Neiman Marcus 2013 Annual Report Download - page 118

Table of Contents
At August 2, 2014, borrowings under the Senior Secured Term Loan Facility bore interest at a rate per annum equal to, at our option, either (a) a base
rate determined by reference to the higher of 1) the prime rate of Credit Suisse AG (the administrative agent), 2) the federal funds effective rate plus ½ of
1.00% and 3) the adjusted one-month LIBOR plus 1.00% or (b) an adjusted LIBOR (for a period equal to the relevant interest period, and in any event, never
less than 1.00%), subject to certain adjustments, in each case plus an applicable margin. The applicable margin is up to 2.25% with respect to base rate
borrowings and up to 3.25% with respect to LIBOR borrowings. The applicable margin is subject to adjustment based on the senior secured first lien net
leverage ratio. The applicable margin with respect to outstanding LIBOR borrowings was 3.25% at August 2, 2014. The interest rate on the outstanding
borrowings pursuant to the Senior Secured Term Loan Facility was 4.25% at August 2, 2014.
Subject to certain exceptions and reinvestment rights, our Senior Secured Term Loan Facility requires that 100% of the net cash proceeds from
certain asset sales and debt issuances and 50% (subject to step downs based on our senior secured first lien net leverage ratio) from excess cash flow, as
defined in the credit agreement, for each of our fiscal years (commencing with the period ending July 26, 2015) must be used to pay down outstanding
borrowings under our Senior Secured Term Loan Facility.
Depending on the Company’s senior secured first lien net leverage ratio as defined in the credit agreement governing the Senior Secured Term Loan
Facility, we could be required to prepay outstanding term loans from a certain portion of our annual excess cash flow, as defined in the credit agreement.
Required excess cash flow payments commence at 50% of our annual excess cash flow (which percentage will be reduced to 25% if our senior secured first
lien net leverage ratio is equal to or less than 4.0 to 1.0 but greater than 3.5 to 1.0 and will be reduced to 0% if our senior secured first lien net leverage ratio is
equal to or less than 3.5 to 1.0). For fiscal year 2014, we were not required to prepay any outstanding term loans pursuant to the annual excess cash flow
requirements. We also must offer to prepay outstanding term loans at 100% of the principal amount to be prepaid, plus accrued and unpaid interest, with the
net cash proceeds of certain asset sales under certain circumstances.
We may repay all or any portion of the outstanding Senior Secured Term Loan Facility at any time, subject to redeployment costs in the case of
prepayment of LIBOR borrowings other than the last day of the relevant interest period and in the event of certain repayments, conversions or replacements
of the term loans under the Senior Secured Term Loan Facility that directly or indirectly result in a reduction of the "effective" interest rate applicable to such
term loans or any applicable replacement tranche of debt prior to March 13, 2015, a payment of 1.00% of the aggregate principal amount of the term loans so
repaid, converted or replaced. The Senior Secured Term Loan Facility amortizes in equal quarterly installments in an amount equal to 1.00% per annum of
the principal amount outstanding as of the Refinancing Amendment, less any voluntary or mandatory prepayments, with the remaining balance due at final
maturity.
Our Senior Secured Term Loan Facility is guaranteed by Holdings and each of our current and future subsidiary guarantors other than (a) unrestricted
subsidiaries, (b) certain immaterial subsidiaries, (c) foreign subsidiaries and any domestic subsidiary of a foreign subsidiary, (d) certain holding companies of
foreign subsidiaries, (e) captive insurance subsidiaries, not for profit subsidiaries, or a subsidiary which is a special purpose entity for securitization
transactions or like special purposes and (f) any subsidiary that is prohibited by applicable law or contractual obligation from acting as a guarantor or which
would require governmental approval to provide a guarantee (unless such approval has been received). All obligations under the Senior Secured Term Loan
Facility, and the guarantees of those obligations, are secured, subject to certain exceptions, by substantially all of the assets of Holdings, the Company and
the subsidiary guarantors, including:
• a first‑priority pledge of 100% of the Company's capital stock and certain of the capital stock held by the Company, Holdings 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);
• a first‑priority security interest in, and mortgages on, substantially all other tangible and intangible assets of the Company, Holdings and each
subsidiary guarantor, including a significant portion of the Company’s owned real property 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 the Company or the subsidiary guarantors from credit card clearinghouses and processors or otherwise in respect of all credit card
charges for sales of inventory by the Company and the subsidiary guarantors, certain related assets and proceeds of the foregoing.
Capital stock and other securities of a subsidiary of the Company that are owned by the Company or any subsidiary guarantor will not constitute
collateral under the Senior Secured Term Loan Facility to the extent that such securities cannot
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