-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T/mxqiZIsVx7gfcpjsgoCgbh0Sv25R4S8B/K488T5Ys1NHUHUjgkHnccyJOYHTXH UWZ4RAsToxLPexYWODbotQ== /in/edgar/work/0000819539-00-000006/0000819539-00-000006.txt : 20001030 0000819539-00-000006.hdr.sgml : 20001030 ACCESSION NUMBER: 0000819539-00-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20000731 FILED AS OF DATE: 20001027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEIMAN MARCUS GROUP INC CENTRAL INDEX KEY: 0000819539 STANDARD INDUSTRIAL CLASSIFICATION: [5311 ] IRS NUMBER: 954119509 STATE OF INCORPORATION: DE FISCAL YEAR END: 0801 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-09659 FILM NUMBER: 747107 BUSINESS ADDRESS: STREET 1: 27 BOYLSTON ST STREET 2: P O BOX 9187 CITY: CHESTNUT HILL STATE: MA ZIP: 02467 BUSINESS PHONE: 6172320760 MAIL ADDRESS: STREET 1: 27 BOYLSTON ST STREET 2: P O BOX 9187 CITY: CHESTNUT HILL STATE: MA ZIP: 02467 10-K 1 0001.txt NEIMAN MARCUS GROUP, INC. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. __________________ FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended July 29, 2000 Commission File Number 1-9659 _______________ THE NEIMAN MARCUS GROUP, INC. (Exact name of registrant as specified in its charter) 27 Boylston Street, Chestnut Hill, Massachusetts 02467 (Address of principal executive offices) (Zip Code) Delaware 95-4119509 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) Registrant's telephone number and area code: 617-232-0760 _______________ Securities registered pursuant to Section 12(b) of the Act: Title of each Class Name of each Exchange on which Registered Class A Common Stock, $.01 par value New York Stock Exchange Class B Common Stock, $.01 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None _______________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of the voting stock held by non-affiliates of the registrant as of October 24, 2000 was $1,214,714,944. There were 27,584,379 shares of Class A Common Stock and 19,941,432 shares of Class B Common Stock outstanding as of October 24, 2000. _________________________________________________ Documents Incorporated by Reference Portions of the Company's 2000 Annual Report to Shareholders are incorporated by reference in Parts I, II and IV of this Report. Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on January 19, 2001 are incorporated by reference in Part III of this Report. THE NEIMAN MARCUS GROUP, INC. ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JULY 29, 2000 TABLE OF CONTENTS Page No. PART I . Item 1. Business 1 Item 2. Properties 4 Item 3. Legal Proceedings 4 Item 4. Submission of Matters to a Vote of Security Holders 5 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters 5 Item 6. Selected Financial Data 5 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 5 Item 8. Financial Statements and Supplementary Data 5 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 5 PART III Item 10. Directors and Executive Officers of the Registrant 6 Item 11. Executive Compensation 8 Item 12. Security Ownership of Certain Beneficial Owners and Management 8 Item 13. Certain Relationships and Related Transactions 8 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 9 Signatures S-1 PART I Item 1. Business General The Neiman Marcus Group, Inc. (together with its operating divisions and subsidiaries, the "Company") is a Delaware corporation which commenced operations in August 1987. Prior to October 22, 1999, Harcourt General, Inc. ("Harcourt General"), a Delaware corporation based in Chestnut Hill, Massachusetts, owned approximately 54% of the outstanding common stock of the Company. On October 22, 1999 Harcourt General distributed to its stockholders approximately 21.4 million of the 26.4 million shares of the Company's common stock held by Harcourt General (the "Distribution"). For more information about the Distribution and the relationship between the Company and Harcourt General, see Note 6 to the Consolidated Financial Statements in Item 14 below. Business Overview The Company is a high-end specialty retailer operating through specialty retail stores, consisting of Neiman Marcus Stores and Bergdorf Goodman, and a direct marketing operation, Neiman Marcus Direct. The 31 Neiman Marcus stores are in premier retail locations in major markets nationwide, and the two Bergdorf Goodman stores, the main store and the Bergdorf Goodman Men store, are located in Manhattan at 58th Street and Fifth Avenue. Neiman Marcus Stores and Bergdorf Goodman offer high-end fashion apparel and accessories primarily from leading designers. Neiman Marcus Direct, the Company's direct marketing operation, offers a mix of apparel and home furnishings which is complementary to the Neiman Marcus Stores merchandise. Neiman Marcus Direct also publishes the Horchow catalogues, the world famous Neiman Marcus Christmas Book, and Chef's Catalog, a leading direct marketer of gourmet cookware and high-end kitchenware. For more information about the Company's business segments, see Note 13 to the Consolidated Financial Statements in Item 14 below. Description of Operations Specialty Retail Stores Neiman Marcus Stores Neiman Marcus Stores offer women's and men's apparel, fashion accessories, shoes, cosmetics, furs, precious and designer jewelry, decorative home accessories, fine china, crystal and silver, gourmet food products, children's apparel and gift items. A relatively small portion of Neiman Marcus Stores' customers accounts for a significant percentage of its retail sales. The Company currently operates 31 Neiman Marcus stores, located in Arizona (Scottsdale); California (five stores: Beverly Hills, Newport Beach, Palo Alto, San Diego and San Francisco); Colorado (Denver); the District of Columbia; Florida (two stores: Fort Lauderdale and Bal Harbour); Georgia (Atlanta); Hawaii (Honolulu); Illinois (three stores: Chicago, Northbrook and Oak Brook); Missouri (St. Louis); Massachusetts (Boston); Minnesota (Minneapolis); Michigan (Troy); Nevada (Las Vegas); New Jersey (two stores: Short Hills and Paramus); New York (Westchester); Pennsylvania (King of Prussia); Texas (six stores: three in Dallas, one in Fort Worth and two in Houston); and Virginia (McLean). The average size of these 31 stores is approximately 144,000 gross square feet, and they range in size from 90,000 gross square feet to 269,000 gross square feet. The Company plans to open new Neiman Marcus stores in Palm Beach, Florida in November 2000; Plano, Texas in 2001; Tampa, Florida in 2001; Coral Gables, Florida in 2002; Orlando, Florida in 2003; and Long Island, New York subsequent to 2003 on a schedule not yet determined. The Plano store will replace the existing store located in the Prestonwood Mall in Dallas. The Company has opened three stores under the name The Galleries of Neiman Marcus to test the concept of using small stores featuring precious and fine jewelry, gifts and decorative home accessories to extend the Neiman Marcus brand into certain markets that may not be large enough to support full-line stores. The Galleries of Neiman Marcus stores opened in Cleveland, Ohio in November 1998; in Phoenix, Arizona in December 1998; and in Seattle, Washington in October 1999, and range in size from 9,000 to 12,000 square feet. The Company continues to evaluate the concept based on the performance of these first three stores. Bergdorf Goodman The Company operates two Bergdorf Goodman stores in Manhattan at 58th Street and Fifth Avenue. The main Bergdorf Goodman store consists of 250,000 gross square feet. The core of Bergdorf Goodman's offerings includes high-end women's apparel and unique fashion accessories from leading designers. Bergdorf Goodman also features traditional and contemporary decorative home accessories, precious and fashion jewelry, gifts, and gourmet foods. Bergdorf Goodman Men consists of 66,000 gross square feet and is dedicated to fine men's apparel and accessories. In fiscal 2000, the Company completed a remodeling project at the Bergdorf Goodman main store that added 15,000 square feet of selling space in a new plaza level below the first floor. Clearance Centers The Company operates eleven clearance centers which average 25,000 gross square feet each. These stores provide an efficient and controlled outlet for the sale of marked down merchandise from Neiman Marcus Stores, Bergdorf Goodman and Neiman Marcus Direct. Direct Marketing The Company's direct marketing operation, Neiman Marcus Direct, operates an upscale direct marketing business, which primarily offers women's apparel, accessories and specialty cosmetics under the Neiman Marcus name and, through its Horchow catalogue, offers quality home furnishings, tabletop, linens and decorative accessories. Neiman Marcus Direct also annually publishes the world famous Neiman Marcus Christmas Book and offers a broad range of more modestly priced items through its Trifles and Grand Finale catalogues. The Company acquired Chef's Catalog, a leading direct marketer of gourmet cookware and high-end kitchenware, in January 1998, and has consolidated those operations into Neiman Marcus Direct. Other In fiscal 1999, the Company launched its Brand Development Initiative to invest in high-potential designer resources that serve affluent customers. In November 1998, the Company acquired a 51% interest in Gurwitch Bristow Products, which manufactures and markets Laura Mercier cosmetic lines, for $6.7 million. In February 1999, the Company acquired a 56% interest in Kate Spade LLC, a manufacturer of high-end fabric and leather handbags and accessories, for $33.6 million. In October 1999, the Company launched NeimanMarcus.com, an internet e- commerce site, which features approximately 4,000 products and 100 designer e- boutiques. Competition The specialty retail industry is highly competitive and fragmented. The Company competes with large specialty retailers, traditional and better department stores, national apparel chains, designer boutiques, individual specialty apparel stores and direct marketing firms. The Company competes for customers principally on the basis of quality, assortment and presentation of merchandise, customer service, sales and marketing programs and value and, in the case of Neiman Marcus Stores and Bergdorf Goodman, on the basis of store ambience. In addition, the Company competes for quality merchandise and assortment principally based on relationships with designer resources and purchasing power. The Company's apparel business is especially dependent upon its relationship with these designer resources. Neiman Marcus Stores competes with other retailers for real estate opportunities, principally on the basis of its ability to attract customers. Neiman Marcus Direct competes principally on the basis of quality, assortment and presentation of merchandise, customer service, price and speed of delivery. Employees At July 29, 2000, Neiman Marcus Stores had approximately 12,500 employees, Bergdorf Goodman had approximately 1,100 employees, and Neiman Marcus Direct had approximately 1,550 employees. The Company's staffing requirements fluctuate during the year as a result of the seasonality of the retail apparel industry and, accordingly, the Company expects to add approximately 2,000 more seasonal employees in the second quarter of fiscal 2001. None of the employees of Neiman Marcus Stores or Neiman Marcus Direct are subject to collective bargaining agreements. Approximately 18% of the Bergdorf Goodman employees are subject to collective bargaining agreements. The Company believes that its relations with its employees are generally good. Capital Expenditures; Seasonality; Liquidity For information on capital expenditures, seasonality and liquidity, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 below. Executive Officers of the Registrant The information set forth under the heading "Executive Officers" in Item 10 below is incorporated herein by reference. Item 2. Properties The Company's corporate headquarters are located at Harcourt General's leased facility in Chestnut Hill, Massachusetts. The operating headquarters for Neiman Marcus Stores, Bergdorf Goodman and Neiman Marcus Direct are located in Dallas, New York City and Las Colinas, Texas, respectively. The aggregate gross square footage used in the Company's operations is approximately as follows: Owned Subject to Owned Ground Lease Leased Total Specialty Retail Stores.. 348,000 2,112,000 2,582,000 5,042,000 Distribution, Support and Office Facilities.....1,169,000 0 659,000 1,828,000 Leases for substantially all of the Company's stores, including renewal options, range from 30 to 99 years. The lease on the Bergdorf Goodman main store expires in 2050, and the lease on the Bergdorf Goodman Men store expires in 2010, with two 10-year renewal options. Leases are generally at fixed rentals, and a majority of leases provide for additional rentals based on sales in excess of predetermined levels. The Company owns approximately 34 acres of land in Longview, Texas, where its National Service Center, the principal distribution facility for Neiman Marcus Stores, is located in a 464,000 square foot facility, and also owns approximately 50 acres of land in Las Colinas, Texas, where its 705,000 square foot Neiman Marcus Direct warehouse and distribution facility is located. For further information on the Company's properties, see "Operating Leases" in Note 10 of the Notes to the Consolidated Financial Statements in Item 14 below. For more information about the Company's plans to open additional stores, see "Description of Operations" in Item 1 above. Item 3. Legal Proceedings The Company presently is engaged in various legal actions which are incidental to the ordinary conduct of its business. The Company believes that any liability arising as a result of these actions and proceedings will not have a material adverse effect on the Company's financial position or results of operations. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters The information contained under the captions "Stock Information" and "Shares Outstanding" on page 55 of the Company's Annual Report to Shareholders for the fiscal year ending July 29, 2000 (the "2000 Annual Report") is incorporated herein by reference. Beginning with the third quarter of fiscal 1995, the Company eliminated the quarterly cash dividend on its Common Stock. The Company currently does not intend to resume paying cash dividends on its Common Stock. Item 6. Selected Financial Data The response to this Item is contained in the 2000 Annual Report under the caption "Selected Financial Data" on page 54 and is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The response to this Item is contained in the 2000 Annual Report under the caption "Management's Discussion and Analysis" on pages 29 through 33 and is incorporated herein by reference. Item 7A. Quantitative and Qualitative Disclosures about Market Risk. The response to this Item is contained in the 2000 Annual Report under the caption "Management's Discussion and Analysis - Quantitative and Qualitative Disclosure About Market Risk" on pages 32 and 33 and is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data The Consolidated Financial Statements and supplementary data referred to in Item 14 are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not Applicable. PART III Item 10. Directors and Executive Officers of the Registrant Directors The response to this Item regarding the directors of the Company and compliance with Section 16(a) of the Securities Exchange Act of 1934 by the Company's officers and directors is contained in the Proxy Statement for the 2001 Annual Meeting of Stockholders under the captions "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" and is incorporated herein by reference. Executive Officers Set forth below are the names, ages at October 24, 2000, and principal occupations for the last five years of each executive officer of the Company. All such persons have been elected to serve until the next annual election of officers and their successors are elected or until their earlier resignation or removal. Richard A. Smith - 75 Chairman of the Company and of Harcourt General; Chief Executive Officer of the Company from January 1997 until December 1998 and prior to December 1991; Chief Executive Officer of Harcourt General from January 1997 until November 1999 and prior to December 1991; Chairman and Chief Executive Officer (until October 2000) of GC Companies, Inc.; Director of the Company, Harcourt General and GC Companies, Inc. In October 2000, GC Companies, Inc. filed a voluntary petition in the United States Bankruptcy Court for the District of Delaware under Chapter 11 of the Bankruptcy Code. Mr. Smith is the father of Robert A. Smith and the father-in-law of Brian J. Knez. Robert A. Smith - 41 Co-Chief Executive Officer of the Company since May 1999; Chief Executive Officer of the Company from December 1998 until May 1999; President and Co-Chief Executive Officer of Harcourt General since November 1999; President and Chief Operating Officer of the Company from January 1997 until December 1998; President and Co-Chief Operating Officer of Harcourt General from January 1997 until November 1999; Group Vice President of the Company and of Harcourt General prior to January 1997; President and Chief Operating Officer of GC Companies, Inc. from November 1995 until October 2000; Director of the Company and of Harcourt General. In October 2000, GC Companies, Inc. filed a voluntary petition in the United States Bankruptcy Court for the District of Delaware under Chapter 11 of the Bankruptcy Code. Mr. Smith is the son of Richard A. Smith and the brother-in-law of Brian J. Knez. Brian J. Knez - 43 Co-Chief Executive Officer of the Company since May 1999; President and Co-Chief Executive Officer of Harcourt General since November 1999; President and Co-Chief Operating Officer of Harcourt General from January 1997 until November 1999; President (until November 1998) and Chief Executive Officer of Harcourt, Inc. since May 1995. Director of the Company and Harcourt General. Mr. Knez is the son-in-law of Richard A. Smith and the brother-in-law of Robert A. Smith. John R. Cook - 59 Senior Vice President and Chief Financial Officer and a director of the Company; Senior Vice President and Chief Financial Officer of Harcourt General. Eric P. Geller - 53 Senior Vice President, General Counsel and Secretary of the Company and of Harcourt General. Burton M. Tansky - 62 President and Chief Operating Officer of the Company since December 1998; Executive Vice President of the Company from February 1998 until December 1998; Chairman and Chief Executive Officer of Neiman Marcus Stores from May 1994 until February 2000. Hubert W. Mullins - 49 Chairman and Chief Executive Officer of Neiman Marcus Stores since February 2000; Vice Chairman of Neiman Marcus Stores from December 1998 until February 2000; Executive Vice President of Neiman Marcus Stores from February 1998 until December 1998; Executive Vice President - Merchandise of Neiman Marcus Stores from February 1996 until February 1998; Senior Vice President and General Merchandise Manager prior thereto. Gerald A. Sampson - 59 President and Chief Operating Officer of Neiman Marcus Stores. Ronald L. Frasch - 52 Chairman and Chief Executive Officer of Bergdorf Goodman since April 2000; President of GFT, USA, a manufacturer of designer apparel, from July 1996 until December 1999; President and Chief Executive Officer of Escada USA prior thereto. Karen W. Katz - 43 President and Chief Executive Officer of Neiman Marcus Direct since May 2000; Executive Vice President of Neiman Marcus Stores from February 1998 until May 2000; Senior Vice President and Director of Neiman Marcus Stores from September 1996 until February 1998; Vice President and General Manager of the Northpark Neiman Marcus store prior thereto. Peter Farwell - 57 Vice President - Corporate Relations of the Company and of Harcourt General. Paul F. Gibbons - 49 Vice President and Treasurer of the Company and of Harcourt General. Gerald T. Hughes - 43 Vice President - Human Resources of the Company and of Harcourt General. Catherine N. Janowski - 39 Vice President and Controller of the Company and of Harcourt General since November 1997; Director, Corporate Accounting of the Company and of Harcourt General prior thereto. Gail S. Mann - 49 Vice President- Corporate Law of the Company and of Harcourt General since August 1999; Vice President, Assistant General Counsel, Secretary and Clerk, Digital Equipment Corporation from 1994 until September 1998. Michael F. Panutich - 52 Vice President - General Auditor of the Company and of Harcourt General. Paul J. Robershotte - 46 Vice President - Strategy and Business Development of the Company and of Harcourt General since February 1999; President and Chief Executive Officer of Age Wave Communications from February 1996 until June 1998; Executive Vice President and Chief Operating Officer of Age Wave, Inc. from May 1995 until February 1996. Item 11. Executive Compensation The response to this Item is contained in the Proxy Statement for the 2001 Annual Meeting of Stockholders under the captions "Directors' Compensation", "Executive Compensation" and "Transactions Involving Management" and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The response to this Item is contained in the Proxy Statement for the 2001 Annual Meeting of Stockholders under the caption "Stock Ownership of Certain Beneficial Owners and Management" and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions The response to this Item is contained in the Proxy Statement for the 2001 Annual Meeting of Stockholders under the captions "Executive Compensation" and "Transactions Involving Management" and is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 14(a)(1) Consolidated Financial Statements The documents listed below are incorporated herein by reference to the 2000 Annual Report, and are incorporated herein by reference into Item 8 hereof: Consolidated Balance Sheets - July 29, 2000 and July 31, 1999 Consolidated Statements of Earnings for the fiscal years ended July 29, 2000; July 31, 1999, and August 1, 1998. Consolidated Statements of Cash Flows for the fiscal years ended July 29, 2000; July 31, 1999 and August 1, 1998. Consolidated Statements of Shareholders' Equity for the fiscal years ended July 29, 2000; July 31, 1999 and August 1, 1998. Notes to Consolidated Financial Statements. Independent Auditors' Report. 14(a)(2) Consolidated Financial Statement Schedules The document and schedule listed below are filed as part of this Form 10-K: Document/Schedule Page in Form 10-K Independent Auditors' Report on Consolidated Financial Statement Schedule F-1 Schedule II - Valuation and Qualifying Accounts and Reserves F-2 All other schedules for which provision is made in the applicable regulations of the Securities and Exchange Commission have been omitted because the information is disclosed in the Consolidated Financial Statements or because such schedules are not required or are not applicable. 14(a)(3) Exhibits The exhibits filed as part of this Annual Report are listed in the Exhibit Index immediately preceding the exhibits. The Company has identified with an asterisk in the Exhibit Index each management contract or compensatory plan or arrangement filed as an exhibit to this Form 10-K in response to Item 14(c) of Form 10-K. 14(b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the thirteen weeks ended July 29, 2000. INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of The Neiman Marcus Group, Inc. Chestnut Hill, MA We have audited the consolidated financial statements of The Neiman Marcus Group, Inc. and subsidiaries as of July 29, 2000 and July 31, 1999, and for each of the three years in the period ended July 29, 2000 and have issued our report thereon dated August 31, 2000; such financial statements and report are included in your 2000 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the financial statement schedule of The Neiman Marcus Group, Inc. and subsidiaries, listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Boston, Massachusetts August 31, 2000
THE NEIMAN MARCUS GROUP, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES THREE YEARS ENDED JULY 29, 2000 (In thousands) COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E Additions ______________________ Balance at Charged toCharged to Balance at Beginning Costs and Other Deductions - End Description of Period Expenses Accounts - (A) of Period ________________________________________________________________________________________________ YEAR ENDED JULY 29, 2000 Allowance for doubtful accounts $2,300 1,357 - 3,457 $ 200 (deducted from accounts receivable) YEAR ENDED JULY 31, 1999 Allowance for doubtful accounts $1,800 2,366 - 1,866 $2,300 (deducted from accounts receivable) YEAR ENDED AUGUST 1, 1998 Allowance for doubtful accounts (deducted from accounts receivable) $1,700 2,771 - 2,671 $1,800 (A) Write-off of uncollectible accounts net of recoveries and other miscellaneous deductions.
F-2 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE NEIMAN MARCUS GROUP, INC. By: /s/ Robert A. Smith Robert A. Smith Co-Chief Executive Officer By: /s/ Brian J. Knez Brian J. Knez Co-Chief Executive Officer Dated: October 25, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the following capacities and on the dates indicated. Signature Title Date Principal Executive Officers: /s/ Robert A. Smith Co-Chief Executive Officer October 25, 2000 Robert A. Smith /s/ Brian J. Knez Co-Chief Executive Officer October 25, 2000 Brian J. Knez Principal Financial Officer: /s/ John R. Cook Senior Vice President and October 25, 2000 John R. Cook Chief Financial Officer Principal Accounting Officer: /s/ Catherine N. Janowski Vice President and October 25, 2000 Catherine N. Janowski Controller Directors: /s/ Richard A. Smith October 25, 2000 Richard A. Smith /s/ John R. Cook October 25, 2000 John R. Cook /s/ Matina S. Horner October 25, 2000 Matina S. Horner /s/ Brian J. Knez October 25, 2000 Brian J. Knez /s/ Vincent M. O'Reilly October 25, 2000 Vincent M. O'Reilly /s/ Walter J. Salmon October 25, 2000 Walter J. Salmon /s/ Robert A. Smith October 25, 2000 Robert A. Smith EXHIBIT INDEX 3.1(a) Restated Certificate of Incorporation of the Company, incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1999. 3.1(b) Certificates of Designation with respect to Series A Junior Participating Preferred Stock, Series B Junior Participating Preferred Stock and Series C Junior Participating Preferred Stock, incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1999. 3.2 By-Laws of the Company, incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1999. 4.1 Indenture, dated as of May 27, 1998, between the Company and The Bank of New York, as trustee (the "Indenture"), incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended August 1, 1998. 4.2 Form of 6.65% Senior Note Due 2008, dated May 27, 1998, issued by the Company pursuant to the Indenture, incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended August 1, 1998. 4.3 Form of 7.125% Senior Note Due 2008, dated May 27, 1998, issued by the Company pursuant to the Indenture, incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended August 1, 1998. 4.4 Rights Agreement, dated as of October 6, 1999, between the Company and BankBoston, N.A., as Rights Agent, incorporated herein by reference to Exhibit 4 to the Company's Registration Statement on Form 8-A dated October 15, 1999. *10.1 Amended and Restated Intercompany Services Agreement, dated as of November 1, 1999 between Harcourt General and the Company, incorporated by reference herein to the Company's Quarterly Report on Form 10-Q for the quarter ended October 30, 1999. *10.2 The Neiman Marcus Group, Inc. 1987 Stock Incentive Plan, incorporated herein by reference to the Company's Annual Report on Form 10-K for the twenty-six week period ended August 1, 1987. *10.3 The Neiman Marcus Group, Inc. 1997 Incentive Plan, as amended, incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended January 29, 2000. *10.4 Termination and Change of Control Agreement between the Company and Burton M. Tansky dated October 6, 1999, as supplemented by Letter Agreement dated November 11, 1999, incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended October 30, 1999. *10.5 Termination and Change of Control Agreement between the Company and Gerald A. Sampson dated October 6, 1999, as supplemented by Letter Agreement dated November 17, 1999, incorporated herein by reference to the Company's Quarterly Report or Form 10-Q for the quarter ended October 30, 1999. *10.6 Key Executive Stock Purchase Loan Plan, as amended, incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended August 2, 1997. *10.7 Supplemental Executive Retirement Plan, incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended July 30, 1988. *10.8 Description of the Company's Executive Life Insurance Plan,incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended August 1, 1992. *10.9 Supplementary Executive Medical Plan, incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1993. *10.10 Key Employee Deferred Compensation Plan, as amended, incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended July 30, 1994. *10.11 Deferred Compensation Plan For Non-Employee Directors, as amended, incorporated herein by reference to the Company's Annual Report on Form 10-K for the fiscal year ended August 1, 1998. *10.12 Termination and Change of Control Agreement between the Company and Ronald Frasch dated April 27, 2000. *10.13 Termination and Change of Control Agreement between the Company and Karen W. Katz dated May 22, 2000. 10.14(a)Credit Agreement dated as of October 29, 1997 among the Company, the Banks parties thereto, Bank of America National Trust and Savings Association, as Syndication Agent, The Chase Manhattan Bank, as Documentation Agent, and Morgan Guaranty Trust Company of New York, as Administrative Agent, (the "Credit Agreement") incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended November 1, 1997. 10.14(b)Amendment to the Credit Agreement dated August 27, 1999, incorporated herein by reference to the Company's Annual Report on From 10-K for the fiscal year ended July 31, 1999. 10.15 Neiman Marcus Group Credit Card Master Trust Series 2000-1 Class A Purchase Agreement, dated July 12, 2000. 10.16 Receivables Purchase Agreement dated as of July 2, 2000 between Bergdorf Goodman, Inc. and Neiman Marcus Funding Corporation. 10.17 Receivables Purchase Agreement, dated as of March 1, 1995, and amended and restated as of July 2, 2000 between the Company and Neiman Marcus Funding Corporation. 10.18 Pooling and Servicing Agreement, dated as of March 1, 1995, and amended and restated as of July 2, 2000 between Neiman Marcus Funding Corporation, the Company and The Bank of New York. 10.19 Series 2000-1 Supplement, dated as of July 21, 2000, to the Pooling and Servicing Agreement, dated as of March 1, 1995, and amended and restated as of July 2, 2000 among Neiman Marcus Funding Corporation, the Company and The Bank of New York. 10.20 Trustee Resignation and Agent Appointment Agreement dated as of July 2, 2000 by and among the Company, Neiman Marcus Funding Corporation, The Chase Manhattan Bank and The Bank of New York. 10.21 Exchange and Repurchase Agreement between The Neiman Marcus Group, Inc. and Harcourt General, Inc., incorporated herein by Reference to Exhibit 10.1 to Registration Statement on Form S-3 of The Neiman Marcus Group, Inc. dated October 10, 1996 (Registration No. 333-11721). 10.22 Amended and Restated Agreement and Plan of Merger, dated as of July 1, 1999, among The Neiman Marcus Group, Inc., Harcourt General, Inc. and Spring Merger Corporation, incorporated herein by reference to the Company's Definitive Schedule 14A dated August 10, 1999. 10.23 Amended and Restated Distribution Agreement, dated as of July 1, 1999, between Harcourt General, Inc. and The Neiman Marcus Group, Inc., incorporated herein by reference to the Company's Definitive Schedule 14A dated August 10, 1999. 10.24 Agreement, dated as of September 1, 1999, among the Company and certain holders of the Company's Class B Common Stock, incorporated herein by reference to the Company's Annual Report on From 10-K for the fiscal year ended July 31, 1999. 13.1 The following sections of the 2000 Annual Report to Shareholders ("2000 Annual Report") which are expressly incorporated by reference into this Annual Report on Form 10-K: Management's Discussion and Analysis at pages 29 through 33 of the 2000 Annual Report. Consolidated Financial Statements and the Notes thereto at pages 34 through 52 of the 2000 Annual Report. Independent Auditors' Report at page 53 of the 2000 Annual Report. The information appearing under the caption "Selected Financial Data" on page 54 of the 2000 Annual Report. The information appearing under the captions "Stock Information" and "Shares Outstanding" on page 55 of the 2000 Annual Report. 18.1 Letter regarding Change in Accounting Principle, incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended October 30, 1999. 21.1 Subsidiaries of the Company. 23.1 Consent of Deloitte & Touche LLP. 27.1 Financial Data Schedule. 99.1 Dividend Reinvestment and Common Stock Purchase Plan, incorporated herein by reference to the Company's Registration Statement on Form S-3 dated September 17, 1990 (Registration No. 33-36419). ___________________________________________ * Management contract or compensatory plan or arrangement filed pursuant to Item 14(c) of Form 10-K. EX-10.12 2 0002.txt TERMINATION & CONTROL AGRMT EXHIBIT 10.12 TERMINATION AND CHANGE OF CONTROL AGREEMENT 1. This Termination and Change of Control Agreement ("Agreement") is entered into as of April 27 , 2000 between Ronald Frasch ("Mr. Frasch" or the "Executive") and The Neiman Marcus Group, Inc. ("NMG"). 2. Mr. Frasch is employed "at-will" as Chief Executive Officer of Bergdorf Goodman, Inc., and Mr. Frasch or NMG may terminate Mr. Frasch's employment at any time, with or without notice, for any reason. Notwithstanding this at-will employment, NMG wishes to provide some protection to Mr. Frasch if the Executive's employment ends under certain circumstances. 3. a. While Mr. Frasch is employed at-will, if NMG terminates Mr. Frasch's employment other than "for cause" or other than due to "total disability" or death, NMG agrees to provide Mr. Frasch with a termination package consisting of (a) an amount equivalent to 1.5 times his then- current annual base salary, less required withholding, which amount would be paid over an18-month period in regular, bi-weekly installments following such termination; and (b) continuation of the medical and dental insurance coverage in which he participates at the time of such termination (or as such coverage may be changed from time-to-time for employees generally) for 18 months or until he starts full-time employment, whichever is sooner. Mr. Frasch will be responsible for paying his portion of monthly premiums for the medical and dental insurance coverage at the same rate paid by active employees, and Mr. Frasch authorizes NMG to deduct such amounts from the payments it makes to him. For the purposes of determining whether or not NMG has terminated the Executive's employment, any material, adverse change in the terms and conditions of his employment, which change causes the Executive to resign his employment, will be deemed a termination. b. If Mr. Frasch's services are terminated by a successor to NMG other than "for cause" or other than due to "total disability" or death within two years of a change of control of NMG, as a change of control is defined in Appendix A, or if the Executive resigns his employment within two years of such a change of control because he is not permitted to continue in a position comparable in duties and responsibilities to that which he held before such a change of control, Mr. Frasch shall receive the termination package set forth in paragraph 3.a. 4. For the purposes of determining Mr. Frasch's eligibility for the termination package set forth in this Agreement: a. "For cause" means, in NMG's reasonable judgment, a breach of duty by Mr. Frasch in the course of his employment involving fraud, acts of dishonesty (other than inadvertent acts or omissions), or moral turpitude, repeated insubordination, failure to devote his full working time and best efforts to the performance of his duties, or conviction of a felony or other serious criminal offense. Provided that, with respect to insubordination or devotion of his working time, Mr. Frasch has been provided prior written notice of the problem and afforded a reasonable opportunity to correct same. b. "Total Disability" means that, in NMG's reasonable judgment, Mr. Frasch is unable to perform his duties for (a) 80% or more of the normal working days during six consecutive calendar months or (b) 50% or more of the normal working days during twelve consecutive calendar months. c. "Change of Control" has the meaning set forth in Appendix A. 5. Payment by NMG of the termination package set forth in paragraph 3 constitutes full satisfaction of NMG's obligations to Mr. Frasch, if any, (including the right to any severance payments) which arise from or relate in any way to the termination of Mr. Frasch's employment. However, nothing in this Agreement is intended to limit any earned, vested benefits (other than any entitlement to severance pay) that Mr. Frasch may have under the applicable provisions of any benefit plan in which Mr. Frasch is participating at the time of his termination of employment or resignation. 6. The unenforceability of any provision of this Agreement shall not affect the enforceability of any other provision of this Agreement. 7. This Agreement contains the entire agreement between the parties and supersedes all prior agreements and understandings, oral or written, with respect to the termination of Mr. Frasch's at-will employment and the subject matter of the Agreement. This Agreement may not be changed orally. It may be changed only by written agreement signed by the party against whom any waiver, change amendment, modification or discharge is sought. 8. The validity, performance and enforceability of this Agreement will be determined and governed by the laws of the Commonwealth of Massachusetts without regard to its conflict of laws principles. The Neiman Marcus Group, Inc. /s/ Ronald Frasch By /s/ Burton M. Tansky Mr. Ronald Frasch Appendix A A Change of Control will occur for purposes of this Agreement: (i) upon the consummation of any transaction or series of transactions under which the Company is merged or consolidated with any other company, other than a merger or consolidation which would result in the shareholders of the Company immediately prior thereto continuing to own (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company, the acquiring entity or such surviving entity outstanding immediately after such merger or consolidation in substantially the same proportion such shareholders held the voting securities of the company immediately prior to the merger or consolidation; (ii) if any person or group (as used in section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing more than 40% of (a) the shares of the Company's Class B Common Stock then outstanding or (b) the total voting power (other than in the election of directors) of all securities of the Company then outstanding; or (iii) if, during any period of twenty-four consecutive months, individuals who at the beginning of such period constitute the Board of Directors, and any new director whose election or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason (other than death or disability) to constitute at least a majority thereof; or (iv) the complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company's assets, other than a liquidation of the Company into a wholly-owned subsidiary. EX-10.13 3 0003.txt TERMINATION & CONTROL AGREEMENT EXHIBIT 10.13 TERMINATION AND CHANGE OF CONTROL AGREEMENT 1. This Termination and Change of Control Agreement ("Agreement") is entered into as of May 22, 2000 between Karen W. Katz ("Ms. Katz" or the "Executive") and The Neiman Marcus Group, Inc. ("NMG"). 2. Ms. Katz is employed "at-will" as President and Chief Executive Officer of NM Direct, and Ms. Katz or NMG may terminate Ms. Katz's employment at any time, with or without notice, for any reason. Notwithstanding this at-will employment, NMG wishes to provide some protection to Ms. Katz if the Executive's employment ends under certain circumstances. 3. a. While Ms. Katz is employed at-will, if NMG terminates Ms. Katz's employment other than "for cause" or other than due to "total disability" or death, NMG agrees to provide Ms. Katz with a termination package consisting of (a) an amount equivalent to 1.5 times her then-current annual base salary, less required withholding, which amount would be paid over an 18-month period in regular, bi-weekly installments following such termination; and (b) continuation of the medical and dental insurance coverage in which she participates at the time of such termination (or as such coverage may be changed from time-to-time for employees generally) for 18 months or until she starts full-time employment, whichever is sooner. Ms. Katz will be responsible for paying her portion of monthly premiums for the medical and dental insurance coverage at the same rate paid by active employees, and Ms. Katz authorizes NMG to deduct such amounts from the payments it makes to her. For the purposes of determining whether or not NMG has terminated the Executive's employment, any material, adverse change in the terms and conditions of her employment, which change causes the Executive to resign her employment, will be deemed a termination. b. If Ms. Katz's services are terminated by a successor to NMG other than "for cause" or other than due to "total disability" or death within two years of a change of control of NMG, as a change of control is defined in Appendix A, or if the Executive resigns her employment within two years of such a change of control because she is not permitted to continue in a position comparable in duties and responsibilities to that which she held before such a change of control, Ms. Katz shall receive the termination package set forth in paragraph 3.a. 4. For the purposes of determining Ms. Katz's eligibility for the termination package set forth in this Agreement: a. "For cause" means, in NMG's reasonable judgment, a breach of duty by Ms. Katz in the course of her employment involving fraud, acts of dishonesty (other than inadvertent acts or omissions), or moral turpitude, repeated insubordination, failure to devote her full working time and best efforts to the performance of her duties, or conviction of a felony or other serious criminal offense. Provided that, with respect to insubordination or devotion of her working time, Ms. Katz has been provided prior written notice of the problem and afforded a reasonable opportunity to correct same b. "Total Disability" means that, in NMG's reasonable judgment, Ms. Katz is unable to perform her duties for (a) 80% or more of the normal working days during six consecutive calendar months or (b) 50% or more of the normal working days during twelve consecutive calendar months. c. "Change of control" has the meaning set forth in Appendix A. 5. Payment by NMG of the termination package set forth in paragraph 3 constitutes full satisfaction of NMG's obligations to Ms. Katz, if any, (including the right to any severance payments) which arise from or relate in any way to the termination of Ms. Katz's employment. However, nothing in this Agreement is intended to limit any earned, vested benefits (other than any entitlement to severance pay) that Ms. Katz may have under the applicable provisions of any benefit plan in which Ms. Katz is participating at the time of her termination of employment or resignation. 6. The unenforceability of any provision of this Agreement shall not affect the enforceability of any other provision of this Agreement. 7. This Agreement contains the entire agreement between the parties and supersedes all prior agreements and understandings, oral or written, with respect to the termination of Ms. Katz's at-will employment and the subject matter of the Agreement. This Agreement may not be changed orally. It may be changed only by written agreement signed by the party against whom any waiver, change amendment, modification or discharge is sought. 8. The validity, performance and enforceability of this Agreement will be determined and governed by the laws of the Massachusetts without regard to its conflict of laws principles. The Neiman Marcus Group, Inc. /s/ Karen Katz By: /s/Burton M. Tansky - ---------------------- ------------------- Ms. Karen Katz Burton M. Tanksy Appendix A A Change of Control will occur for purposes of this Agreement: (i) upon the consummation of any transaction or series of transactions under which the Company is merged or consolidated with any other company, other than a merger or consolidation which would result in the shareholders of the Company immediately prior thereto continuing to own (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company, the acquiring entity or such surviving entity outstanding immediately after such merger or consolidation in substantially the same proportion such shareholders held the voting securities of the company immediately prior to the merger or consolidation; (ii) if any person or group (as used in section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing more than 40% of (a) the shares of the Company's Class B Common Stock then outstanding or (b) the total voting power (other than in the election of directors) of all securities of the Company then outstanding; or (iii) if, during any period of twenty-four consecutive months, individuals who at the beginning of such period constitute the Board of Directors, and any new director whose election or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason (other than death or disability) to constitute at least a majority thereof; or (iv) the complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company's assets, other than a liquidation of the Company into a wholly-owned subsidiary. EX-10.15 4 0004.txt CREDIT CARD MASTER TRUST EXHIBIT 10.15 NEIMAN MARCUS GROUP CREDIT CARD MASTER TRUST SERIES 2000-1 $225,000,000 Class A Floating Rate Asset Backed Certificates, Series 2000-1 CLASS A PURCHASE AGREEMENT July 12, 2000 Deutsche Bank Securities Inc., 31 West 52nd Street New York, New York 10019 As Representative of the Class A Initial Purchasers Ladies and Gentlemen: 1. Introductory. The Neiman Marcus Group, Inc., a Delaware corporation ("NMG") and Bergdorf Goodman, Inc., a New York corporation ("Bergdorf Goodman") propose to sell, transfer and convey receivables (the "Receivables") generated by a portfolio of certain consumer revolving credit card accounts and non-card installment accounts and other rights to Neiman Marcus Funding Corporation, a Delaware corporation and a wholly owned subsidiary of NMG (the "Seller"). The Seller from time to time will transfer and convey the Receivables to the Neiman Marcus Group Credit Card Master Trust (the "Trust"), and the Seller proposes to cause the Trust to sell to Deutsche Bank Securities Inc. and Chase Securities Inc. (each an "Initial Purchaser" and, collectively, the "Initial Purchasers"), for whom you are acting as a representative (the "Representative"), $225,000,000 Class A Floating Rate Asset Backed Certificates, Series 2000-1 (the "Class A Certificates") in the Trust. The Receivables will be conveyed to the Seller (i) by NMG pursuant to the Receivables Purchase Agreement, dated as of March 1, 1995 and as amended and restated as of July 3, 2000 (the "NMG Receivables Purchase Agreement"), between NMG and the Seller and (ii) by Bergdorf Goodman pursuant to the Receivables Purchase Agreement, dated as of July 3, 2000 (the "Bergdorf Receivables Purchase Agreement" and together with the NMG Receivables Purchase Agreement, the "Receivables Purchase Agreements") between Bergdorf Goodman and the Seller, and will be transferred from the Seller to the Trust pursuant to (i) the amended and restated Pooling and Servicing Agreement, dated as of July 3, 2000 (the "Pooling and Servicing Agreement"), among NMG, the Seller and The Bank of New York, as trustee (the "Trustee"), and (ii) the Series 2000-1 Supplement to the Pooling and Servicing Agreement, dated on or about July 21, 2000 (the "Supplement"), among NMG, the Seller and the Trustee. The Class A Certificates, together with the Class B and Class C Certificates and the Seller Certificate that will initially be retained by the Seller, will be issued pursuant to the Pooling and Servicing Agreement and the Supplement. The Class A Certificates may only be resold to (i) "qualified institutional buyers" ("QIBs") in reliance upon Rule 144A ("Rule 144A") of the Securities Act of 1933, as amended (the "Securities Act"), (ii) non-U.S. persons outside the United States, as defined by Regulation S of the Securities Act ("Regulation S") in a transaction meeting the requirements of Regulation S, (iii) persons in the United States pursuant to another exemption from registration under the Securities Act and who have delivered an opinion of counsel in form satisfactory to the Trustee and the Seller stating that the purchase is being made pursuant to an exemption from the registration requirements of the Securities Act and (iv) the Seller. In connection with the sale of the Class A Certificates, Seller has prepared (a) a preliminary offering memorandum dated July 7, 2000 (the "Preliminary Offering Memorandum") and (b) a final offering memorandum dated July 12, 2000 (the "Final Offering Memorandum") in form and substance satisfactory to the Initial Purchasers. All references to the Final Offering Memorandum shall be deemed to include all amendments and supplements thereto. This Class A Purchase Agreement shall hereinafter be referred to as this "Agreement." This Agreement, the Receivables Purchase Agreements, the Pooling and Servicing Agreement and the Supplement shall collectively hereinafter be referred to as the "Basic Documents." Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Pooling and Servicing Agreement and Supplement. 