Neiman Marcus 2008 Annual Report Download - page 110

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If at any time the aggregate amount of outstanding revolving loans, unreimbursed letter of credit drawings and undrawn
letters of credit under the Asset-Based Revolving Credit Facility exceeds the lesser of (a) the commitment amount and (b) the
borrowing base (including as a result of reductions to the borrowing base that would result from certain non-ordinary course sales of
inventory with a value in excess of $25 million, if applicable), NMG will be required to repay outstanding loans or cash collateralize
letters of credit in an aggregate amount equal to such excess, with no reduction of the commitment amount. In addition, if at any time
the aggregate amount of outstanding revolving loans and incremental term loans, unreimbursed letter of credit drawings and undrawn
letters of credit under the Asset-Based Revolving Credit Facility exceeds the reported value of inventory owned by the borrowers and
guarantors, NMG will be required to eliminate such excess within the earlier of 30 days from such occurrence or 5 business days from
the first date on or after such occurrence at which excess availability is less than $75 million. If (a) the amount available under the
Asset-Based Revolving Credit Facility is less than the greater of (i) 20% of the lesser of (A) the aggregate revolving commitments and
(B) the borrowing base and (ii) $75 million or (b) an event of default has occurred, NMG will be required to repay outstanding loans
and cash collateralize letters of credit with the cash NMG would then be required to deposit daily in a collection account maintained
with the agent under the Asset-Based Revolving Credit Facility.
NMG may voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans at any time
without premium or penalty other than customary "breakage" costs with respect to LIBOR loans. There is no scheduled amortization
under the Asset-Based Revolving Credit Facility; the principal amount of the revolving loans outstanding thereunder will be due and
payable in full on January 15, 2013.
All obligations under the Asset-Based Revolving Credit Facility are guaranteed by the Company and certain of NMG's
existing and future domestic subsidiaries. As of August 1, 2009, the assets of NMG's non-guarantor subsidiaries aggregated
approximately $0.3 million. All obligations under NMG's Asset-Based Revolving Credit 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
subsidiaries that have guaranteed the Asset-Based Revolving Credit Facility (subsidiary guarantors), including:
• a first-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;
• a second-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 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 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 its ability
and the ability of its subsidiaries to:
• incur additional indebtedness;
• pay dividends on NMG's capital stock or redeem, repurchase or retire NMG's capital stock or indebtedness;
• make investments, loans, advances and acquisitions;
• create restrictions on the payment of dividends or other amounts to NMG from its subsidiaries that are not guarantors;
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