's total leverage ratio is less than a specified ratio) of its annual excess cash flow (as defined in the credit agreement). For fiscal
year 2010, NMG was required to prepay $92.6 million of outstanding term loans pursuant to the annual excess cash flow
requirements. Of such amount, NMG paid $85.0 million in the fourth quarter of fiscal year 2010 and will make the remaining $7.6
million payment in the first quarter of fiscal year 2011. For fiscal year 2009, NMG was required to prepay $26.6 million of
outstanding term loans in the first quarter of fiscal year 2010 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 101% of the principal amount to be prepaid, plus accrued and unpaid interest to the date of prepayment.
NMG also must offer to prepay outstanding term loans at 100% of the principal amount to be prepaid, plus accrued and unpaid
interest, with the proceeds of certain asset sales under certain circumstances.
NMG may voluntarily prepay outstanding loans under the Senior Secured Term Loan Facility at any time without premium
or penalty other than customary "breakage" costs with respect to LIBOR loans. There is no scheduled amortization under the Senior
Secured Term Loan Facility.
All obligations under the Senior Secured Term Loan Facility are unconditionally guaranteed by the Company and each direct
and indirect domestic subsidiary of NMG that guarantees the obligations of NMG under its Asset-Based Revolving Credit Facility.
All obligations under the Senior Secured Term Loan Facility, and the guarantees of those obligations, are secured, subject to certain
significant exceptions, by substantially all of the assets of the Company, NMG and the subsidiary guarantors, including:
• a first-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 first-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, but excluding, among
other things, the collateral described in the following 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 for sales of inventory by NMG and the subsidiary guarantors, certain
related assets and proceeds of the foregoing.
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 Senior Secured Term Loan Facility to the extent that such securities cannot secure the 2028
Debentures or other secured public debt obligations without requiring the preparation and filing of separate financial statements of
such subsidiary in accordance with applicable SEC rules. As a result, the collateral under NMG's Senior Secured Term Loan 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 credit agreement governing the Senior Secured Term Loan Facility contains a number of negative covenants that are
substantially similar to those governing the Senior Notes and additional covenants related to the security arrangements for the Senior
Secured Term Loan Facility. The credit agreement 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.
The fair value of the Senior Secured Term Loan Facility was approximately $1,426.4 million at July 31, 2010 and $1,332.5
million at August 1, 2009 based on prevailing market rates at this time.
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