2. Representations and Warranties of NMG and the Seller. NMG and the Seller hereby jointly and severally represent and warrant to, and agree with, the Initial Purchasers that: (a) The Final Offering Memorandum will not, as of the date thereof and as of the Closing Date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information relating to any Initial Purchaser furnished to the Seller by such Initial Purchaser expressly for use therein. (b) As of the Closing Date, the representations and warranties of NMG and the Seller in the Basic Documents will be true and correct in all material respects. (c) As of the Closing Date, each consent, approval, authorization or order of, or filing with, any court or governmental agency or body which is required to be obtained or made by NMG or the Seller for the consummation of the transactions contemplated by this Agreement and the other Basic Documents shall have been obtained, except as otherwise provided in the Basic Documents. (d) Each of NMG and the Seller has been duly organized and is validly existing as a corporation in good standing under the laws of Delaware and each of NMG and the Seller is duly qualified to do business and is in good standing in each jurisdiction which requires such qualification wherein it owns or leases material properties or conducts material business. Neither NMG nor the Seller is in violation of its charter or by-laws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any agreement or instrument to which it is a party or by which it or its properties are bound which would have a material adverse effect on the transactions contemplated herein or in any other Basic Document. The execution, delivery and performance of each Basic Document, and the issuance and sale by the Seller of the Class A Certificates, and compliance with the terms and provisions thereof will not, subject to obtaining any consents or approvals as may be required under the securities or "Blue Sky" laws of various jurisdictions, result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court having jurisdiction over NMG, the Seller or any of their respective properties or any agreement or instrument to which NMG or the Seller is a party or by which NMG or the Seller is bound or to which any of the properties of NMG or the Seller is subject, or the charter or by-laws of NMG or the Seller and each of NMG and the Seller have corporate power to enter into each Basic Document to which it is a party and to consummate the transactions contemplated hereby and thereby. (e) This Agreement has been duly authorized, executed and delivered by NMG and the Seller and constitutes a legal, valid and binding agreement enforceable against NMG and the Seller in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws, regulations or procedures of general applicability relating to or affecting enforcement of the rights of creditors, or by general equity principles and the discretion of the court before which any proceeding is brought (regardless of whether enforceability is considered in a proceeding in equity or at law) and public policy under applicable securities laws. (f) Each Basic Document, when executed and delivered as contemplated hereby and thereby, will have been duly authorized, executed and delivered by, NMG and the Seller and, when so executed and delivered, will constitute a legal, valid and binding agreement enforceable against NMG and the Seller in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws, regulations or procedures of general applicability relating to or affecting enforcement of the rights of creditors, or by general equity principles and the discretion of the court before which any proceeding is brought (regardless of whether enforceability is considered in a proceeding in equity or at law) and public policy under applicable securities laws. (g) As of the Closing Date, the Class A Certificates will have been duly and validly authorized by the Seller and, when executed and authenticated as specified in the Pooling and Servicing Agreement, will be validly issued and outstanding and will be entitled to the benefits set forth in the Pooling and Servicing Agreement. (h) There are no actions, proceedings or investigations now pending against NMG or the Seller or, to the best knowledge of NMG and the Seller, threatened against NMG or the Seller (A) that are required to be disclosed in the Preliminary Offering Memorandum or the Final Offering Memorandum, other than those disclosed therein, or (B)(1) asserting the invalidity of any Basic Document or the Class A Certificates, (2) seeking to prevent the issuance of the Class A Certificates or the consummation of any of the transactions contemplated by the Basic Documents, (3) that might materially and adversely affect the performance by NMG or the Seller of its obligations under, or the validity or enforceability of, any of the Basic Documents or the Class A Certificates, or (4) seeking to affect adversely the federal income tax attributes of the Class A Certificates as described in the Final Offering Memorandum under "U.S. Federal Income Tax Consequences." (i) Any taxes, fees and other governmental charges that are assessed and due in connection with the execution, delivery and issuance of each Basic Document shall have been paid by NMG or the Seller at or prior to the Closing Date to the extent required to be so paid at or prior to the Closing Date under applicable law. (j) Each of NMG and the Seller possesses all material licenses, certificates, authorities or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies deemed by such corporation to be reasonably necessary to conduct the business now operated by it and as described in the Final Offering Memorandum, and neither NMG nor the Seller has received notice of proceedings relating to the revocation or modification of, or notice of its failure to obtain, any such license, certificate, authority or permit which, singly or in the aggregate, if the subject of any unfavorable decision, ruling or finding, would materially and adversely affect the conduct of the business, operations, financial condition or income of NMG or the Seller. (k) Neither the Trust nor the Seller is subject to registration as an "investment company" under the Investment Company Act of 1940, as amended (the "1940 Act"). (l) On or before the Closing Date, NMG and the Seller shall have caused their respective computer records to be marked to reflect the conveyances of the Receivables effected by the Receivables Purchase Agreements and the Pooling and Servicing Agreement and to show the Trust's interest in the Receivables, and from and after the Closing Date neither NMG nor the Seller shall take any action inconsistent with the Trust's interest in such Receivables, other than as permitted by the Receivables Purchase Agreements or the Pooling and Servicing Agreement and Supplement. (m) Assuming compliance by the Initial Purchasers with the offering restrictions set forth herein and in the Final Offering Memorandum, it is not necessary in connection with the offer, sale and delivery of the Class A Certificates to or by the Initial Purchasers in the manner contemplated by this Agreement to register the Class A Certificates under the Securities Act. (n) None of NMG, the Seller, any of their Affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation D")) or, to NMG's or the Seller's knowledge, the Trust has directly or through any agent (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any "security" (as defined in the Securities Act) that is or will be integrated with the sale of the Class A Certificates in a manner that would require the registration under the Securities Act of the offering of the Class A Certificates or (ii) assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 3, engaged in any form of general solicitation or general advertising in connection with the offering or sale of the Class A Certificates in the United States (as those terms are used in Regulation D) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. (o) None of NMG, the Seller nor any of their Affiliates has directly or through any agent (it being understood that NMG and the Seller make no representation and warranty in this regard with respect to the Initial Purchasers) engaged in any "directed selling efforts" (as defined in Rule 902(c) under Regulation S) with respect to the Class A Certificates. NMG, the Seller, their Affiliates and any agent acting on behalf of any of them (it being understood that NMG and the Seller make no representation or warranty in this regard with respect to the Initial Purchasers) have complied with the "offering restrictions" (as defined in Rule 902(g) under Regulation S) with respect to Class A Certificates sold outside the United States. (p) The Class A Certificates will not be, on the Closing Date, of the same class (as defined in Rule 144A) as securities listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or quoted in a U.S. automated interdealer quotation system. (q) None of NMG, the Seller, any of their Affiliates, to NMG's or the Seller's knowledge, the Trust or any Person acting on behalf of any of them made offers or sales of securities under circumstances that would require registration of the Class A Certificates under the Securities Act. 3. Representations and Warranties of the Initial Purchasers. Each Initial Purchaser, severally but not jointly, represents and agrees that: (a) It is a QIB and is purchasing for its own account (and not for the account of others) or as a fiduciary or agent for others (which others are also QIBs). Each Initial Purchaser is aware that it (or any account for which it is purchasing) may be required to bear the economic risk of an investment in the Class A Certificates for an indefinite period, and it (or such account) is able to bear such risk for an indefinite period. (b) It will not sell, pledge or otherwise transfer any Class A Certificate to any person unless either (i) such sale, pledge or other transfer is made to NMG or the Seller, (ii) so long as the Class A Certificates are eligible for resale pursuant to Rule 144A under the Securities Act, such sale, pledge or other transfer is made to a person whom it reasonably believes is a QIB acting for its own account (and not for the account of others) or as a fiduciary or agent for others (which others also are QIBs) to whom notice is given that the sale, pledge or transfer is being made in reliance on Rule 144A, (iii) such sale, pledge or other transfer is made outside the United States in compliance with Regulation S under the Securities Act or (iv) such sale, pledge or other transfer is made in the United States pursuant to another exemption from registration under the Securities Act and in such case, (A) the Trustee will require that the prospective seller and the prospective transferee certify to the Trustee and Seller in writing the facts surrounding such transfer, which certification will be in form and substance satisfactory to the Trustee, NMG and the Seller, and (B) the Trustee will require a written opinion of counsel (which will not be at the expense of NMG, Seller or the Trustee) satisfactory to Seller and the Trustee to the effect that such transfer will not violate the Securities Act. With respect to offers and sales outside the United States, as described in clause 3(c)(iii) above, each Initial Purchaser, severally but not jointly, represents and agrees that: (i) it understands that no action has been or will be taken by NMG or the Seller that would permit a public offering of the Class A Certificates, or possession or distribution of the Preliminary Offering Memorandum or the Final Offering Memorandum or any other offering or publicity material relating to the Class A Certificates, in any country or jurisdiction where action for that purpose is required; (ii) it will comply with all applicable laws and regulations in each jurisdiction in which it acquires, offers, sells or delivers Class A Certificates or has in its possession or distributes the Preliminary Offering Memorandum or the Final Offering Memorandum or any such other material, in all cases at its own expense; (iii) it understands that the Class A Certificates have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Securities Act or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act; (iv) it has offered the Class A Certificates and will offer and sell the Class A Certificates (x) as part of its distribution at any time and (y) otherwise until 40 days after the later of the date upon which the offering of the Class A Certificates commenced to persons other than distributors in reliance upon Regulation S and the Closing Date, only in accordance with Rule 903 of Regulation S. Accordingly, neither such Initial Purchaser, nor any of its Affiliates, nor any persons acting on its behalf has engaged or will engage in any directed selling efforts (within the meaning of Regulation S) with respect to the Class A Certificates, and such Initial Purchaser, its Affiliates and any such persons have complied and will comply with the offering restrictions requirement of Regulation S; and (v) it agrees that, at or prior to confirmation of sales of the Class A Certificates, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Class A Certificates from it during the distribution compliance period (as defined in Regulation S) a confirmation or notice to substantially the following effect: "THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAW. EACH PURCHASER OF THIS CERTIFICATE IS HEREBY NOTIFIED THAT THE SELLER OF THIS CERTIFICATE MAY BE RELYING ON THE EXEMPTIONS FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATIONS THEREUNDER." (c) The Class A Certificates may not be purchased by or transferred to any "employee benefit plan" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (whether or not subject to ERISA, and including, without limitation, foreign or government plans) or by any "plan" described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended, or any entity whose underlying assets include plan assets by reason of a plan's investment in such entity (each, a "Plan"), except for an insurance company using the assets of its general account that represents and warrants that, at the time of acquisition and throughout the period it holds the Class A Certificates (i) it is eligible for and meets the requirements of Department of Labor Prohibited Transaction Class Exemption 95-60, (ii) less than 25% of the assets of such account are (or represent) assets of a Plan, and (iii) it is not a service provider to the Trust, or an affiliate of a service provider to the Trust, and would not otherwise be excluded under 2510.3-101(f)(1). (d) It understands that each Class A Certificate will bear a legend or legends substantially in the following form unless the Seller determines otherwise, consistent with applicable law: "THIS CERTIFICATE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, UNITED STATES PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN "INSTITUTIONAL ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (B) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (C) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, IN THE CASE OF THIS CLAUSE (D), PRIOR TO SUCH TRANSFER, FURNISHES THE TRUST AND THE SELLER A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUST AND THE SELLER) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF CERTIFICATES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE NEIMAN MARCUS GROUP, INC., THE SELLER, THE TRUST AND BERGDORF GOODMAN, INC., THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, (3) REPRESENTS THAT EITHER (A) IT IS NOT ACQUIRING THE CERTIFICATES WITH THE ASSETS OF A BENEFIT PLAN OR (B) ITS PURCHASE AND HOLDING OF THE CERTIFICATES WILL NOT RESULT IN A NONEXEMPT PROHIBITED TRANSACTION UNDER SECTION 406(a) OF ERISA OR SECTION 4975 OF THE CODE, AND (4) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE POOLING AGREEMENT UNDER WHICH THIS CERTIFICATE WAS ISSUED CONTAINS A PROVISION REQUIRING THE TRUST AND THE SELLER TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING." Terms used in this Section 3 and not otherwise defined in this Agreement have the meanings given to them by Regulation S. 4. Purchase, Sale and Delivery of Class A Certificates. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Seller agrees to sell to the Initial Purchasers, and the Initial Purchasers agree, severally and not jointly, to purchase from the Seller, the respective aggregate principal amount of the Class A Certificates set forth below opposite the names of the Initial Purchasers. The Class A Certificates are to be purchased at the purchase price of 99.65% of the aggregate principal amounts thereof. Initial Purchaser Principal Amount of Class A Certificates Deutsche Bank Securities Inc. $168,750,000 Chase Securities Inc. 56,250,000 ------------ Total $225,000,000 The Seller will deliver the Class A Certificates to the Initial Purchasers against payment of the purchase price therefor in immediately available funds to the order of the Seller at the office of Mayer, Brown & Platt, 190 South LaSalle Street, Chicago, Illinois at 10:00 A.M., Chicago time, on July 21, 2000, or at such other time not later than seven full Business Days thereafter as the Initial Purchasers and the Seller determine, such time being herein referred to as the "Closing Date." Each of the Class A Certificates will be initially represented by one or more certificates (the "DTC Securities") registered in the name of Cede & Co., the nominee of The Depository Trust Company ("DTC"). The interests of beneficial owners of the DTC Securities will be represented by book entries on the records of DTC and participating members thereof. Definitive certificates evidencing the Class A Certificates will be available only under the limited circumstances specified in the Pooling and Servicing Agreement. Such certificates will be made available for examination and packaging by the Initial Purchasers no later than 12:00 noon, Chicago time, on the first business day prior to the Closing Date. 5. Resale by the Initial Purchasers. The Initial Purchasers propose to offer the Class A Certificates for resale upon the terms set forth in this Agreement, the Preliminary Offering Memorandum and the Final Offering Memorandum. 6. Certain Agreements of NMG and the Seller. NMG and the Seller jointly and severally covenant and agree with the Initial Purchasers that: (a) So long as any of the Class A Certificates are outstanding, the Seller will furnish to the Initial Purchasers copies of all reports or other communications (financial or other) furnished to holders of the Class A Certificates. (b) If, at any time prior to the completion of the initial placement of the Class A Certificates, any event shall occur as a result of which it is necessary to amend or supplement the Final Offering Memorandum in order to make the statements therein, in the light of the circumstances when the Final Offering Memorandum is delivered to a purchaser, not misleading, or if it is necessary to amend or supplement the Final Offering Memorandum to comply with law, the Seller will forthwith prepare and furnish, at the expense of the Seller, to the Initial Purchasers and to any other Persons (whose names and addresses the Initial Purchasers will furnish to the Seller) to which Class A Certificates may have been sold by the Initial Purchasers and to any other Person upon request, such amendments or supplements to the Final Offering Memorandum as may be necessary so that the statements in the Final Offering Memorandum as so amended or supplemented will not, in the light of the circumstances when the Final Offering Memorandum is delivered to a purchaser, be misleading or so that the Final Offering Memorandum will comply with law. (c) The Seller and NMG shall furnish copies of the Final Offering Memorandum to the Initial Purchasers at such times and in such quantities as the Initial Purchasers may reasonably request. (d) So long as any of the Class A Certificates are outstanding, the Seller will deliver to the Initial Purchasers (i) as soon as available, copies of all reports required to be delivered to holders pursuant to Article III of the Pooling and Servicing Agreement and Section 5.2 of the Supplement; (ii) as soon as available, copies of each document relating to the Trust required to be filed with the Commission pursuant to the Securities Exchange Act of 1934, as amended, or any order of the Commission thereunder, and (iii) such other information concerning the Trust, NMG, the Seller or the Class A Certificates as the Initial Purchasers may reasonably request from time to time. (e) In order to render the Class A Certificates eligible for resale pursuant to Rule 144A under the Act, while any of the Class A Certificates remain outstanding, NMG and the Seller shall make available, upon request, to any holder of Class A Certificates or prospective purchaser of Class A Certificates the information required by Rule 144A(d)(4) under the Securities Act, unless NMG or the Seller furnishes information to the Securities and Exchange Commission in accordance with Rule 12g3-2(b) or pursuant to Section 13 or 15(d) of the Exchange Act. (f) The Seller and NMG each agree that they will not and will cause their affiliates (as defined in Rule 501(b) of Regulation D) not to solicit any offer to buy or make any offer or sale of, or otherwise negotiate in respect of, certificates if, as a result of the doctrine of "integration" referred to in Rule 502 under the Securities Act, such offer or sale would render invalid (for the purpose of (i) the sale of the Class A Certificates by the Trust to the Initial Purchasers, (ii) the resale of the Class A Certificates by the Initial Purchasers to subsequent purchasers or (iii) the resale of the Class A Certificates by such subsequent purchasers to others) the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof, by Rule 144A or by Regulation S thereunder or otherwise. (g) None of NMG, the Seller or any of their affiliates (as defined in Rule 501(b) of Regulation D) will directly or through any agent, assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 3: (i) engage in any form of general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offering or sale of the Class A Certificates in the United States or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act or (ii) engage in any "directed selling efforts" (as defined in Rule 902(c) under Regulations S) with respect to the Class A Certificates. NMG, the Seller and their affiliates (as defined in Rule 501(b) of Regulation D) and any agent acting on their behalf, assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 3, will comply with the "offering restrictions" (as defined in Rule 902(g) under Regulation S) with respect to any Class A Certificates sold outside the United States. (h) The Seller will pay all expenses incident to the performance of its obligations under this Agreement, including (i) the printing (or other reproducing) of the Preliminary Offering Memorandum and the Final Offering Memorandum; (ii) the reproducing of the Basic Documents; (iii) the preparation, issuance and delivery of the certificates evidencing the Class A Certificates to the Initial Purchasers; (iv) the fees of DTC in connection with the bookentry registration of the Class A Certificates; (v) the fees and disbursements of (A) Mayer, Brown & Platt, Ropes & Gray and the Seller's accountants and (B) the Trustee and its counsel; (vi) the printing (or otherwise reproducing) and delivery to the Initial Purchasers of copies of the Preliminary Offering Memorandum and Final Offering Memorandum to the Initial Purchasers; and (vii) the fees charged by the Rating Agencies for rating the Class A Certificates. (i) To the extent, if any, that any rating provided with respect to the Class A Certificates by the Rating Agencies is conditional upon the furnishing of documents or the taking of any other actions by NMG or the Seller, NMG or the Seller shall furnish (or cause to be furnished) such documents and take (or cause to be taken) any such other actions. (j) For a period of thirty days from the date hereof, the Seller will not, without the prior written consent of the Initial Purchasers, directly or indirectly, offer, sell or contract to sell, or announce the offering of, in a public or private transaction, any other series of certificates evidencing interests in the Receivables. 7. Conditions of the Obligations of the Initial Purchasers. The obligation of the Initial Purchasers to purchase and pay for the Class A Certificates will be subject to the accuracy of the representations and warranties on the part of NMG and the Seller herein, to the accuracy of the statements of officers of NMG and the Seller made pursuant to the provisions hereof, to the performance by the Seller hereunder and to the following additional conditions precedent: (a) The Initial Purchasers shall have received from Deloitte & Touche LLP a letter or letters, dated the date of the Final Offering Memorandum, confirming that they are independent public accountants within the meaning of the Securities Act and otherwise in form and substance satisfactory to the Initial Purchasers and counsel to the Initial Purchasers. (b) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development involving a prospective change, in or affecting particularly the business or properties of the Trust or NMG or the Seller which, in the reasonable judgment of the Initial Purchasers, could materially impair the investment quality of the Class A Certificates; (ii) any downgrading in the rating of any securities of the Trust or NMG or the Seller, by any "nationally recognized statistical rating organization" (as such term is defined for purposes of Rule 436(g) under the Securities Act), or any public announcement that any such organization has under surveillance or review its rating of any securities of the Trust or NMG or the Seller (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (iii) any suspension of trading of any securities of NMG or the Seller on any exchange or in the over-the-counter market or any setting of minimum prices for trading on such exchange; or (iv) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of the Initial Purchasers, the effects of any such outbreak, escalation, declaration, calamity or emergency could make it impractical or inadvisable to proceed with completion of the sale of, and payment for, the Class A Certificates. (c) The Initial Purchasers shall have received a certificate, dated the Closing Date, signed by the President or any Vice President and the principal financial or principal accounting officer or the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary of each of NMG and the Seller to the effect that the signers of such certificate, certify on behalf of NMG and the Seller, that they have carefully examined the Basic Documents and the Final Offering Memorandum and stating that: (i) the representations and warranties of NMG and the Seller in the Basic Documents are true and correct in all material respects at and as of the date of such certificate as if made on and as of such date (except to the extent they expressly relate to an earlier date); (ii) NMG and the Seller have complied, in all material respects, with all the agreements and satisfied, in all material respects, all the conditions on the part of NMG and the Seller to be performed or satisfied at or prior to the date of such certificate; and (iii) nothing has come to the attention of NMG or the Seller that would lead NMG or the Seller to believe that the Final Offering Memorandum contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) Mayer, Brown & Platt shall have delivered a favorable opinion dated the Closing Date in form and substance reasonably satisfactory to the Initial Purchasers, and NMG and the Seller shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass on such matters. (e) Gail S. Mann, Vice President and Associate General Counsel of NMG, shall have delivered a favorable opinion with respect to clauses (i) through (vi) and clause (ix) of this paragraph (e); Mayer, Brown & Platt shall have delivered a favorable opinion with respect to clauses (vii), (viii) and (x) through (xi), (xii(a)) (with respect to Texas), (xii(b)), (xiii) (with respect to Texas and New York) and (xiv) through (xxi); and Ropes & Gray shall have delivered a favorable opinion with respect to clauses (xii(a) (with respect to Massachusetts)) and (xiii) (with respect to Massachusetts) of this paragraph (e). Each opinion shall be dated the Closing Date and shall be satisfactory in form and substance to the Initial Purchasers and its counsel, to the effect that: (i) Each of NMG and the Seller is validly existing and in good standing as a corporation under the laws of the State of Delaware, is duly qualified to do business and is in good standing under the laws of each jurisdiction which requires such qualification wherein it owns or leases material properties or conducts material business, and has full power and authority to own its properties, and to enter into and perform its obligations under this Agreement and the other Basic Documents and to consummate the transactions contemplated hereby and thereby; (ii) this Agreement and the other Basic Documents have been duly authorized, executed and delivered by NMG and the Seller; (iii) the Class A Certificates have been duly authorized by the Seller; (iv) neither the execution nor the delivery of this Agreement and the other Basic Documents, nor the issuance or delivery of the Class A Certificates, nor the consummation of any of the transactions contemplated herein or therein, nor the fulfilment of the terms of the Class A Certificates or the Basic Documents will conflict with or violate any term or provision of the charter or by-laws of Bergdorf Goodman, NMG or the Seller, or result in a breach or violation of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of Bergdorf Goodman, NMG or the Seller pursuant to any material statute currently applicable to such corporation or any order or regulation known to such counsel to be currently applicable to such corporation of any court, regulatory body, administrative agency or governmental body having jurisdiction over Bergdorf Goodman, NMG or the Seller, as the case may be, or the terms of any indenture or other agreement or instrument to which Bergdorf Goodman, NMG or the Seller is a party or by which any of them or any of their properties are bound; (v) there is no pending or to the best knowledge of such counsel, threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator with respect to the Trust, the Class A Certificates, the Basic Documents or any of the transactions contemplated herein or therein or with respect to NMG or the Seller which, in the case of any such action, suit or proceeding with respect to NMG or the Seller, would have a material adverse effect on the holders of the Class A Certificates or the Trust or upon the ability of any of them to perform their obligations under any of such agreements, and there is no material contract or document relating to the Trust or property conveyed to the Trust which is not disclosed in the Final Offering Memorandum; (vi) such counsel has no reason to believe that (other than accounting, statistical or financial data included therein, as to which counsel need express no belief) the Final Offering Memorandum, as amended or supplemented as of the date of such opinion, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein in the light of the circumstances under which they were made, not misleading; (vii) it is not necessary in connection with the offer, sale and delivery of the Class A Certificates in the manner contemplated by this Agreement and the Pooling and Servicing Agreement to register the Class A Certificates under the Securities Act; (viii) the statements in the Final Offering Memorandum under the heading "Legal Aspects of the Receivables", to the extent that they constitute statements of matters of law or legal conclusions with respect thereto, have been prepared or reviewed by such counsel and are correct in all material respects; (ix) no consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any court, federal or state governmental agency or regulatory body is required for NMG and the Seller to consummate the transactions contemplated by the Basic Documents, except (x) such consents, approvals, authorizations, orders, registrations, filings, qualifications, licenses or permits as have been made or obtained or as may be required under the state securities or "Blue Sky" laws of any jurisdiction in connection with the purchase of the Class A Certificates and the subsequent distribution thereof by the Initial Purchasers or (y) where the failure to have such consents, approvals, authorizations, orders, registrations, filings, qualifications, licenses or permits would not have a material adverse effect on the Trust's interests in the Receivables or, without limiting the foregoing, on the transactions contemplated by the Basic Documents; (x) the Basic Documents constitute the legal, valid and binding agreement of each of NMG and the Seller enforceable against each of NMG and the Seller in accordance with its terms subject (x) to applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws, regulations or procedures of general applicability relating to or generally affecting enforcement of the rights of creditors; (y) to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and (z) with respect to rights of indemnity under this Agreement, to limitations of public policy under applicable securities laws; (xi) the Class A Certificates when duly and validly executed and authenticated in accordance with the terms of the Pooling and Servicing Agreement and the Supplement and delivered to and paid for by the Initial Purchasers pursuant to this Agreement, will be validly issued and outstanding, enforceable in accordance with their terms subject (x) to applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws, regulations or procedures of general applicability relating to or generally affecting enforcement of the rights of creditors and (y) to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law); (xii) the security interest created by the Receivables Purchase Agreements in NMG's and Bergdorf Goodman's interests in the Receivables will be perfected, (a) in the case of NMG, under Article 9 of the Uniform Commercial Code of Texas and Massachusetts upon the proper filing of UCC-1 financing statements with the appropriate filing offices in Texas and Massachusetts, and (b) in the case of Bergdorf Goodman, under Article 9 of the Uniform Commercial Code of New York upon the proper filing of UCC-1 financing statements with the appropriate filing offices in New York; (xiii) the security interest created by the Pooling and Servicing Agreement in the Seller's interest in the Receivables will be perfected under Article 9 of the Uniform Commercial Code of Texas and Massachusetts upon the proper filing of UCC-1 financing statements with the appropriate filing offices in Texas and Massachusetts, and at the time of such perfection, such security interest will be of first priority under Article 9 of the New York Uniform Commercial Code; (xiv) the UCC-1 financing statements are in appropriate form for filing and (a) no other filings or other actions, with respect to the Seller's interest in the Receivables, are necessary to perfect the interest of the Seller in the Receivables, and the proceeds thereof, conveyed to the Seller thereunder and (b) no other filings or other actions, with respect to the Trustee's interest in the Receivables, are necessary to perfect the interest of the Trustee in the Receivables, and proceeds thereof, against third parties, except, in each case, that appropriate continuation statements must be filed in accordance with the applicable state's requirements; (xv) the Receivables Purchase Agreements create in favor of the Seller security interests under Article 9 of the New York Uniform Commercial Code ("NYUCC") in the rights of Bergdorf Goodman and NMG in the Receivables (and collections thereon) and the Pooling and Servicing Agreement creates in favor of the Trustee a security interest under Article 9 of the NYUCC in the rights of the Seller in the Receivables (and collections thereon); (xvi) the Certificates and the Basic Documents conform in all material respects to the descriptions thereof contained in the Final Offering Memorandum; (xvii) neither the Pooling and Servicing Agreement nor the Supplement will be required to be qualified under the Trust Indenture Act of 1939, as amended; (xviii) the Trust is not required to be registered as an "investment company" under the 1940 Act; and (xix) the statements in the Final Offering Memorandum under the heading "U.S. Federal Income Tax Considerations" accurately describe the material Federal income tax consequences to holders of the Certificates and the statements under the heading "ERISA Considerations", to the extent that they constitute statements of matters of law or legal conclusions with respect thereto, have been prepared or reviewed by such counsel and accurately describe the material consequences to holders of the Certificates under ERISA; (xx) in a properly presented and argued case in a proceeding under Title 11 of the United States Code, 11 U.S.C. '' 101, et seq. (the "Bankruptcy Code"), if the matter were properly briefed and presented to a court, the court would hold that (1) the transfer of the Receivables by NMG to the Seller and by Bergdorf Goodman to the Seller in the manner set forth in the related Receivables Purchase Agreement would constitute an absolute sale of the Receivables, rather than a borrowing by NMG or Bergdorf Goodman, as applicable, secured by the related Receivables, so that such Receivables would not be the property of the estate of NMG or Bergdorf Goodman, as applicable, under Section 541(a) of the Bankruptcy Code, and thus (2) the Seller's rights to the Receivables would not be impaired by the operation of Section 362(a) of the Bankruptcy Code; and (xxi) if NMG or Bergdorf Goodman should become a debtor in a case under the Bankruptcy Code, and the Seller would not otherwise properly be a debtor in a case under the Bankruptcy Code, and if the matter were properly briefed and presented to a court exercising bankruptcy jurisdiction, the court, exercising reasonable judgment after full consideration of all relevant factors, would not order, over the objection of the Certificateholders, the substantive consolidation of the assets and liabilities of the Seller with those of NMG or Bergdorf Goodman, as applicable. In rendering such opinions, counsel may refer to or rely upon, (A) as to matters involving the application of the law of any jurisdiction other than the states in which they are licensed to practice, the corporate law of the State of Delaware and the United States Federal laws, to the extent deemed proper and stated in such opinion, the opinion of other counsel of good standing believed by such counsel to be reliable and acceptable to the Initial Purchasers and its counsel, and (B) as to matters of fact, to the extent deemed proper and as stated therein, on certificates of responsible officers of the Seller and public officials. Further, for purposes of the opinion delivered pursuant to clause (x) above, counsel may assume that the applicable laws of the State of New York are the same as the applicable laws of the Commonwealth of Massachusetts and Texas. (f) The Initial Purchasers shall receive evidence satisfactory to them that, on or before the Closing Date, UCC-1 financing statements have been filed pursuant to the laws of the States of Massachusetts, Texas and New York (and such other states as may be necessary or desirable pursuant to applicable state law) reflecting the interest of the Trust in the Receivables and the proceeds thereof. (g) Counsel to the Trustee shall have delivered a favorable opinion, dated the Closing Date, as the case may be, and satisfactory in form and substance to the Initial Purchasers and their counsel and the Seller and its counsel, to the effect that: (i) the Trustee has been duly organized and is validly existing and in good standing as a national banking association under the laws of the United States, is duly qualified to do business in all jurisdictions where the nature of its operations as contemplated by the Pooling and Servicing Agreement and the Supplement requires such qualifications, and has the power and authority (corporate and other) to take all action required of it under, the Pooling and Servicing Agreement and the Supplement; (ii) the execution, delivery and performance by the Trustee of the Pooling and Servicing Agreement and the Supplement and the issuance of the Class A Certificates by the Trustee have been duly authorized by all necessary corporate action on the part of the Trustee, and under present laws do not and will not contravene any law or governmental regulation or order presently binding on the Trustee or the charter or the by-laws of the Trustee or contravene any provision of or constitute a default under any indenture, contract or other instrument to which the Trustee is a party or by which the Trustee is bound; (iii) the execution, delivery and performance by the Trustee of the Pooling and Servicing Agreement and the Supplement and the issuance of the Class A Certificates by the Trustee do not require the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of any federal, state or other governmental agency or authority which has not previously been effected; (iv) each of the Class A Certificates has been duly authenticated and delivered by the Trustee and each of the Class A Certificates and the Pooling and Servicing Agreement and the Supplement constitute legal, valid and binding agreements of the Trustee, enforceable against the Trustee in accordance with its terms (subject to applicable bankruptcy, insolvency and similar laws generally affecting creditors' rights); and (v) no approval, authorization or other action by, or filing with, any governmental authority of the United States of America or the State of New York having jurisdiction over the banking or trust powers of the Trustee is required in connection with its execution and delivery of the Pooling and Servicing Agreement and the Supplement or the performance by the Trustee of the terms of the Pooling and Servicing Agreement and the Supplement. (h) The Class A Certificates shall have been given the highest investment grade rating by both Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Group ("S&P"), and neither Moody's nor S&P shall have placed the Class A Certificates under review with possible negative implications. (i) All proceedings in connection with the transactions contemplated by this Agreement and the other Basic Documents and all documents incident hereto and thereto shall be reasonably satisfactory in form and substance to the Initial Purchasers and their Counsel, and the Initial Purchasers and their Counsel shall have received such information, certificates and documents as the Initial Purchasers and their Counsel may reasonably request. 8. Indemnification and Contribution. (a) NMG and the Seller, jointly and severally, will indemnify and hold the Initial Purchasers harmless against any losses, claims, damages or liabilities, joint or several, to which the Initial Purchasers may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Preliminary Offering Memorandum or the Final Offering Memorandum, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Initial Purchasers for any legal or other expenses reasonably incurred by the Initial Purchasers in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that neither NMG nor the Seller will be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to NMG or the Seller by the Initial Purchasers specifically for use therein. NMG and the Seller acknowledge that their names constitute the only information furnished in writing by the Initial Purchasers or on behalf of the Initial Purchasers for inclusion in the Final Offering Memorandum. (b) Each Initial Purchaser, severally (in proportion to their respective purchase obligations) and not jointly, will indemnify and hold harmless NMG and the Seller against any losses, claims, damages or liabilities, joint or several, to which NMG or the Seller may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Preliminary Offering Memorandum or the Final Offering Memorandum, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to NMG or the Seller by such Initial Purchaser specifically for use therein, as set forth in subsection (a) above, and will reimburse any legal or other expenses reasonably incurred by NMG or the Seller in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission to so notify the indemnifying party (i) will not relieve it from liability under subsections (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligations provided under subsections (a) or (b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party under this Section 8 shall not be liable for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action. (d) If the indemnification provided for in this Section 8 is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by NMG and the Seller, on the one hand, and the Initial Purchasers, on the other, from the offering of the Class A Certificates or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of NMG and/or the Seller, on the one hand, and the Initial Purchasers, on the other, in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by NMG and the Seller, on the one hand, and the Initial Purchasers, on the other, shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by NMG and the Seller bear to the total discounts and commissions received by the Initial Purchasers. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by NMG or the Seller, on the one hand, or by the Initial Purchasers, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Initial Purchaser shall be required to contribute any amount in excess of the discount applicable to the Class A Certificates purchased by such Initial Purchaser hereunder. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations pursuant to this subsection (d) to contribute are several in proportion to their respective purchase obligations and not joint. (e) The obligations of NMG and the Seller under this Section 8 shall be in addition to any liability which NMG and the Seller may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Initial Purchasers within the meaning of the Securities Act; and the obligations of the Initial Purchasers under this Section 8 shall be in addition to any liability that the Initial Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each director of NMG and the Seller, and to each person, if any, who controls NMG or the Seller within the meaning of the Securities Act. 9. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of NMG and the Seller and their respective officers and of the Initial Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of the Initial Purchasers or NMG or the Seller or any of their respective representatives, officers or directors or any controlling person (within the meaning of the Securities Act), and will survive delivery of and payment for the Class A Certificates. If for any reason the purchase of the Class A Certificates by the Initial Purchasers is not consummated, NMG and the Seller shall remain responsible for the expenses to be paid or reimbursed by NMG and the Seller pursuant to Section 6 hereof and the respective obligations of NMG and the Seller and the Initial Purchasers pursuant to Section 8 hereof shall remain in effect. If the purchase of the Class A Certificates by the Initial Purchasers is not consummated for any reason or the occurrence of any event specified in clause (iii) or (iv) of Section 7(b) hereof, NMG and the Seller, jointly and severally, will reimburse the Initial Purchasers for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Class A Certificates. 10. Notices. All communications hereunder will be in writing and, if sent to the Initial Purchasers, will be mailed, delivered or telecopied and confirmed to Deutsche Bank Securities Inc., at 31 West 52nd Street, New York, New York 10019; if sent to the Seller, will be mailed, delivered or telecopied and confirmed to it at Neiman Marcus Funding Corporation, 1201 Elm Street, Dallas, Texas 75201, Attention of the Vice President - Credit (facsimile no. 214-761-2650), and if sent to NMG, will be mailed, delivered or telecopied and confirmed to it at 27 Boylston Street, Chestnut Hill, Massachusetts 02167, Attention of the General Counsel (facsimile no. 617-278-5567). 11. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 8 hereof, and no other person will have any right or obligation hereunder. 12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 13. Representation of Initial Purchasers. Any action under this Agreement taken by the Initial Purchasers jointly or by Deutsche Bank Securities Inc. will be binding on the Initial Purchasers. 14. Applicable Law and Time. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. Unless otherwise set forth herein, specified times of day refer to New York City time. 15. