Neiman Marcus 2012 Annual Report Download - page 115

Table of Contents
· 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 and 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 $50.0 million.
2028 Debentures. NMG has outstanding $125.0 million aggregate principal amount of its 7.125% 2028 Debentures. NMG equally and ratably
secures its 2028 Debentures by a first lien security interest on certain collateral subject to liens granted under NMG’s senior secured credit facilities
constituting (a) 1) 100% of the capital stock of certain of NMG’s existing and future domestic subsidiaries and 2) 100% of the non-voting stock and 65% of
the voting stock of certain of NMG’s existing and future foreign subsidiaries and (b) certain of NMG’s principal properties that include approximately half of
NMG’s full-line stores, in each case, to the extent required by the terms of the indenture governing the 2028 Debentures. The 2028 Debentures contain
covenants that restrict NMG’s ability to create liens and enter into sale and lease back transactions. The collateral securing the 2028 Debentures will be
released upon the release of liens on such collateral under NMG’s senior secured credit facilities and any other debt (other than the 2028 Debentures) secured
by such collateral. Capital stock and other securities of a subsidiary of NMG that are owned by NMG or any subsidiary will not constitute collateral under
the 2028 Debentures to the extent such property does not constitute collateral under NMG’s senior secured credit facilities as described above. The 2028
Debentures are guaranteed on an unsecured, senior basis by the Company. The guarantee by the Company is full and unconditional. The Company’s
guarantee of the 2028 Debentures is subject to automatic release if the requirements for legal defeasance or covenant defeasance of the 2028 Debentures are
satisfied, or if NMG’s obligations under the indenture governing the 2028 Debentures are discharged. Currently, the Company’s non-guarantor subsidiaries
consist principally of Bergdorf Goodman, Inc., through which NMG conducts the operations of its Bergdorf Goodman stores, and NM Nevada Trust, which
holds legal title to certain real property and intangible assets used by NMG in conducting its operations. The 2028 Debentures include certain restrictive
covenants and a cross-acceleration provision in respect of any other indebtedness that has an aggregate principal amount exceeding $15.0 million. Our 2028
Debentures mature on June 1, 2028.
Retirement of Previously Outstanding Senior Notes and Senior Subordinated Notes. We previously had outstanding $752.4 million
aggregate principal amount of Senior Notes and $500.0 million aggregate principal amount of Senior Subordinated Notes, both of which we incurred in
connection with the acquisition of NMG in 2005. In May 2011, in connection with the TLF Amendment, we repurchased and cancelled $689.2 million
principal amount of the Senior Notes through a tender offer and redeemed the remaining $63.2 million principal amount of Senior Notes on June 15, 2011
(after which no Senior Notes remained outstanding). In November 2012, in connection with the ITL Amendment, we repurchased and cancelled
$294.2 million principal amount of Senior Subordinated Notes through a tender offer and redeemed the remaining $205.8 million principal amount of Senior
Subordinated Notes on December 31, 2012 (after which no Senior Subordinated Notes remained outstanding).
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