Neiman Marcus 2007 Annual Report Download - page 109

Table of Contents
• consolidate or merge;
• create liens; and
• enter into sale and lease back transactions.
The covenants limiting dividends and other restricted payments; investments, loans, advances and acquisitions; and
prepayments or redemptions of other indebtedness, each permit the restricted actions in an unlimited amount, subject to the
satisfaction of certain payment conditions, principally that NMG must have at least $75.0 million of pro forma excess availability
under the Asset-Based Revolving Credit Facility and that NMG must be in pro forma compliance with the fixed charge coverage ratio
described below.
Although the credit agreement governing the Asset-Based Revolving Credit Facility does not require NMG to comply with
any financial ratio maintenance covenants, if less than $60.0 million were available to be borrowed under the Asset-Based Revolving
Credit Facility at any time, NMG would not be permitted to borrow any additional amounts unless its pro forma ratio of consolidated
EBITDA to consolidated Fixed Charges (as such terms are defined in the credit agreement) were at least 1.1 to 1.0. The credit
agreement also contains customary affirmative covenants and events of default.
Senior Secured Term Loan Facility. On October 6, 2005, in connection with the Acquisition, NMG entered into a credit
agreement and related security and other agreements for a $1,975.0 million Senior Secured Term Loan Facility with Credit Suisse as
administrative agent and collateral agent. The full amount of the Senior Secured Term Loan Facility was borrowed on October 6,
2005. NMG voluntarily repaid $100.0 million principal amount of the loans under its Senior Secured Term Loan Facility in fiscal year
2006 and $250 million in fiscal year 2007.
At August 2, 2008, borrowings under the Senior Secured Term Loan Facility bore interest at a rate per annum equal to, at
NMG's option, either (a) a base rate determined by reference to the higher of (1) the prime rate of Credit Suisse and (2) the federal
funds effective rate plus 1/2 of 1% or (b) a LIBOR rate, subject to certain adjustments, in each case plus an applicable margin. At
August 2, 2008, the applicable margin with respect to base rate borrowings was 0.75% and the applicable margin with respect to
LIBOR borrowings was 1.75%. The interest rate on the outstanding borrowings pursuant to the Senior Secured Term Loan Facility
was 4.42% at August 2, 2008.
The credit agreement governing the Senior Secured Term Loan Facility requires NMG to prepay outstanding term loans with
50% (which percentage will be reduced to 25% if NMG's total leverage ratio is less than a specified ratio and will be reduced to 0% if
NMG's total leverage ratio is less than a specified ratio) of its annual excess cash flow (as defined in the credit agreement). For fiscal
years 2008 and 2007, NMG was not required to prepay any outstanding term loans pursuant to the annual excess cash flow
requirements. If a change of control (as defined in the credit agreement) occurs, NMG will be required to offer to prepay all
outstanding term loans, at a prepayment price equal to 101% of the principal amount to be prepaid, plus accrued and unpaid interest to
the date of prepayment. NMG also must offer to prepay outstanding term loans at 100% of the principal amount to be prepaid, plus
accrued and unpaid interest, with the proceeds of certain asset sales under certain circumstances.
NMG may voluntarily prepay outstanding loans under the Senior Secured Term Loan Facility at any time without premium
or penalty other than customary "breakage" costs with respect to LIBOR loans. There is no scheduled amortization under the Senior
Secured Term Loan Facility. The principal amount of the loans outstanding is due and payable in full on April 6, 2013.
All obligations under the Senior Secured Term Loan Facility are unconditionally guaranteed by the Company and each direct
and indirect domestic subsidiary of NMG that guarantees the obligations of NMG under its Asset-Based Revolving Credit Facility. All
obligations under the Senior Secured Term Loan Facility, and the guarantees of those obligations, are secured, subject to certain
significant exceptions, by substantially all of the assets of the Company, NMG and the subsidiary guarantors, including:
• a first-priority pledge of 100% of NMG's capital stock and certain of the capital stock held by NMG, the Company 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); and
• 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
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