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties hereto with respect to the subject matter of this Agreement and supersedes all prior agreements or understandings, written or oral, among the parties with respect to the subject matter of this Agreement. If the foregoing is in accordance with the Initial Purchasers understanding of our agreement, kindly sign and return to us one of the counterparts hereof, whereupon it will become a binding agreement between the Seller and the Initial Purchasers in accordance with its terms. Very truly yours, NEIMAN MARCUS FUNDING CORPORATION By: _____________________________ Name: Title: THE NEIMAN MARCUS GROUP, INC. By: ____________________________ Name: Title: The foregoing Class A Purchase Agreement is hereby confirmed and accepted as of the date first above written. DEUTSCHE BANK SECURITIES INC. CHASE SECURITIES INC. By: Deutsche Bank Securities Inc., as Representative of the Initial Purchasers By: ______________________________ Name: Title: By: _____________________________ Name: Title: EX-10.16 5 0005.txt RECEIVABLES PURCHASE AGMT 7/2/2000 Exhibit 10.16 EXECUTION COPY BERGDORF GOODMAN, INC., Seller and NEIMAN MARCUS FUNDING CORPORATION, Purchaser RECEIVABLES PURCHASE AGREEMENT Dated as of July 2, 2000 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . .1 Section 1.1. Definitions . . . . . . . . . . . . .1 Section 1.2. Other Definitional Provisions. . . .3 ARTICLE II PURCHASE AND CONVEYANCE OF RECEIVABLES . . . . . . . . . . . .4 Section 2.1. Purchase. . . . . . . . . . . . . . .4 Section 2.2. Addition of Additional Accounts . . .5 ARTICLE III CONSIDERATION AND PAYMENT. . . . . . . . . . . . . . . . . . .6 Section 3.1. Purchase Price. . . . . . . . . . . .6 Section 3.2. Adjustments to Purchase Price . . . .6 ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . .7 Section 4.1. Representations and Warranties of BG Relating to BG. . . . . . . . . . . . . . . . . . . . . . .7 Section 4.2. Representations and Warranties of BG Relating to the Agreement and the Receivables . . . . . . . .8 Section 4.3. Representations and Warranties of Funding 10 ARTICLE V COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5.1. BG Covenants. . . . . . . . . . . . 11 ARTICLE VI REPURCHASE OBLIGATION. . . . . . . . . . . . . . . . . . . . 14 Section 6.1. Reassignment of Ineligible Receivables 14 Section 6.2. Reassignment of Certificateholders' Interest in Trust Portfolio . . . . . . . . 14 ARTICLE VII CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . 15 Section 7.1. Conditions to Funding's Obligations Regarding Initial Receivables . . . . . . . . . . . . . . 15 Section 7.2. Conditions to Funding's Obligations Regarding Additional Receivables . . . . . . . . . . . . . . 15 Section 7.3. Conditions Precedent to Obligations of BG16 ARTICLE VIII TERM AND PURCHASE TERMINATION. . . . . . . . . . . . . . . . 16 Section 8.1. Term. . . . . . . . . . . . . . . . 16 Section 8.2. Purchase Termination. . . . . . . . 17 ARTICLE IX MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . 17 Section 9.1. Amendment . . . . . . . . . . . . . 17 Section 9.2. GOVERNING LAW . . . . . . . . . . . 18 Section 9.3. Notices . . . . . . . . . . . . . . 18 Section 9.4. Severability of Provisions. . . . . 18 Section 9.5. Assignment, Sale of Accounts. . . . 18 Section 9.6. Acknowledgement and Agreement of BG 19 Section 9.7. Further Assurances. . . . . . . . . 20 Section 9.8. No Waiver; Cumulative Remedies. . . 20 Section 9.9. Counterparts. . . . . . . . . . . . 20 Section 9.10. Binding Third-Party Beneficiaries . 20 Section 9.11. Merger and Integration. . . . . . . 20 Section 9.12. Headings. . . . . . . . . . . . . . 20 Section 9.13. Schedules and Exhibits. . . . . . . 20 Section 9.14. Survival of Representations and Warranties 21 Exhibit A - Form of Supplemental Conveyance SCHEDULE Schedule 1 - List of Accounts [Deemed Incorporated by Reference] RECEIVABLES PURCHASE AGREEMENT, dated as of July 2, 2000, by and between BERGDORF GOODMAN, INC., a New York corporation ("BG"), and NEIMAN MARCUS FUNDING CORPORATION, a Delaware corporation ("Funding"). W I T N E S S E T H: WHEREAS, Funding desires to purchase, from time to time, certain Receivables (hereinafter defined) arising in certain Accounts (hereinafter defined) of BG generated on or before the Initial Cut-Off Date (hereinafter defined), or to be generated after the Initial Cut-Off date, by BG; WHEREAS, BG desires to sell from time to time and assign such Receivables to Funding upon the terms and conditions hereinafter set forth; WHEREAS, it is contemplated that the Receivables purchased hereunder will be transferred by Funding to the Trust (hereinafter defined) in connection with the issuance of certain Certificates (hereinafter defined); and WHEREAS, BG agrees that all covenants and agreements made by BG herein with respect to the Accounts (hereinafter defined) and Receivables shall also be for the benefit of the Trustee (hereinafter defined) and all holders of the Certificates. NOW, THEREFORE, it is hereby agreed by and between Funding and BG as follows: ARTICLE I DEFINITIONS Section 1.1. Definitions. Each capitalized term used herein or in any certificate, document, or Conveyance Paper made or delivered pursuant hereto, and not defined herein or therein, shall have the meaning specified in the Pooling and Servicing Agreement. In addition, the following words and phrases shall have the following meanings: "Account" shall mean (a) each revolving credit account or other consumer revolving credit or installment account established pursuant to an Account Agreement between BG and any Person and identified by account number and by the receivables balance in a computer file, microfiche list or printed list delivered to Funding by BG (and, in turn to the Trustee by Funding pursuant to Section 2.01 of the Pooling and Servicing Agreement) on or prior to the Closing Date, (b) each Additional Account, (c) any account originated as a replacement of an Account in connection with the upgrade of such Account to premium status (provided that such a replacement account can be traced or identified by reference to, or by way of, the applicable computer file, microfiche list or printed list previously delivered pursuant hereto), (d) each account into which an Account shall be transferred (a "Transferred Account") provided that (i) such transfer was made in accordance with the Account Guidelines and (ii) such account can be traced or identified as an account into which an Account has been transferred, and (e) each surviving account resulting from the combination, in accordance with the Account Guidelines, of two or more of the Accounts but shall exclude (f) any Account all of the Receivables of which are either: (i) after the Removal Date, removed by Funding pursuant to Section 2.10 of the Pooling and Servicing Agreement, (ii) reassigned to Funding pursuant to Section 2.05 of the Pooling and Servicing Agreement or (iii) assigned and transferred to the Servicer pursuant to Section 3.03 of the Pooling and Servicing Agreement. "Addition Date" shall mean (a) with respect to any Additional Accounts designated by Funding pursuant to Section 2.09(a), (b) or (d) of the Pooling and Servicing Agreement, the date from and after which such Additional Accounts are to be included as Accounts pursuant to Section 2.09(a), (b) or (d) of the Pooling and Servicing Agreement and (b) with respect to any Participation Interests, the date from and after which such Participation Interests are to be included as assets of the Trust pursuant to Section 2.09(a) or (b) of the Pooling and Servicing Agreement. "Addition Notice Date" shall have the meaning specified in Section 2.2 of this Agreement. "Agreement" shall mean this Receivables Purchase Agreement and all amendments hereof and supplements hereto. "BG" shall mean Bergdorf Goodman, Inc., a New York corporation. "Closing Date" shall mean July 2, 2000. "Conveyance" shall have the meaning specified in Section 2.1(a). "Conveyance Papers" shall have the meaning specified in Section 4.1(c). "Credit Adjustment" shall have the meaning specified in Section 3.2. "Debtor Relief Laws" shall mean (i) the Bankruptcy Code of the United States of America and (ii) all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, readjustment of debt, marshalling of assets or similar debtor relief laws of the United States, any state or any foreign country from time to time in effect affecting the rights of creditors generally. "Funding" shall mean Neiman Marcus Funding Corporation, a Delaware corporation. "Initial Account" shall mean any Account in existence on the Closing Date. "Initial Cut-Off Date" shall mean the close of business on July 1, 2000. "Insolvency Event" shall have the meaning specified in Section 8.2. "New Principal Receivables" shall have the meaning set forth in Section 3.1. "Pooling and Servicing Agreement" shall mean the Pooling and Servicing Agreement, dated as of March 1, 1995 and amended and restated as of July 2, 2000, among The Neiman Marcus Group, Inc., as Servicer, Funding, as Seller and the Trustee, and all amendments and supplements thereto. "Portfolio Reassignment Price" shall mean the portion of the amount payable by Funding to the Trustee pursuant to Section 2.06 of the Pooling and Servicing Agreement. "Purchase Price" shall have the meaning set forth in Section 3.1. "Purchased Assets" shall have the meaning set forth in Section 2.1. "Receivables" shall mean "Receivables" (as such term is defined in the Pooling and Servicing Agreement) existing or created after the Initial Cut-Off Date in respect of the Initial Accounts or the Additional Cut-Off Date in respect of Additional Accounts. "Repurchase Price" shall have the meaning set forth in Section 6.1. "Supplemental Conveyance" shall have the meaning set forth in Section 2.2. "Trust" shall mean the trust created by the Pooling and Servicing Agreement. "Trustee" shall mean The Bank of New York, a New York banking corporation, as, and acting in the capacity of, Trustee under the Pooling and Servicing Agreement, or its successor-in-interest, or any successor trustee appointed in accordance with the Pooling and Servicing Agreement. Section 1.2. Other Definitional Provisions. (a) Each capitalized term defined in this Agreement shall have the defined meaning when used in any certificate, other document, or Conveyance Paper made or delivered pursuant hereto unless otherwise defined therein. (b) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement or any Conveyance Paper shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, Subsection, Schedule and Exhibit references contained in this Agreement are references to Sections, Subsections, Schedules and Exhibits in or to this Agreement unless otherwise specified. (c) All determinations of the principal or finance charge balance of Receivables, and of any collections thereof, shall be made in accordance with the Pooling and Servicing Agreement and all applicable Supplements. (d) As used in this Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in any such certificate or other document to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Agreement or in any such certificate or other document shall control. (e) Any reference to each Rating Agency shall only apply to any specific rating agency if such rating agency is then rating any outstanding Series. (f) Unless otherwise specified, references to any amount as on deposit or outstanding on any particular date shall mean such amount at the close of business on such day. ARTICLE II PURCHASE AND CONVEYANCE OF RECEIVABLES Section 2.1. Purchase. (a) By execution of this Agreement, BG does hereby sell, transfer, assign, set over and otherwise convey to Funding (collectively, the "Conveyance"), without recourse all of its right, title and interest in, to and under (i) the Receivables now existing or hereafter created from time to time under the Initial Accounts prior to the termination of this Agreement pursuant to Article VIII hereof, (ii) all Recoveries allocable to the foregoing Accounts and all Recoveries which are identified as relating to specific Defaulted Receivables and (iii) all monies due or to become due thereunder and all amounts received with respect thereto and all proceeds (including, without limitation, "proceeds" as such term is defined in the UCC) thereof (the "Purchased Assets"). (b) In connection with such Conveyance, BG agrees (i) to record and file, at its own expense, any financing statements (and continuation statements with respect to such financing statements when applicable) and to take such other action with respect to the Receivables now existing and hereafter created, meeting the requirements of applicable state law in such manner and in such jurisdictions as are necessary to perfect, and maintain perfection of, the Conveyance of such Purchased Assets from BG to Funding on and after the Closing Date, (ii) that such financing statements shall name BG, as seller, and Funding, as purchaser, of the Receivables and (iii) to deliver a file-stamped copy of such financing statements or other evidence of such filings (excluding such continuation statements, which shall be delivered as filed) to Funding (or to the Trustee, if Funding so directs) as soon as is practicable after filing. (c) In connection with such Conveyance, BG further agrees that it will, at its own expense, on or prior to the Closing Date, (i) indicate in its computer files or microfiche or printed lists that Receivables created in connection with the Initial Accounts have been conveyed (a) to Funding pursuant to this Agreement and (b) by Funding to the Trustee pursuant to the Pooling and Servicing Agreement for the benefit of the Certificateholders by including (or deleting, in the case of Removed Accounts) in such computer files and microfiche or printed lists the code or other notation identifying each such Account and (ii) deliver to Funding on or prior to the Closing Date a computer file or microfiche or printed list containing a true and complete list of all such Initial Accounts specifying for each such Account, as of the Initial Cut-Off Date (A) its account number, (B) the aggregate amount outstanding in such Account and (C) the aggregate amount of Principal Receivables in such Initial Account. Such computer files or microfiche or printed lists, as supplemented from time to time to reflect Additional Accounts or Removed Accounts, shall be marked as Schedule I to this Agreement, shall be delivered to Funding (or to the Trustee, if so directed by Funding) and marked as proprietary and confidential, and are hereby incorporated into and made a part of this Agreement. BG further agrees not to alter the code or other notation referenced in clause (i) of this paragraph with respect to any Account during the term of this Agreement unless and until (x) such Account becomes a Removed Account or (y) BG shall have delivered to Funding and the Trustee at least 30 days' prior written notice of its intention to do so and has taken such action as is necessary or advisable to cause the respective interests of Funding and the Trustee in the Receivables and other Trust Assets to continue to be perfected with the priority required by this Agreement and the Pooling and Servicing Agreement, respectively. (d) It is the intention of the parties hereto that the conveyance of the Receivables and the other Purchased Assets by BG to Funding as provided in this Section 2.1 be, and be construed as, an absolute sale of the Receivables by BG to Funding. Furthermore, it is not intended that such conveyance be deemed a pledge of the Receivables and the other Purchased Assets by BG to Funding to secure a debt or other obligation of BG. This Agreement shall also be deemed to be a security agreement within the meaning of Article 9 of the UCC and the conveyance provided for in this Section 2.1 shall be deemed to be a grant by BG to Funding of a "security interest" within the meaning of Article 9 of the UCC in all of BG's right, title and interest in and to the Receivables and the other Purchased Assets and all amounts payable to the holders of the Receivables after the Closing Date in accordance with the terms thereof and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property. Section 2.2. Addition of Additional Accounts. (a) If, from time to time, Funding becomes obligated to designate Additional Accounts pursuant to Section 2.09(a) of the Pooling and Servicing Agreement, then Funding shall give BG written notice thereof on or before the eighth Business Day (the "Addition Notice Date") prior to the Addition Date therefor, and BG shall on or before the Addition Date designate sufficient Eligible Accounts to be included as Accounts so that after the inclusion thereof Funding will be in compliance with the requirements of Section 2.09 of the Pooling and Servicing Agreement. BG shall have sole responsibility for selecting such Additional Accounts and shall on or prior to the Addition Date therefor execute and deliver to Funding a written assignment from BG to Funding in substantially the form of Exhibit A (the "Supplemental Conveyance"). Upon such designation, such Additional Accounts shall be deemed to be Accounts hereunder. (b) Subject to the limitations set forth in Section 2.09(d) of the Pooling and Servicing Agreement and in any Supplement, Automatic Additional Accounts shall be included as Accounts from and after the date of creation thereof (other than any such date of creation falling during each period beginning on an Automatic Addition Termination Date or an Automatic Addition Suspension Date and ending on the day immediately preceding a Restart Date). ARTICLE III CONSIDERATION AND PAYMENT Section 3.1. Purchase Price. The "Purchase Price" for the Receivables which came into existence on or prior to the Closing Date conveyed to Funding under this Agreement shall be payable in cash on the Closing Date and shall be an amount equal to 100% of Principal Receivables so conveyed, adjusted to reflect such factors as BG and Funding mutually agree will result in a Purchase Price determined to approximate the fair market value of such Receivables. Such computation of initial purchase price shall assume no reinvestment in new Receivables. The Purchase Price for the Receivables (including Receivables in Additional Accounts) to be conveyed to Funding under this Agreement that come into existence after the Closing Date shall be payable on the Distribution Date following the Monthly Period during which such Receivables are conveyed by BG to Funding in an amount equal to 100% of the Principal Receivables so conveyed (the "New Principal Receivables"), adjusted to reflect such factors as BG and Funding mutually agree will result in a Purchase Price determined to approximate the fair market value of such New Principal Receivables. Section 3.2. Adjustments to Purchase Price. The Purchase Price shall be adjusted on each Distribution Date (a "Credit Adjustment") with respect to any Receivable previously conveyed to Funding by BG which has since been reduced by BG or the Servicer because of a rebate, refund, unauthorized charge or billing error to a cardholder because such Receivable was created in respect of merchandise that was refused or returned by a cardholder. The amount of such adjustment shall equal (x) the reduction in the principal balance of such Receivable resulting from the occurrence of such event multiplied by (y) a fraction, the numerator of which is the Purchase Price paid with respect to all Receivables on the Payment Date on which such Receivables were purchased computed in accordance with Section 3.1 and the denominator of which is the aggregate face amount of the Principal Receivables paid for on such date pursuant to such Section. In the event that an adjustment pursuant to this Section 3.2 causes the Purchase Price to be a negative number, BG agrees that, not later than 11:00 A.M. New York City time on such Distribution Date, BG shall pay to Funding, by making a deposit into the Collection Account in same-day funds, an amount equal to the amount by which the Purchase Price minus the Credit Adjustment would be reduced below zero. ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.1. Representations and Warranties of BG Relating to BG. BG hereby represents and warrants to, and agrees with, Funding as of the Closing Date and on each Addition Date, that: (a) Organization and Good Standing. BG is a corporation validly existing in good standing under the laws of the State of New York, and has full corporate power, authority and legal right to own its properties and conduct its business as such properties are presently owned and such business is presently conducted, and to execute, deliver and perform its obligations under this Agreement. (b) Due Qualification. BG is duly qualified to do business and is in good standing as a foreign corporation (or is exempt from such requirements), and has obtained all necessary licenses and approvals in each jurisdiction in which failure to so qualify or to obtain such licenses and approvals would render any Account Agreement relating to an Account owned by BG or any Receivable unenforceable by BG, the Seller, the Servicer or the Trustee or would have a material adverse effect on the interests of the Investor Certificateholders. (c) Due Authorization. The execution, delivery and performance of this Agreement and any other document or instrument delivered pursuant hereto (such other documents or instruments, collectively, the "Conveyance Papers") and the consummation of the transactions provided for in this Agreement or any other Conveyance Papers have been duly authorized by all necessary corporate action on the part of BG. (d) No Conflict. The execution and delivery of this Agreement and the Conveyance Papers by BG, the performance of the transactions contemplated by this Agreement and the Conveyance Papers, and the fulfillment of the terms of this Agreement and the Conveyance Papers applicable to BG will not conflict with, violate or result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default under, any indenture, contract, agreement, mortgage, deed of trust, or other instrument to which BG is a party or by which it or any of its properties are bound. (e) No Violation. The execution, delivery and performance of this Agreement and the Conveyance Papers by BG and the fulfillment by BG of the terms hereof and thereof will not conflict with or violate any Requirements of Law applicable to BG. (f) No Proceedings. There are no proceedings or investigations pending or, to the best knowledge of BG, threatened against BG, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality (i) asserting the invalidity of this Agreement or any of the Conveyance Papers, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any of the Conveyance Papers, (iii) seeking any determination or ruling that, in the reasonable judgment of BG, would materially and adversely affect the performance by BG of its obligations under this Agreement or any of the Conveyance Papers, (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement or any of the Conveyance Papers or (v) seeking to affect adversely the income tax attributes of the Trust under United States Federal or applicable state income or franchise tax systems. (g) All Consents. All approvals, authorizations, consents, orders or registrations or declarations with any Person or any governmental body or official required in connection with the execution and delivery by BG of this Agreement or any of the Conveyance Papers and the performance of the transactions contemplated by this Agreement or any of the Conveyance Papers by BG have been duly obtained, effected or given and are in full force and effect. (h) Insolvency. BG is not insolvent and no Insolvency Event with respect to BG has occurred, and the transfer of the Receivables by BG to Funding contemplated hereby has not been made in contemplation of such insolvency or Insolvency Event. The representations and warranties set forth in this Section 4.1 shall survive the transfer and assignment of the Receivables to Funding. Upon discovery by BG or Funding of a breach of any of the foregoing representations and warranties, the party discovering such breach shall give written notice to the other party within three Business Days following such discovery. BG agrees to cooperate with Funding and the Trustee in attempting to cure any such breach. Section 4.2. Representations and Warranties of BG Relating to the Agreement and the Receivables. (a) Representations and Warranties. BG hereby represents and warrants to Funding as of the date of this Agreement, as of the Closing Date and, with respect to Additional Accounts, as of the related Addition Date that: (i) this Agreement and, in the case of Additional Accounts, the related Supplemental Conveyance, each constitute a valid and binding obligation of BG enforceable against BG in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity); (ii) as of the Initial Cut-Off Date, and as of the related Addition Date with respect to Additional Accounts, Schedule I to this Agreement and the related computer file, microfiche list or printed list delivered pursuant to this Agreement, as supplemented to such date, is an accurate and complete listing in all material respects of all the Accounts as of the Initial Cut-Off Date or such Additional Cut- Off Date, as the case may be, and the information contained therein with respect to the identity of such Accounts and the Receivables existing thereunder is true and correct in all material respects as of the Initial Cut-Off Date or such applicable Additional Cut-Off Date, as the case may be; (iii) BG is the legal and beneficial owner of all right, title and interest in and to each Receivable, BG has the full right, power and authority to transfer the Receivables pursuant to this Agreement; and each Receivable conveyed to Funding by BG has been conveyed to Funding free and clear of any Lien of any Person claiming through or under BG or any of its Affiliates (other than Liens permitted under Section 5.1(b)) and in compliance, in all material respects, with all Requirements of Law applicable to BG; (iv) all authorizations, consents, orders, approvals or authorizations of or registrations or declarations with any Governmental Authority required to be obtained, effected or given by BG in connection with the conveyance of each Receivable to Funding have been duly obtained, effected or given and are in full force and effect; (v) this Agreement or, in the case of Additional Accounts, the related Supplemental Conveyance constitutes a valid transfer and assignment to Funding of all right, title and interest of BG in and to the Receivables and the other Purchased Assets, all monies due or to become due with respect thereto and all proceeds thereof, and, in the case of Additional Accounts, the related Supplemental Conveyance, will constitute, at the time of such addition, an absolute sale of such property and the proceeds thereof. Upon the filing of the financing statements pursuant to Section 2.1(a) and, in the case of Receivables hereafter created and the proceeds thereof, upon the creation thereof, Funding shall have a first-priority security interest in such property and proceeds (as defined in the UCC) except for Liens permitted by Section 5.1(b); (vi) except as otherwise expressly provided in this Agreement, the Pooling and Servicing Agreement or any Supplement, neither BG nor any Person claiming through or under BG has any claim to or interest in the Collection Account, the Special Funding Account, any Series Account or any Series Enhancement; (vii) on the Initial Cut-Off Date, each Initial Account is an Eligible Account and, on the applicable Additional Cut-Off Date, each related Additional Account is an Eligible Account; (viii) on the Initial Cut-Off Date, each Receivable then existing is an Eligible Receivable, and, on the applicable Additional Cut-Off Date, each Receivable contained in any related Additional Account is an Eligible Receivable; (ix) as of the date of the creation of any new Receivable, such Receivable is an Eligible Receivable; and (x) no selection procedure has been utilized by BG that BG reasonably believes would result in a selection of Initial Accounts (from among the available Eligible Accounts owned by BG on the Trust Cut-Off Date) that would be materially adverse to the interests of the Investor Certificateholders. (b) Notice of Breach. The representations and warranties set forth in this Section 4.2 shall survive the transfer and assignment of the Receivables to Funding. Upon discovery by either BG or Funding of a breach of any of the representations and warranties set forth in this Section 4.2, the party discovering such breach shall give written notice to the other party within three Business Days following such discovery; provided that the failure to give notice within three Business Days does not preclude subsequent notice. BG hereby acknowledges that Funding intends to rely on the representations hereunder in connection with representations made by Funding to secured parties, assignees or subsequent transferees including but not limited to transfers made by Funding to the Trust pursuant to the Pooling and Servicing Agreement. BG agrees to cooperate with Funding and the Trustee in attempting to cure any such breach. Section 4.3. Representations and Warranties of Funding. As of the Closing Date, Funding hereby represents and warrants to, and agrees with, BG that: (a) Organization and Good Standing. Funding is a corporation validly existing in good standing under the laws of the State of Delaware and has full power and authority to own its properties and conduct its business as such properties are presently owned and such business is presently conducted and to execute, deliver and perform its obligations under this Agreement and the Conveyance Papers. (b) Due Authorization. The execution and delivery of this Agreement and the Conveyance Papers and the consummation of the transactions provided for in this Agreement and the Conveyance Papers have been duly authorized by Funding by all necessary corporate action on the part of Funding. (c) No Conflict. The execution and delivery of this Agreement and the Conveyance Papers, the performance of the transactions contemplated by this Agreement and the Conveyance Papers, and the fulfillment of the terms hereof and thereof, will not conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default under, any indenture, contract, agreement, mortgage, deed of trust or other instrument to which Funding is a party or by which it or any of its properties are bound. (d) No Violation. The execution, delivery and performance of this Agreement and the Conveyance Papers by Funding and the fulfillment of the terms contemplated herein and therein applicable to Funding will not conflict with or violate any Requirements of Law applicable to Funding. (e) No Proceedings. There are no proceedings or investigations pending or, to the best knowledge of Funding, threatened against Funding, before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality (i) asserting the invalidity of this Agreement or any of the Conveyance Papers, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any of the Conveyance Papers, (iii) seeking any determination or ruling that, in the reasonable judgment of Funding, would materially and adversely affect the performance by Funding of its obligations under this Agreement or any of the Conveyance Papers or (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement or any of the Conveyance Papers. (f) All Consents. All authorizations, consents, orders or approvals of or registrations or declarations with any Governmental Authority required to be obtained, effected or given by Funding in connection with the execution and delivery by Funding of this Agreement and the Conveyance Papers and the performance of the transactions contemplated by this Agreement and the Conveyance Papers or the fulfillment of the terms of this Agreement and the Conveyance Papers by Funding have been duly obtained, effected or given and are in full force and effect. The representations and warranties set forth in this Article IV shall survive the Conveyance of the Receivables to Funding and termination of the rights and obligations of Funding and BG under this Agreement. Upon discovery by Funding or BG of a breach of any of the foregoing representations and warranties, the party discovering such breach shall give prompt written notice to the other party. ARTICLE V COVENANTS Section 5.1. BG Covenants. BG hereby covenants and agrees with Funding as follows: (a) Receivables not to be Evidenced by Promissory Notes. Except in connection with the enforcement or collection of an Account, BG will take no action to cause any Receivable transferred by it pursuant hereto to be evidenced by any "instrument", other than an instrument that, taken together with one or more other writings constitutes chattel paper (as such terms are defined in the UCC) and, if any such Receivable is so evidenced (whether or not in connection with the enforcement or collection of an Account), it shall be deemed to be an Ineligible Receivable in accordance with Section 6.1(a) and shall be reassigned to the Seller in accordance with Section 6.1(b). (b) Security Interests. Except for the conveyances hereunder or as otherwise provided herein, BG will not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist, any Lien on any Receivable, whether now existing or hereafter created, or any interest therein; and BG will immediately notify Funding of the existence of any Lien on any Receivable; and BG shall defend the right, title and interest of Funding in, to and under the Receivables, whether now existing or hereafter created, against all claims of third parties claiming through or under BG; provided, however, that nothing in this Section 5.1(b) shall prevent or be deemed to prohibit BG from suffering to exist upon any of the Receivables any Lien for taxes if such taxes shall not at the time be due and payable or if the Seller shall currently be contesting the validity thereof in good faith by appropriate proceedings and shall have set aside on its books adequate reserves with respect thereto. (c) BG's Interest. Except for the conveyances hereunder and in connection with any transaction permitted pursuant to Section 9.5 or the Pooling and Servicing Agreement, BG hereby agrees not to transfer, assign, exchange or otherwise convey or pledge, hypothecate or otherwise grant a security interest in the Accounts and any such attempted transfer, assignment, exchange, conveyance, pledge, hypothecation or grant shall be void. (d) Account Allocations. In the event that BG is unable for any reason to transfer Receivables to Funding in accordance with the provisions of this Agreement (including, without limitation, by reason of the application of the provisions of Section 8 or any Governmental Authority having regulatory authority over BG or any court of competent jurisdiction ordering that BG not transfer any additional Principal Receivables to Funding) then, in any such event, BG agrees (except as prohibited by any such order) to allocate and pay to Funding, after the date of such inability, all amounts in the manner by which Funding will allocate and pay to the Trust after such inability by Funding pursuant to Section 2.11 of the Pooling and Servicing Agreement. (e) Delivery of Collections or Recoveries. If BG receives Collections or Recoveries, BG agrees to pay to Funding (or to the Servicer if Funding so directs) all such Collections and Recoveries as soon as practicable after receipt thereof but in no event later than two Business Days after the Date of Processing by BG. (f) Notice of Liens. BG shall notify Funding promptly after becoming aware of any Lien on any Receivable other than the conveyances hereunder or any Lien permitted under Section 5.1(b) hereof or Section 2.07(b) of the Pooling and Servicing Agreement. (g) Periodic Rate Finance Charges. (i) Except (x) as otherwise required by any Requirement of Law or (y) as is deemed by BG in its sole discretion to be necessary, it shall not at any time reduce the annual percentage rates of the Periodic Finance Charges assessed on the Receivables or other fees charged on any of the Accounts if, as a result of any such reduction, either (i) BG's reasonable expectation is that such reduction will cause a Pay Out Event to occur or (ii) such reduction is not also applied to any comparable segment of consumer revolving credit card accounts or other consumer revolving credit or installment accounts owned by BG which have characteristics the same as, or substantially similar to, such Accounts. (h) Account Agreements and Guidelines. BG shall comply with and perform its obligations under the Account Agreements relating to the Accounts and the Account Guidelines except insofar as any failure to so comply or perform would not materially and adversely affect the rights of Funding hereunder and the rights of the Trust or the Certificateholders under the Pooling and Servicing Agreement or the Certificates. Subject to compliance with all Requirements of Law, BG may change the terms and provisions of the Account Agreements or the Account Guidelines with respect to any of the Accounts in any respect (including the calculation of the amount, or the timing, of charge-offs and the Periodic Finance Charges and other fees to be assessed thereon) only if in the reasonable judgment of BG such change is made applicable to any comparable segment of the consumer revolving credit card accounts or other consumer revolving credit or installment accounts owned by BG that have characteristics the same as, or substantially similar to, such Accounts. (i) Documentation of Transfer. BG shall cause to be executed, delivered and/or filed any documents (including financing statements and/or continuation statements under the UCC) that would be necessary to perfect and maintain the security interest in and to the Purchased Assets contemplated by this Agreement. (j) Approval of Official Records. The execution, delivery and performance of BG's obligations under this Agreement, and the transactions contemplated hereby, have been duly approved by BG's Board of Directors. (k) Sale. BG agrees to treat the Conveyance, for all purposes (including all relevant tax and financial accounting purposes) as a sale on all federal and state tax returns, financial statements and other applicable documents. (l) Continuous Perfection. BG shall not change its name, identity or structure in any manner that might cause any financing or continuation statement filed pursuant to this Agreement to be misleading within the meaning of Section 9-402(7) of the UCC (or any other then applicable provision of the UCC) unless BG shall have delivered to Funding at least 30 days' prior written notice thereof and, no later than 30 days after making such change, shall have taken all action necessary or advisable to amend such financing statement or continuation statement so that it is not misleading. BG shall not change its chief executive office or change the location of its principal records concerning the Receivables or the Collections unless it has delivered to Funding at least 30 days' prior written notice of its intention to do so and has taken such action as is necessary or advisable to cause the interest of Funding in the Receivables and other Purchased Assets to continue to be perfected with the priority required by this Agreement. ARTICLE VI REPURCHASE OBLIGATION Section 6.1. Reassignment of Ineligible Receivables. (a) In the event any representation or warranty under Section 4.2(a)(ii), (iii), (iv), (vii), (viii) or (ix) is not true and correct in any material respect as of the date specified therein with respect to any Receivable or any related Account and as a result thereof Funding is required to accept reassignment of Ineligible Receivables previously sold by BG to Funding pursuant to Section 2.05(a) of the Pooling and Servicing Agreement, BG shall accept reassignment of Funding's interest in such Ineligible Receivables on the terms and conditions set forth in Section 6.1(b). (b) BG shall accept the reassignment from Funding of any Ineligible Receivables previously sold by BG to Funding on or prior to the end of the Monthly Period in which such reassignment obligation arises, and shall pay for such reassigned Ineligible Receivables by treating such Ineligible Receivables as if they were subject to a reversal of the entire unpaid principal balance thereof plus accrued and unpaid finance charges at the annual percentage rate applicable to such Receivables from the last date billed through the end of such Monthly Period and by adjusting the purchase price of future Receivables purchased as provided in Section 3.2 (the "Repurchase Price"). Upon any such reassignment of Ineligible Receivables, Funding shall automatically and without further action be deemed to sell, transfer, assign, set-over and otherwise convey to BG, without recourse, representation or warranty, all the right, title and interest of Funding in and to such Ineligible Receivables, all monies due or to become due with respect thereto and all proceeds thereof; and such reassigned Ineligible Receivables shall be treated by Funding as collected in full as of the date on which they were transferred. Funding shall execute such documents and instruments of transfer or assignment and take such other actions as shall reasonably be requested by BG to effect the reassignment to BG of such Ineligible Receivables pursuant to this subsection. Section 6.2. Reassignment of Certificateholders' Interest in Trust Portfolio. In the event any representation or warranty set forth in Section 4.1(a) or (c) or Section 4.2(a)(i), (v) or (vi) is not true and correct in any material respect and as a result thereof Funding is required to accept a reassignment of the Receivables transferred to the Trust by Funding pursuant to Section 2.06 of the Pooling and Servicing Agreement, BG shall be obligated to accept a reassignment of Funding's interest in such Receivables on the terms set forth below. BG shall pay to Funding by depositing in the Collection Account in same-day funds, not later than 12:00 noon New York City time, on the Distribution Date following the Monthly Period in which such reassignment obligation arises, in payment for such reassignment, an amount equal to the Portfolio Reassignment Price. ARTICLE VII CONDITIONS PRECEDENT Section 7.1. Conditions to Funding's Obligations Regarding Initial Receivables. The obligations of Funding to purchase the Receivables in the Initial Accounts on the Closing Date shall be subject to the satisfaction of the following conditions: (a) All representations and warranties of BG contained in this Agreement shall be true and correct on the Closing Date with the same effect as though such representations and warranties had been made on such date; (b) All information concerning the Initial Accounts provided to Funding shall be true and correct as of the Initial Cut-Off Date in all material respects; (c) BG shall have (i) delivered to Funding (or to the Trustee, if Funding so directs) a computer file, microfiche list or printed list containing a true and complete list of all Initial Accounts identified by account number and by the Receivables balance as of the Initial Cut-Off Date and (ii) substantially performed all other obligations required to be performed by the provisions of this Agreement; (d) BG shall have recorded and filed, at its expense, any UCC-1 or other financing statement with respect to the Receivables (other than Receivables in Additional Accounts) now existing and hereafter created for the transfer of accounts (as defined in Section 9-106 of the UCC) meeting the requirements of applicable state law in such manner and in such jurisdictions as would be necessary or advisable to perfect or evidence the sale of the Receivables from BG to Funding, and shall deliver a file-stamped copy of such financing statements or other evidence of such filings to Funding; (e) On or before the Closing Date, Funding and the Trustee shall have entered into an amendment to the Pooling and Servicing Agreement and the closing of such amendment to the Pooling and Servicing Agreement shall take place simultaneously with the initial closing hereunder; and (f) All corporate and legal proceedings and all instruments in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to Funding, and Funding shall have received from BG copies of all documents (including, without limitation, records of corporate proceedings) relevant to the transactions herein contemplated as Funding may reasonably have requested. Section 7.2. Conditions to Funding's Obligations Regarding Additional Receivables. The obligations of Funding to purchase any Receivables created on or after the Closing Date, shall be subject to the satisfaction of the following conditions: (a) All representations and warranties of BG contained in this Agreement shall be true and correct with the same effect as though such representations and warranties had been made on the date of such purchase; (b) All information (concerning any Account to which such Receivables relate) provided or to be provided to Funding shall be true and correct in all material respects on the date of such purchase; (c) BG shall have indicated in its computer files, microfiche list or printed list that such Receivables (created in respect of any Account to which such Receivables relate) have been sold to Funding in accordance with this Agreement and transferred to the Trust pursuant to the Pooling and Servicing Agreement for the benefit of the Certificateholders; and (d) BG shall have recorded and filed, at its expense, any UCC-1 or other financing statement with respect to such Receivables in any Additional Accounts in connection with the transfer of accounts (as defined in Section 9-106 of the UCC) meeting the requirements of applicable state law in such manner and in such jurisdictions as may be necessary or advisable to perfect or evidence the sale of such Receivables from BG to Funding, and shall deliver a file-stamped copy of such financing statements or other evidence of such filings to Funding. Section 7.3. Conditions Precedent to Obligations of BG. The obligations of BG to sell on any date Receivables shall be subject to the satisfaction of the following conditions: (a) All representations and warranties of Funding contained in this Agreement shall be true and correct with the same effect as though such representations and warranties had been made on the date of such sale; (b) Payment or provision for payment of the Purchase Price in accordance with the provision of Section 3.1 and 3.2 hereof shall have been made; and (c) All corporate and legal proceedings and all instruments in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to BG, and BG shall have received from Funding copies of all documents (including, without limitation, records of corporate proceedings) relevant to the transactions herein contemplated as BG may reasonably have requested. ARTICLE VIII TERM AND PURCHASE TERMINATION Section 8.1. Term. This Agreement shall commence as of the date of execution and delivery hereof and shall continue until the termination of the Trust as provided in Article XII of the Pooling and Servicing Agreement. Section 8.2. Purchase Termination. If BG shall fail generally to, or admit in writing its inability to, pay its debts as they become due; or if a proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of BG in an involuntary case under any Debtor Relief Law, or for the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of BG or for any substantial part of BG's property, or for the winding-up or liquidation of BG's affairs and, if instituted against BG, any such proceeding shall continue undismissed or unstayed and in effect, for a period of 60 consecutive days, or any of the actions sought in such proceeding shall occur; or if BG shall commence a voluntary case under any Debtor Relief Law, or if BG shall consent to the entry of an order for relief in an involuntary case under any Debtor Relief Law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of, or for, any substantial part of its property, or any general assignment for the benefit of its creditors; or BG or any subsidiary of BG shall have taken any corporate action in furtherance of any of the foregoing actions (each an "Insolvency Event"); then BG shall immediately cease to transfer Principal Receivables to Funding and shall promptly give notice to Funding and the Trustee of such Insolvency Event. Notwithstanding any cessation of the transfer to Funding of additional Principal Receivables, Principal Receivables transferred to Funding prior to the occurrence of such Insolvency Event and Collections in respect of such Principal Receivables and Finance Charge Receivables whenever created, accrued in respect of such Principal Receivables, shall continue to be property of Funding transferable by Funding to the Trust pursuant to the Pooling and Servicing Agreement. ARTICLE IX MISCELLANEOUS PROVISIONS Section 9.1. Amendment. This Agreement and any Conveyance Papers and the rights and obligations of the parties hereunder may not be changed orally, but only by an instrument in writing signed by Funding and BG in accordance with this Section 9.1. This Agreement and any Conveyance Papers may be amended from time to time by Funding and BG (i) to cure any ambiguity, (ii) to correct or supplement any provisions herein which may be inconsistent with any other provisions herein or in any such other Conveyance Papers, (iii) to add any other provisions with respect to matters or questions arising under this Agreement or any Conveyance Papers that shall not be inconsistent with the provisions of this Agreement or any Conveyance Papers, (iv) to change or modify the Purchase Price, (v) to change, modify, delete or add any other obligation of BG or Funding and (vi) to provide for the transfer by BG or Funding of its interest in and to all or part of the Accounts in accordance with the provisions of the Pooling and Servicing Agreement (if such transfer is for less than all of the Accounts, the respective rights, duties and obligations of Funding, BG and the Servicer will be determined at the time of such transfer); provided, however, that no amendment pursuant to clause (v) of this Section 9.1 shall be effective unless BG and Funding have been notified in writing that the Rating Agency Condition has been satisfied; provided, further, that such action shall not (as evidenced by an Opinion of Counsel delivered to the Trustee) adversely affect in any material respect the interests of the Trustee or the Certificateholders, unless the Trustee shall consent thereto. Any reconveyance executed in accordance with the provisions hereof shall not be considered to be an amendment to this Agreement. A copy of any amendment to this Agreement shall be sent to the Rating Agency. Section 9.2. GOVERNING LAW. THIS AGREEMENT AND THE CONVEYANCE PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 9.3. Notices. (a) All demands, notices, instructions, directions and communications (collectively, "Notices") under this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered at, mailed by registered mail, return receipt requested, or sent by facsimile transmission to (i) in the case of Funding, to The Neiman Marcus Group, Inc., 27 Boylston Street, Chestnut Hill, Massachusetts 02467, Attention of the General Counsel (facsimile no. 617-278-5397), with a copy to Neiman Marcus Funding Corporation, 1201 Elm Street, Dallas, Texas 75201, Attention of the President (facsimile no. 214-761-2650), (ii) in the case of BG, to The Neiman Marcus Group, Inc., 27 Boylston Street, Chestnut Hill, Massachusetts 02467, Attention of the General Counsel (facsimile no. 617-278- 5397), (iii) in the case of the Trustee, to The Bank of New York, 101 Barclay Street, Floor 12E, New York, New York 10286, Attention Corporate Trust Administration - Asset-Backed Finance Unit (facsimile no. 212-___-____), (iv) in the case of Moody's, to 99 Church Street, New York, New York 10007, Attention of ABS Monitoring Department 4th Floor (facsimile no. 212-553-4600) and (v) in the case of Standard & Poor's, to 55 Water Street, New York, New York 10004, Attention of Asset Backed Group, 15th Floor (facsimile no. 212- 312-0323). Section 9.4. