Neiman Marcus 2012 Annual Report Download - page 113

Table of Contents
· 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 (SEC) 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 our ability and the
ability of our subsidiaries to:
· incur additional indebtedness;
· pay dividends on capital stock or redeem, repurchase or retire capital stock or indebtedness;
· make investments, loans, advances and acquisitions;
· create restrictions on the payment of dividends or other amounts to us from our subsidiaries that are not guarantors;
· engage in transactions with affiliates;
· sell assets, including capital stock of our subsidiaries;
· consolidate or merge;
· create liens; and
· enter into sale and lease back transactions.
We and our subsidiaries are prohibited under the Asset-Based Revolving Credit Facility from making restricted payments, including cash dividends
on common stock, unless such restricted payment falls under a permitted exception. The Asset-Based Revolving Credit Facility permits us to make a cash
dividend if (i) certain payment conditions, as described below, are satisfied, (ii) the dividend is made with the proceeds of certain issuances of debt and (iii)
the dividend is in an amount that does not exceed $30.0 million less the amount of certain investments and debt payments made prior to such dividend.
The facility contains covenants limiting dividends and other restricted payments, investments, loans, advances and acquisitions, and prepayments
or redemptions of other indebtedness. These covenants permit such 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 15% of the lesser
of (a) the revolving commitments under the facility and (b) the borrowing base, and NMG’s delivering projections demonstrating that projected excess
availability for the next six months will be equal to such thresholds and that NMG has a pro forma ratio of consolidated EBITDA to consolidated Fixed
Charges (as such terms are defined in the credit agreement) of at least 1.0 to 1.0 (or 1.1 to 1.0 for dividends or other distributions with respect to any equity
interests in NMG, its parent or any subsidiary). 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 $50.0 million.
In November 2012, we entered into an amendment to our Asset-Based Revolving Credit Facility to permit the ITL Amendment (described below) and
the repurchase of our Senior Subordinated Notes.
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. In May 2011, NMG entered into an amendment and restatement (the TLF Amendment) of the Senior
Secured Term Loan Facility. The TLF Amendment increased the amount of borrowings to $2,060.0 million and extended the maturity of the loans to May 16,
2018. Loans that were not extended under the TLF Amendment were refinanced. The proceeds of the incremental borrowings under the term loan facility,
along with cash on hand, were used to repurchase or redeem the $752.4 million principal amount outstanding of
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