Neiman Marcus 2010 Annual Report Download - page 15

Table of Contents
indentures governing the Senior Subordinated Notes and the 2028 Debentures and the credit agreements governing the Senior Secured
Credit Facilities include covenants that, among other things, restrict NMG's ability to:
• incur additional indebtedness;
• pay dividends on NMG's capital stock or redeem, repurchase or retire its capital stock or indebtedness;
• 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.
The covenants limit NMG's ability to distribute earnings to us, in the form of dividends or otherwise. 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 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 in the facilities described above may constitute an event of default, permitting the
lenders to declare all outstanding borrowings due under the relevant facility to be immediately due and payable, or to enforce their
security interest. Agreements governing NMG's indebtedness also contain cross-default provisions, under which a declaration of
default under a credit facility would result in an event of default under the notes and the debentures, which in turn may lead to
mandatory redemption of such instruments in full. Moreover, in an event of default or cross-default, certain lenders would also have
the right to terminate any commitments they have to provide further borrowings.
A breach of any of the restrictive covenants would also result in a default under the indenture for our Senior Subordinated
Notes after notice and failure to cure. If any such default occurs, the trustee or specified percentage of note holders may elect to
declare all outstanding notes under the indenture, together with accrued interest, to be due and payable, which would result in an event
of default under our Senior Secured Credit Facilities and the 2028 Debentures.
Based on the foregoing factors, the operating and financial restrictions and covenants in NMG's debt agreements and any
future financing agreements could adversely affect NMG's ability to finance future operations or capital needs or to engage in other
business activities.
We are indirectly owned and controlled by the Sponsors and their interests may conflict with those of our creditors and other
stakeholders.
We are indirectly owned and controlled by the Sponsors. The interests of the Sponsors may not in all cases be aligned with
those of our creditors and other stakeholders. For example, if we encounter financial difficulties or are unable to pay our debts as they
mature, the interests of the Sponsors might conflict with our creditors' interests. In addition, the Sponsors may have an interest in
pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments,
even though such transactions might involve risks to holders of our indebtedness and other stakeholders. Furthermore, the Sponsors
may in the future own businesses that directly or indirectly compete with us. One or more of the Sponsors also may pursue acquisition
opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us.
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