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement or any Conveyance Paper shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions, and terms of this Agreement or any Conveyance Paper and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of any Conveyance Paper. Section 9.5. Assignment, Sale of Accounts. (a) Notwithstanding anything to the contrary contained herein, except as set forth in Section 9.5(b) and other than Funding's assignment of its rights, title, and interests in, to, and under this Agreement to the Trustee for the benefit of the Certificateholders as contemplated by the Pooling and Servicing Agreement and Section 9.6 hereof, the Accounts, this Agreement and all other Conveyance Papers may not be assigned by the parties hereto. (b) Notwithstanding the provisions of Section 9.5(a) hereof and of Sections 7.02 and 8.02 of the Pooling and Servicing Agreement, BG may assign, convey and transfer all of its consumer revolving credit card accounts or other consumer revolving credit or installment accounts and the receivables arising thereunder, which may include all, but not less than all, of the Accounts, and its interest in any Participation Interests (collectively, the "Assigned Assets"), together with all obligations under this Agreement or relating to the transactions contemplated hereby (collectively, the "Assumed Obligations"), to another entity (the "Assuming Entity") which may be an entity that is not affiliated with BG, and BG may assign, convey and transfer the Assigned Assets and the Assumed Obligations to the Assuming Entity, without the consent or approval of the Certificateholders in the proportions described in Section 9.02(a) of the Pooling and Servicing Agreement, in each case upon satisfaction of the following conditions: (i) the Assuming Entity, BG and the Trustee shall have entered into an assumption agreement (the "Assumption Agreement") providing for the Assuming Entity to assume the Assumed Obligations, including the obligation under this Agreement to transfer the Receivables arising under the Accounts to Funding, and BG shall have delivered to Funding and the Trustee an Officer's Certificate and an Opinion of Counsel each stating that such assumption and transfer comply with this Section, that such Assumption Agreement is a valid and binding obligation of such Assuming Entity enforceable against such Assuming Entity in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws affecting creditors' rights generally from time to time in effect and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity), and that all conditions precedent herein provided for relating to such transaction have been complied with; (ii) BG or the Assuming Entity shall have delivered to the Trustee copies of UCC-1 financing statements covering such Accounts to perfect Funding's interest in the Receivables arising herein and any Conveyance Papers or Supplemental Conveyance; (iii) Funding shall have received written notice that the Rating Agency Condition has been satisfied with respect to such transfer and assumption and shall have delivered copies of each such written notice to the Servicer and the Trustee; (iv) Funding shall have received an Opinion of Counsel with respect to clauses (i) and (ii) above and as to certain other matters that Funding may specify; and (v) the Trustee shall have received a Tax Opinion. Notwithstanding such assumption, BG shall continue to be liable for all representations and warranties and covenants made by it and all obligations performed or to be performed by it in its capacity hereunder prior to such transfer. Section 9.6. Acknowledgement and Agreement of BG. By execution below, BG expressly acknowledges and agrees that all of Funding's right, title, and interest in, to, and under this Agreement, including, without limitation, all of Funding's right, title, and interest in and to the Receivables purchased pursuant to this Agreement, shall be assigned by Funding to the Trustee for the benefit of the Certificateholders, and BG consents to such assignment. Additionally, BG agrees for the benefit of the Trustee that any amounts payable by BG to Funding hereunder which are to be paid by Funding to the Trustee for the benefit of the Certificateholders shall be paid by BG, on behalf of Funding, directly to the Trustee. Any payment required to be made on or before a specified date in same-day funds may be made on the prior business day in next-day funds. Section 9.7. Further Assurances. Funding and BG agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the other party more fully to effect the purposes of this Agreement and the Conveyance Papers, including, without limitation, the execution of any UCC financing statements or continuation statements or equivalent documents relating to the Receivables for filing under the provisions of the UCC or other law of any applicable jurisdiction. Section 9.8. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of Funding or BG, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. Section 9.9. Counterparts. This Agreement and all Conveyance Papers may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. Section 9.10. Binding Third-Party Beneficiaries. This Agreement and the Conveyance Papers will inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. The parties hereto intend that the Trustee shall be a third-party beneficiary of this Agreement. Section 9.11. Merger and Integration. Except as specifically stated otherwise herein, this Agreement and the Conveyance Papers set forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement and the Conveyance Papers. This Agreement and the Conveyance Papers may not be modified, amended, waived or supplemented except as provided herein. Section 9.12. Headings. The headings set forth herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. Section 9.13. Schedules and Exhibits. The schedules and exhibits attached hereto and referred to herein shall constitute a part of this Agreement and are incorporated into this Agreement for all purposes. Section 9.14. Survival of Representations and Warranties. All representations, warranties and agreements contained in this Agreement or contained in any Assignment, shall remain operative and in full force and effect and shall survive conveyance of the Receivables by Funding to the Trustee pursuant to the Pooling and Servicing Agreement. IN WITNESS WHEREOF, Funding and BG have caused this Agreement to be duly executed by their respective officers as of the day and year first above written. NEIMAN MARCUS FUNDING CORPORATION By ___________________________________ Name: ___________________________________ Title: ____________________________________ BERGDORF GOODMAN, INC. By ____________________________________ Name: _________________________________ Title: ________________________________ EXHIBIT A FORM OF SUPPLEMENTAL CONVEYANCE (As required by Section 2.2 of the Receivables Purchase Agreement) SUPPLEMENTAL CONVEYANCE NO. ____ dated as of __________, 2000, by and between BERGDORF GOODMAN, INC., as seller ("BG"), and NEIMAN MARCUS FUNDING CORPORATION, as purchaser ("Funding"), pursuant to the Receivables Purchase Agreement referred to below. WITNESSETH: WHEREAS, BG and Funding are parties to a Receivables Purchase Agreement, dated as of July __, 2000 (hereinafter as such agreement may have been, or may from time to time be, amended, supplemented or otherwise modified, the "Receivables Purchase Agreement"); WHEREAS, pursuant to the Receivables Purchase Agreement, BG wishes to designate Additional Accounts to be included as Accounts and BG wishes to convey the Receivables of such Additional Accounts, whether now existing or hereafter created, to Funding pursuant to the Receivables Purchase Agreement (as each such term is defined in the Receivables Purchase Agreement); and WHEREAS, Funding is willing to accept such designation and conveyance subject to the terms and conditions hereof. NOW, THEREFORE, BG and Funding hereby agree as follows: 1. Defined Terms. Each capitalized term used herein shall have the meanings specified in the Receivables Purchase Agreement unless otherwise defined herein. "Addition Date" shall mean, with respect to the Additional Accounts designated hereby, __________, 200__. 2. Designation of Additional Accounts. BG delivers herewith a computer file, microfiche list or printed list containing a true and complete schedule identifying all such Additional Accounts and specifying for each such Account, as of the Additional Cut-Off Date, its account number, the aggregate amount outstanding in such Account and the aggregate amount of Principal Receivables in such Account. Such computer file, microfiche list or printed list shall be, as of the date of this Supplemental Conveyance, incorporated into and made part of this Supplemental Conveyance and is marked as Schedule I to this Supplemental Conveyance. 3. Conveyance of Receivables. (a) BG does hereby sell, transfer, assign, set over and otherwise convey to Funding (collectively, the "Conveyance"), without recourse, all of its right, title and interest in, to and under the Receivables generated by such Additional Accounts, now existing and hereafter created, all Recoveries allocable to such Additional Accounts and all monies due or to become due thereunder and all amounts received with respect thereto and all proceeds (including, without limitation, "proceeds" as defined in Article 9 of the UCC) thereof. The foregoing sale, transfer, assignment, set-over and conveyance does not constitute and is not intended to result in a creation or an assumption by Funding of any obligation of the Servicer, BG or any other Person in connection with the Accounts, the Receivables or under any agreement or instrument relating thereto. (b) In connection with the Conveyance, BG agrees to record and file, at its own expense, one or more UCC financing statements (and continuation statements with respect to such financing statements when applicable) with respect to the Receivables, now existing and hereafter created, for the sale of accounts meeting the requirements of applicable state law in such manner and in such jurisdictions as may be necessary or advisable to perfect or evidence the sale and assignment of the Receivables to Funding, and to deliver a file-stamped copy of such financing statement or other evidence of such filing to Funding. (c) In connection with such sale, BG further agrees, at its own expense, on or prior to the date of this Supplemental Conveyance, to indicate in the appropriate computer files, microfiche list or other records that all Receivables created in connection with the Additional Accounts designated hereby have been conveyed to Funding pursuant to this Supplemental Conveyance. 4. Acceptance by Funding. Subject to the satisfaction of the conditions set forth in Section 6 of this Supplemental Conveyance, Funding hereby acknowledges its acceptance of all right, title and interest to the property, now existing and hereafter created, conveyed to Funding pursuant to Section 3(a) of this Supplemental Conveyance, and declares that it shall maintain such right, title and interest. Funding further acknowledges that, prior to or simultaneously with the execution and delivery of this Supplemental Conveyance, BG delivered to Funding (or to the Trustee if Funding has so directed) the computer file, microfiche list or printed list described in Section 2 of this Supplemental Conveyance. 5. Representations and Warranties of BG. BG hereby represents and warrants to Funding as of the date of this Supplemental Conveyance and as of the Addition Date that: (a) Legal, Valid and Binding Obligation. This Supplemental Conveyance constitutes a legal, valid and binding obligation of BG enforceable against BG in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally from time to time in effect and except as such enforceability may be limited by general principles of equity; (b) Eligibility of Accounts. Each Additional Account designated hereby is an Eligible Account; (c) Selection Procedures. (i) No selection procedure believed by BG to be adverse to the interests of Funding or the Investor Certificateholders was used in selecting the Additional Accounts; and (ii) the selection procedures used in selecting the Additional Accounts designated hereby are substantially the same as the selection procedures used in selecting the Initial Accounts identified in the computer file, microfiche list or printed list delivered pursuant to Section 2.1(c) of the Receivables Purchase Agreement; (d) Insolvency. BG is not insolvent and, after giving effect to the conveyance set forth in Section 3 of this Supplemental Conveyance, will not be insolvent; (e) Sale of Receivables. This Supplemental Conveyance constitutes a valid sale, transfer and assignment to Funding of all right, title and interest of BG in the Receivables and other Purchased Assets now existing or hereafter created, all monies due or to become due and all amounts received with respect thereto and the "proceeds" (as defined in the UCC) thereof, relating thereto; (f) No Conflict. The execution and delivery of this Supplemental Conveyance, the performance of the transactions contemplated by this Supplemental Conveyance and the fulfillment of the terms hereof, will not conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default under, any indenture, contract, agreement, mortgage, deed of trust or other instrument to which BG is a party or by which it or its properties are bound; (g) No Violation. The execution and delivery of this Supplemental Conveyance by BG, the performance of the transactions contemplated by this Supplemental Conveyance and the fulfillment of the terms hereof applicable to BG will not conflict with or violate any Requirements of Law applicable to BG; (h) No Proceedings. There are no proceedings or investigations, pending or, to the best knowledge of BG, threatened against BG before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality (i) asserting the invalidity of the Receivables Purchase Agreement or this Supplemental Conveyance, (ii) seeking to prevent the consummation of any of the transactions contemplated by the Receivables Purchase Agreement or this Supplemental Conveyance, (iii) seeking any determination or ruling that, in the reasonable judgment of BG, would materially and adversely affect the performance by BG of its obligations under the Receivables Purchase Agreement or this Supplemental Conveyance or (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Supplemental Conveyance; and (i) All Consents. All authorizations, consents, orders or approvals of any court or other governmental authority required to be obtained by BG in connection with the execution and delivery of this Supplemental Conveyance by BG and the performance of the transactions contemplated by this Supplemental Conveyance by BG, have been obtained. 6. Conditions Precedent. The acceptance of Funding set forth in Section 4 of this Supplemental Conveyance is subject to the satisfaction, on or prior to the Addition Date, of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties made by BG in Section 5 of this Supplemental Conveyance shall be true and correct as of the date of this Supplemental Conveyance and as of the Addition Date. (b) Officer's Certificate. BG shall have delivered to Funding an Officer's Certificate confirming that (i) the Additional Accounts shall be Eligible Accounts and (ii) (A) no selection procedures believed by BG or Funding to be materially adverse to the interests of the Investor Certificateholders shall have been used in selecting the Additional Accounts; (B) the selection procedures used in selecting the Additional Accounts shall be substantially the same as the selection procedures used in selecting the original Accounts identified in the computer file, microfiche list or printed list delivered pursuant to Section 2.01 of the Pooling and Servicing Agreement; (C) the list of Additional Accounts, as of the Additional Cut-Off Date, is a true and complete schedule identifying all such Additional Accounts and specifies for each such Account, as of the Additional Cut-Off Date, its account number, the aggregate amount outstanding in such Account and the aggregate amount of Principal Receivables in such Account. (c) Additional Information. BG shall have delivered to Funding such information as was reasonably requested by Funding to satisfy itself as to the accuracy of the representation and warranty set forth in Section 5(d) of this Supplemental Conveyance. 7. Ratification of the Receivables Purchase Agreement. The Receivables Purchase Agreement is hereby ratified, and all references to the "Receivables Purchase Agreement", to "this Agreement" and "herein" shall be deemed from and after the Addition Date to be a reference to the Receivables Purchase Agreement as supplemented by this Supplemental Conveyance. Except as expressly amended hereby, all the representations, warranties, terms, covenants and conditions of the Receivables Purchase Agreement shall remain unamended and shall continue to be, and shall, remain, in full force and effect in accordance with its terms and except as expressly provided herein shall not constitute or be deemed to constitute a waiver of compliance with or consent to non-compliance with any term or provision of the Receivables Purchase Agreement. 8. Counterparts. This Supplemental Conveyance may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have caused this Supplemental Conveyance to be duly executed and delivered by their respective duly authorized officers on the day and the year first above written. NEIMAN MARCUS FUNDING CORPORATION By ____________________________________ Name: _________________________________ Title: ________________________________ BERGDORF GOODMAN, INC. By __________________________________ Name: __________________________________ Title: __________________________________ Schedule I to Supplemental Conveyance Additional Accounts Schedule I LIST OF ACCOUNTS DEEMED INCORPORATED BY REFERENCE EX-10.17 6 0006.txt RECEIVABLES PURCHASE AGMT 3/1/1995 EXHIBIT 10.17 [EXECUTION COPY] THE NEIMAN MARCUS GROUP, INC., Seller and NEIMAN MARCUS FUNDING CORPORATION, Purchaser RECEIVABLES PURCHASE AGREEMENT Dated as of March 1, 1995 and Amended and Restated as of July 2, 2000 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . .4 Section 1.1. Definitions . . . . . . . . . . . . . . . .4 Section 1.2. Other Definitional Provisions. . . . . . .6 ARTICLE II PURCHASE AND CONVEYANCE OF RECEIVABLES. . . . . . . . . .7 Section 2.1. Purchase. . . . . . . . . . . . . . . . . .7 Section 2.2. Addition of Additional Accounts . . . . . .8 ARTICLE III CONSIDERATION AND PAYMENT. . . . . . . . . . . . . . . . . . .9 Section 3.1. Purchase Price. . . . . . . . . . . . . . .9 Section 3.2. Adjustments to Purchase Price . . . . . . .9 ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 10 Section 4.1. Representations and Warranties of NMG Relating to NMG10 Section 4.2. Representations and Warranties of NMG Relating to the Agreement and the Receivables. . . . . . . . . . . 11 Section 4.3. Representations and Warranties of Funding 13 ARTICLE V COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 5.1. NMG Covenants . . . . . . . . . . . . . . 14 Section 5.2. Funding Covenant; Servicing Fee . . . . . 17 ARTICLE VI REPURCHASE OBLIGATION. . . . . . . . . . . . . . . . . . . . 17 Section 6.1. Reassignment of Ineligible Receivables. . 17 Section 6.2. Reassignment of Certificateholders' Interest in Trust Portfolio. . . . . . . . . . . . . . . . . . . . . 17 ARTICLE VII CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . 18 Section 7.1. Conditions to Funding's Obligations Regarding Initial Receivables. . . . . . . . . . . . . . . . . . . . 18 Section 7.2. Conditions to Funding's Obligations Regarding Additional Receivables . . . . . . . . . . . . . . 19 Section 7.3. Conditions Precedent to Obligations of NMG19 ARTICLE VIII TERM AND PURCHASE TERMINATION. . . . . . . . . . . . . . . . 20 Section 8.1. Term. . . . . . . . . . . . . . . . . . . 20 Section 8.2. Purchase Termination. . . . . . . . . . . 20 ARTICLE IX MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . 20 Section 9.1. Amendment . . . . . . . . . . . . . . . . 20 SECTION 9.2. GOVERNING LAW . . . . . . . . . . . . . . 21 Section 9.3. Notices . . . . . . . . . . . . . . . . . 21 Section 9.4. Severability of Provisions. . . . . . . . 21 Section 9.5. Assignment, Sale of Accounts. . . . . . . 22 Section 9.6. Acknowledgement and Agreement of NMG. . . 23 Section 9.7. Further Assurances. . . . . . . . . . . . 23 Section 9.8. No Waiver; Cumulative Remedies. . . . . . 23 Section 9.9. Counterparts . . . . . . . . . . . . . . 23 Section 9.10. Binding Third-Party Beneficiaries. . . . 23 Section 9.11. Merger and Integration . . . . . . . . . 24 Section 9.12. Headings . . . . . . . . . . . . . . . . 24 Section 9.13. Schedules and Exhibits . . . . . . . . . 24 Section 9.14. Survival of Representations and Warranties24 EXHIBIT Exhibit A - Form of Supplemental Conveyance SCHEDULE Schedule 1 - List of Accounts [Deemed Incorporated by Reference] RECEIVABLES PURCHASE AGREEMENT, dated as of March 1, 1995 and amended and restated as of July 2, 2000, by and between THE NEIMAN MARCUS GROUP, INC., a Delaware corporation ("NMG"), and NEIMAN MARCUS FUNDING CORPORATION, a Delaware corporation and a subsidiary of NMG ("Funding"). NMG, as seller, and Funding, as purchaser, originally entered into this Agreement (the "Existing Agreement") as of March 1, 1995. Pursuant to Section 9.1 of the Existing Agreement, the parties desire to amend and restate the Existing Agreement as set forth herein. It is hereby agreed by and between Funding and NMG as follows: ARTICLE I DEFINITIONS Section 1.1. Definitions. Each capitalized term used herein or in any certificate, document, or Conveyance Paper made or delivered pursuant hereto, and not defined herein or therein, shall have the meaning specified in the Pooling and Servicing Agreement. In addition, the following words and phrases shall have the following meanings: "Account" shall mean (a) each revolving credit account or other consumer revolving credit or installment account established pursuant to an Account Agreement between NMG and any Person and identified by account number and by the receivables balance in a computer file, microfiche list or printed list delivered to Funding by NMG (and, in turn to the Trustee by Funding pursuant to Section 2.01 of the Pooling and Servicing Agreement) on or prior to the Closing Date, (b) each Additional Account, (c) any account originated as a replacement of an Account in connection with the upgrade of such Account to premium status (provided that such a replacement account can be traced or identified by reference to, or by way of, the applicable computer file, microfiche list or printed list previously delivered pursuant hereto), (d) each account into which an Account shall be transferred (a "Transferred Account") provided that (i) such transfer was made in accordance with the Account Guidelines and (ii) such account can be traced or identified as an account into which an Account has been transferred, and (e) each surviving account resulting from the combination, in accordance with the Account Guidelines, of two or more of the Accounts but shall exclude (f) any Account all of the Receivables of which are either: (i) after the Removal Date, removed by Funding pursuant to Section 2.10 of the Pooling and Servicing Agreement, (ii) reassigned to Funding pursuant to Section 2.05 of the Pooling and Servicing Agreement or (iii) assigned and transferred to the Servicer pursuant to Section 3.03 of the Pooling and Servicing Agreement. "Addition Date" shall mean (a) with respect to any Additional Accounts designated by Funding pursuant to Section 2.09(a), (b) or (d) of the Pooling and Servicing Agreement, the date from and after which such Additional Accounts are to be included as Accounts pursuant to Section 2.09(a), (b) or (d) of the Pooling and Servicing Agreement, and (b) with respect to any Participation Interests, the date from and after which such Participation Interests are to be included as assets of the Trust pursuant to Section 2.09(a) or (b) of the Pooling and Servicing Agreement. For the avoidance of doubt, the "Addition Date" for each account identified in the Restatement Date Account Schedule that was not designated as an Account prior to the Restatement Date is the Restatement Date. "Addition Notice Date" shall have the meaning specified in Section 2.2 of this Agreement. "Agreement" shall mean this Receivables Purchase Agreement and all amendments hereof and supplements hereto. "Closing Date" shall mean March 15, 1995. "Conveyance" shall have the meaning specified in Section 2.1(a). "Conveyance Papers" shall have the meaning specified in Section 4.1(c). "Credit Adjustment" shall have the meaning specified in Section 3.2. "Debtor Relief Laws" shall mean (i) the Bankruptcy Code of the United States of America and (ii) all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, readjustment of debt, marshalling of assets or similar debtor relief laws of the United States, any state or any foreign country from time to time in effect affecting the rights of creditors generally. "Funding" shall mean Neiman Marcus Funding Corporation, a Delaware corporation. "Initial Account" shall mean any Account in existence on the Closing Date. "Initial Cut-Off Date" shall mean the close of business on March 1, 1995. "Insolvency Event" shall have the meaning specified in Section 8.2. "New Principal Receivables" shall have the meaning set forth in Section 3.1. "NMG" shall mean The Neiman Marcus Group, Inc., a Delaware corporation. "Pooling and Servicing Agreement" shall mean the Pooling and Servicing Agreement, dated as of March 1, 1995, and amended and restated as of July 2, 2000, among NMG, as Servicer, Funding, as Seller and the Trustee, and all amendments and supplements thereto. "Portfolio Reassignment Price" shall mean the portion of the amount payable by Funding to the Trustee pursuant to Section 2.06 of the Pooling and Servicing Agreement. "Purchase Price" shall have the meaning set forth in Section 3.1. "Purchased Assets" shall have the meaning set forth in Section 2.1. "Receivables" shall mean "Receivables" (as such term is defined in the Pooling and Servicing Agreement) existing or created after the Initial Cut--Off Date in respect of the Initial Accounts or the Additional Cut-Off Date in respect of Additional Accounts. "Repurchase Price" shall have the meaning set forth in Section 6.1. "Supplemental Conveyance" shall have the meaning set forth in Section 2.2. "Trust" shall mean the trust created by the Pooling and Servicing Agreement. "Trustee" shall mean The Bank of New York, a New York banking corporation, as, and acting in the capacity of, Trustee under the Pooling and Servicing Agreement, or its successor-in-interest, or any successor trustee appointed in accordance with the Pooling and Servicing Agreement. Section 1.2. Other Definitional Provisions. (a) Each capitalized term defined in this Agreement shall have the defined meaning when used in any certificate, other document, or Conveyance Paper made or delivered pursuant hereto unless otherwise defined therein. (b) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement or any Conveyance Paper shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, Subsection, Schedule and Exhibit references contained in this Agreement are references to Sections, Subsections, Schedules and Exhibits in or to this Agreement unless otherwise specified. (c) All determinations of the principal or finance charge balance of Receivables, and of any collections thereof, shall be made in accordance with the Pooling and Servicing Agreement and all applicable Supplements. (d) As used in this Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in any such certificate or other document to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Agreement or in any such certificate or other document shall control. (e) Any reference to each Rating Agency shall only apply to any specific rating agency if such rating agency is then rating any outstanding Series. (f) Unless otherwise specified, references to any amount as on deposit or outstanding on any particular date shall mean such amount at the close of business on such day. ARTICLE II PURCHASE AND CONVEYANCE OF RECEIVABLES Section 2.1. Purchase. (a) By execution of this Agreement, NMG does hereby sell, transfer, assign, set over and otherwise convey to Funding (collectively, the "Conveyance"), without recourse all of its right, title and interest in, to and under (i) the Receivables now existing or hereafter created from time to time under the Initial Accounts prior to the termination of this Agreement pursuant to Article VIII hereof, (ii) all Recoveries allocable to the foregoing Accounts and all Recoveries which are identified as relating to specific Defaulted Receivables and (iii) all monies due or to become due thereunder and all amounts received with respect thereto and all proceeds (including, without limitation, "proceeds" as such term is defined in the UCC) thereof (the "Purchased Assets"). (b) In connection with such Conveyance, NMG agrees (i) to record and file, at its own expense, any financing statements (and continuation statements with respect to such financing statements when applicable) and to take such other action with respect to the Receivables now existing and hereafter created, meeting the requirements of applicable state law in such manner and in such jurisdictions as are necessary to perfect, and maintain perfection of, the Conveyance of such Purchased Assets from NMG to Funding on and after the Closing Date, (ii) that such financing statements shall name NMG, as seller, and Funding, as purchaser, of the Receivables and (iii) to deliver a file-stamped copy of such financing statements or other evidence of such filings (excluding such continuation statements, which shall be delivered as filed) to Funding (or to the Trustee, if Funding so directs) as soon as is practicable after filing. (c) In connection with such Conveyance, NMG further agrees that it will, at its own expense, on or prior to the Closing Date, (i) indicate in its computer files or microfiche or printed lists that Receivables created in connection with the Initial Accounts have been conveyed (a) to Funding pursuant to this Agreement and (b) by Funding to the Trustee pursuant to the Pooling and Servicing Agreement for the benefit of the Certificateholders by including (or deleting, in the case of Removed Accounts) in such computer files and microfiche or printed lists the code or other notation identifying each such Account and (ii) deliver to Funding on or prior to the Closing Date a computer file or microfiche or printed list containing a true and complete list of all such Initial Accounts specifying for each such Account, as of the Initial Cut-Off Date (A) its account number, (B) the aggregate amount outstanding in such Account and (C) the aggregate amount of Principal Receivables in such Initial Account. Such computer files or microfiche or printed lists, as supplemented from time to time to reflect Additional Accounts or Removed Accounts, shall be marked as Schedule I to this Agreement, shall be delivered to Funding (or to the Trustee, if so directed by Funding) and marked as proprietary and confidential, and are hereby incorporated into and made a part of this Agreement. NMG further agrees not to alter the code or other notation referenced in clause (i) of this paragraph with respect to any Account during the term of this Agreement unless and until (x) such Account becomes a Removed Account or (y) NMG shall have delivered to Funding and the Trustee at least 30 days' prior written notice of its intention to do so and has taken such action as is necessary or advisable to cause the respective interests of Funding and the Trustee in the Receivables and other Trust Assets to continue to be perfected with the priority required by this Agreement and the Pooling and Servicing Agreement, respectively. (d) It is the intention of the parties hereto that the conveyance of the Receivables and the other Purchased Assets by NMG to Funding as provided in this Section 2.1 be, and be construed as, an absolute sale of the Receivables by NMG to Funding. Furthermore, it is not intended that such conveyance be deemed a pledge of the Receivables and the other Purchased Assets by NMG to Funding to secure a debt or other obligation of NMG. This Agreement shall also be deemed to be a security agreement within the meaning of Article 9 of the UCC and the conveyance provided for in this Section 2.1 shall be deemed to be a grant by NMG to Funding of a "security interest" within the meaning of Article 9 of the UCC in all of NMG's right, title and interest in and to the Receivables and the other Purchased Assets and all amounts payable to the holders of the Receivables after the Closing Date in accordance with the terms thereof and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property. Section 2.2. Addition of Additional Accounts. (a) If, from time to time, Funding becomes obligated to designate Additional Accounts pursuant to Section 2.09(a) of the Pooling and Servicing Agreement, then Funding shall give NMG written notice thereof on or before the eighth Business Day (the "Addition Notice Date") prior to the Addition Date therefor, and NMG shall on or before the Addition Date, designate sufficient Eligible Accounts to be included as Accounts so that after the inclusion thereof Funding will be in compliance with the requirements of Section 2.09 of the Pooling and Servicing Agreement. NMG shall have sole responsibility for selecting such Additional Accounts and shall on or prior to the Addition Date therefor execute and deliver to Funding a written assignment from NMG to Funding in substantially the form of Exhibit A (the "Supplemental Conveyance"). Upon such designation, such Automatic Additional Accounts shall be deemed to be Accounts hereunder. (b) Subject to the limitations set forth in Section 2.09(d) of the Pooling and Servicing Agreement and in any Supplement, Automatic Additional Accounts shall be included as Accounts from and after the date of creation thereof (other than any such date of creation falling during each period beginning on an Automatic Addition Termination Date or an Automatic Addition Suspension Date and ending on the day immediately preceding a Restart Date). ARTICLE III CONSIDERATION AND PAYMENT Section 3.1. Purchase Price. (a) The "Purchase Price" for the Receivables which came into existence on or prior to the Closing Date conveyed to Funding under this Agreement shall be payable on the Closing Date and shall be an amount equal to 100% of Principal Receivables so conveyed, adjusted to reflect such factors as NMG and Funding mutually agree will result in a Purchase Price determined to approximate the fair market value of such Receivables. Such computation of initial purchase price shall assume no reinvestment in new Receivables. The Purchase Price for the Receivables (including Receivables in Additional Accounts) to be conveyed to Funding under this Agreement that come into existence after the Closing Date shall be payable on the Distribution Date following the Monthly Period during which such Receivables are conveyed by NMG to Funding in an amount equal to 100% of the Principal Receivables so conveyed (the "New Principal Receivables"), adjusted to reflect such factors as NMG and Funding mutually agree will result in a Purchase Price determined to approximate the fair market value of such New Principal Receivables. (b) The Purchase Price to be paid by Funding on the Closing Date and on each Addition Date shall be paid (i) in cash, (ii) with the consent of NMG, by means of capital contributed by NMG to Funding in the form of a contribution of the Receivables in the related Additional Accounts, (iii) with the consent of NMG pursuant to the Revolving Credit Agreement, dated as of March 1, 1995, between NMG and Funding, or (iv) with the consent of NMG, any combination of the foregoing. Section 3.2. Adjustments to Purchase Price. The Purchase Price shall be adjusted on each Distribution Date (a "Credit Adjustment") with respect to any Receivable previously conveyed to Funding by NMG which has since been reduced by NMG or the Servicer because of a rebate, refund, unauthorized charge or billing error to a cardholder because such Receivable was created in respect of merchandise that was refused or returned by a cardholder. The amount of such adjustment shall equal (x) the reduction in the principal balance of such Receivable resulting from the occurrence of such event multiplied by (y) a fraction, the numerator of which is the Purchase Price paid with respect to all Receivables on the Payment Date on which such Receivables were purchased computed in accordance with Section 3.1 and the denominator of which is the aggregate face amount of the Principal Receivables paid for on such date pursuant to such Section. In the event that an adjustment pursuant to this Section 3.2 causes the Purchase Price to be a negative number, NMG agrees that, not later than 11:00 A.M. New York City time on such Distribution Date, NMG shall pay to Funding, by making a deposit into the Collection Account in same-day funds, an amount equal to the amount by which the Purchase Price minus the Credit Adjustment would be reduced below zero. ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.1. Representations and Warranties of NMG Relating to NMG. NMG hereby represents and warrants to, and agrees with, Funding as of the Closing Date and on each Addition Date, that: (a) Organization and Good Standing. NMG is a corporation validly existing in good standing under the laws of the State of Delaware, and has full corporate power, authority and legal right to own its properties and conduct its business as such properties are presently owned and such business is presently conducted, and to execute, deliver and perform its obligations under this Agreement. (b) Due Qualification. NMG is duly qualified to do business and is in good standing as a foreign corporation (or is exempt from such requirements), and has obtained all necessary licenses and approvals in each jurisdiction in which failure to so qualify or to obtain such licenses and approvals would render any Account Agreement relating to an Account owned by NMG or any Receivable unenforceable by NMG, the Seller, the Servicer or the Trustee or would have a material adverse effect on the interests of the Investor Certificateholders. (c) Due Authorization. The execution, delivery and performance of this Agreement and any other document or instrument delivered pursuant hereto (such other documents or instruments, collectively, the "Conveyance Papers") and the consummation of the transactions provided for in this Agreement or any other Conveyance Papers have been duly authorized by all necessary corporate action on the part of NMG. (d) No Conflict. The execution and delivery of this Agreement and the Conveyance Papers by NMG, the performance of the transactions contemplated by this Agreement and the Conveyance Papers, and the fulfillment of the terms of this Agreement and the Conveyance Papers applicable to NMG will not conflict with, violate or result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default under, any indenture, contract, agreement, mortgage, deed of trust, or other instrument to which NMG is a party or by which it or any of its properties are bound. (e) No Violation. The execution, delivery and performance of this Agreement and the Conveyance Papers by NMG and the fulfillment by NMG of the terms hereof and thereof will not conflict with or violate any Requirements of Law applicable to NMG. (f) No Proceedings. There are no proceedings or investigations pending or, to the best knowledge of NMG, threatened against NMG, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality (i) asserting the invalidity of this Agreement or any of the Conveyance Papers, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any of the Conveyance Papers, (iii) seeking any determination or ruling that, in the reasonable judgment of NMG, would materially and adversely affect the performance by NMG of its obligations under this Agreement or any of the Conveyance Papers, (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement or any of the Conveyance Papers or (v) seeking to affect adversely the income tax attributes of the Trust under United States Federal or applicable state income or franchise tax systems. (g) All Consents. All approvals, authorizations, consents, orders or registrations or declarations with any Person or any governmental body or official required in connection with the execution and delivery by NMG of this Agreement or any of the Conveyance Papers and the performance of the transactions contemplated by this Agreement or any of the Conveyance Papers by NMG have been duly obtained, effected or given and are in full force and effect. (h) Insolvency. NMG is not insolvent and no Insolvency Event with respect to NMG has occurred, and the transfer of the Receivables by NMG to Funding contemplated hereby has not been made in contemplation of such insolvency or Insolvency Event. The representations and warranties set forth in this Section 4.1 shall survive the transfer and assignment of the Receivables to Funding. Upon discovery by NMG or Funding of a breach of any of the foregoing representations and warranties, the party discovering such breach shall give written notice to the other party within three Business Days following such discovery. NMG agrees to cooperate with Funding and the Trustee in attempting to cure any such breach. Section 4.2. Representations and Warranties of NMG Relating to the Agreement and the Receivables. (a) Representations and Warranties. NMG hereby represents and warrants to Funding as of the date of this Agreement, as of the Closing Date and, with respect to Additional Accounts, as of the related Addition Date that: (i) this Agreement and, in the case of Additional Accounts, the related Supplemental Conveyance, each constitute a valid and binding obligation of NMG enforceable against NMG in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity); (ii) as of the Initial Cut-Off Date, and as of the related Addition Date with respect to Additional Accounts, Schedule I to this Agreement and the related computer file, microfiche list or printed list delivered pursuant to this Agreement, as supplemented to such date, is an accurate and complete listing in all material respects of all the Accounts as of the Initial Cut-Off Date or such Additional Cut- Off Date, as the case may be, and the information contained therein with respect to the identity of such Accounts and the Receivables existing thereunder is true and correct in all material respects as of the Initial Cut-Off Date or such applicable Additional Cut-Off Date, as the case may be; (iii) NMG is the legal and beneficial owner of all right, title and interest in and to each Receivable, NMG has the full right, power and authority to transfer the Receivables pursuant to this Agreement; and each Receivable conveyed to Funding by NMG has been conveyed to Funding free and clear of any Lien of any Person claiming through or under NMG or any of its Affiliates (other than Liens permitted under Section 5.1(b)) and in compliance, in all material respects, with all Requirements of Law applicable to NMG; (iv) all authorizations, consents, orders, approvals or authorizations of or registrations or declarations with any Governmental Authority required to be obtained, effected or given by NMG in connection with the conveyance of such Receivable to Funding have been duly obtained, effected or given and are in full force and effect; (v) this Agreement or, in the case of Additional Accounts, the related Supplemental Conveyance constitutes a valid transfer and assignment to Funding of all right, title and interest of NMG in and to the Receivables and the other Purchased Assets, all monies due or to become due with respect thereto and all proceeds thereof, and, in the case of Additional Accounts, the related Supplemental Conveyance, will constitute, at the time of such addition, an absolute sale of such property and the proceeds thereof. Upon the filing of the financing statements pursuant to Section 2.1(a) and, in the case of Receivables hereafter created and the proceeds thereof, upon the creation thereof, Funding shall have a first-priority security interest in such property and proceeds (as defined in the UCC) except for Liens permitted by Section 5.1(b); (vi) except as otherwise expressly provided in this Agreement, the Pooling and Servicing Agreement or any Supplement, neither NMG nor any Person claiming through or under NMG has any claim to or interest in the Collection Account, the Special Funding Account, any Series Account or any Series Enhancement; (vii) on the Initial Cut-Off Date, each Initial Account is an Eligible Account and, on the applicable Additional Cut-Off Date, each related Additional Account is an Eligible Account; (viii) on the Initial Cut-Off Date, each Receivable then existing is an Eligible Receivable, and, on the applicable Additional Cut-Off Date, each Receivable contained in any related Additional Account is an Eligible Receivable; (ix) as of the date of the creation of any new Receivable, such Receivable is an Eligible Receivable; and (x) no selection procedure has been utilized by NMG that NMG reasonably believes would result in a selection of Initial Accounts (from among the available Eligible Accounts owned by NMG on the Trust Cut-Off Date) that would be materially adverse to the interests of the Investor Certificateholders. (b) Notice of Breach. The representations and warranties set forth in this Section 4.2 shall survive the transfer and assignment of the Receivables to Funding. Upon discovery by either NMG or Funding of a breach of any of the representations and warranties set forth in this Section 4.2, the party discovering such breach shall give written notice to the other party within three Business Days following such discovery; provided that the failure to give notice within three Business Days does not preclude subsequent notice. NMG hereby acknowledges that Funding intends to rely on the representations hereunder in connection with representations made by Funding to secured parties, assignees or subsequent transferees including but not limited to transfers made by Funding to the Trust pursuant to the Pooling and Servicing Agreement. NMG agrees to cooperate with Funding and the Trustee in attempting to cure any such breach. Section 4.3. Representations and Warranties of Funding. As of the Closing Date, Funding hereby represents and warrants to, and agrees with, NMG that: (a) Organization and Good Standing. Funding is a corporation validly existing in good standing under the laws of the State of Delaware and has full power and authority to own its properties and conduct its business as such properties are presently owned and such business is presently conducted and to execute, deliver and perform its obligations under this Agreement and the Conveyance Papers. (b) Due Authorization. The execution and delivery of this Agreement and the Conveyance Papers and the consummation of the transactions provided for in this Agreement and the Conveyance Papers have been duly authorized by Funding by all necessary corporate action on the part of Funding. (c) No Conflict. The execution and delivery of this Agreement and the Conveyance Papers, the performance of the transactions contemplated by this Agreement and the Conveyance Papers, and the fulfillment of the terms hereof and thereof, will not conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default under, any indenture, contract, agreement, mortgage, deed of trust or other instrument to which Funding is a party or by which it or any of its properties are bound. (d) No Violation. The execution, delivery and performance of this Agreement and the Conveyance Papers by Funding and the fulfillment of the terms contemplated herein and therein applicable to Funding will not conflict with or violate any Requirements of Law applicable to Funding. (e) No Proceedings. There are no proceedings or investigations pending or, to the best knowledge of Funding, threatened against Funding, before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality (i) asserting the invalidity of this Agreement or any of the Conveyance Papers, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any of the Conveyance Papers, (iii) seeking any determination or ruling that, in the reasonable judgment of Funding, would materially and adversely affect the performance by Funding of its obligations under this Agreement or any of the Conveyance Papers or (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement or any of the Conveyance Papers. (f) All Consents. All authorizations, consents, orders or approvals of or registrations or declarations with any Governmental Authority required to be obtained, effected or given by Funding in connection with the execution and delivery by Funding of this Agreement and