Neiman Marcus 2012 Annual Report Download - page 86

Table of Contents
including but not limited to, 1) the appointment or termination of certain members of management, 2) the disposal of all or substantially all assets, 3) the
declaration of a dividend, 4) an initial public offering, 5) the grant of future registration rights and 6) any liquidation, bankruptcy, reorganization or similar
transaction. Other decisions of the board of directors of Holding require the approval of at least two directors appointed by each of the Principal Stockholders.
In both cases, these requirements are subject to the Principal Stockholders’ respective ownership percentage in Holding being at least 30% of their initial
ownership interests.
Registration Rights Agreement
The Principal Stockholder Funds and the Co-Investors entered into a registration rights agreement with us upon completion of the Acquisition.
Pursuant to this agreement, the Principal Stockholder Funds can cause us to register their interests in us under the Securities Act and to maintain a shelf
registration statement effective with respect to such interests. The Principal Stockholder Funds and the Co-Investors are also entitled to participate on a pro
rata basis in any registration of our equity interests under the Securities Act that we may undertake. Under the registration rights agreement, we have agreed to
indemnify the Principal Stockholders, each member, limited or general partner thereof, each member, limited or general partner of each such member, limited
or general partner, each of their respective affiliates, officers, directors, stockholders, employees, advisors, and agents, controlling persons and each of their
respective representatives against any losses or damages arising out of any untrue statement or omission of material fact in any registration statement or
prospectus pursuant to which we sell shares of our common stock, unless such liability arose from such indemnified party’s misstatement or omission, and
the Principal Stockholders have agreed to indemnify us against all losses caused by their misstatements or omissions.
Management Services Agreement
In connection with the Acquisition, we entered into a management services agreement with affiliates of the Principal Stockholders pursuant to which
affiliates of one of the Principal Stockholders received on the closing date of the Acquisition a transaction fee of $25 million in cash in connection with the
Acquisition. Affiliates of the other Principal Stockholder waived any cash transaction fee in connection with the Acquisition. In addition, pursuant to such
agreement, and in exchange for consulting and management advisory services provided to us by the Principal Stockholders and their affiliates, affiliates of the
Principal Stockholders receive an aggregate annual management fee equal to the lesser of 1) 0.25% of consolidated annual revenue and 2) $10 million. We
paid management fees of $10.0 million in each of fiscal years 2013, 2012 and 2011, in each case split equally between the two Principal Stockholders. The
management services agreement includes customary exculpation and indemnification provisions in favor of the Principal Stockholders and their affiliates.
Pursuant to the management services agreement, upon completion of the Future Sponsors’ Acquisition, we expect to pay a one-time success fee to the Principal
Stockholders in an amount to be determined as provided for in the management services agreement based on our total enterprise value and our consolidated
EBITDA for the four fiscal quarters immediately preceding closing of the merger. See Note 14 of the Notes to Consolidated Financial Statements for a further
description of the management services agreement.
Certain Charter and By-Laws Provisions
Our Certificate of Incorporation and our Amended and Restated By-Laws contain provisions limiting directors’ obligations in respect of corporate
opportunities.
Management Stockholders’ Agreement
Subject to the management stockholders’ agreement, certain members of management, including Burton M. Tansky, Karen W. Katz, James E.
Skinner, and James J. Gold, along with 21 other current or former members of management, elected to invest in us by contributing cash or equity interests in
NMG, or a combination of both, to us prior to the merger and receiving equity interests in the Company in exchange thereof immediately after completion of
the merger pursuant to rollover agreements with NMG and we entered into prior to the effectiveness of the merger. The aggregate amount of this investment was
approximately $25.6 million.
The management stockholders’ agreement creates certain rights and restrictions on these equity interests, including transfer restrictions and tag-
along, drag-along, put, call, and registration rights in certain circumstances.
83