Neiman Marcus 2008 Annual Report Download - page 111

Table of Contents
• engage in transactions with NMG's affiliates;
• sell assets, including capital stock of NMG's subsidiaries;
• 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 pro forma excess availability under the Asset-Based
Revolving Credit Facility equal to at least 25% of the lesser of (a) the revolving commitments under the facility and (b) the borrowing
base, NMG delivering projections demonstrating that projected excess availability for the next twelve months will be equal to such
thresholds and that NMG have a pro forma ratio of consolidated EBITDA to consolidated Fixed Charges (as such terms are defined in
the credit agreement) of at least 1.2 to 1.0 (or 1.1 to 1.0 for prepayments or redemptions of other indebtedness). The Asset-Based
Revolving Credit Facility 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 million.
Senior Secured Term Loan Facility. In October 2005, NMG entered into a credit agreement and related security and other
agreements for a $1,975.0 million Senior Secured Term Loan Facility. 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 1, 2009, the
outstanding balance under the Senior Secured Term Loan Facility was $1,625.0 million (including $26.6 million of borrowings
classified as current liabilities). The principal amount of the loans outstanding is due and payable in full on April 6, 2013.
At August 1, 2009, 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 ½ of 1% or (b) a LIBOR rate, subject to certain adjustments, in each case plus an applicable margin. The
interest rate on the outstanding borrowings pursuant to the Senior Secured Term Loan Facility was 2.50% at August 1, 2009. The
applicable margin is subject to adjustment based on contractually defined debt coverage ratios. At August 1, 2009, the applicable
margin with respect to base rate borrowings was 1.00% and the applicable margin with respect to LIBOR borrowings was 2.00%.
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
year 2009, NMG will be required to prepay $26.6 million of outstanding term loans in the first quarter of fiscal year 2010 pursuant to
the annual excess cash flow requirements. 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.
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:
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