the Conveyance Papers and the performance of the transactions contemplated by this Agreement and the Conveyance Papers or the fulfillment of the terms of this Agreement and the Conveyance Papers by Funding have been duly obtained, effected or given and are in full force and effect. The representations and warranties set forth in this Article IV shall survive the Conveyance of the Receivables to Funding and termination of the rights and obligations of Funding and NMG under this Agreement. Upon discovery by Funding or NMG of a breach of any of the foregoing representations and warranties, the party discovering such breach shall give prompt written notice to the other party. ARTICLE V COVENANTS Section 5.1. NMG Covenants. NMG hereby covenants and agrees with Funding as follows: (a) Receivables not to be Evidenced by Promissory Notes. Except in connection with the enforcement or collection of an Account, NMG will take no action to cause any Receivable transferred by it pursuant hereto to be evidenced by any "instrument", other than an instrument that, taken together with one or more other writings constitutes chattel paper (as such terms are defined in the UCC) and, if any such Receivable is so evidenced (whether or not in connection with the enforcement or collection of an Account), it shall be deemed to be an Ineligible Receivable in accordance with Section 6.1(a) and shall be reassigned to the Seller in accordance with Section 6.1(b). (b) Security Interests. Except for the conveyances hereunder or as otherwise provided herein, NMG will not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist, any Lien on any Receivable, whether now existing or hereafter created, or any interest therein; and NMG will immediately notify Funding of the existence of any Lien on any Receivable; and NMG shall defend the right, title and interest of Funding in, to and under the Receivables, whether now existing or hereafter created, against all claims of third parties claiming through or under NMG; provided, however, that nothing in this Section 5.1(b) shall prevent or be deemed to prohibit NMG from suffering to exist upon any of the Receivables any Lien for taxes if such taxes shall not at the time be due and payable or if the Seller shall currently be contesting the validity thereof in good faith by appropriate proceedings and shall have set aside on its books adequate reserves with respect thereto. (c) NMG's Interest. Except for the conveyances hereunder and in connection with any transaction permitted pursuant to Section 9.5 or the Pooling and Servicing Agreement, NMG hereby agrees not to transfer, assign, exchange or otherwise convey or pledge, hypothecate or otherwise grant a security interest in the Accounts and any such attempted transfer, assignment, exchange, conveyance, pledge, hypothecation or grant shall be void. (d) Account Allocations. In the event that NMG is unable for any reason to transfer Receivables to Funding in accordance with the provisions of this Agreement (including, without limitation, by reason of the application of the provisions of Section 8 or any Governmental Authority having regulatory authority over NMG or any court of competent jurisdiction ordering that NMG not transfer any additional Principal Receivables to Funding) then, in any such event, NMG agrees (except as prohibited by any such order) to allocate and pay to Funding, after the date of such inability, all amounts in the manner by which Funding will allocate and pay to the Trust after such inability by Funding pursuant to Section 2.11 of the Pooling and Servicing Agreement. (e) Delivery of Collections or Recoveries. If NMG receives Collections or Recoveries, NMG agrees to pay to Funding (or to the Servicer if Funding so directs) all such Collections and Recoveries as soon as practicable after receipt thereof but in no event later than two Business Days after the Date of Processing by NMG. (f) Notice of Liens. NMG shall notify Funding promptly after becoming aware of any Lien on any Receivable other than the conveyances hereunder or any Lien permitted under Section 5.1(b) hereof or Section 2.07(b) of the Pooling and Servicing Agreement. (g) Periodic Rate Finance Charges. (i) Except (x) as otherwise required by any Requirement of Law or (y) as is deemed by NMG in its sole discretion to be necessary, it shall not at any time reduce the annual percentage rates of the Periodic Finance Charges assessed on the Receivables or other fees charged on any of the Accounts if, as a result of any such reduction, either (i) NMG's reasonable expectation is that such reduction will cause a Pay Out Event to occur or (ii) such reduction is not also applied to any comparable segment of consumer revolving credit card accounts or other consumer revolving credit or installment accounts owned by NMG which have characteristics the -same as, or substantially similar to, such Accounts. (h) Account Agreements and Guidelines. NMG shall comply with and perform its obligations under the Account Agreements relating to the Accounts and the Account Guidelines except insofar as any failure to so comply or perform would not materially and adversely affect the rights of Funding hereunder and the rights of the Trust or the Certificateholders under the Pooling and Servicing Agreement or the Certificates. Subject to compliance with all Requirements of Law, NMG may change the terms and provisions of the Account Agreements or the Account Guidelines with respect to any of the Accounts in any respect (including the calculation of the amount, or the timing, of charge-offs and the Periodic Finance Charges and other fees to be assessed thereon) only if in the reasonable judgment of NMG such change is made applicable to any comparable segment of the consumer revolving credit card accounts or other consumer revolving credit or installment accounts owned by NMG that have characteristics the same as, or substantially similar to, such Accounts. (i) Documentation of Transfer. NMG shall cause to be executed, delivered and/or filed any documents (including financing statements and/or continuation statements under the UCC) that would be necessary to perfect and maintain the security interest in and to the Purchased Assets contemplated by this Agreement. (j) Approval of Official Records. The execution, delivery and performance of NMG's obligations under this Agreement, and the transactions contemplated hereby, have been duly approved by NMG's Board of Directors. (k) Sale. NMG agrees to treat the Conveyance, for all purposes (including all relevant tax and financial accounting purposes) as a sale on all federal and state tax returns, financial statements and other applicable documents. (l) Continuous Perfection. NMG shall not change its name, identity or structure in any manner that might cause any financing or continuation statement filed pursuant to this Agreement to be misleading within the meaning of Section 9-402(7) of the UCC (or any other then applicable provision of the UCC) unless NMG shall have delivered to Funding at least 30 days prior written notice thereof and, no later than 30 days after making such change, shall have taken all action necessary or advisable to amend such financing statement or continuation statement so that it is not misleading. NMG shall not change its chief executive office or change the location of its principal records concerning the Receivables or the Collections unless it has delivered to Funding at least 30 days prior written notice of its intention to do so and has taken such action as is necessary or advisable to cause the interest of Funding in the Receivables and other Purchased Assets to continue to be perfected with the priority required by this Agreement. Section 5.2. Funding Covenant; Servicing Fee. Funding covenants and agrees with NMG to pay NMG from available amounts any portion of the Servicing Fee that is not paid to NMG pursuant to Section 3.02 of the Pooling and Servicing Agreement. If NMG is subsequently paid such Servicing Fee pursuant to the Pooling and Servicing Agreement, then NMG shall promptly return such payments to Funding. ARTICLE VI REPURCHASE OBLIGATION Section 6.1. Reassignment of Ineligible Receivables. (a) In the event any representation or warranty under Section 4.2(a)(ii), (iii), (iv), (vii), (viii) or (ix) is not true and correct in any material respect as of the date specified therein with respect to any Receivable or any related Account and as a result thereof Funding is required to accept reassignment of Ineligible Receivables previously sold by NMG to Funding pursuant to Section 2.05(a) of the Pooling and Servicing Agreement, NMG shall accept reassignment of Funding's interest in such Ineligible Receivables on the terms and conditions set forth in Section 6.1(b). (b) NMG shall accept the reassignment from Funding of any Ineligible Receivables previously sold by NMG to Funding on or prior to the end of the Monthly Period in which such reassignment obligation arises, and shall pay for such reassigned Ineligible Receivables by treating such Ineligible Receivables as if they were subject to a reversal of the entire unpaid principal balance thereof plus accrued and unpaid finance charges at the annual percentage rate applicable to such Receivables from the last date billed through the end of such Monthly Period and by adjusting the purchase price of future Receivables purchased as provided in Section 3.2 (the "Repurchase Price"). Upon any such reassignment of Ineligible Receivables, Funding shall automatically and without further action be deemed to sell, transfer, assign, set-over and otherwise convey to NMG, without recourse, representation or warranty, all the right, title and interest of Funding in and to such Ineligible Receivables, all monies due or to become due with respect thereto and all proceeds thereof; and such reassigned Ineligible Receivables shall be treated by Funding as collected in full as of the date on which they were transferred. Funding shall execute such documents and instruments of transfer or assignment and take such other actions as shall reasonably be requested by NMG to effect the reassignment to NMG of such Ineligible Receivables pursuant to this subsection. Section 6.2. Reassignment of Certificateholders' Interest in Trust Portfolio. In the event any representation or warranty set forth in Section 4.1(a) or (c) or Section 4.2(a)(i), (v) or (vi) is not true and correct in any material respect and as a result thereof Funding is required to accept a reassignment of the Receivables transferred to the Trust by Funding pursuant to Section 2.06 of the Pooling and Servicing Agreement, NMG shall be obligated to accept a reassignment of Funding's interest in such Receivables on the terms set forth below. NMG shall pay to Funding by depositing in the Collection Account in same-day funds, not later than 12:00 noon New York City time, on the Distribution Date following the Monthly Period in which such reassignment obligation arises, in payment for such reassignment, an amount equal to the Portfolio Reassignment Price. ARTICLE VII CONDITIONS PRECEDENT Section 7.1. Conditions to Funding's Obligations Regarding Initial Receivables. The obligations of Funding to purchase the Receivables in the Initial Accounts on the Closing Date shall be subject to the satisfaction of the following conditions: (a) All representations and warranties of NMG contained in this Agreement shall be true and correct on the Closing Date with the same effect as though such representations and warranties had been made on such date; (b) All information concerning the Initial Accounts provided to Funding shall be true and correct as of the Initial Cut-Off Date in all material respects; (c) NMG shall have (i) delivered to Funding (or to the Trustee, if Funding so directs) a computer file, microfiche list or printed list containing a true and complete list of all Initial Accounts identified by account number and by the Receivables balance as of the Initial Cut-Off Date and (ii) substantially performed all other obligations required to be performed by the provisions of this Agreement; (d) NMG shall have recorded and filed, at its expense, any UCC-1 or other financing statement with respect to the Receivables (other than Receivables in Additional Accounts) now existing and hereafter created for the transfer of accounts (as defined in Section 9-106 of the UCC) meeting the requirements of applicable state law in such manner and in such jurisdictions as would be necessary or advisable to perfect or evidence the sale of the Receivables from NMG to Funding, and shall deliver a file-stamped copy of such financing statements or other evidence of such filings to Funding; (e) On or before the Closing Date, Funding and the Trustee shall have entered into an amendment to the Pooling and Servicing Agreement and the closing of such amendment to the Pooling and Servicing Agreement shall take place simultaneously with the initial closing hereunder; and (f) All corporate and legal proceedings and all instruments in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to Funding, and Funding shall have received from NMG copies of all documents (including, without limitation, records of corporate proceedings) relevant to the transactions herein contemplated as Funding may reasonably have requested. Section 7.2. Conditions to Funding's Obligations Regarding Additional Receivables. The obligations of Funding to purchase any Receivables created on or after the Closing Date, shall be subject to the satisfaction of the following conditions: (a) All representations and warranties of NMG contained in this Agreement shall be true and correct with the same effect as though such representations and warranties had been made on the date of such purchase; (b) All information (concerning any Account to which such Receivables relate) provided or to be provided to Funding shall be true and correct in all material respects on the date of such purchase; (c) NMG shall have indicated in its computer files, microfiche list or printed list that such Receivables (created in respect of any Account to which such Receivables relate) have been sold to Funding in accordance with this Agreement and transferred to the Trust pursuant to the Pooling and Servicing Agreement for the benefit of the Certificateholders; and (d) NMG shall have recorded and filed, at its expense, any UCC-1 or other financing statement with respect to such Receivables in any Additional Accounts in connection with the transfer of accounts (as defined in Section 9-106 of the UCC) meeting the requirements of applicable state law in such manner and in such jurisdictions as may be necessary or advisable to perfect or evidence the sale of such Receivables from NMG to Funding, and shall deliver a file-stamped copy of such financing statements or other evidence of such filings to Funding. Section 7.3. Conditions Precedent to Obligations of NMG. The obligations of NMG to sell on any date Receivables shall be subject to the satisfaction of the following conditions: (a) All representations and warranties of Funding contained in this Agreement shall be true and correct with the same effect as though such representations and warranties had been made on the date of such sale; (b) Payment or provision for payment of the Purchase Price in accordance with the provision of Section 3.1 and 3.2 hereof shall have been made; and (c) All corporate and legal proceedings and all instruments in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to NMG, and NMG shall have received from Funding copies of all documents (including, without limitation, records of corporate proceedings) relevant to the transactions herein contemplated as NMG may reasonably have requested. ARTICLE VIII TERM AND PURCHASE TERMINATION Section 8.1. Term. This Agreement shall commence as of the date of execution and delivery hereof and shall continue until the termination of the Trust as provided in Article XII of the Pooling and Servicing Agreement. Section 8.2. Purchase Termination. If NMG shall fail generally to, or admit in writing its inability to, pay its debts as they become due; or if a proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of NMG in an involuntary case under any Debtor Relief Law, or for the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of NMG or for any substantial part of NMG's property, or for the winding-up or liquidation of NMG's affairs and, if instituted against NMG, any such proceeding shall continue undismissed or unstayed and in effect, for a period of 60 consecutive days, or any of the actions sought in such proceeding shall occur; or if NMG shall commence a voluntary case under any Debtor Relief Law, or if NMG shall consent to the entry of an order for relief in an involuntary case under any Debtor Relief Law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of, or for, any substantial part of its property, or any general assignment for the benefit of its creditors; or NMG or any subsidiary of NMG shall have taken any corporate action in furtherance of any of the foregoing actions (each an "Insolvency Event"); then NMG shall immediately cease to transfer Principal Receivables to Funding and shall promptly give notice to Funding and the Trustee of such Insolvency Event. Notwithstanding any cessation of the transfer to Funding of additional Principal Receivables, Principal Receivables transferred to Funding prior to the occurrence of such Insolvency Event and Collections in respect of such Principal Receivables and Finance Charge Receivables whenever created, accrued in respect of such Principal Receivables, shall continue to be property of Funding transferable by Funding to the Trust pursuant to the Pooling and Servicing Agreement. ARTICLE IX MISCELLANEOUS PROVISIONS Section 9.1. Amendment. This Agreement and any Conveyance Papers and the rights and obligations of the parties hereunder may not be changed orally, but only by an instrument in writing signed by Funding and NMG in accordance with this section 9.1. This Agreement and any Conveyance Papers may be amended from time to time by Funding and NMG (i) to cure any ambiguity, (ii) to correct or supplement any provisions herein which may be inconsistent with any other provisions herein or in any such other Conveyance Papers, (iii) to add any other provisions with respect to matters or questions arising under this Agreement or any Conveyance Papers that shall not be inconsistent with the provisions of this Agreement or any Conveyance Papers, (iv) to change or modify the Purchase Price, (v) to change, modify, delete or add any other obligation of NMG or Funding and (vi) to provide for the transfer by NMG or Funding of its interest in and to all or part of the Accounts in accordance with the provisions of the Pooling and Servicing Agreement (if such transfer is for less than all of the Accounts, the respective rights, duties and obligations of Funding, NMG and the Servicer will be determined at the time of such transfer); provided, however, that no amendment pursuant to clause (v) of this Section 9.1 shall be effective unless NMG and Funding have been notified in writing that the Rating Agency Condition has been satisfied; provided, further, that such action shall not (as evidenced by an Opinion of Counsel delivered to the Trustee) adversely affect in any material respect the interests of the Trustee or the Certificateholders, unless the Trustee shall consent thereto. Any reconveyance executed in accordance with the provisions hereof shall not be considered to be an amendment to this Agreement. A copy of any amendment to this Agreement shall be sent to the Rating Agency. SECTION 9.2. GOVERNING LAW. THIS AGREEMENT AND THE CONVEYANCE PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 9.3. Notices. (a) All demands, notices, instructions, directions and communications (collectively, "Notices") under this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered at, mailed by registered mail, return receipt requested, or sent by facsimile transmission to (i) in the case of Funding, to Neiman Marcus Funding Corporation, 1201 Elm Street, Dallas, Texas 75201, Attention of the President (facsimile no. 214-761-2650), (ii) in the case of NMG, to The Neiman Marcus Group, Inc., 27 Boylston Street, Chestnut Hill, Massachusetts 02467, Attention of the General Counsel (facsimile no. 617-278-5397) and (iii) in the case of the Trustee, to The Bank of New York, 101 Barclay Street, Floor 12E, New York, New York 10286, Attention Corporate Trust Administration-Asset-Backed Finance Unit (facsimile no. 212-___-____), (iv) in the case of Moody's, to 99 Church Street, New York, New York 10007, Attention ABS Monitoring Department 4th Floor (facsimile no. 212-553-4600) and (v) in the case of Standard & Poor's, to 55 Water Street, New York, New York 10004, Attention Asset Backed Group, 15th Floor (facsimile no. 212-312- 0323). Section 9.4. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement or any Conveyance Paper shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions, and terms of this Agreement or any Conveyance Paper and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of any Conveyance Paper. Section 9.5. Assignment, Sale of Accounts. (a) Notwithstanding anything to the contrary contained herein, except as set forth in Section 9.5(b) and other than Funding's assignment of its rights, title, and interests in, to, and under this Agreement to the Trustee for the benefit of the Certificateholders as contemplated by the Pooling and Servicing Agreement and Section 9.6 hereof, the Accounts, this Agreement and all other Conveyance Papers may not be assigned by the parties hereto. (b) Notwithstanding the provisions of Section 9.5(a) hereof and of Sections 7.02 and 8.02 of the Pooling and Servicing Agreement, NMG may assign, convey and transfer all of its consumer revolving credit card accounts or other consumer revolving credit or installment accounts and the receivables arising thereunder, which may include all, but not less than all, of the Accounts, and its interest in any Participation Interests (collectively, the "Assigned Assets"), together with all servicing functions under the Pooling and Servicing Agreement and other obligations under this Agreement or relating to the transactions contemplated hereby (collectively, the "Assumed Obligations"), to another entity (the "Assuming Entity") which may be an entity that is not affiliated with NMG, and NMG may assign, convey and transfer the Assigned Assets and the Assumed Obligations to the Assuming Entity, without the consent or approval of the Certificateholders in the proportions described in Section 9.02(a) of the Pooling and Servicing Agreement, in each case upon satisfaction of the following conditions: (i) the Assuming Entity, NMG and the Trustee shall have entered into an assumption agreement (the "Assumption Agreement") providing for the Assuming Entity to assume the Assumed Obligations, including the obligation under this Agreement to transfer the Receivables arising under the Accounts to Funding, and NMG shall have delivered to Funding and the Trustee an Officer's Certificate and an Opinion of Counsel each stating that such assumption and transfer comply with this Section, that such Assumption Agreement is a valid and binding obligation of such Assuming Entity enforceable against such Assuming Entity in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws affecting creditors' rights generally from time to time in effect and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity), and that all conditions precedent herein provided for relating to such transaction have been complied with; (ii) NMG or the Assuming Entity shall have delivered to the Trustee copies of UCC-1 financing statements covering such Accounts to perfect Funding's interest in the Receivables arising herein and any Conveyance Papers or Supplemental Conveyance; (iii) Funding shall have received written notice that the Rating Agency Condition has been satisfied with respect to such transfer and assumption and shall have delivered copies of each such written notice to the Servicer and the Trustee; (iv) Funding shall have received an Opinion of Counsel with respect to clauses (i) and (ii) above and as to certain other matters that Funding may specify; and (v) the Trustee shall have received a Tax Opinion. Notwithstanding such assumption, NMG shall continue to be liable for all representations and warranties and covenants made by it and all obligations performed or to be performed by it in its capacity hereunder prior to such transfer or as Servicer prior to such transfer. Section 9.6. Acknowledgement and Agreement of NMG. By execution below, NMG expressly acknowledges and agrees that all of Funding's right, title, and interest in, to, and under this Agreement, including, without limitation, all of Funding's right, title, and interest in and to the Receivables purchased pursuant to this Agreement, shall be assigned by Funding to the Trustee for the benefit of the Certificateholders, and NMG consents to such assignment. Additionally, NMG agrees for the benefit of the Trustee that any amounts payable by NMG to Funding hereunder which are to be paid by Funding to the Trustee for the benefit of the Certificateholders shall be paid by NMG, on behalf of Funding, directly to the Trustee. Any payment required to be made on or before a specified date in same-day funds may be made on the prior business day in next-day funds. Section 9.7. Further Assurances. Funding and NMG agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the other party more fully to effect the purposes of this Agreement and the Conveyance Papers, including, without limitation, the execution of any UCC financing statements or continuation statements or equivalent documents relating to the Receivables for filing under the provisions of the UCC or other law of any applicable jurisdiction. Section 9.8. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of Funding or NMG, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. Section 9.9. Counterparts. This Agreement and all Conveyance Papers may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. Section 9.10. Binding Third-Party Beneficiaries. This Agreement and the Conveyance Papers will inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. The parties hereto intend that the Trustee shall be a third-party beneficiary of this Agreement. Section 9.11. Merger and Integration. Except as specifically stated otherwise herein, this Agreement and the Conveyance Papers set forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement and the Conveyance Papers. This Agreement and the Conveyance Papers may not be modified, amended, waived or supplemented except as provided herein. Section 9.12. Headings. The headings set forth herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. Section 9.13. Schedules and Exhibits. The schedules and exhibits attached hereto and referred to herein shall constitute a part of this Agreement and are incorporated into this Agreement for all purposes. Section 9.14. Survival of Representations and Warranties. All representations, warranties and agreements contained in this Agreement or contained in any Assignment, shall remain operative and in full force and effect and shall survive conveyance of the Receivables by Funding to the Trustee pursuant to the Pooling and Servicing Agreement. IN WITNESS WHEREOF, Funding and NMG have caused this Agreement to be duly executed by their respective officers as of the day and year first above written. NEIMAN MARCUS FUNDING CORPORATION By ______________________________________ Name: ___________________________________ Title: ____________________________________ THE NEIMAN MARCUS GROUP, INC. By ______________________________________ Name: ___________________________________ Title: ____________________________________ EXHIBIT A FORM OF SUPPLEMENTAL CONVEYANCE (As required by Section 2.2 of the Receivables Purchase Agreement) SUPPLEMENTAL CONVEYANCE NO. ____ dated as of __________, 2000, by and between THE NEIMAN MARCUS GROUP, INC., as seller ("NMG"), and NEIMAN MARCUS FUNDING CORPORATION, as purchaser ("Funding"), pursuant to the Receivables Purchase Agreement referred to below. WITNESSETH: WHEREAS, NMG and Funding are parties to a Receivables Purchase Agreement, dated as of March 1, 1995 and amended and restated as of July 2, 2000 (hereinafter as such agreement may have been, or may from time to time be, amended, supplemented or otherwise modified, the "Receivables Purchase Agreement"); WHEREAS, pursuant to the Receivables Purchase Agreement, NMG wishes to designate Additional Accounts to be included as Accounts and NMG wishes to convey the Receivables of such Additional Accounts, whether now existing or hereafter created, to Funding pursuant to the Receivables Purchase Agreement (as each such term is defined in the Receivables Purchase Agreement); and WHEREAS, Funding is willing to accept such designation and conveyance subject to the terms and conditions hereof. NOW, THEREFORE, NMG and Funding hereby agree as follows: 1. Defined Terms. Each capitalized term used herein shall have the meanings specified in the Receivables Purchase Agreement unless otherwise defined herein. "Addition Date" shall mean, with respect to the Additional Accounts designated hereby, __________, 2000. 2. Designation of Additional Accounts. NMG delivers herewith a computer file, microfiche list or printed list containing a true and complete schedule identifying all such Additional Accounts and specifying for each such Account, as of the Additional Cut-Off Date, its account number, the aggregate amount outstanding in such Account and the aggregate amount of Principal Receivables in such Account. Such computer file, microfiche list or printed list shall be, as of the date of this Supplemental Conveyance, incorporated into and made part of this Supplemental Conveyance and is marked as Schedule I to this Supplemental Conveyance. 3. Conveyance of Receivables. (a) NMG does hereby sell, transfer, assign, set over and otherwise convey to Funding (collectively, the "Conveyance"), without recourse, all of its right, title and interest in, to and under the Receivables generated by such Additional Accounts, now existing and hereafter created, all Recoveries allocable to such Additional Accounts and all monies due or to become due thereunder and all amounts received with respect thereto and all proceeds (including, without limitation, "proceeds" as defined in Article 9 of the UCC) thereof. The foregoing sale, transfer, assignment, set-over and conveyance does not constitute and is not intended to result in a creation or an assumption by Funding of any obligation of the Servicer, NMG or any other Person in connection with the Accounts, the Receivables or under any agreement or instrument relating thereto. (b) In connection with the Conveyance, NMG agrees to record and file, at its own expense, one or more UCC financing statements (and continuation statements with respect to such financing statements when applicable) with respect to the Receivables, now existing and hereafter created, for the sale of accounts meeting the requirements of applicable state law in such manner and in such jurisdictions as may be necessary or advisable to perfect or evidence the sale and assignment of the Receivables to Funding, and to deliver a file-stamped copy of such financing statement or other evidence of such filing to Funding. (c) In connection with such sale, NMG further agrees, at its own expense, on or prior to the date of this Supplemental Conveyance, to indicate in the appropriate computer files, microfiche list or other records that all Receivables created in connection with the Additional Accounts designated hereby have been conveyed to Funding pursuant to this Supplemental Conveyance. 4. Acceptance by Funding. Subject to the satisfaction of the conditions set forth in Section 6 of this Supplemental Conveyance, Funding hereby acknowledges its acceptance of all right, title and interest to the property, now existing and hereafter created, conveyed to Funding pursuant to Section 3(a) of this Supplemental Conveyance, and declares that it shall maintain such right, title and interest. Funding further acknowledges that, prior to or simultaneously with the execution and delivery of this Supplemental Conveyance, NMG delivered to Funding (or to the Trustee if Funding has so directed) the computer file, microfiche list or printed list described in Section 2 of this Supplemental Conveyance. 5. Representations and Warranties of NMG. NMG hereby represents and warrants to Funding as of the date of this Supplemental Conveyance and as of the Addition Date that: (a) Legal, Valid and Binding Obligation. This Supplemental Conveyance constitutes a legal, valid and binding obligation of NMG enforceable against NMG in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally from time to time in effect and except as such enforceability may be limited by general principles of equity; (b) Eligibility of Accounts. Each Additional Account designated hereby is an Eligible Account; (c) Selection Procedures. (i) No selection procedure believed by NMG to be adverse to the interests of Funding or the Investor Certificateholders was used in selecting the Additional Accounts; and (ii) the selection procedures used in selecting the Additional Accounts designated hereby are substantially the same as the selection procedures used in selecting the Initial Accounts identified in the computer file, microfiche list or printed list delivered pursuant to Section 2.1(c) of the Receivables Purchase Agreement; (d) Insolvency. NMG is not insolvent and, after giving effect to the conveyance set forth in Section 3 of this Supplemental Conveyance, will not be insolvent; (e) Sale of Receivables. This Supplemental Conveyance constitutes a valid sale, transfer and assignment to Funding of all right, title and interest of NMG in the Receivables and other Purchased Assets now existing or hereafter created, all monies due or to become due and all amounts received with respect thereto and the "proceeds" (as defined in the UCC) thereof, relating thereto; (f) No Conflict. The execution and delivery of this Supplemental Conveyance, the performance of the transactions contemplated by this Supplemental Conveyance and the fulfillment of the terms hereof, will not conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default under, any indenture, contract, agreement, mortgage, deed of trust or other instrument to which NMG is a party or by which it or its properties are bound; (g) No Violation. The execution and delivery of this Supplemental Conveyance by NMG, the performance of the transactions contemplated by this Supplemental Conveyance and the fulfillment of the terms hereof applicable to NMG will not conflict with or violate any Requirements of Law applicable to NMG; (h) No Proceedings. There are no proceedings or investigations, pending or, to the best knowledge of NMG, threatened against NMG before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality (i) asserting the invalidity of the Receivables Purchase Agreement or this Supplemental Conveyance, (ii) seeking to prevent the consummation of any of the transactions contemplated by the Receivables Purchase Agreement or this Supplemental Conveyance, (iii) seeking any determination or ruling that, in the reasonable judgment of NMG, would materially and adversely affect the performance by NMG of its obligations under the Receivables Purchase Agreement or this Supplemental Conveyance or (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Supplemental Conveyance; and (i) All Consents. All authorizations, consents, orders or approvals of any court or other governmental authority required to be obtained by NMG in connection with the execution and delivery of this Supplemental Conveyance by NMG and the performance of the transactions contemplated by this Supplemental Conveyance by NMG, have been obtained. 6. Conditions Precedent. The acceptance of Funding set forth in Section 4 of this Supplemental Conveyance is subject to the satisfaction, on or prior to the Addition Date, of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties made by NMG in Section 5 of this Supplemental Conveyance shall be true and correct as of the date of this Supplemental Conveyance and as of the Addition Date. (b) Officer's Certificate. NMG shall have delivered to Funding an Officer's Certificate confirming that (i) the Additional Accounts shall be Eligible Accounts and (ii) (A) no selection procedures believed by NMG or Funding to be materially adverse to the interests of the Investor Certificateholders shall have been used in selecting the Additional Accounts; (B) the selection procedures used in selecting the Additional Accounts shall be substantially the same as the selection procedures used in selecting the original Accounts identified in the computer file, microfiche list or printed list delivered pursuant to Section 2.01 of the Pooling and Servicing Agreement; (C) the list of Additional Accounts, as of the Additional Cut-Off Date, is a true and complete schedule identifying all such Additional Accounts and specifies for each such Account, as of the Additional Cut-Off Date, its account number, the aggregate amount outstanding in such Account and the aggregate amount of Principal Receivables in such Account. (c) Additional Information. NMG shall have delivered to Funding such information as was reasonably requested by Funding to satisfy itself as to the accuracy of the representation and warranty set forth in Section 5(d) of this Supplemental Conveyance. 7. Ratification of the Receivables Purchase Agreement. The Receivables Purchase Agreement is hereby ratified, and all references to the "Receivables Purchase Agreement", to "this Agreement" and "herein" shall be deemed from and after the Addition Date to be a reference to the Receivables Purchase Agreement as supplemented by this Supplemental Conveyance. Except as expressly amended hereby, all the representations, warranties, terms, covenants and conditions of the Receivables Purchase Agreement shall remain unamended and shall continue to be, and shall, remain, in full force and effect in accordance with its terms and except as expressly provided herein shall not constitute or be deemed to constitute a waiver of compliance with or consent to non-compliance with any term or provision of the Receivables Purchase Agreement. 8. Counterparts. This Supplemental Conveyance may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have caused this Supplemental Conveyance to be duly executed and delivered by their respective duly authorized officers on the day and the year first above written. NEIMAN MARCUS FUNDING CORPORATION By ________________________________ Name: _____________________________ Title: ____________________________ THE NEIMAN MARCUS GROUP, INC. By _______________________________ Name: ____________________________ Title: ___________________________ Schedule I to Supplemental Conveyance Additional Accounts Schedule I LIST OF ACCOUNTS DEEMED INCORPORATED BY REFERENCE EX-10.18 7 0007.txt POOLING AND SERVICING AGMT 3/1/1995 EXHIBIT 10.18 NEIMAN MARCUS FUNDING CORPORATION, Seller THE NEIMAN MARCUS GROUP, INC., Servicer and THE BANK OF NEW YORK, Trustee NEIMAN MARCUS GROUP CREDIT CARD MASTER TRUST POOLING AND SERVICING AGREEMENT Dated as of March 1, 1995 and amended and restated as of July 2, 2000 TABLE OF CONTENTS Page ARTICLE I Definitions Section 1.01 Definitions . . . . . . . . . . . . . . . . . .1 Section 1.02 Other Definitional Provisions . . . . . . . . 21 ARTICLE II Conveyance of Receivables Section 2.01 Conveyance of Receivables . . . . . . . . . . 22 Section 2.02 Acceptance by Trustee . . . . . . . . . . . . 23 Section 2.03 Representations and Warranties of the Seller Relating to the Seller . . . . . . 24 Section 2.04 Representations and Warranties of the Seller Relating to the Agreement and any Supplement and the Receivables . . . . . . . . 26 Section 2.05 Reassignment of Ineligible Receivables . . . 28 Section 2.06 Reassignment of Receivables in Trust Portfolio. . 30 Section 2.07 Covenants of the Seller . . . . . . . . . . . 31 Section 2.08 Covenants of The Seller with Respect to the Purchase Agreements 34 Section 2.09 Addition of Accounts . . 35 Section 2.10 Removal of Accounts . . . . . . . . . . . . . 39 Section 2.11 Account Allocations . . . . . . . . . . . . . 40 Section 2.12 Discount Option . . . . . . . . . . . . . . . 41 Section 2.13 Additional Sellers and Account Originators . 41 ARTICLE III Administration and Servicing of Receivables Section 3.01 Acceptance of Appointment and Other Matters Relating to the Servicer 42 Section 3.02 Servicing Compensation . 43 Section 3.03 Representations, Warranties and Covenants of the Servicer 43 Section 3.04 Reports for the Trustee. . . 47 Section 3.05 Annual Certificate of Servicer. . . . . . . . 48 Section 3.06 Annual Servicing Report of Independent Public Accountants; Copies of Reports Available 48 Section 3.07 Tax Treatment . . .49 Section 3.08 Notices to The Neiman Marcus Group, Inc . . . 49 Section 3.09 Adjustments . . . . . . . . . . . . . . . . . 49 Section 3.10 Reports to the Commission . . . . . . . . . . 50 ARTICLE IV Rights of Certificateholders and Allocation andApplication of Collections Section 4.01 Rights of Certificateholders. . . . . . . . . 51 Section 4.02 Establishment of Collection Account and Excess Funding Account 51 Section 4.03 Collections and Allocations. 53 Section 4.04 Shared Principal Collections. . . . . . . . . 54 Section 4.05 Excess Finance Charge Collections . . . . . . 55 Section 4.06 Allocations During Funding Period . . . . . . 55 ARTICLE V Distributions and Reports to Certificateholders ARTICLE VI The Certificates Section 6.01 The Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 6.02 Authentication of Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 6.03 New Issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 6.04 Registration of Transfer and Exchange of Certificates 58 Section 6.05 Mutilated, Destroyed, Lost or Stolen Certificates. . . . . . . . . . . . . . . . . 61 Section 6.06 Persons Deemed Owners . . . . . . . . . . . . 62 Section 6.07 Appointment of Paying Agent . . . . . . . . . 62 Section 6.08 Access to List of Registered Certificateholders' Names and Addresses 63 Section 6.09 Authenticating Agent . . 63 Section 6.10 Book-Entry Certificates . . . . . . . . . . . 64 Section 6.11 Notices to Clearing Agency . . . . . . . . . 65 Section 6.12 Definitive Certificates . . . . . . . . . . . 65 Section 6.13 Global Certificate. . . . . . . . . . . . . . 66 Section 6.14 Uncertificated Classes. . . . . . . . . . . . 66 ARTICLE VII Other Matters Relating to the Seller Section 7.01 Liability of the Seller . . . . . . . . . . . 66 Section 7.02 Merger or Consolidation of, or Assumption of the Obligations of, the Seller 67 Section 7.03 Limitations on Liability of the Seller . . . 68 Section 7.04 Seller Indemnification of the Trust and the Trustee 68 ARTICLE VIII Other Matters Relating to the Servicer Section 8.01 Liability of the Servicer . . . . . . . . . . 69 Section 8.02 Merger or Consolidation of, or Assumption of the Obligations of, the Servicer 69 Section 8.03 Limitation on Liability of the Servicer and Others 70 Section 8.04 Servicer Indemnification of the Trust and the Trustee 70 Section 8.05 The Servicer Not To Resign . .71 Section 8.06 Access to Certain Documentation and Information Regarding the Receivables 72 Section 8.07 Delegation of Duties . . 72 Section 8.08 Examination of Records . . . . . . . . . . . 72 ARTICLE IX Pay Out Events Section 9.01 Pay Out Events . . . . . . . . . . . . . . . 72 ARTICLE X Servicer Defaults Section 10.01 Servicer Defaults . . . . . . . . . . . . . . 73 Section 10.02 Trustee to Act; Appointment of Successor. . . 76 Section 10.03 Notification to Certificateholders. . . . . . 78 ARTICLE XI The Trustee Section 11.01 Duties of Trustee . . . . . . . . . . . . . . 78 Section 11.02 Certain Matters Affecting the Trustee . . . . 80 Section 11.03 Trustee Not Liable for Recitals in Certificates. . . . . . . . . . . . . . . . . 81 Section 11.04 Trustee May Own Certificates. . . . . . . . . 81 Section 11.05 The Servicer To Pay Trustee's Fees and Expenses. . . . . . . . . . . . . . . . . . . 81 Section 11.06 Eligibility Requirements for Trustee. . . . . 82 Section 11.07 Resignation or Removal of Trustee . . . . . . 82 Section 11.08 Successor Trustee . . . . . . . . . . . . . . 83 Section 11.09 Merger or Consolidation of Trustee. . . . . . 83 Section 11.10 Appointment of CoTrustee or Separate Trustee. 83 Section 11.11 Tax Return. . . . . . . . . . . . . . . . . . 85 Section 11.12 Trustee May Enforce Claims Without Possession of Certificates 85 Section 11.13 Suits for Enforcement. . 85 Section 11.14 Rights of Certificateholders to Direct Trustee. . 85 Section 11.15 Representations and Warranties of Trustee . . 86 Section 11.16 Maintenance of Office or Agency . . . . . . . 86 Section 11.17 Confidentiality . . . . . . . . . . . . . . . 86 ARTICLE XII Termination Section 12.01 Termination of Trust. . . . . . . . . . . . . 87 Section 12.02 Final Distribution. . . . . . . . . . . . . . 87 Section 12.03 Seller's Termination Rights . . . . . . . . . 88 Section 12.04 Defeasance. . . . . . . . . . . . . . . . . . 89 ARTICLE XIII Miscellaneous Provisions Section 13.01 Amendment; Waiver of Past Defaults. . . . . . 90 Section 13.02 Protection of Right, Title and Interest to Trust . . . . . . . . . . . . . . . . . . . . 92 Section 13.03 Limitation on Rights of Certificateholders. . 93 Section 13.04 GOVERNING LAW . . . . . . . . . . . . . . . . 94 Section 13.05 Notices, Payments . . . . . . . . . . . . . . 94 Section 13.06 Rule 144A Information . . . . . . . . . . . . 95 Section 13.07 Severability of Provisions. . . . . . . . . . 95 Section 13.08 Assignment. . . . . . . . . . . . . . . . . . 95 Section 13.09 Certificates Nonassessable and Fully Paid . . 95 Section 13.10 Further Assurances. . . . . . . . . . . . . . 95 Section 13.11 Nonpetition Covenant. . . . . . . . . . . . . 95 Section 13.12 No Waiver; Cumulative Remedies. . . . . . . . 96 Section 13.13 Counterparts. . . . . . . . . . . . . . . . . 96 Section 13.14 Third-Party Beneficiaries . . . . . . . . . . 96 Section 13.15 Actions by Certificateholders . . . . . . . . 96 Section 13.16 Merger and Integration. . . . . . . . . . . . 96 Section 13.17 Headings. . . . . . . . . . . . . . . . . . . 97 Section 13.18 No Proceedings. . . . . . . . . . . . . . . . 97 EXHIBITS Exhibit A Form of Seller Certificate Exhibit B Form of Assignment of Receivables in Additional Accounts Exhibit C Form of Reassignment of Receivables in Removed Accounts Exhibit D Form of Annual Servicer's Certificate Exhibit E-1 Private Placement Legend Exhibit E-2 Representation Letter Exhibit E-3 ERISA Legend Exhibit F Example of an Account Agreement Exhibit G Reserved Exhibit H-1 Form of Opinion of Counsel with respect to Amendments Exhibit H-2 Form of Opinion of Counsel with Respect to Accounts SCHEDULES Schedule 1 List of Accounts [Deemed Incorporated] POOLING AND SERVICING AGREEMENT, dated as of March 1 1995 and amended and restated as of July 2, 2000, among NEIMAN MARCUS FUNDING CORPORATION, a Delaware corporation, as Seller, THE NEIMAN MARCUS GROUP, INC., a Delaware corporation, as Servicer, and THE BANK OF NEW YORK, a New York banking corporation, as Trustee. Neiman Marcus Funding Corporation, as Seller, and The Neiman Marcus Group, Inc., as Servicer, originally entered into this Agreement (the "Existing Agreement") with The Chase Manhattan Bank, N.A., as trustee, as of March 1, 1995. Pursuant to Section 11.07 of the Existing Agreement, the Chase Manhattan Bank, N.A. is resigning as trustee, and the Servicer is appointing The Bank of New York as the replacement trustee. Seller also wishes to amend certain terms of the Existing Agreement, in accordance with the requirements of Section 13.01(a) thereof, and the conditions specified in such Section have been satisfied. In consideration of the mutual agreements herein contained, each party agrees as follows for the benefit of the other parties, the Certificateholders and any Series Enhancer to the extent provided herein and in any Supplement: ARTICLE I Definitions Definitions . Whenever used in this Agreement, the following words and phrases shall have the following meanings, and the definitions of such terms are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. "Account" shall mean each Initial Account and each Additional Account, but shall exclude any Account all the Receivables in which are either reassigned or assigned to the Seller or its designee or the Servicer in accordance with the terms of this Agreement. The definition of Account shall include each account into which an Account is transferred (a "Transferred Account"); provided that (i) such transfer is made in accordance with the Account Guidelines and (ii) such Transferred Account can be traced or identified, by reference to or by way of the computer files, microfiche lists or printed lists delivered to the Trustee pursuant to Section 2.01 or 2.09(f), as an account into which an Account has been transferred. The term "Account" shall be deemed to refer to an Additional Account only from and after the Addition Date with respect thereto, and the term "Account" shall be deemed to refer to any Removed Account only prior to the Removal Date with respect thereto. "Account Agreement" shall mean, with respect to an Account, the agreements between the Account Originator that owns such Account and the related Obligor, governing the terms and conditions of such Account, as such agreements may be amended, modified or otherwise changed from time to time and as distributed (including any amendments and revisions thereto) to such Obligors. Examples of Account Agreements are attached as Exhibit F. "Account Guidelines" shall mean, with respect to an Account, the written policies and procedures of the Account Originator that owns such Account relating to the operation of its consumer revolving or installment lending business, including, without limitation, the written policies and procedures for determining the creditworthiness of account customers, the extension of credit to account customers and relating to the maintenance of accounts and collection of receivables with respect thereto, as such policies and procedures may be amended, modified, or otherwise changed from time to time to conform with all Requirements of Law, the failure to comply with which would have a material adverse effect on interests hereunder of Investor Certificateholders. "Account Originator" shall mean (i) The Neiman Marcus Group, Inc., a Delaware corporation, (ii) Bergdorf Goodman Inc., a New York corporation, (iii) any other originator of Accounts that, in either case, enters into a Purchase Agreement with the Seller in accordance with Section 2.13 and (iv) any transferee of the respective Accounts of any of the foregoing in accordance with the applicable Purchase Agreement and the respective successors or assigns of the foregoing under the applicable Purchase Agreement. "Accumulation Period" shall mean, with respect to any Series, the period, if any, specified as such in the related Supplement. "Act" shall mean the Securities Act of 1933, as amended. "Addition" shall mean the designation of additional Eligible Accounts to be included as Accounts pursuant to Section 2.09(a), (b) or (d) or of Participation Interests to be included as Trust Assets pursuant to Section 2.09(a) or (b). "Addition Cut-Off Date" shall mean (a) with respect to Automatic Additional Accounts, the date of creation thereof and (b) with respect to other Additional Accounts, the date as of which any Additional Accounts or Participation Interests are designated for inclusion in the Trust, as specified in the related Assignment. "Addition Date" shall mean (a) with respect to Additional Accounts, the date on which the Receivables in such Additional Accounts are conveyed to the Trust pursuant to Section 2.09(a), (b) or (d) and (b) with respect to Participation Interests, the date from and after which such Participation Interests are to be included as Trust Assets pursuant to Section 2.09(a) or (b). For the avoidance of doubt, the "Addition Date" for each account identified in the Restatement Date Account Schedule that was not designated as an Account prior to the Restatement Date is the Restatement Date. "Additional Account" shall mean each revolving credit card account or other consumer revolving credit or installment account established pursuant to an Account Agreement, which account is designated pursuant to Section 2.09(a), (b) or (d) to be included as an Account and is identified in a computer file, microfiche list or printed list delivered to the Trustee by the Seller pursuant to Section 2.01 and 2.09(f); provided that no such identification shall be required for Automatic Additional Accounts created on or after July 2, 2000. For the avoidance of doubt, each account identified in the Restatement Date Account Schedule that was not designated as an Account prior to the Restatement Date is an Additional Account. "Adjusted Invested Amount" shall have, with respect to any Series, the meaning specified in the related Supplement. If the Supplement for a Series does not specify an "Adjusted Invested Amount," then the Adjusted Invested Amount of that Series shall equal its Invested Amount. "Affiliate" shall mean, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, "control" shall mean the power to direct the management and policies of a Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meaning correlative to the foregoing. "Aggregate Addition Limit" shall mean the maximum number of accounts that may be designated as Automatic Additional Accounts. The Aggregate Addition Limit shall be deemed to be exceeded at any time when the designation of one more Automatic Additional Account would cause: (a) the number of accounts so designated during any fiscal quarter to exceed 15% of the number of Accounts as of the first day of the fiscal year during which such fiscal quarters fall; or (b) the number of accounts so designated during any twelve-month period to exceed 20% of the number of Accounts as of the first day of such twelve-month period. The Aggregate Addition Limit shall also be deemed to be exceeded from and after the first Determination Date in any fiscal quarter if: (x) the aggregate balance of Receivables in Accounts that were designated as Automatic Additional Accounts during the preceding fiscal quarter is greater than 15% of the aggregate balance of Receivables as of the beginning of the fiscal year during which such fiscal quarter falls; or (y) the aggregate balance of Receivables in Accounts that were designated as Automatic Additional Accounts during the preceding four consecutive fiscal quarters is greater than 20% of the aggregate balance of Receivables as of the beginning of the first of such four preceding fiscal quarters. For purposes of this definition, references to fiscal quarters and fiscal years refer to fiscal quarters and fiscal years of The Neiman Marcus Group, Inc., and all revolving credit card accounts or other consumer revolving credit or installment accounts established by Bergdorf Goodman Inc. and in existence during the four consecutive fiscal quarters ending in July 2000 shall be deemed to have been Accounts. "Agreement" shall mean this Pooling and Servicing Agreement and all amendments hereof and supplements hereto, including, with respect to any Series or Class, the related Supplement. "Amortization Period" shall mean, with respect to any Series or any Class within a Series, a period following the Revolving Period, that shall be the controlled amortization period, the principal amortization period, the rapid amortization period, the optional amortization period, the limited amortization period or other amortization period, in each case as defined with respect to such Series in the related Supplement. "Applicants" shall have the meaning specified in Section 6.08. "Assignment" shall have the meaning specified in Section 2.09(f). "Authorized Newspaper" shall mean any newspaper or newspapers of general circulation in the Borough of Manhattan, The City of New York printed in the English language (and, with respect to any Series or Class, if and so long as the Investor Certificates of such Series or Class are listed on the Luxembourg Stock Exchange and such exchange shall so require, in Luxembourg, printed in any language satisfying the requirements of such exchange) and customarily published on each business day at such place, whether or not published on Saturdays, Sundays or holidays. "Automatic Addition Suspension Date" shall have the meaning specified in Section 2.09(d). "Automatic Addition Termination Date" shall have the meaning specified in Section 2.09(d). "Automatic Additional Account" shall have the meaning specified in Section 2.09(d). "Base Rate" shall have the meaning, with respect to any Series, specified in the related Supplement. "Bearer Certificate" shall have the meaning specified in Section 6.01. "Benefit Plan" shall have the meaning specified in Section 6.04(c). "Book-Entry Certificates" shall mean beneficial interests in the Investor Certificates, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 6.10. "Business Day" shall mean any day other than (a) a Saturday or Sunday, (b) any other day on which national banking associations or state banking institutions in New York, New York, Dallas, Texas or Boston, Massachusetts are authorized or obligated by law, executive order or governmental decree to be closed or (c) for purposes of any particular Series, any other day specified in the related Supplement. "Certificate" shall mean any one of the Investor Certificates or the Seller Certificate. "Certificate Owner" shall mean, with respect to a Book-Entry Certificate, the Person who is the owner of such Book-Entry Certificate, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly or as an indirect participant, in accordance with the rules of such Clearing Agency). "Certificate Rate" shall mean, with respect to any Series or Class, the certificate rate specified therefor in the related Supplement. "Certificate Register" shall mean the register maintained pursuant to Section 6.04, providing for the registration of the Registered Certificates and the Seller Certificate and transfers and exchanges thereof. "Certificateholder" or "Holder" shall mean an Investor Certificateholder or a Person in whose name the Seller Certificate is registered. "Certificateholders' Interest" shall have the meaning specified in Section 4.01. "Class" shall mean, with respect to any Series, any one of the classes of Investor Certificates of that Series. "Clearing Agency" shall mean an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. "Clearing Agency Participant" shall mean a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Date" shall mean, with respect to any Series, the closing date specified in the related Supplement. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Collection Account" shall have the meaning specified in Section 4.02. "Collections" shall mean all payments (including Recoveries of Principal Receivables or Finance Charge Receivables) received by the Servicer with respect to the Receivables, in the form of cash, checks (to the extent collected), wire transfers or other form of payment in accordance with the Account Agreement in effect from time to time on any Receivables. If so specified in any Supplement, Collections shall also include any payments received by the Servicer with respect to Participation Interests. "Commission" shall mean the Securities and Exchange Commission. "Controlled Distribution Amount", with respect to any Series, shall have the meaning specified in the related Supplement. "Corporate Trust Office" shall have the meaning specified in Section 11.16. "Coupon" shall have the meaning specified in Section 6.01. "Daily Report" shall have the meaning specified in Section 3.04(c). "Date of Processing" shall mean, with respect to any transaction, the Business Day such transaction is first recorded under the Servicer's (or, in the case of an Account Originator, the Account Originator's) customary and usual servicing practices on the Servicer's (or, in the case of an Account Originator, the Account Originator's) computer file of consumer revolving credit card accounts and other consumer revolving or installment credit accounts. "Debtor Relief Laws" shall mean the Bankruptcy Code of the United States of America and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, readjustment of debt, marshalling of assets or similar debtor relief laws of the United States, any state or any foreign country from time to time in effect, affecting the rights of creditors generally. "Defaulted Amount" shall mean, with respect to any Monthly Period, an amount (which shall not be less than zero) equal to (a) the amount of Principal Receivables that became Defaulted Receivables in such Monthly Period, minus (b) the sum of (i) the amount of any Defaulted Receivables of which the Seller or the Servicer became obligated to accept reassignment or assignment in accordance with the terms of this Agreement during such Monthly Period and (ii) the amount of Recoveries received in such Monthly Period with respect to Finance Charge Receivables and Principal Receivables previously charged off as uncollectible; provided, however, that, if an Insolvency Event occurs with respect to the Seller, the amount of such Defaulted Receivables that are subject to reassignment to the Seller in accordance with the terms of this Agreement shall not be added to the sum so subtracted and, if any of the events described in Section 10.01(d) occur with respect to the Servicer, the amount of such Defaulted Receivables that are subject to reassignment or assignment to the Servicer in accordance with the terms of this Agreement shall not be added to the sum so subtracted. "Defaulted Receivable" shall mean, with respect to any Monthly Period, all Principal Receivables in any Account that are charged off as uncollectible in such Monthly Period in accordance with the Account Guidelines and the Servicer's customary and usual servicing procedures for servicing revolving credit card and installment receivables comparable to the Receivables. A Principal Receivable in any Account shall become a Defaulted Receivable on the day on which such Principal Receivable is recorded as charged off on the Servicer's computer master file of consumer credit card and installment accounts in accordance with the Account Guidelines. "Defeasance" shall have the meaning specified in Section 12.04. "Defeased Series" shall have the meaning specified in Section 12.04. "Definitive Certificates" shall have the meaning specified in Section 6.10. "Definitive Euro-Certificates" shall have the meaning specified in Section 6.13. "Deposit Date" shall mean each day on which the Servicer deposits Collections in the Collection Account. "Depositaries" shall mean the Person specified in the applicable Supplement, in its capacity as depositary for the respective accounts of any Clearing Agency or, with respect to Global Certificates, any foreign clearing agencies set forth in the related Supplement. "Depository Agreement" shall mean, with respect to any Series or Class, the agreement among the Seller, the Trustee and the applicable Clearing Agency. "Determination Date" shall mean the third Business Day prior to each Distribution Date. "Discount Option Receivables" shall have the meaning specified in Section 2.12. "Discount Option Receivables Collections" shall mean on any Date of Processing on and after the date on which the Seller's exercise of its discount option pursuant to Section 2.12 takes effect, the product of (a) a fraction the numerator of which is the amount of the Discount Option Receivables and the denominator of which is the amount of all of the Principal Receivables (including Discount Option Receivables) at the end of the prior Monthly Period and (b) Collections of Principal Receivables that arise in the Accounts on such day on or after the date such option is exercised that would otherwise be Principal Receivables. "Discount Percentage" shall have the meaning specified in Section 2.12. "Distribution Date" shall mean, unless otherwise specified in the Supplement for the related Series, the 15th day of each calendar month during the term hereof, or, if such 15th day is not a Business Day, the next succeeding Business Day. "Document Delivery Date" shall mean (a) the first Closing Date in the case of Initial Accounts, (b) July 8, 2000 in the case of all Accounts designated to the Trust on or prior to July 2, 2000 which were not identified on Schedule 1 (as supplemented) prior to that date, (c) the Addition Date in the case of Additional Accounts (other than Automatic Additional Accounts) and (d) the Removal Date in the case of Removed Accounts. "Eligible Account" shall mean a revolving credit card account or other consumer revolving credit or installment account owned by an Account Originator that as of the Trust Cut-Off Date with respect to an Initial Account or as of the related Addition Cut-Off Date with respect to an Additional Account meets the requirement of either clauses (i) or (ii) below: (i) (a) is in existence and maintained by the Account Originator or an Affiliate thereof; (b) is payable in United States dollars; (c) except as provided below, has not been identified as an account the credit cards with respect to which have been reported to the applicable Account Originator as having been lost or stolen; (d) has not been, and does not have any Receivables which have been, sold, pledged, assigned or otherwise conveyed to any person (except pursuant to this Agreement), unless any such pledge or assignment is released on or before the initial Closing Date or the Addition Date, as applicable; (e) except as provided below, does not have any Receivables that are Defaulted Receivables; (f) except as provided below, does not have any Receivables that have been identified by the applicable Account Originator or the relevant Obligor as having been incurred as a result of fraudulent use of any related credit card; and (g) has an Obligor who has provided as his or her most recent billing address, an address located in the United States or its territories or possessions or a United States military address; provided, however, that as of any date of determination, up to 3% of the Accounts (calculated by number of Accounts) may have Obligors who have provided addresses outside of such jurisdictions or (ii) with respect to Additional Accounts, the addition of such Accounts shall have satisfied the Rating Agency Condition. Eligible Accounts may include accounts, the receivables of which have been written off, or with respect to which the applicable Account Originator believes the related Obligor is bankrupt, or as to which certain receivables have been identified by the Obligor as having been incurred as a result of fraudulent use of any credit cards, or as to which any credit cards have been reported to the applicable Account Originator as lost or stolen; provided that (a) the balance of all receivables included in such accounts is reflected on the books and records of the applicable Account Originator (and is treated for purposes of this Agreement) as "zero", and (b) charging privileges with respect to all such accounts have been canceled in accordance with the Account Guidelines of the applicable Account Originator and will not be reinstated by the applicable Account Originator or the Servicer. "Eligible Deposit Account" shall mean either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States or any one of the states thereof, including the District of Columbia (or any domestic branch of a foreign bank), and acting as a trustee for funds deposited in such account, so long as any of the securities of such depository institution shall have a credit rating from each Rating Agency in one of its generic credit rating categories that signifies investment grade. "Eligible Institution" shall mean (a) a depository institution (which may be the Trustee or an affiliate) organized under the laws of the United States or any one of the states thereof that at all times (i) has either (x) a long-term unsecured debt rating of A2 or better by Moody's or (y) a certificate of deposit rating of P-1 by Moody's, (ii) has either (x) a long-term unsecured debt rating of AAA by Standard & Poor's or (y) a certificate of deposit rating of A-1+ by Standard & Poor's and (iii) is a member of the FDIC or (b) any other institution that is acceptable to Moody's and Standard & Poor's. "Eligible Investments" shall mean book-entry securities, negotiable instruments or securities represented by instruments in bearer or registered form that evidence: (a) direct obligations of, and obligations fully guaranteed as to timely payment of principal and interest by, the United States of America; (b) demand deposits, time deposits or certificates of deposit (having original maturities of no more than 365 days) of depository institutions or trust companies incorporated under the laws of the United States of America or any state thereof (or domestic branches of foreign banks) and subject to supervision and examination by federal or state banking or depository institution authorities; provided that at the time of the Trust's investment or contractual commitment to invest therein, the shortterm debt rating of such depository institution or trust company shall be in the highest investment category of each Rating Agency; (c) commercial paper or other shortterm obligations having, at the time of the Trust's investment or contractual commitment to invest therein, a rating from each Rating Agency in its highest investment category; (d) demand deposits, time deposits and certificates of deposit that are fully insured by the FDIC, with a Person the commercial paper of which has a credit rating from each Rating Agency in its highest investment category; (e) notes or bankers' acceptances (having original maturities of no more than 365 days) issued by any depository institution or trust company referred to in (b) above; (f) investments in money market funds (including funds of the Trustee or its affiliates as well as funds for which the Trustee and its affiliates may receive compensation) rated in the highest investment category by each Rating Agency or otherwise approved in writing by each Rating Agency; (g) time deposits, other than as referred to in clause (d) above, with a Person the commercial paper of which has a credit rating from each Rating Agency in its highest investment category; or (h) any other investments approved in writing by each Rating Agency. "Eligible Receivable" shall mean each Receivable: that has arisen under an Eligible Account; (a) that was created in compliance with the Account Guidelines and all Requirements of Law applicable to the applicable Account Originator, the failure to comply with which would have a material adverse effect on Investor Certificateholders, and pursuant to an Account Agreement that complies with all Requirements of Law applicable to the applicable Account Originator, the failure to comply with which would have a material adverse effect on Investor Certificateholders; (b) for which all consents, licenses, approvals or authorizations of, or registrations with, any Governmental Authority required to be obtained or given by the applicable Account Originator in connection with the creation of such Receivable or the execution and delivery by the applicable Account Originator, and performance by the applicable Account Originator of its obligations under the related Account Agreement, have been duly obtained or given and are in full force and effect as of such date of creation of such Receivable, if, and to the extent that the failure to so obtain or give any such consent, license, approval, authorization or registration would have a material adverse effect on the Investor Certificateholders; (c) as to which, at the time of its transfer to the Trust, the Seller or the Trust will have good and marketable title free and clear of all Liens (other than any Lien for taxes if such taxes are not then due and payable or if the Seller is then contesting the validity thereof in good faith by appropriate proceedings and has set aside on its books adequate reserves with respect thereto); (d) that has been the subject of a valid transfer and assignment from the Seller to the Trust of all the Seller's right, title and interest therein; (e) that at and after the time of transfer to the Trust is the legal, valid and binding payment obligation of the Obligor thereon, legally enforceable against such Obligor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect, affecting the enforcement of creditors' rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity); (f) that constitutes either an "account" a "general intangible" or "chattel paper" under and as defined in Article 9 of the UCC; (g) that, at the time of its transfer to the Trust, has not been waived or modified except as permitted in accordance with Section 3.03(h); (h) that, at the time of its transfer to the Trust, is not subject to any right of rescission, setoff, counterclaim or any other defense of the Obligor (including the defense of usury), other than defenses arising out of Debtor Relief Laws or other similar laws affecting the enforcement of creditors' rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or equity) or as to which the Servicer is required by Section 3.09 to make an adjustment; (i) as to which, at the time of its transfer to the Trust, the Seller has satisfied all obligations to be fulfilled at the time it is transferred to the Trust; and (j) as to which, at the time of its transfer to the Trust, the Seller has not taken any action that, or failed to take any action the omission of which, would, at the time of its transfer to the Trust, impair the rights of the Trust or the Certificateholders therein. "Eligible Servicer" shall mean the Trustee, a wholly-owned subsidiary of the Trustee or an entity that, at the time of its appointment as Servicer, (a) is servicing a portfolio of consumer revolving credit card accounts or other consumer revolving credit or installment accounts, (b) is legally qualified and has the capacity to service the Accounts, (c) is qualified (or licensed) to use the software that is then being used to service the Accounts or obtains the right to use, or has its own, software that is adequate to perform its duties under this Agreement, (d) has, in the reasonable judgment of the Trustee, the ability to professionally and competently service a portfolio of similar accounts and (e) has a net worth of at least $50,000,000 as of the end of its most recent fiscal quarter. "Enhancement Agreement" shall mean any agreement, instrument or document governing the terms of any Series Enhancement or pursuant to which any Series Enhancement is issued or outstanding. "Enhancement Invested Amount", with respect to any Series, shall have the meaning specified in the related Supplement. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "Excess Finance Charge Collections" shall have the meaning specified in Section 4.05. "Excess Funding Account" shall have the meaning specified in Section 4.02. "Excluded Series" shall mean any Series designated as such in the relevant Supplement. "Existing Agreement" shall have the meaning specified in the Recitals. "FDIC" shall mean the Federal Deposit Insurance Corporation or any successor. "Finance Charge Receivables" shall mean, with respect to any Monthly Period, the sum of (i) all amounts billed to the Obligors on any Account at the beginning of such Monthly Period in respect of Periodic Finance Charges and late fees and (ii) Discount Option Receivables. "Finance Charge Shortfalls" shall have the meaning specified in Section 4.05. "Floating Allocation Percentage" shall mean, with respect to any Series, the floating allocation percentage specified in the related Supplement. "Funding Period" shall have the meaning specified in Section 4.06. "Global Certificate" shall have the meaning specified in Section 6.13. "Governmental Authority" shall mean the United States of America, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Group" shall mean, with respect to any Series, the group of Series, if any, in which the related Supplement specifies such Series is to be included. "Ineligible Receivables" shall have the meaning specified in Section 2.05(a). "Initial Account" shall mean each revolving credit card account or other consumer revolving or installment credit account established pursuant to an Account Agreement between The Neiman Marcus Group, Inc., as the initial Account Originator and any Person, and identified by account number and by the Receivable balance in a computer file, microfiche list or printed list delivered to the Trustee by the Seller on or prior to the first Closing Date pursuant to Section 2.01. "Insolvency Event" shall have the meaning specified in Section 9.01(a). "Insurance Proceeds" shall mean any amounts recovered by the Servicer pursuant to any credit insurance policies covering any Obligor with respect to Receivables under such Obligor's Account. "Interest Funding Account" shall mean, with respect to any Series, the account, if any, specified as such in the related Supplement. "Invested Amount" shall have, with respect to any Series, the meaning specified in the related Supplement. "Investment Company Act" shall mean the Investment Company Act of 1940, as amended. "Investor Certificateholder" shall mean the Person in whose name a Registered Certificate is registered in the Certificate Register or the holder of any Bearer Certificate (or the Global Certificate, as the case may be) or Coupon. "Investor Certificates" shall mean any one of the certificates (including the Bearer Certificates, the Registered Certificates or any Global Certificate) executed by the Seller and authenticated by or on behalf of the Trustee, substantially in the form attached to the related Supplement, other than the Seller Certificate. "Investor Percentage" shall have, for any Series, with respect to Principal Receivables, Finance Charge Receivables and Receivables in Defaulted Accounts, the meaning specified in the related Supplement. "Late Fees" shall mean the fees specified in the Account Agreement applicable to each Account for late fees with respect to such Account. "Lien" shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, participation or equity interest, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever, including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing and the filing of any financing statement under the UCC (other than any such financing statement filed for informational purposes only) or comparable law of any jurisdiction to evidence any of the foregoing, excluding any lien or filing pursuant to this Agreement; provided, however, that any assignment or transfer pursuant to Section 6.03(c) or (d) or Section 7.02 shall not be deemed to constitute a Lien. "Monthly Period" shall mean each calendar month, unless otherwise defined in any Supplement. "Monthly Servicing Fee" shall have the meaning specified in the related Supplement. "Moody's" shall mean Moody's Investors Service, Inc., or its successor. "Notices" shall have the meaning specified in Section 13.05(a). "Obligor" shall mean, with respect to any Account, the Person or Persons obligated to make payments with respect to such Account, including any guarantor thereof. "Officer's Certificate" shall mean, unless otherwise specified in this Agreement, a certificate delivered to the Trustee signed by the Chairman of the Board, President, any Vice President or the Treasurer of the Seller or the Servicer, as the case may be. "Opinion of Counsel" shall mean a written opinion of counsel, who may be counsel for, or an employee of, the Person providing the opinion and which opinion shall be reasonably acceptable to the Trustee. "Participation Interests" shall have the meaning specified in Section 2.09(a). "Paying Agent" shall mean any paying agent and copaying agent appointed pursuant to Section 6.07. "Pay Out Event" shall mean, with respect to any Series, each event specified in Section 9.01 and each additional event, if any, specified in the relevant Supplement as a Pay Out Event with respect to such Series. "Periodic Finance Charges" shall have the meaning specified in the Account Agreement applicable to each Account for finance charges (due to periodic rate) or any similar term. "Person" shall mean any legal person, including any individual, corporation, partnership, joint venture, association, jointstock company, trust, unincorporated organization, governmental entity or other entity of similar nature. "Portfolio Yield" shall have the meaning, with respect to any Series, specified in the related Supplement. "Pre-Funding Account" shall have the meaning specified in Section 4.06. "Principal Allocation Percentage" shall mean, with respect to any Series, the principal allocation percentage specified in the related Supplement. "Principal Funding Account" shall mean, with respect to any Series, the account, if any, specified as such in the related Supplement. "Principal Receivable" shall mean all Receivables that are not Finance Charge Receivables. In calculating the aggregate amount of Principal Receivables on any day, the amount of Principal Receivables shall not include Defaulted Receivables and shall be reduced by the aggregate amount of credit balances in the Accounts on such day. Any Receivables that the Seller is unable to transfer as provided in Section 2.11 shall not be included in calculating the aggregate amount of Principal Receivables, except to the extent so provided in Section 2.11. "Principal Sharing Series" shall mean a Series that, pursuant to the Supplement therefor, is entitled to receive Shared Principal Collections. "Principal Shortfalls" shall have the meaning specified in Section 4.04. "Principal Terms" shall mean, with respect to any Series, (i) the name or designation; (ii) the initial principal amount (or method for calculating such amount) and its invested amount in the Trust; (iii) the Certificate Rate (or method for the determination thereof); (iv) the payment date or dates and the date or dates from which interest shall accrue; (v) the method for allocating Collections to Certificateholders of such Series; (vi) the designation of any Series Accounts and the terms governing the operation of any such Series Accounts; (vii) the method of calculating the servicing fee with respect thereto; (viii) the provider, if any, and the terms of any form of Series Enhancement with respect thereto; (ix) the terms on which the Investor Certificates of such Series may be exchanged for Investor Certificates of another Series, repurchased by the Seller or any Affiliate of the Seller or remarketed to other investors; (x) the Series Termination Date; (xi) the number of Classes of Investor Certificates of such Series and, if such Series consists of more than one Class, the rights and priorities of each such Class; (xii) the extent to which the Investor Certificates of such Series will be issuable in temporary or permanent global form (and, in such case, the depositary for such Global Certificate or Certificates, the terms and conditions, if any, upon which such Global Certificates may be exchanged, in whole or in part, for Definitive Certificates, and the manner in which any interest payable on a temporary or Global Certificate will be paid); (xiii) whether the Investor Certificates of such Series may be issued as Bearer Certificates and any limitation imposed thereon; (xiv) the priority of such Series with respect to any other Series; (xv) whether or not such Series is a Principal Sharing Series; (xvi) the Group, if any, to which such Series belongs; and (xvii) any other terms of, or with respect to, such Series. "Purchase Agreement" shall mean (i) the Receivables Purchase Agreement, dated as of March 1, 1995 and amended and restated as of July 2, 2000, between The Neiman Marcus Group, Inc. and Neiman Marcus Funding Corporation, (ii) the Receivables Purchase Agreement, dated as of July 2, 2000, between Bergdorf Goodman Inc. and Neiman Marcus Funding Corporation and (iii) any other receivables purchase agreement entered into between another Account Originator and the Seller in accordance with Section 2.13, substantially in the form of the Receivables Purchase Agreement referred to in clause (ii) above. "Rating Agency" shall mean, with respect to any outstanding Series or Class, each statistical rating agency selected by the Seller to rate the Investor Certificates of such Series or Class. "Rating Agency Condition" shall mean, with respect to any action, that each Rating Agency shall have notified the Seller, the Servicer and the Trustee in writing that such action will not result in a reduction or withdrawal of the rating of any outstanding Series or Class with respect to which it is a Rating Agency. "Reassignment" shall have the meaning specified in Section 2.10. "Receivable" shall mean any amount owing by the Obligor under an Account from time to time, including amounts owing for purchases of goods and services, and amounts payable for Finance Charge Receivables and excluding annual fees and non-sufficient fund fees on the Accounts. A Receivable shall be deemed to have been created at the end of the day on the Date of Processing of such Receivable. Receivables that become Defaulted Receivables shall not be shown on the Servicer's records as amounts payable (and shall cease to be included as Receivables) on the day on which they become Defaulted Receivables. "Record Date" shall mean, with respect to any Distribution Date, the last Business Day of the preceding calendar month, except as otherwise provided with respect to a Series in the related Supplement. "Recoveries" shall mean all amounts, including Insurance Proceeds, received by the Servicer with respect to Receivables that have previously become Defaulted Receivables. "Registered Certificateholder" shall mean the Holder of a Registered Certificate. "Registered Certificates" shall have the meaning specified in Section 6.01. "Removal Date" shall have the meaning specified in Section 2.10(a). "Removal Notice Date" shall have the meaning specified in Section 2.10(a). "Removed Accounts" shall have the meaning specified in Section 2.10. "Required Designation Date" shall have the meaning specified in Section 2.09(a). "Required Principal Balance" shall mean, as of any date of determination, the sum of the numerators used at such date to calculate the Investor Percentage with respect to Principal Receivables for all Series outstanding on such date. "Required Retained Interest" shall mean the product of the Required Retained Percentage and the sum of the outstanding principal amounts of all classes of all Series. "Required Retained Percentage" shall mean the highest Required Retained Percentage specified in any Supplement or such lower amount as is established by the Seller and as to which a Tax Opinion has been delivered. "Required Seller's Interest" shall mean, as of any date of determination, the product of (i) the aggregate Principal Receivables and (ii) the Required Seller's Percentage; provided that if such percentage is zero, any amount by which the Seller's Interest is below zero will constitute the amount by which the Seller's Interest will be less than the Required Seller's Interest. "Required Seller's Percentage" shall mean, as of any date of determination, the weighted average of the Required Seller's Percentages, based on the Invested Amounts of each Series outstanding as of such date, specified in the Supplements for all outstanding Series. "Requirements of Law" with respect to any Person shall mean the certificate of incorporation or articles of association and bylaws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, or determination of an arbitrator or Governmental Authority, in each case applicable to or binding upon such Person or to which such Person is subject, whether Federal, state or local. "Responsible Officer" shall mean any officer within the Corporate Trust Department (or any successor group of the Trustee), including any vice president, assistant vice president, assistant secretary or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred at the Trustee's Corporate Trust Office because of such officer's knowledge of and familiarity with the particular subject. "Restart Date" shall have the meaning specified in Section 2.09(d). "Restatement Date" shall mean July 2, 2000. "Restatement Date Account Schedule" shall mean a computer file, microfiche list or printed list containing a true and complete list of all Accounts as of the beginning of the day on the Restatement Date, which is required to be delivered to the Trustee no later than July 8, 2000. "Retained Interest" shall mean, on any date of determination, the sum of the Seller's Interest (excluding the interest represented by any Supplemental Certificate) and the Invested Amount represented by any Seller Retained Certificate. "Retained Percentage" shall mean, on any date of determination, the percentage equivalent of a fraction the numerator of which is the Retained Interest and the denominator of which is the aggregate amount of Principal Receivables at the end of the day immediately prior to such date of determination plus all amounts on deposit in the Excess Funding Account (but not including investment earnings on such amounts). "Revolving Period" shall mean, with respect to any Series, the period specified as such in the related Supplement. "Rule 144A" shall mean Rule 144A under the Act, as such Rule may be amended from time to time. "Scheduled Amortization Period" shall mean, with respect to any Series, the period, if any, specified as such in the related Supplement. "Seller" shall mean Neiman Marcus Funding Corporation, a Delaware corporation, or its successors or assigns under this Agreement and additional sellers, if any, designated in accordance with Sections 2.13 or 6.03(d). "Seller Certificate" shall mean the certificate executed by the Seller and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A. "Seller Retained Certificates" shall mean Investor Certificates of any Series that the Seller retained pursuant to the terms of any Supplement. "Seller Retained Class" shall mean any Class of Investor Certificates of any Series that the Seller retained pursuant to the terms of any Supplement. "Seller's Interest" shall have the meaning specified in Section 4.01. For purposes of all calculations under this Agreement, the amount of the Seller's Interest at any time shall equal the result of (i) the sum of (a) the aggregate Principal Receivables and (b) the amount on deposit in the Excess Funding Account minus (ii) the sum of the Adjusted Invested Amounts of all outstanding Series. "Seller's Percentage" shall mean, with respect to Finance Charge Receivables and Defaulted Receivables, 100% less the sum of the Floating Allocation Percentages with respect to all outstanding Series and with respect to Principal Receivables, 100% less the sum of the Principal Allocation Percentages with respect to all outstanding Series. "Series" shall mean any series of Investor Certificates established pursuant to a Supplement. "Series Account" shall mean any deposit, trust, escrow or similar account maintained for the benefit of the Investor Certificateholders of any Series or Class, as specified in any Supplement. "Series Allocation Percentage" shall mean with respect to any Series, on any date of determination, the percentage equivalent of a fraction the numerator of which is the Series Invested Amount of such Series and the denominator of which is the sum of the Series Invested Amounts of all Series then outstanding. "Series Enhancement" shall mean the rights and benefits provided to the Investor Certificateholder of any Series or Class pursuant to any letter of credit, surety bond, cash collateral account, enhancement invested amount, spread account, guaranteed rate agreement, maturity liquidity facility, tax protection agreement, interest rate swap agreement, interest rate cap agreement or other similar arrangement. The subordination of any Class to another Class shall be deemed to be a Series Enhancement. "Series Enhancer" shall mean the Person or Persons providing any Series Enhancement, other than the Investor Certificateholders of any Class that is subordinated to another Class. "Series Invested Amount" shall have, with respect to any Series, the meaning specified in the related Supplement. "Series Issuance Date" shall mean, with respect to any Series, the date on which the Investor Certificates of such Series are to be originally issued in accordance with Section 6.03 and the related Supplement. "Series Termination Date" shall mean, with respect to any Series, the termination date specified in the related Supplement. "Service Transfer" shall have the meaning specified in Section 10.01. "Servicer" shall mean The Neiman Marcus Group, Inc., in its capacity as Servicer pursuant to this Agreement, and, after any Service Transfer, the Successor Servicer. "Servicer Default" shall have the meaning specified in Section 10.01. "Servicing Fee" shall mean, with respect to any Series, the servicing fee specified in Section 3.02. "Servicing Fee Rates" shall mean, with respect to any Series, the Servicing Fee Rate specified in the related Supplement. "Servicing Officer" shall mean any officer of the Servicer involved in, or responsible for, the administration and servicing of the Receivables whose name appears on a list of servicing officers furnished to the Trustee by the Servicer, as such list may from time to time be amended. "Shared Principal Collections" shall have the meaning specified in Section 4.04. "Standard & Poor's" shall mean Standard & Poor's Ratings Group, a division of McGraw Hill Corporation or its successor. "Successor Servicer" shall have the meaning specified in Section 10.02(a). "Supplement" shall mean, with respect to any Series, a Supplement to this Agreement, executed and delivered in connection with the original issuance of the Investor Certificates of such Series pursuant to Section 6.03, and all amendments thereof and supplements thereto. "Supplemental Certificate" shall have the meaning specified in Section 6.03(c). "Tax Opinion" shall mean, with respect to any action, an Opinion of Counsel to the effect that, for Federal income tax purposes, (a) such action will not adversely affect the tax characterization as debt of Investor Certificates of any outstanding Series or Class that were characterized as debt at the time of their issuance, (b) following such action the Trust will not be deemed to be an association (or publicly traded partnership) taxable as a corporation and (c) such action will not cause or constitute an event in which gain or loss would be recognized by any Investor Certificateholders. "Termination Notice" shall have the meaning specified in Section 10.01. "Transfer Agent and Registrar" shall have the meaning specified in Section 6.04. "Transfer Date" shall mean the Business Day immediately preceding each Distribution Date. "Transfer Restriction Event" shall have the meaning specified in Section 2.11. "Transferred Account" shall have the meaning set forth in the definition of "Account". "Trust" shall mean the Neiman Marcus Group Credit Card Master Trust created by this Agreement. "Trust Assets" shall have the meaning specified in Section 2.01. "Trust Cut-Off Date" shall mean March 1, 1995. "Trustee" shall mean The Bank of New York in its capacity as trustee on behalf of the Trust, or its successor in interest, or any successor trustee appointed as herein provided. "UCC" shall mean the Uniform Commercial Code, as amended from time to time, as in effect in the State of New York and in any other State where the filing of a financing statement is required to perfect the Seller's or the Trust's interest in the Receivables and the proceeds thereof or in any other specified jurisdiction. "United States" shall mean the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction. "U.S. person" or "United States person" shall mean a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States, or an estate or trust the income of which is subject to United State Federal income taxation regardless of its source. "Variable Funding Certificates" shall have the meaning specified in any Variable Funding Supplement. "Variable Funding Supplement" shall mean a Supplement executed in connection with the issuance of, and otherwise specifying the terms governing the issuance of, Variable Funding Certificates provided for therein. Other Definitional Provisions (a) . (a) With respect to any Series, all terms used herein and not otherwise defined herein shall have meanings ascribed to them in the related Supplement. (b) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (c) As used in this Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in any such certificate or other document to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Agreement or in any such certificate or other document shall control. (d) The agreements, representations and warranties of Neiman Marcus Funding Corporation and The Neiman Marcus Group, Inc. in this Agreement in each of their respective capacities as Seller and as Servicer, shall be deemed to be the agreements, representations and warranties of Neiman Marcus Funding Corporation and The Neiman Marcus Group, Inc. solely in each such respective capacity for so long as Neiman Marcus Funding Corporation and The Neiman Marcus Group, Inc. act in each such capacity under this Agreement. (e) Any reference to each Rating Agency shall only apply to any specific rating agency if such rating agency is then rating any outstanding Series. (f) Unless otherwise specified, references to any amount as on deposit or outstanding on any particular date shall mean such amount at the close of business on such day. (g) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; references to any Section, Schedule or Exhibit are references to Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified; and the term "including" means "including without limitation." ARTICLE II Conveyance of Receivables Conveyance of Receivables . By execution of this Agreement, the Seller does hereby sell, transfer, assign, set over and otherwise convey to the Trust, for the benefit of the Certificateholders, all its right, title and interest in, to and under the Receivables existing at the close of business on the Trust Cut-Off Date, in the case of Receivables arising in the Initial Accounts owned by The Neiman Marcus Group, Inc., as the initial Account Originator, and on the applicable Addition Date, in the case of Receivables arising in the Additional Accounts owned by the applicable Account Originator, and in each case, thereafter created from time to time until the termination of the Trust, all Recoveries allocable to the Trust as provided herein, all moneys due or to become due and all amounts received with respect to any of the foregoing and all proceeds (including "proceeds" as defined in the UCC) of any of the foregoing. Such property, together with all moneys on deposit in the Collection Account, the Excess Funding Account, the Series Accounts and any Series Enhancement shall constitute the assets of the Trust (the "Trust Assets"). The foregoing does not constitute and is not intended to result in the creation or assumption by the Trust, the Trustee, any Investor Certificateholders or any Series Enhancer of any obligation of any Account Originator, the Servicer, the Seller or any other Person in connection with the Accounts or the Receivables or under any agreement or instrument relating thereto, including any obligation to Obligors, merchant banks, merchants clearance systems or insurers. The Seller agrees to record and file, at its own expense, financing statements (and continuation statements when applicable) with respect to the Receivables and other Trust Assets now existing and hereafter created in Accounts owned by each Account Originator meeting the requirements of applicable state law in such manner and in such jurisdictions as are necessary to perfect, and maintain the perfection of, the sale and assignment of such Receivables to the Trust, and to deliver a file stamped copy of each such financing statement or other evidence of such filing (which may, for purposes of this Section 2.01 consist of telephone confirmation of such filing promptly followed by delivery to the Trustee of a filestamped copy) to the Trustee on or prior to the initial Closing Date, in the case of such Receivables arising in the Initial Accounts, and (if any additional filing is so necessary) the applicable Addition Date, in the case of such Receivables arising in Additional Accounts. The Trustee shall be under no obligation whatsoever to file such financing or continuation statements or to make any other filing under the UCC in connection with such sale and assignment. The Seller further agrees, at its own expense, (a) on or prior to (x) the initial Closing Date, in the case of the Initial Accounts, (y) the applicable Addition Date, in the case of Additional Accounts, and (z) the applicable Removal Date, in the case of Removed Accounts, to indicate in the appropriate computer files that Receivables created in connection with the Accounts owned by each Account Originator (other than Removed Accounts) have been conveyed to the Trust pursuant to this Agreement for the benefit of the Certificateholders (or conveyed to the Seller or its designee in accordance with Section 2.10, in the case of Removed Accounts) by including (or deleting in the case of Removed Accounts) in such computer files the code identifying each such Account and (b) on or prior to the applicable Document Delivery Date, to deliver to the Trustee a computer file, microfiche list or printed list containing a true and complete list of all such Accounts, specifying for each such Account, as of the Trust Cut-Off Date, in the case of the Initial Accounts, the applicable Addition Cut-Off Date, in the case of Additional Accounts (other than Automatic Additional Accounts), and the Removal Date, in the case of Removed Accounts, its account number, the aggregate amount outstanding in such Account and the aggregate amount of Principal Receivables outstanding in such Account. Such file or list, as supplemented from time to time to reflect Additional Accounts and Removed Accounts, shall be marked as Schedule 1 to this Agreement and is hereby incorporated into and made a part of this Agreement. The Seller further agrees not to alter the code referenced in this paragraph with respect to any Account during the term of this Agreement unless and until (a) such Account becomes a Removed Account or (b) the Seller shall have delivered to the Trustee at least 30 days prior written notice of its intention to do so and has taken such action as is necessary or advisable to cause the interest of the Trustee in the Receivables and other Trust Assets to continue to be perfected with the priority required by this Agreement. It is the intention of the parties hereto that the conveyance of the Receivables and all other Trust Assets by the Seller to the Trustee, on behalf of the Trust, as provided in this Section 2.01 be, and be construed as, an absolute sale of the Receivables by the Seller to the Trust, for the benefit of the Certificateholders. Furthermore, it is not intended that such conveyance be deemed a pledge of the Receivables and the other Trust Assets by the Seller to the Trustee to secure a debt or other obligation of the Seller. This Agreement shall also be deemed to be a security agreement within the meaning of Article 9 of the UCC and the conveyance provided for in this Section 2.01 shall be deemed to be a grant by the Seller to the Trustee of a "security interest" within the meaning of Article 9 of the UCC in all of the Seller's right, title and interest in and to the Receivables and other Trust Assets and all amounts payable to the holders of the Receivables after the Closing Date in accordance with the terms thereof and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property, including without limitation all amounts from time to time held or invested in the Series Accounts, whether in the form of cash, instruments, securities or other property. Acceptance by Trustee (a) . (a) The Trustee hereby acknowledges its acceptance on behalf of the Trust of all right, title and interest to the property, now existing and hereafter created, conveyed to the Trust pursuant to Section 2.01 and declares that it shall maintain such right, title and interest, upon the trust herein set forth, for the benefit of all Certificateholders. The Trustee further acknowledges that, prior to or simultaneously with the execution and delivery of this Agreement, the Seller delivered to the Trustee the computer file, microfiche list or printed list relating to the Initial Accounts described in the penultimate paragraph of Section 2.01. (b) The Trustee hereby agrees not to disclose to any Person any of the account numbers or other information contained in the computer files, microfiche lists or printed lists marked as Schedule 1 or otherwise delivered to the Trustee from time to time, except (i) to a Successor Servicer or as required by a Requirement of Law applicable to the Trustee, (ii) in connection with the performance of the Trustee's duties hereunder or (iii) in enforcing the rights of Certificateholders. The Trustee (i) agrees to take such measures as shall be reasonably requested by the Seller to protect and maintain the security and confidentiality of such information and (ii) in any event will maintain and preserve such files or lists and the confidentiality of the information contained in such files or lists in the same manner and with the same degree of care that it would exercise with respect to similar files, lists or information maintained by it for its own account. The Trustee will also, upon two Business Days prior notice, allow the Seller to inspect the Trustee's security and confidentiality arrangements from time to time during normal business hours. The Trustee shall provide the Seller with notice no later than five Business Days prior to any disclosure pursuant to this Section. (c) The Trustee shall have no power to create, assume or incur indebtedness or other liabilities in the name of the Trust other than as contemplated in this Agreement or any Supplement. (d) The Trustee hereby agrees not to use any information it obtains pursuant to this Agreement, including any of the account numbers or other information contained in the computer files, microfiche lists or printed lists marked as Schedule 1 or otherwise delivered by the Seller to the Trustee pursuant to Sections 2.01, 2.09, 2.10 or 3.04(c), to compete or assist any person in competing with any Account Originator or the Seller in their respective businesses. Representations and Warranties of the Seller Relating to the Seller . The Seller hereby represents and warrants to the Trust (and agrees that the Trustee may rely on each such representation and warranty in accepting the Receivables in trust and in authenticating the Certificates) as of each Closing Date that: (a) Organization and Good Standing. The Seller is a corporation validly existing in good standing under the laws of the State of Delaware, and has full corporate power, authority and legal right to own its properties and conduct its business as such properties are presently owned and such business is presently conducted, to execute, deliver and perform its obligations under this Agreement and each Supplement and to execute and deliver to the Trustee the Certificates pursuant hereto. (b) Due Qualification. The Seller is duly qualified to do business and is in good standing as a foreign corporation (or is exempt from such requirements), and has obtained all necessary licenses and approvals in each jurisdiction in which failure to so qualify or to obtain such licenses and approvals would render any Account Agreement relating to an Account owned by any Account Originator or any Receivable transferred to the Trust by the Seller unenforceable by the Account Originator, the Seller, the Servicer or the Trustee or would have a material adverse effect on the interests of the Certificateholders hereunder or under any Supplement. (c) Due Authorization. The execution, delivery and performance of this Agreement and each Supplement by the Seller, the execution and delivery to the Trustee of the Certificates by the Seller and the consummation by the Seller of the transactions provided for in this Agreement and each Supplement have been duly authorized by the Seller by all necessary corporate action on the part of the Seller and this Agreement and each Supplement will remain, from the time of its execution, an official record of the Seller. (d) No Conflict. The execution and delivery by the Seller of this Agreement, each Supplement and the Certificates, the performance by the Seller of the transactions contemplated by this Agreement and each Supplement and the fulfillment by the Seller of the terms hereof and thereof will not conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default under, any indenture, contract, agreement, mortgage, deed of trust, or other instrument to which the Seller is a party or by which it or any of its properties are bound. (e) No Violation. The execution and delivery by the Seller of this Agreement, each Supplement and the Certificates, the performance by the Seller of the transactions contemplated by this Agreement and each Supplement and the fulfillment by the Seller of the terms hereof and thereof will not conflict with or violate any Requirements of Law applicable to the Seller. (f) No Proceedings. There are no proceedings or investigations pending or, to the best knowledge of the Seller, threatened against the Seller, before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality (i) asserting the invalidity of this Agreement, any Supplement or the Certificates, (ii) seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated by this Agreement, any Supplement or the Certificates, (iii) seeking any determination or ruling that, in the reasonable judgment of the Seller, would materially and adversely affect the performance by the Seller of its obligations under this Agreement or any Supplement, (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement, any Supplement or the Certificates or (v) seeking to affect adversely the income tax attributes of the Trust under the Federal or applicable state income or franchise tax systems. (g) All Consents Required. All approvals, authorizations, consents, orders or other actions of any Person or of any governmental body or official required in connection with the execution and delivery by the Seller of this Agreement, each Supplement and the Certificates, the performance by the Seller of the transactions contemplated by this Agreement and each Supplement and the fulfillment by the Seller of the terms hereof and thereof, have been obtained. (h) Insolvency. No Insolvency Event with respect to any Account Originator or the Seller has occurred and the transfer of the Receivables by the Seller to the Trust has not been made in contemplation of the occurrence thereof. The representations and warranties of the Seller set forth in this Section 2.03 shall survive the transfer and assignment by the Seller of the respective Receivables to the Trust. Upon discovery by the Seller, the Servicer or the Trustee of a breach of any of the representations and warranties by the Seller set forth in this Section 2.03, the party discovering such breach shall give prompt written notice to the others and to each Series Enhancer entitled thereto pursuant to the relevant Supplement. The Seller agrees to cooperate with the Servicer and the Trustee in attempting to cure any such breach. For purposes of the representations and warranties set forth in this Section 2.03, each reference to a Supplement shall be deemed to refer only to those Supplements in effect as of the relevant Closing Date. Representations and Warranties of the Seller Relating to the Agreement and any Supplement and the Receivables (a) . (a) Representations and Warranties. The Seller hereby represents and warrants to the Trust (and agrees that the Trustee may rely on each such representation and warranty in accepting the Receivables in trust and in authenticating the Certificates) as of the date of this Agreement and the date of each Supplement, as of each Closing Date and, with respect to Additional Accounts, as of the related Addition Date that: (i) this Agreement, each Supplement and, in the case of Additional Accounts, the related Assignment, each constitutes a legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity); (ii) as of the first Closing Date and as of the related Addition Date with respect to Additional Accounts, and as of the applicable Removal Date with respect to the Removed Accounts, Schedule 1 to this Agreement and the related computer file, microfiche list or printed list delivered pursuant to this Agreement, as supplemented to such date, is an accurate and complete listing in all material respects of all the Accounts owned by each Account Originator as of the Trust Cut- Off Date, such Additional Cut-Off Date or such Removal Date, as the case may be, and the information contained therein with respect to the identity of such Accounts and the Receivables existing in such Accounts is true and correct in all material respects as of the Trust Cut-Off Date, such Addition Cut-Off Date or such Removal Date, as the case may be; (iii) the Seller is the legal and beneficial owner of all right, title and interest in each Receivable and the Seller has the full right to transfer such Receivables to the Trust, and each Receivable conveyed to the Trust by the Seller has been conveyed to the Trust free and clear of any Lien of any Person claiming through or under the Seller or any of its Affiliates (other than Liens permitted under subsection 2.07(b)) and in compliance, in all material respects, with all Requirements of Law applicable to the Seller; (iv) all authorizations, consents, orders or approvals of or registrations or declarations with any Governmental Authority required to be obtained, effected or given by the Seller in connection with the conveyance by the Seller of Receivables to the Trust have been duly obtained, effected or given and are in full force and effect; (v) this Agreement or, in the case of Additional Accounts, the related Assignment constitutes a valid transfer and assignment to the Trust of all right, title and interest of the Seller in the Receivables and other Trust Assets conveyed to the Trust by the Seller and all monies due or to become due with respect thereto and the proceeds thereof and this Agreement or, in the case of Additional Accounts, the related Assignment constitutes a grant of a "security interest" (as defined in the UCC) in such property to the Trust, that, in the case of existing Receivables and the proceeds thereof, is enforceable upon execution and delivery of this Agreement, or, with respect to then existing Receivables in Additional Accounts, as of the applicable Addition Date, and that will be enforceable with respect to such Receivables hereafter and thereafter created and the proceeds thereof upon such creation. Upon the filing of the financing statements pursuant to Section 2.01 and, in the case of Receivables hereafter created and the proceeds thereof, upon the creation thereof, the Trust shall have a first priority security interest in such property and proceeds (as defined in the UCC) except for Liens permitted under subsection 2.07(b); (vi) except as otherwise expressly provided in this Agreement or any Supplement, neither the Seller nor any Person claiming through or under the Seller has any claim to or interest in the Collection Account, the Excess Funding Account, any Series Account or any Series Enhancement; (vii) on the Trust Cut-Off Date, each Initial Account is an Eligible Account (and each such Initial Account was, as of the Trust Cut-Off Date, a "NM regular account", "InCircle Card", "NM Plus Card", "NM Signature Account" or "Platinum Card" revolving credit card or installment account), and on the applicable Addition Cut-Off Date, each related Additional Account is an Eligible Account; (viii) on the Trust Cut-Off Date, each Receivable then existing is an Eligible Receivable and, on the applicable Addition Cut-Off Date, each Receivable contained in any related Additional Account is an Eligible Receivable; (ix) as of the date of the creation of any new Receivable, such Receivable is an Eligible Receivable; and (x) no selection procedure has been utilized by The Neiman Marcus Group, Inc., as the initial Account Originator or the Seller that the Seller reasonably believes would result in a selection of Initial Accounts (from among the available Eligible Accounts owned by The Neiman Marcus Group, Inc., as the initial Account Originator on the Trust Cut-Off Date) that would be materially adverse to the interests of the Investor Certificateholders. (b) Notice of Breach. The representations and warranties of the Seller set forth in this Section 2.04 shall survive the transfer and assignment by the Seller of Receivables to the Trust. Upon discovery by the Seller, the Servicer or the Trustee of a breach of any of the representations and warranties by the Seller set forth in this Section 2.04, the party discovering such breach shall give prompt written notice to the others and to each Series Enhancer entitled thereto pursuant to the relevant Supplement. The Seller agrees to cooperate with the Servicer and the Trustee in attempting to cure any such breach. For purposes of the representations and warranties set forth in this Section 2.04, each reference to a Supplement shall be deemed to refer only to those Supplements in effect as of the date of the relevant representations or warranties. Reassignment of Ineligible Receivables (a) . (a) Reassignment of Receivables. In the event (i) any representation or warranty of the Seller contained in Section 2.04(a)(ii), (iii), (iv), (vii), (viii), (ix) or (x) is not true and correct in any material respect as of the date specified therein with respect to any Receivable transferred to the Trust by the Seller or any Account owned by any Account Originator and as a result of such breach any Receivables in the related Account become Defaulted Receivables or the Trust's rights in, to or under such Receivables or the proceeds of such Receivables are impaired or such proceeds are not available for any reason to the Trust free and clear of any Lien, the principal balance of such Receivables shall be reduced to zero for the purposes of this Agreement and, unless cured within 60 days (or such longer period, not in excess of 150 days, as may be agreed to by the Trustee) after the earlier to occur of the discovery thereof by the Seller or receipt by the Seller or a designee of the Seller of notice thereof given by the Trustee, or (ii) it is so provided in Section 2.07(a) with respect to any Receivables transferred to the Trust by the Seller, then the Seller shall accept reassignment of all Receivables in the related Account ("Ineligible Receivables") on the terms and conditions set forth in paragraph (b) below; provided, however, that such Receivables will not be deemed to be Ineligible Receivables and will not be reassigned to the Seller if, on any day prior to the end of such 60day or longer period, (x) either (A) in the case of an event described in clause (i) above the relevant representation and warranty shall be true and correct in all material respects as if made on such day or (B) in the case of an event described in clause (ii) above the circumstances causing such Receivable to become an Ineligible Receivable shall no longer exist and (y) the Seller shall have delivered an Officer's Certificate describing the nature of such breach and the manner in which the relevant representation and warranty became true and correct. (b) Price of Reassignment. The Servicer shall deduct the portion of the Ineligible Receivables reassigned to the Seller that are Principal Receivables from the aggregate amount of Principal Receivables used to calculate the Seller's Interest, the Retained Interest and the Floating Allocation Percentage and the Principal Allocation Percentage applicable to any Series. If, following the exclusion of such Principal Receivables from the calculation of the Seller's Interest and the Retained Interest, the Seller's Interest would be less than the Required Seller's Interest or the Retained Interest will be less than the Required Retained Interest, the Seller shall make a deposit into the Excess Funding Account in immediately available funds prior to the next succeeding Business Day in an amount equal to the amount by which the Seller's Interest would be less than the Required Seller's Interest or the amount by which the Retained Interest would be less than the Required Retained Interest, as the case may be (up to the amount of such Principal Receivables). The payment of such deposit amount in immediately available funds shall otherwise be considered payment in full of all of the Ineligible Receivables. Upon the deposit, if any, required to be made to the Excess Funding Account as provided in this Section and the reassignment of Ineligible Receivables, the Trustee, on behalf of the Trust, shall automatically and without further action be deemed to sell, transfer, assign, set over and otherwise convey to the Seller or its designee, without recourse, representation or warranty, all the right, title and interest of the Trust in and to such Ineligible Receivables, all moneys due or to become due and all amounts received with respect thereto and all proceeds thereof. The Trustee shall execute such documents and instruments of transfer or assignment and take such other action as shall reasonably be requested by the Seller to effect the conveyance of Ineligible Receivables pursuant to this Section. The obligation of the Seller to accept reassignment of any Ineligible Receivables, and to make the deposits, if any, required to be made to the Excess Funding Account as provided in this Section, shall constitute the sole remedy respecting the event giving rise to such obligation available to Certificateholders (or the Trustee on behalf of the Certificateholders) or any Series Enhancer. Reassignment of Receivables in Trust Portfolio . If any representation or warranty of the Seller set forth in Section 2.03(a), (b) or (c) or Section 2.04(a)(i), (v) or (vi) is not true and correct in any material respect and such breach has a material adverse effect on the Certificateholders' Interest in the Receivables transferred to the Trust by the Seller, then either the Trustee or the Holders of Investor Certificates evidencing not less than 50% of the aggregate unpaid principal amount of all outstanding Investor Certificates, by notice then given to the Seller and the Servicer (and to the Trustee if given by the Investor Certificateholders), may direct the Seller to accept a reassignment of the Receivables transferred to the Trust by the Seller if such breach and any material adverse effect caused by such breach is not cured within 60 days of such notice (or within such longer period, not in excess of 150 days, as may be specified in such notice), and upon those conditions the Seller shall be obligated to accept such reassignment on the terms set forth below; provided, however, that such Receivables will not be reassigned to the Seller if, on any day prior to the end of such 60day or longer period (i) the relevant representation and warranty shall be true and correct in all material respects as if made on such day and (ii) the Seller shall have delivered an Officer's Certificate describing the nature of such breach and the manner in which the relevant representation and warranty became true and correct. The Seller shall deposit in the Collection Account in immediately available funds not later than 12:00 noon, New York City time, on the first Distribution Date following the Monthly Period in which such reassignment obligation arises, in payment for such reassignment, an amount equal to the sum of the amounts specified therefor with respect to each outstanding Series in the related Supplement. Notwithstanding anything to the contrary in this Agreement, such amounts shall be distributed on such Distribution Date in accordance with Article IV and the terms of each Supplement. The payment of such deposit amount in immediately available funds shall otherwise be considered payment in full of all of the Receivables. Upon the deposit, if any, required to be made to the Collection Account as provided in this Section and the reassignment of the applicable Receivables, the Trustee, on behalf of the Trust, shall automatically and without further action be deemed to sell, transfer, assign, set over and otherwise convey to the Seller or its designee, without recourse, representation or warranty, all the right, title and interest of the Trust in and to such Receivables, all moneys due or to become due and all amounts received with respect thereto and all proceeds thereof. The Trustee shall execute such documents and instruments of transfer or assignment and take such other actions as shall reasonably be requested by the Seller to effect the conveyance of such Receivables pursuant to this Section. The obligation of the Seller to accept reassignment of any Receivables, and to make the deposits, if any, required to be made to the Collection Account as provided in this Section, shall constitute the sole remedy respecting the event giving rise to such obligation available to Certificateholders (or the Trustee on behalf of the Certificateholders). Covenants of the Seller . The Seller hereby covenants as follows: (a) Receivables to be Accounts, General Intangibles or Chattel Paper. Except in connection with the enforcement or collection of an Account, the Seller will take no action to cause any Receivable transferred by it to the Trust to be evidenced by any instrument (as defined in the UCC) and, if any such Receivable is so evidenced (whether or not in connection with the enforcement or collection of an Account), it shall be deemed to be an Ineligible Receivable in accordance with Section 2.05(a) and shall be reassigned to the Seller in accordance with Section 2.05(b). (b) Security Interests. Except for the conveyances hereunder, the Seller will not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist any Lien on any Receivable, whether now existing or hereafter created, or any interest therein; the Seller will immediately notify the Trustee of the existence of any Lien on any Receivable; and the Seller shall defend the right, title and interest of the Trust in, to and under the Receivables, whether now existing or hereafter created, against all claims of third parties claiming through or under the Seller; provided, however, that nothing in this Section 2.07(b) shall prevent or be deemed to prohibit the Seller from suffering to exist upon any of the Receivables any Liens for taxes if such taxes shall not at the time be due and payable or if the Seller shall currently be contesting the validity thereof in good faith by appropriate proceedings and shall have set aside on its books adequate reserves with respect thereto. Notwithstanding the foregoing, nothing in this Section 2.07(b) shall be construed to prevent or be deemed to prohibit the transfer of the Seller Certificate and certain other rights of the Seller in accordance with the terms of this Agreement and any related Supplement. (c) Seller's Interest. Except for the conveyances hereunder, in connection with any transaction permitted by Sections 7.02 and as provided in Sections 2.13 and 6.03, the Seller agrees not to transfer, assign, exchange or otherwise convey or pledge, hypothecate or otherwise grant a security interest in the Seller's Interest represented by the Seller Certificate or any Supplemental Certificate and any such attempted transfer, assignment, exchange, conveyance, pledge, hypothecation or grant shall be void. (d) Delivery of Collections or Recoveries. If the Seller receives Collections or Recoveries, the Seller agrees to pay the Servicer all such Collections and Recoveries as soon as practicable after receipt thereof but in no event later than two Business Days after the Date of Processing by the Seller. (e) Notice of Liens. The Seller shall notify the Trustee and each Series Enhancer entitled to such notice pursuant to the relevant Supplement promptly after becoming aware of any Lien on any Receivable other than the conveyances hereunder or Liens permitted under Section 2.07(b). (f) Separate Corporate Existence. The Seller shall: (i) Maintain in full effect its existence, rights and franchises as a corporation under the laws of the state of its incorporation and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement and the Purchase Agreements and each other instrument or agreement necessary or appropriate to proper administration hereof and permit and effectuate the transactions contemplated hereby. (ii) Maintain its own deposit account or accounts, separate from those of any Affiliate of the Seller, with commercial banking institutions. The funds of the Seller will not be diverted to any other Person or for other than the corporate use of the Seller, and, except as may be expressly permitted by this Agreement or the Purchase Agreements, the funds of the Seller shall not be commingled with those of any Affiliate of the Seller. (iii) Ensure that, to the extent that it shares the same officers or other employees as any of its stockholders or Affiliates, the salaries of and the expenses related to providing benefits to such officers and other employees shall be fairly allocated among such entities, and each such entity shall bear its fair share of the salary and benefit costs associated with all such common officers and employees. (iv) Ensure that, to the extent that it jointly contracts with any of its stockholders or Affiliates to do business with vendors or service providers or to share overhead expenses, the costs incurred in so doing shall be allocated fairly among such entities, and each such entity shall bear its fair share of such costs. To the extent that Seller contracts or does business with vendors or service providers where the goods and services provided are partially for the benefit of any other Person, the costs incurred in so doing shall be fairly allocated to or among such entities for whose benefit the goods and services are provided, and each such entity shall bear its fair share of such costs. All material transactions between the Seller and any of its Affiliates shall be only on an arm's-length basis and shall receive the approval of the Seller's Board of Directors including at least one Independent Director (defined below). (v) Maintain a principal executive and administrative office through which its business is conducted separate from those of its stockholders and Affiliates. To the extent that the Seller and any of its stockholders or Affiliates have offices in contiguous space, there shall be fair and appropriate allocation of overhead costs among them, and each such entity shall bear its fair share of such expenses. (vi) Conduct its affairs strictly in accordance with its Certificate of Incorporation and observe all necessary, appropriate and customary corporate formalities, including, but not limited to, holding all regular and special stockholders' and directors' meetings appropriate to authorize all corporate action, keeping separate and accurate minutes of such meetings, passing all resolutions or consents necessary to authorize actions taken or to be taken, and maintaining accurate and separate books, records and accounts, including, but not limited to, payroll and intercompany transaction accounts. Regular stockholders' and directors' meetings shall be held at least annually. (vii) Ensure that its Board of Directors shall be elected independently from the Boards of Directors of its Affiliates and shall at all times include at least one Independent Director (for purposes hereof, "Independent Director" shall mean any member of the Board of Directors of the Seller that is not and has not at any time been (x) a director, officer, employee or shareholder of any Affiliate of the Seller or (y) a member of the immediate family of any of the foregoing). (viii) Ensure that decisions with respect to its business and daily operations shall be independently made by the Seller (although the officer making any particular decision may also be an officer or director of an Affiliate of the Seller) and shall not be dictated by an Affiliate of the Seller. (ix) Act solely in its own corporate name and through its own authorized officers and agents, and no Affiliate of the Seller shall be appointed to act as agent of the Seller, except as expressly contemplated by this Agreement or the Purchase Agreements; (x) Ensure that no Affiliate of the Seller shall advance funds to the Seller, other than capital contributions from The Neiman Marcus Group, Inc. made to enable the Seller to pay the purchase price of Receivables or as is otherwise provided in any Purchase Agreement, and no Affiliate of the Seller will otherwise supply funds to, or guaranty debts of, the Seller; provided, however, that an Affiliate of the Seller may provide funds to the Seller in connection with capitalization of the Seller provided to assure that the Seller has "substantial assets" as described in Treasury Regulation Section 301.7701-2(d)(2). (xi) Not enter into any guaranty, or otherwise become liable, with respect to any obligation of any Affiliate of the Seller other than with respect to Section 7.04. (xii) Ensure that any financial reports required of the Seller shall comply with generally accepted accounting principles and shall be issued separately from, but may be consolidated with, any reports prepared for any of its Affiliates. (g) Continuous Perfection. The Seller shall not change its name, identity or structure in any manner that might cause any financing or continuation statement filed pursuant to this Agreement to be misleading within the meaning of Section 9-402(7) of the UCC (or any other then applicable provision of the UCC) unless the Seller shall have delivered to the Trustee at least 30 days prior written notice thereof and, no later than 30 days after making such change, shall have taken all action necessary or advisable to amend such financing statement or continuation statement so that it is not misleading. The Seller shall not change its chief executive office or change the location of its principal records concerning the Receivables, the Trust Assets or the Collections unless it has delivered to the Trustee at least 30 days prior written notice of its intention to do so and has taken such action as is necessary or advisable to cause the interest of the Trustee in the Receivables and other Trust Assets to continue to be perfected with the priority required by this Agreement. Covenants of The Seller with Respect to the Purchase Agreements . The Seller, in its capacity as purchaser of the Receivables from the Account Originators pursuant to the Purchase Agreements, hereby covenants that the Seller will at all times enforce the covenants and agreements of each Account Originator in the applicable Purchase Agreement, including, without limitation, covenants to the effect set forth below. (a) Periodic Finance Charges and Other Fees. Except as otherwise required by any Requirement of Law, or as is deemed by the applicable Account Originator in its sole discretion to be necessary it shall not at any time reduce the annual percentage rates of the Periodic Finance Charges assessed on the Receivables or other fees charged on any of the Accounts if, as a result of any such reduction, either (i) the Seller's reasonable expectation is that such reduction will cause a Pay Out Event to occur or (ii) such reduction is not also applied to any comparable segment of consumer revolving credit card accounts or other consumer revolving or installment credit accounts owned by the applicable Account Originator that have characteristics the same as, or substantially similar to, such Accounts. (b) Account Agreements and Account Guidelines. Each Account Originator shall comply with and perform its obligations under the Account Agreements relating to its Accounts and the Account Guidelines except insofar as any failure so to comply or perform would not materially and adversely affect the rights of the Trust or the Certificateholders hereunder or under the Certificates. Subject to compliance with all Requirements of Law, each Account Originator may change the terms and provisions of the Account Agreements or the Account Guidelines with respect to any of the Accounts in any respect (including the calculation of the amount, or the timing, of charge- offs and the Periodic Finance Charges and other fees to be assessed thereon) only if in the reasonable judgment of the Account Originator such change is made applicable to any comparable segment of the consumer revolving credit card accounts or other consumer revolving or installment credit accounts owned by the Account Originator that have characteristics the same as, or substantially similar to, such Accounts. The Seller further covenants that the Seller will not enter into any amendments to any Purchase Agreement unless the Rating Agency Condition has been satisfied. Addition of Accounts . (a) Required Additions. (i) (i) If, as of the close of business on the last Business Day of any Monthly Period, either (i) the Seller's Interest is less than the Required Seller's Interest on such date or (ii) the aggregate amount of Principal Receivables plus amounts on deposit in the Excess Funding Account is less than the Required Principal Balance on such date, the Seller shall on or prior to the close of business on the 10th Business Day following the last Business Day of such Monthly Period (the "Required Designation Date"), unless the Retained Interest exceeds the Required Retained Interest or the aggregate amount of Principal Receivables plus amounts on deposit in the Excess Funding Account exceeds the Required Principal Balance, as the case may be, in either case as of the close of business on any day after the last Business Day of such Monthly Period and prior to the Required Designation Date, designate additional Eligible Accounts to be included as Accounts as of the Required Designation Date or any earlier date in a sufficient amount such that, after giving effect to such addition, the Seller's Interest as of the close of business on the Addition Date is at least equal to the Required Seller's Interest on such date and the aggregate amount of Principal Receivables plus amounts on deposit in the Excess Funding Account equals or exceeds the Required Principal Balance on such date. The failure of any condition set forth in paragraph (c) or (d) below, as the case may be, shall not relieve the Seller of its obligation pursuant to this paragraph; provided, however, that the failure of the Seller to transfer Receivables to the Trust as provided in this paragraph solely as a result of the unavailability of a sufficient amount of Eligible Receivables shall not constitute a breach of this Agreement; provided further, that any such failure that has not been timely cured will nevertheless result in the occurrence of a Pay Out Event with respect to each Series for which, pursuant to the Supplement therefor, a failure by the Seller to convey Receivables in Additional Accounts or Participation Interests to the Trust by the day on which it is required to convey such Receivables or Participation Interests constitutes a "Pay Out Event" (as defined in such Supplement). (ii) In lieu of, or in addition to, designating Additional Accounts pursuant to clause (i) above, the Seller may, subject to the conditions specified in paragraph (c) below, convey to the Trust participations representing undivided interests in a pool of assets primarily consisting of revolving credit card or installment receivables generated in accounts owned by any Account Originator, and any interests in the foregoing, including securities representing or backed by such receivables, and other self-liquidating financial assets including, without limitation, any "Eligible Assets" as such term is defined in Rule 3a-7 under the Investment Company Act of 1940, as amended (or any successor to such Rule) and collections thereon ("Participation Interests"). The addition of Participation Interests in the Trust pursuant to this paragraph (a) or paragraph (b) below shall be effected by a Supplement, dated the applicable Addition Date, pursuant to Section 13.01(a). (b) Permitted Additions. The Seller may from time to time, at its sole discretion, subject to the conditions specified in paragraph (c) or (d) below, as the case may be, designate additional Eligible Accounts to be included as Accounts or Participation Interests to be included as Trust Assets, in either case as of the applicable Addition Date. (c) Conditions to Addition. On the Addition Date with respect to any Additional Accounts or Participation Interests added pursuant to Sections 2.09(a) or Section 2.09(b), the Trust shall purchase the Receivables in such Additional Accounts (and such Additional Accounts shall be deemed to be Accounts for purposes of this Agreement) or shall purchase such Participation Interests, subject to the satisfaction of the following conditions: (i) on or before the tenth Business Day immediately preceding the Addition Date, the Seller shall have given the Trustee, the Servicer, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement written notice that the Additional or Participation Interests will be included and specifying the applicable Addition Date, the Addition Cut-Off Date, the approximate number of accounts expected to be added and the approximate aggregate balances expected to be outstanding in the accounts to be added; (ii) in the case of Additional Accounts, the Seller shall have delivered to the Trustee copies of UCCl financing statements covering such Additional Accounts, if necessary to perfect the Trust's interest in the Receivables arising therein; (iii) as of each of the Addition Cut-Off Date and the Addition Date, (x) no Insolvency Event with respect to any applicable Account Originator or the Seller shall have occurred, (y) no applicable Account Originator or the Seller shall be insolvent and (z) the transfer of the Receivables arising in the Additional Accounts or the Participation Interests to the Trust shall not have been made in contemplation of the occurrence of an Insolvency Event or the insolvency thereof; (iv) except in the case of an Addition pursuant to Section 2.09(a), the Rating Agency Condition shall have been satisfied and in the case of an Addition pursuant to Section 2.09(a) that would exceed the Aggregate Addition Limit, the Seller shall have provided to Standard & Poor's at least 15 days prior written notice of such Addition and at or prior to the end of such 15day period, the Seller shall receive a notice in writing from Standard & Poor's that such Addition will not result in the lowering or withdrawal of its then existing rating of the Investor Certificates of any Series; (v) the Seller shall have delivered to the Trustee and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Officer's Certificate, a copy of which shall be delivered to each Rating Agency, dated the Addition Date, stating that (x) in the case of Additional Accounts, as of the applicable Addition Date the Additional Accounts are all Eligible Accounts, (y) to the extent applicable, the conditions set forth in clauses (ii) through (iv) above have been satisfied and (z) the Seller reasonably believes that (A) the addition by the Seller of the Receivables arising in the Additional Accounts or of the Participation Interests to the Trust will not, based on the facts known to such officer at the time of such certification, then or thereafter cause a Pay Out Event to occur with respect to any Series or otherwise have a material adverse effect on any Series and (B) in the case of Additional Accounts, no selection procedure was utilized by the Seller that would result in a selection of Additional Accounts (from among the available Eligible Accounts owned by the applicable Account Originator) that would be materially adverse to the interests of the Investor Certificateholders of any Series as of the Addition Date; and (vi) the Seller shall have delivered to the Trustee, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement an outside Opinion of Counsel, dated the Addition Date, in accordance with Section 13.02(d). (d) Automatic Additional Accounts. Subject to the limitations specified below in this subsection 2.09(d) and to any further limitations specified in any Supplement, Automatic Additional Accounts shall be included as Accounts from and after the date upon which they are created, and all Receivables in Automatic Additional Accounts, whether such Receivables are then existing or thereafter created, shall be transferred automatically to the Trust upon their creation. For purposes of the foregoing, "Automatic Additional Accounts" means revolving credit card accounts or other consumer revolving or installment credit accounts that are (x) originated after March 1, 1995, by an Account Originator and (y) of a type included as Initial Accounts or that have previously been listed in the Restatement Date Account Schedule or included in any Addition (that, with respect to any Addition, satisfies the Account Guidelines) effected in accordance with all of the conditions specified in subsection 2.09(c) or (d); provided however, the Seller may add other types of Accounts pursuant to this Section 2.09(d) if the Rating Agencies consent, in writing, to the addition of such other types of Accounts. The Seller may elect at any time to terminate the inclusion in Accounts of new accounts which would otherwise be Automatic Additional Accounts as of any Business Day (the "Automatic Addition Termination Date"), or suspend any such inclusion as of any Business Day (an "Automatic Addition Suspension Date") until a date (the "Restart Date") to be notified in writing by the Seller to the Trustee by delivering to the Trustee, Servicer and each Rating Agency at least ten days' prior written notice of such election with respect to an Automatic Addition Termination Date, Automatic Addition Suspension Date or Restart Date, as the case may be. Promptly after each of an Automatic Addition Termination Date, an Automatic Addition Suspension Date and a Restart Date, the Seller and the Trustee agree to execute, and the Seller agrees to record and file at its own expense, an amendment to the financing statements referred to in Section 2.01 to specify the accounts then subject to this Agreement (which specification may incorporate a list of accounts by reference) and, except in connection with any such filing made after a Restart Date, to release any security interest in any accounts created after the Automatic Addition Termination Date or Automatic Addition Suspension Date. In addition, no accounts created on any day shall be Automatic Additional Accounts unless all of the following conditions shall have been satisfied as of that day: (i) if the Aggregate Addition Limit would be exceeded as a result of the inclusion of such Automatic Additional Accounts as Accounts, the Rating Agency Condition shall have been satisfied with respect thereto; (ii) the Seller shall have executed and delivered to the Trustee copies of UCCl financing statements covering such Automatic Additional Accounts, if necessary to perfect the Trust's interest in the Receivables arising thereunder; and (iii) as of each of the Addition Cut-Off Date and the Addition Date, (x) no Insolvency Event with respect to any applicable Account Originator or the Seller shall have occurred, (y) no applicable Account Originator or the Seller shall be insolvent and (z) the transfer of the Receivables arising in the Additional Accounts or the Participation Interests to the Trust shall not have been made in contemplation of the occurrence of an Insolvency Event or the insolvency thereof. (e) Representations and Warranties. The Seller hereby represents and warrants to the Trust as of the related Addition Date as to the matters relating to it set forth in paragraph (d)(iii) above and that the file or list delivered pursuant to paragraph (f) below is, as of the applicable Addition Cut-Off Date, true and complete in all material respects. (f) Delivery of Documents. In the case of the designation of Additional Accounts (other than Automatic Additional Accounts), the Seller shall deliver to the Trustee (i) the computer file, microfiche list or printed list required to be delivered pursuant to Section 2.01 with respect to such Additional Accounts on the applicable Document Delivery Date and (ii) a duly executed, written Assignment (including an acceptance by the Trustee for the benefit of the Certificateholders), substantially in the form of Exhibit B (the "Assignment"), on the Document Delivery Date. On each day, Schedule 1 to this Agreement shall be automatically deemed to be supplemented to include any Automatic Additional Accounts created on that day. Removal of Accounts . On any day of any Monthly Period the Seller shall have the right to require the reassignment to it or its designee of all the Trust's right, title and interest in, to and under the Receivables then existing and thereafter created, all moneys due or to become due and all amounts received with respect thereto and all proceeds thereof in or with respect to the Accounts then designated by the Seller (the "Removed Accounts") or Participation Interests (unless otherwise set forth in the applicable Supplement), upon satisfaction of the following conditions: (a) on or before the tenth Business Day immediately preceding the Removal Date (the "Removal Notice Date") the Seller shall have given the Trustee, the Servicer, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement written notice of such removal and specifying the date for removal of the Removed Accounts and Participation Interests (the "Removal Date"); (b) with respect to Removed Accounts, on or prior to the date that is 10 Business Days after the Removal Date, the Seller shall have amended Schedule 1 by delivering to the Trustee a computer file, microfiche list or printed list containing a true and complete list of the Removed Accounts specifying for each such Account, as of the Removal Notice Date, its account number, the aggregate amount outstanding, and the aggregate amount of Principal Receivables outstanding in such Account; (c) with respect to Removed Accounts, the Seller shall have represented and warranted as of the Removal Date that the list of Removed Accounts delivered pursuant to paragraph (b) above, as of the Removal Date, is true and complete in all material respects; (d) the Rating Agency Condition shall have been satisfied with respect to such removal; (e) the Seller shall have delivered to the Trustee and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Officer's Certificate, dated as of the Removal Date, to the effect that the Seller reasonably believes that (i) such removal will not, based on the facts known to such officer at the time of such certification, then or thereafter cause a Pay Out Event to occur with respect to any Series and (ii) no selection procedure was utilized by the Seller that would result in a selection of Removed Accounts or Participation Interests that would be materially adverse to the interests of the Investor Certificateholders of any Series as of the Removal Date; (f) the Seller shall not utilize a selection procedure intended to include a disproportionately higher level of Defaulted Receivables in the Removed Accounts than exist in the Accounts and shall not remove such Accounts for the intended purpose of mitigating losses to the Trust; and (g) such other conditions and restrictions as may at any time be specified in an Officer's Certificate of the Seller delivered to the Trustee shall have been satisfied, it being understood that (i) no such additional conditions or restrictions may conflict with or override any of the conditions and restrictions specified above and (ii) upon delivery of such an Officer's Certificate to the Trustee the additional conditions and restrictions specified therein shall be deemed to be incorporated by reference into and become a part of this Agreement. Upon satisfaction of the above conditions, the Trustee shall execute and deliver to the Seller a written reassignment in substantially the form of Exhibit C (the "Reassignment") and shall, without further action, be deemed to sell, transfer, assign, set over and otherwise convey to the Seller or its designee, effective as of the Removal Date, without recourse, representation or warranty, all the right, title and interest of the Trust in and to the Receivables arising in the Removed Accounts or the Participation Interests, all moneys due and to become due and all amounts received with respect thereto and all proceeds thereof. In addition, the Trustee shall execute such other documents and instruments of transfer or assignment and take such other actions as shall reasonably be requested by the Seller to effect the conveyance of Receivables pursuant to this Section. Account Allocations . If the Seller is unable for any reason to transfer Receivables to the Trust in accordance with the provisions of this Agreement, including by reason of any order of any Governmental Authority (a "Transfer Restriction Event"), then, in any such event, (a) the Seller and the Servicer agree (except as prohibited by any such order) to allocate and pay to the Trust, after the date of such inability, all Collections of Receivables including Collections of Receivables transferred to the Trust by the Seller prior to the occurrence of such event, and all amounts that would have constituted Collections but for the Seller's inability to transfer Receivables (up to an aggregate amount equal to the amount of Receivables in the Trust on such date), (b) the Seller and the Servicer agree that such amounts will be applied as Collections in accordance with Article IV and the terms of each Supplement and (c) for so long as the allocation and application of all Collections and all amounts that would have constituted Collections are made in accordance with clauses (a) and (b) above, Principal Receivables and all amounts that would have constituted Principal Receivables but for the Seller's inability to transfer Receivables to the Trust that are written off as uncollectible in accordance with this Agreement shall continue to be allocated in accordance with Article IV and the terms of each Supplement. For the purpose of the immediately preceding sentence, the Seller and the Servicer shall treat the first received Collections as allocable to the Trust until the Trust shall have been allocated and paid Collections in an amount equal to the aggregate amount of Principal Receivables in such Accounts as of the date of the occurrence of such event. If the Seller or the Servicer is unable pursuant to any Requirements of Law to allocate Collections as described above, the Seller and the Servicer agree that, after the occurrence of such event, payments on each Account with respect to the principal balance of such Account shall be allocated first to the oldest principal balance of such Account and shall have such payments applied as Collections in accordance with Article IV and the terms of each Supplement. The parties hereto agree that Finance Charge Receivables, whenever created, accrued in respect of Principal Receivables that have been conveyed to the Trust shall continue to be a part of the Trust notwithstanding any cessation of the transfer of additional Principal Receivables to the Trust and Collections with respect thereto shall continue to be allocated and paid in accordance with Article IV and the terms of each Supplement. Discount Option (a) . (a) The Seller shall have the option to designate at any time a percentage, that may be a fixed percentage or a variable percentage based on a formula (the "Discount Percentage"), of the amount of Receivables arising in the Accounts on or after the date such designation becomes effective that would otherwise constitute Principal Receivables to be treated as Finance Charge Receivables ("Discount Option Receivables"). Without limiting the generality of the foregoing, Discount Option Receivables shall be excluded from the amount of Principal Receivables for purposes of all calculations of the Defaulted Amount, Defaulted Receivables, the Retained Percentage, the Seller's Interest (including related calculations under Sections 2.05(b) and 3.09), the aggregate amount of Principal Receivables for purposes of Section 2.09(a) and the accrual of the Monthly Servicing Fee pursuant to Section 3.02 or any Supplement. (b) On each Date of Processing after the date on which the Seller's exercise of its discount option takes effect, the Seller shall treat Discount Option Receivables Collections as Collections of Finance Charge Receivables. Additional Sellers and Account Originators . The Seller may designate Affiliates of the Seller to be included as Sellers under this Agreement by an amendment to this Agreement (which amendment shall be subject to Section 13.01 and, in connection with such designation, the Seller shall surrender the Seller Certificate to the Trustee in exchange for a newly issued Seller Certificate reflecting such additional Seller's interest in the Seller's Interest; provided, however, that prior to any such designation and issuance the conditions set forth in Section 6.03(c) shall have been satisfied with respect thereto. Upon satisfaction of the Rating Agency Condition, the Seller may also enter into additional receivables purchase agreements with Affiliates of The Neiman Marcus Group, Inc. that are owners of credit card accounts or other consumer revolving credit or installment accounts, which receivables purchase agreements shall constitute "Purchase Agreements" and which owners shall constitute "Account Originators." ARTICLE III Administration and Servicing of Receivables Acceptance of Appointment and Other Matters Relating to the Servicer (a) . (a) The Neiman Marcus Group, Inc. agrees to act as the Servicer under this Agreement and the Certificateholders by their acceptance of Certificates consent to The Neiman Marcus Group, Inc. acting as Servicer. (b) The Servicer shall service and administer the Receivables, shall collect payments due under the Receivables and shall charge off as uncollectible Receivables, all in accordance with its customary and usual servicing procedures for servicing credit card and other consumer revolving credit or installment receivables comparable to the Receivables and in accordance with the Account Guidelines. The Servicer shall have full power and authority, acting alone or through any party properly designated by it hereunder, to do any and all things in connection with such servicing and administration that it may deem necessary or desirable. Without limiting the generality of the foregoing, subject to Section 10.01 and provided The Neiman Marcus Group, Inc. is the Servicer, the Servicer or its designee (rather than the Trustee) is hereby authorized and empowered (i) to make withdrawals and payments or to instruct the Trustee to make withdrawals and payments from the Collection Account and any Series Account, as set forth in this Agreement or any Supplement, and (ii) to take any action required or permitted under any Series Enhancement, as set forth in this Agreement or any Supplement. Without limiting the generality of the foregoing and subject to Section 10.01, the Servicer or its designee is hereby authorized and empowered to make any filings, reports, notices, applications and registrations with, and to seek any consents or authorizations from, the Securities and Exchange Commission and any state securities authority on behalf of the Trust as may be necessary or advisable to comply with any Federal or state securities laws or reporting requirements. The Trustee shall furnish the Servicer with any powers of attorney or other documents necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder. (c) The Servicer shall not be obligated to use separate servicing procedures, offices, employees or accounts for servicing the Receivables from the procedures, offices, employees and accounts used by the Servicer in connection with servicing other credit card receivables. (d) The Servicer shall comply with and perform its servicing obligations with respect to the Accounts and Receivables in accordance with the Account Agreements relating to the Accounts and the Account Guidelines except insofar as any failure to so comply or perform would not materially and adversely affect the Trust or the Investor Certificateholders. (e) The Servicer shall pay out of its own funds, without reimbursement, all expenses incurred in connection with the Trust and the servicing activities hereunder including expenses related to enforcement of the Receivables, fees and disbursements of the Trustee, any Paying Agent and any Transfer Agent and Registrar (including the reasonable fees and expenses of its counsel) in accordance with Section 11.05, fees and disbursements of independent accountants and all other fees and expenses, including the costs of filing UCC continuation statements and the costs and expenses relating to obtaining and maintaining the listing of any Investor Certificates on any stock exchange, that are not expressly stated in this Agreement to be payable by the Trust or the Seller (other than Federal, state, local and foreign income, franchise and other taxes, if any, or any interest or penalties with respect thereto, assessed on the Trust). (f) The Servicer agrees that upon a request by the Seller it will use its best efforts to obtain and maintain the listing of the Investor Certificates of any Series or Class on any specified securities exchange. If any such request is made, the Servicer shall give notice to the Seller and the Trustee on the date on which such Investor Certificates are approved for such listing. Within three Business Days following receipt of notice by the Servicer of any actual, proposed or contemplated delisting of such Investor Certificates by any such securities exchange the Servicer, in its sole discretion, may terminate any listing on any such securities exchange. Servicing Compensation . As full compensation for its servicing activities hereunder and as reimbursement for any expense incurred by it in connection therewith, the Servicer shall be entitled to receive a servicing fee (the "Servicing Fee") with respect to each Monthly Period, payable monthly on the related Distribution Date, in an amount equal to one-twelfth of the product of (a) the weighted average of the Servicing Fee Rates with respect to each outstanding Series (based upon the Servicing Fee Rate for each Series and the Invested Amount (or such other amount as specified in the related Supplement) of such Series, in each case as of the last day of the prior Monthly Period) and (b) the amount of Principal Receivables on the last day of the prior Monthly Period. The share of the Servicing Fee allocable to (i) the Certificateholders' Interest of a particular Series with respect to any Monthly Period (the "Monthly Servicing Fee") and (ii) the Enhancement Invested Amount, if any, of a particular Series with respect to any Monthly Period will each be determined in accordance with the relevant Supplement. The portion of the Servicing Fee with respect to any Monthly Period not so allocated to the Certificateholders' Interest or the Enhancement Invested Amount, if any, of a particular Series shall be paid by the Holder of the Seller Certificate on the related Distribution Date and in no event shall the Trust, the Trustee, the Investor Certificateholders of any Series or any Series Enhancer be liable for the share of the Servicing Fee with respect to any Monthly Period to be paid by the Holder of the Seller Certificate. Representations, Warranties and Covenants of the Servicer . The Neiman Marcus Group, Inc., as initial Servicer, hereby makes, and any Successor Servicer by its appointment hereunder shall make, on each Closing Date (and on the date of any such appointment), the following representations, warranties and covenants to the Trust (and agrees that the Trustee may rely on each such representation, warranty and covenant in accepting the Receivables in trust and in authenticating the Certificates): (a) Organization and Good Standing. The Servicer is a corporation (or with respect to such Successor Servicer, such other corporate entity as may be applicable) duly organized, validly existing and in good standing under the laws of its state of incorporation, and has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Agreement and each Supplement and, in all material respects, to own its properties and conduct its business as such properties are presently owned and as such business is presently conducted. (b) Due Qualification. The Servicer is duly qualified to do business and is in good standing as a foreign corporation (or is exempt from such requirements), and has obtained all necessary licenses and approvals in each jurisdiction in which failure to so qualify or to obtain such licenses and approvals would have a material adverse effect on the interests of the Investor Certificateholders hereunder or under any Supplement. (c) Due Authorization. The execution, delivery, and performance of this Agreement and each Supplement have been duly authorized by the Servicer by all necessary corporate action on the part of the Servicer. (d) Binding Obligation. This Agreement and each Supplement constitutes a legal, valid and binding obligation of the Servicer, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereinafter in effect, affecting the enforcement of creditors' rights in general (or with respect to such Successor Servicer, such other corporate entity as may be applicable) and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). (e) No Violation. The execution and delivery of this Agreement and each Supplement by the Servicer, the performance of the transactions contemplated by this Agreement and each Supplement and the fulfillment of the terms hereof and thereof applicable to the Servicer, will not conflict with, violate, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, any Requirement of Law applicable to the Servicer or any indenture, contract, agreement, mortgage, deed of trust or other instrument to which the Servicer is a party or by which it or any of its properties are bound. (f) No Proceedings. There are no proceedings or investigations pending or, to the best knowledge of the Servicer, threatened against the Servicer before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated by this Agreement or any Supplement, seeking any determination or ruling that, in the reasonable judgment of the Servicer, would materially and adversely affect the performance by the Servicer of its obligations under this Agreement or any Supplement, or seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement or any Supplement. (g) Compliance with Requirements of Law. The Servicer shall duly satisfy all obligations on its part to be fulfilled under or in connection with the Receivables and the related Accounts, will maintain in effect all qualifications required under Requirements of Law in order to properly service the Receivables and the related Accounts and will comply in all material respects with all other Requirements of Law in connection with servicing the Receivables and the related Accounts, the failure to comply with which would have a material adverse effect on the interests of the Investor Certificateholders. (h) No Rescission or Cancellation. Subject to Section 3.09, the Servicer shall not permit any rescission or cancellation of a Receivable except as ordered by a court of competent jurisdiction or other Governmental Authority or in the ordinary course of its business and in accordance with the Account Guidelines. (i) Protection of Certificateholders' Rights. The Servicer shall take no action that, nor omit to take any action the omission of which, would substantially impair the rights of Certificateholders in any Receivable or Account, nor shall it, except in the ordinary course of its business and in accordance with the Account Guidelines, reschedule, revise or defer Collections due on the Receivables. (j) Receivables Not To Be Evidenced by Promissory Notes. Except in connection with its enforcement or collection of an Account, the Servicer will take no action to cause any Receivable to be evidenced by any instrument, other than an instrument that, taken together with one or more other writings, constitutes chattel paper (as such terms are defined in the UCC) and, if any Receivable is so evidenced (whether or not in connection with the enforcement or collection of an Account), it shall be reassigned or assigned to the Servicer as provided in this Section. (k) All Consents Required. All approvals, authorizations, consents, orders or other actions of any Person or of any governmental body or official required in connection with the execution and delivery by the Servicer of this Agreement and each Supplement, the performance by the Servicer of the transactions contemplated by this Agreement and each Supplement and the fulfillment by the Servicer of the terms hereof and thereof, have been obtained; provided, however, that the Servicer makes no representation or warranty regarding state securities or "blue sky" laws in connection with the distribution of the Certificates. (l) Maintenance of Records and Books of Account. The Servicer shall maintain and implement administrative and operating procedures (including the ability to recreate records evidencing the Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, computer records and other information, reasonably necessary or advisable for the collection of all the Receivables. Such documents, books and computer records shall reflect all facts giving rise to the Receivables, all payments and credits with respect thereto, and such documents, books and computer records shall indicate the interests of the Trust in the Receivables. For purposes of the representations and warranties set forth in this Section 3.03, each reference to a Supplement shall be deemed to refer only to those Supplements in effect as of the relevant Closing Date or the date of appointment of a Successor Servicer, as applicable. If any of the representations, warranties or covenants of the Servicer contained in paragraph (g), (h), (i) or (j) with respect to any Receivable or the related Account is breached, and as a result of such breach the Trust's rights in, to or under any Receivables in the related Account or the proceeds of such Receivables are impaired or such proceeds are not available for any reason to the Trust free and clear of any Lien, then no later than the expiration of 60 days (or such longer period, not in excess of 150 days, as may be agreed to by the Trustee) from the earlier to occur of the discovery of such event by the Servicer, or receipt by the Servicer of notice of such event given by the Trustee, all Receivables in the Account or Accounts to which such event relates shall be assigned to the Servicer on the terms and conditions set forth below; provided, however, that such Receivables will not be assigned to the Servicer if, on any day prior to the end of such 60day or longer period, (i) the relevant representation and warranty shall be true and correct, or the relevant covenant shall have been complied with, in all material respects and (ii) the Servicer shall have delivered an Officer's Certificate describing the nature of such breach and the manner in which such breach was cured. The Servicer shall effect such assignment by making a deposit into the Collection Account in immediately available funds prior to the next succeeding Business Day in an amount equal to the amount of such Receivables, which deposit shall be considered a Collection with respect to such Receivables and shall be applied in accordance with Article IV and the terms of each Supplement. Upon each such assignment to the Servicer, the Trustee, on behalf of the Trust, shall automatically and without further action be deemed to sell, transfer, assign, set over and otherwise convey to the Servicer, without recourse, representation or warranty, all right, title and interest of the Trust in and to such Receivables, all moneys due or to become due and all amounts received with respect thereto and all proceeds thereof. The Trustee shall execute such documents and instruments of transfer or assignment and take such other actions as shall be reasonably requested by the Servicer to effect the conveyance of any such Receivables pursuant to this Section. The obligation of the Servicer to accept assignment of such Receivables, and to make the deposits, if any, required to be made to the Excess Funding Account or the Collection Account as provided in the preceding paragraph, shall constitute the sole remedy respecting the event giving rise to such obligation available to Certificateholders (or the Trustee on behalf of Certificateholders) or any Series Enhancer, except as provided in Section 8.04. Section 3.04 Reports for the Trustee. (a) Daily Reports; Adjustments. On each Business Day, the Servicer shall prepare and make available at the office of the Servicer for inspection by the Trustee a report (the "Daily Report") that shall: (i) set forth (x) the aggregate amount of Collections processed by the Servicer on the second preceding Business Day, (y) the amount on deposit in the Excess Funding Account on the second preceding Business Day and (z) a calculation of the Retained Interest and the Required Retained Interest on the second preceding Business Day and a determination of whether the Retained Interest on the second preceding Business Day was greater than the Required Retained Interest on such Business Day and such other information as may be specified in any applicable Supplement; and (ii) allocate for such second preceding Business Day in the manner specified below, (x) the aggregate amount of Collections processed by the Servicer with respect to Principal Receivables and (y) the aggregate amount of Collections processed by the Servicer with respect to Finance Charge Receivables. The estimate of the aggregate amount of Collections processed by the Servicer with respect to Principal Receivables required by paragraph (ii) above shall equal the product of (a) the Collections and (b) a fraction, the numerator of which shall be the aggregate amount of Collections of Principal Receivables as of the last day of the preceding Monthly Period and the denominator of which shall be the aggregate amount of Collections as of such last day. The estimate of the aggregate amount of Collections processed by the Servicer with respect to Finance Charge Receivables required by paragraph (ii) above shall equal the product of (a) the Collections and (b) a fraction, the numerator of which shall be the aggregate amount of Collections of Finance Charge Receivables and Discount Option Receivables as of the last day of the preceding Monthly Period and the denominator of which shall be the aggregate amount of Collections as of such last day. On the Determination Date following each Monthly Period during which the foregoing methods of estimating shall have been used by the Servicer, the Servicer shall make an appropriate "true-up" adjustment of the aggregate amounts allocated as Collections of Principal Receivables and Finance Charge Receivables in the Collection Account for such Monthly Period pursuant to paragraph (ii) above to the actual amount of Collections on Principal Receivables included in the Trust Assets, the amount of Discount Option Receivables allocable to the Certificate Rate for such Monthly Period, and the actual amount of Collections on Finance Charge Receivables included in the Trust Assets, in each case, to reflect the difference between (x) the amounts that should have been recorded as Collections in respect of Principal Receivables and Finance Charge Receivables if actual Collections of Principal Receivables and Finance Charge Receivables had been known and (y) the amount allocated thereto pursuant to the preceding sentence. (b) Monthly Servicer's Certificate. Unless otherwise stated in the Supplement related to any Series, on each Determination Date, the Servicer shall forward to the Trustee, the Paying Agent, each Rating Agency and each Series Enhancer a certificate of a Servicing Officer setting forth (i) the aggregate amounts for the preceding Monthly Period with respect to each of the items specified in clauses (i)(x) and (ii)(y) of subsection 3.04(a), together with the amount and nature of any "true-up" adjustment required by Section 3.04(a), (ii) the Defaulted Amount for the preceding Monthly Period, (iii) Recoveries for the preceding Monthly Period, (iv) a calculation of the Portfolio Yield and Base Rate for each Series then outstanding, (v) the aggregate amount of Receivables and the balance on deposit in the Collection Account (or any subaccount thereof) or any Series Account applicable to any Series then outstanding with respect to Collections processed as of the end of the last day of the preceding Monthly Period, (vi) the aggregate amount of adjustments from the preceding Monthly Period, (vii) the aggregate amount, if any, of withdrawals, drawings or payments under any Series Enhancement with respect to each Series required to be made with respect to the previous Monthly Period, (viii) the sum of all amounts payable to the Investor Certificateholders on the succeeding Distribution Date in respect of interest and principal payable with respect to the Investor Certificates and (ix) such other amounts, calculations, and/or information as may be required by any relevant Supplement. (c) Transferred Accounts. The Servicer covenants and agrees hereby to deliver to the Trustee, within a reasonable time period after any Transferred Account is created, but in any event not later than 15 days after the end of the month within which the Transferred Account is created, a notice specifying the new account number for any Transferred Account and the replaced account number. Annual Certificate of Servicer . The Servicer shall deliver to the Trustee, each Rating Agency and each Series Enhancer entitled thereto pursuant to the relevant Supplement, on or before October 31 of each calendar year, beginning with October 31, 1995, an Officer's Certificate (with appropriate insertions) substantially in the form of Exhibit D. Annual Servicing Report of Independent Public Accountants; Copies of Reports Available (a) . (a) On or before October 31 of each calendar year, beginning with October 31, 1995, the Servicer shall cause a firm of nationally recognized independent public accountants (who may also render other services to the Servicer or the Seller) to furnish a report (addressed to the Trustee) to the Trustee, the Servicer and each Rating Agency to the effect that they have applied certain procedures agreed upon with the Servicer and examined certain documents relating to the servicing of Accounts under this Agreement and each Supplement and that, on the basis of such agreed upon procedures, such firm is of the opinion that the system of internal accounting controls in effect on the date of such statement relating to the servicing procedures performed by the Servicer under this Agreement, taken as a whole, was sufficient for the prevention and detection of errors and irregularities that would be material to the assets of the Trust and such servicing procedures have been conducted in compliance with the terms and conditions set forth in Article III and Article IV and Section 8.08 of this Agreement and the applicable provisions of each Supplement, except for such exceptions as they believe to be immaterial and such other exceptions as shall be set forth in such statement. Such report shall set forth the agreed upon procedures performed. A copy of such report shall be delivered to each Series Enhancer entitled thereto pursuant to the relevant Supplement. (b) On or before October 31 of each calendar year, beginning with October 31, 1995, the Servicer shall cause a firm of nationally recognized independent public accountants (who may also render other services to the Servicer or the Seller) to furnish a report to the Trustee, the Servicer and each Rating Agency to the effect that they have applied certain procedures agreed upon with the Servicer to compare the mathematical calculations of certain amounts set forth in the Servicer's Certificates delivered pursuant to Section 3.04(b) during the period covered by such report with the Servicer's computer reports that were the source of such amounts and that on the basis of such agreed upon procedures and comparison, such accountants are of the opinion that such amounts are in agreement, except for such exceptions as they believe to be immaterial and such other exceptions as shall be set forth in such statement. A copy of such report shall be delivered to each Series Enhancer entitled thereto pursuant to the relevant Supplement. (c) A copy of each certificate and report provided pursuant to Section 3.04(b), 3.05 or 3.06 may be obtained by any Investor Certificateholder or Certificate Owner by a request to the Trustee addressed to the Corporate Trust Office. Tax Treatment . The Seller has entered into this Agreement, and the Certificates will be issued with the intention that, for Federal, state and local income and franchise tax purposes, the Investor Certificates (except Seller Retained Certificates that are held by the Seller) of each Series will qualify as debt secured by the Receivables. The Seller, by entering into this Agreement, each Certificateholder, by the acceptance of its Certificate (and each Certificate Owner, by its acceptance of an interest in the applicable Certificate), agree to treat such Investor Certificates for Federal, state and local income and franchise tax purposes as debt. Each Holder of such Investor Certificate agrees that it will cause any Certificate Owner acquiring an interest in a Certificate through it to comply with this Agreement as to treatment as debt under applicable tax law, as described in this Section 3.07. Furthermore, subject to Section 11.11, the Trustee shall treat the Trust as a security device only, and shall not file tax returns or obtain an employer identification number on behalf of the Trust. Notices to The Neiman Marcus Group, Inc . If The Neiman Marcus Group, Inc. is no longer acting as Servicer, any Successor Servicer shall deliver to The Neiman Marcus Group, Inc. each certificate and report required to be provided thereafter pursuant to Section 3.04(b), 3.05 or 3.06. Adjustments (a) . (a) If the Servicer adjusts downward the amount of any Receivable because of a rebate, refund, unauthorized charge or billing error to an accountholder, or because such Receivable was created in respect of merchandise that was refused or returned by an accountholder, or if the Servicer otherwise adjusts downward the amount of any Receivable without receiving Collections therefor or charging off such amount as uncollectible, then, in any such case, the amount of Principal Receivables used to calculate the Seller's Interest, the Floating Allocation Percentage and the Principal Allocation Percentage applicable to any Series will be reduced by the amount of the adjustment. Similarly, the amount of Principal Receivables used to calculate the Seller's Interest, the Floating Allocation Percentage and the Principal Allocation Percentage applicable to any Series will be reduced by the amount of any Principal Receivable that was discovered as having been created through a fraudulent or counterfeit charge or with respect to which the covenant of the Seller contained in Section 2.07(b) has been breached. Any adjustment required pursuant to either of the two preceding sentences shall be made on or prior to the end of the Monthly Period in which such adjustment obligation arises. If, following the exclusion of such Principal Receivables from the calculation of the Seller's Interest, the Seller's Interest would be less than the Required Seller's Interest, not later than 12:00 noon, New York City time, on the Distribution Date following the Monthly Period in which such adjustment obligation arises, the Seller shall make a deposit into the Excess Funding Account in immediately available funds in an amount equal to the amount by which the Seller's Interest would be less than the Required Seller's Interest (up to the amount of such Principal Receivables). Any amount deposited into the Excess Funding Account pursuant to the preceding sentence shall be considered Collections of Principal Receivables and shall be applied in accordance with Article IV and the terms of each Supplement. (b) If (i) the Servicer makes a deposit into the Collection Account in respect of a Collection of a Receivable and such Collection was received by the Servicer in the form of a check that is not honored for any reason or (ii) the Servicer makes a mistake with respect to the amount of any Collection and deposits an amount that is less than or more than the actual amount of such Collection, the Servicer shall appropriately adjust the amount subsequently deposited into the Collection Account to reflect such dishonored check or mistake. Any Receivable in respect of which a dishonored check is received shall be deemed not to have been paid. Notwithstanding the first two sentences of this paragraph, any adjustments made pursuant to this paragraph will be reflected in a current report but will not change any amount of Collections previously reported pursuant to subsection 3.04(b). Reports to the Commission . The Servicer shall, on behalf of the Trust, cause to be filed with the Commission any periodic reports required to be filed under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder. The Seller shall, at the expense of the Servicer, cooperate in any reasonable request of the Servicer in connection with such filings. ARTICLE IV Rights of Certificateholders andAllocation and Application of Collections Rights of Certificateholders . The Investor Certificates shall represent fractional undivided interests in the Trust, that, with respect to each Series, shall consist of the right to receive, to the extent necessary to make the required payments with respect to the Investor Certificates of such Series at the times and in the amounts specified in the related Supplement, the portion of Collections allocable to Investor Certificateholders of such Series pursuant to this Agreement and such Supplement, funds on deposit in the Collection Account allocable to Certificateholders of such Series pursuant to this Agreement and such Supplement, funds on deposit in any related Series Account and funds available pursuant to any related Series Enhancement (collectively, with respect to all Series, the "Certificateholders' Interest"), it being understood that, unless otherwise specified in the Supplement with respect to such Series, the Investor Certificates of any Series or Class shall not represent any interest in any Series Account or Series Enhancement for the benefit of any other Series or Class. The Seller Certificate shall represent the ownership interest in the remainder of the Trust Assets not allocated pursuant to this Agreement or any Supplement to the Certificateholders' Interest, including the right to receive Collections with respect to the Receivables and other amounts at the times and in the amounts specified in this Agreement or any Supplement to be paid to the Seller on behalf of the Holder of the Seller Certificate (the "Seller's Interest"); provided, however, that the Seller Certificate shall not represent any interest in the Collection Account, any Series Account or any Series Enhancement, except as specifically provided in this Agreement or any Supplement. Establishment of Collection Account and Excess Funding Account . The Servicer, for the benefit of the Certificateholders, shall establish and maintain in the name of the Trustee, on behalf of the Trust, an Eligible Deposit Account bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Certificateholders (the "Collection Account"). The Collection Account shall initially be established with the Trustee. The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Collection Account and in all proceeds thereof for the benefit of the Certificateholders. The Collection Account shall be under the sole dominion and control of the Trustee for the benefit of the Certificateholders. Except as expressly provided in this Agreement, the Servicer agrees that it shall have no right of set-off or banker's lien against, and no right to otherwise deduct from, any funds held in the Collection Account for any amount owed to it by the Trustee, the Trust, any Certificateholder or any Series Enhancer. If at any time the Collection Account ceases to be an Eligible Deposit Account, the Trustee (or the Servicer on its behalf) shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency may consent) establish a new Collection Account meeting the conditions specified above, transfer any cash or any investments to such new Collection Account and from the date such new Collection Account is established, it shall be the "Collection Account". Funds on deposit in the Collection Account (other than amounts deposited pursuant to Section 2.06, 10.01 or 12.02) shall at the direction of the Servicer be invested by the Trustee in Eligible Investments selected by the Servicer. All such Eligible Investments shall be held by the Trustee for the benefit of the Certificateholders. The Trustee shall maintain for the benefit of the Certificateholders possession of the negotiable instruments or securities, if any, evidencing such Eligible Investments. Investments of funds representing Collections collected during any Monthly Period shall be invested in Eligible Investments that will mature so that all funds will be available at the close of business on the Transfer Date following such Monthly Period. No Eligible Investment shall be disposed of prior to its maturity; provided, however, that the Trustee may sell, liquidate or dispose of an Eligible Investment before its maturity, at the written direction of the Servicer, if such sale, liquidation or disposal would not result in a loss of all or part of the principal portion of such Eligible Investment or if, prior to the maturity of such Eligible Investment, a default occurs in the payment of principal, interest or any other amount with respect to such Eligible Investment. On each Distribution Date, all interest and other investment earnings (net of losses and investment expenses) on funds on deposit in the Collection Account shall be treated as Collections of Finance Charge Receivables with respect to the last day of the related Monthly Period, except as otherwise specified in any Supplement. For purposes of determining the availability of funds or the balances in the Collection Account for any reason under this Agreement, all investment earnings net of investment expenses and losses on such funds shall be deemed not to be available or on deposit. The Servicer, for the benefit of the Certificateholders, shall establish and maintain in the name of the Trustee, on behalf of the Trust, an Eligible Deposit Account bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Certificateholders (the "Excess Funding Account"). The Excess Funding Account shall initially be established with the Trustee. The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Excess Funding Account and in all proceeds thereof. The Excess Funding Account shall be under the sole dominion and control of the Trustee for the benefit of the Certificateholders. Except as expressly provided in this Agreement, the Servicer agrees that it shall have no right of set-off or banker's lien against, and no right to otherwise deduct from, any funds held in the Excess Funding Account for any amount owed to it by the Trustee, the Trust, any Certificateholder or any Series Enhancer. If, at any time, the Excess Funding Account ceases to be an Eligible Deposit Account, the Trustee (or the Servicer on its behalf) shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency may consent) establish a new Excess Funding Account meeting the conditions specified above, transfer any cash or any investments to such new Excess Funding Account and from the date such new Excess Funding Account is established, it shall be the "Excess Funding Account". Funds on deposit in the Excess Funding Account shall at the direction of the Servicer be invested by the Trustee in Eligible Investments selected by the Servicer. All such Eligible Investments shall be held by the Trustee for the benefit of the Certificateholders. The Trustee shall maintain for the benefit of the Certificateholders possession of the negotiable instruments or securities, if any, evidencing such Eligible Investments. Funds on deposit in the Excess Funding Account on any Distribution Date will be invested in Eligible Investments that will mature so that all funds will be available at the close of business on the Transfer Date following such Monthly Period. No Eligible Investment shall be disposed of prior to its maturity; provided, however, that the Trustee may sell, liquidate or dispose of an Eligible Investment before its maturity, at the written direction of the Servicer, if such sale, liquidation or disposal would not result in a loss of all or part of the principal portion of such Eligible Investment or if, prior to the maturity of such Eligible Investment, a default occurs, in the payment of principal, interest or any other amount with respect to such Eligible Investment. Unless directed by the Servicer, funds deposited in the Excess Funding Account on a Transfer Date with respect to the next following Distribution Date are not required to be invested overnight. On each Distribution Date, all interest and other investment earnings (net of losses and investment expenses) on funds on deposit in the Excess Funding Account shall be treated as Collections of Finance Charge Receivables with respect to the last day of the related Monthly Period except as otherwise specified in the related Supplement. Unless otherwise directed by the Servicer, funds on deposit in the Excess Funding Account will be withdrawn and paid to the Holder of the Seller Certificate on any Distribution Date to the extent that (x) the Seller's Interest exceeds the Required Seller's Interest and (y) the Retained Interest exceeds the Required Retained Interest on such date. On any Transfer Date on which one or more Series is in an Accumulation Period or Amortization Period, the Servicer shall determine the aggregate amounts of Principal Shortfalls, if any, with respect to each such Series that is a Principal Sharing Series (after giving effect to the allocation and payment provisions in the Supplement with respect to each such Series), and the Servicer shall instruct the Trustee to withdraw such amount (up to the amount on deposit in the Excess Funding Account) on the succeeding Distribution Date and allocate such amount among each such Series as specified in each related Supplement; provided, however, that funds shall only be withdrawn from the Excess Funding Account for allocation to cover such Principal Shortfalls if, and to the extent, that such allocation will not result in the reduction of (x) the Seller's Interest to an amount below the Required Seller's Interest or (y) the Retained Interest to an amount below the Required Retained Interest. For purposes of determining the availability of funds or the balances in the Excess Funding Account for any reason under this Agreement, all investment earnings net of investment expenses and losses on such funds shall be deemed not to be available or on deposit. Collections and Allocations (a) . (a) The Servicer will apply or will instruct the Trustee to apply all funds on deposit in the Collection Account as described in this Article IV and in each Supplement. Except as otherwise provided below and in each Supplement, the Servicer shall deposit Collections into the Collection Account no later than the second Business Day following the Date of Processing of such Collections. Subject to the express terms of any Supplement, but notwithstanding anything else in this Agreement to the contrary, if The Neiman Marcus Group, Inc. or an Affiliate of The Neiman Marcus Group, Inc., remains the Servicer and (x) obtains and for so long as it maintains a short term debt rating of A-1 or better by Standard & Poor's and P-1 or better by Moody's (or such other rating below A-1 or P-1, as the case may be, that is satisfactory to each Rating Agency), or (y) The Neiman Marcus Group, Inc. or such Affiliate has provided to the Trustee a letter of credit covering collection risk of the Servicer acceptable to each Rating Agency (as evidenced by a letter from each Rating Agency to the effect that the Rating Agency Condition has been satisfied), the Servicer need not make the daily deposits of Collections into the Collection Account as provided in the preceding sentence, but may make a single deposit in the Collection Account in immediately available funds not later than 12:00 noon, New York City time, on the related Transfer Date. (b) With respect to each day during each Monthly Period, (i) Collections of Finance Charge Receivables will be allocated to the Certificateholders' Interest of each Series, and (ii) Collections of Principal Receivables will be allocated to the Certificateholders' Interest of each Series, each as set forth in the Supplement related to such Series. On each Determination Date, (i) Collections of Recoveries will be treated as Finance Charge Receivables and allocated to the Certificateholders' Interest of each Series and (ii) Defaulted Receivables will be allocated to the Certificateholders' Interest of each Series, each as set forth in the related Supplement. (c) Throughout the existence of the Trust, unless otherwise stated in any Supplement, the Servicer shall allocate to the Holder of the Seller Certificate an amount equal to the product of (A) the Seller's Percentage and (B) the aggregate amount of such Collections allocated to Principal Receivables and Finance Charge Receivables, respectively, in respect of each Monthly Period. Notwithstanding anything in this Agreement to the contrary, unless otherwise stated in any Supplement, the Servicer need not deposit this amount or any other amounts so allocated to the Seller Certificate pursuant to any Supplement into the Collection Account and shall pay, or be deemed to pay, such amounts as collected to the Holder of the Seller Certificate. The payments to be made to the Holder of the Seller Certificate pursuant to this Section 4.03(c) do not apply to deposits to the Collection Account or other amounts that do not represent Collections, including payment of the purchase price for Receivables pursuant to Section 2.06 or 10.01, proceeds from the sale, disposition or liquidation of Receivables pursuant to Section 12.02 or payment of the purchase price for the Certificateholders' Interest of a specific Series pursuant to the related Supplement. Shared Principal Collections . On each Distribution Date, (a) the Servicer shall allocate Shared Principal Collections to each Principal Sharing Series, pro rata, in proportion to the Principal Shortfalls, if any, with respect to each such Series, and any remainder may, at the option of the Seller, be applied as principal with respect to any Variable Funding Certificate and (b) the Servicer shall withdraw from the Collection Account or the Excess Funding Account and pay to the Holder of the Seller Certificate an amount equal to the excess, if any, of (x) the aggregate amount for all outstanding Series of Collections of Principal Receivables that the related Supplements or this Agreement specify are to be treated as "Shared Principal Collections" for such Distribution Date over (y) the aggregate amount for all outstanding Principal Sharing Series that the related Supplements specify are "Principal Shortfalls" for such Distribution Date; provided, however, that such amounts shall be paid to the Holder of the Seller Certificate only if the Seller's Interest for such Distribution Date (determined after giving effect to any Principal Receivables transferred to the Trust on such date) exceeds zero; and provided further that, if, on any Distribution Date the Seller's Interest is less than or equal to the Required Seller's Interest or the Retained Interest is less than or equal to the Required Retained Interest, the Servicer will not distribute to the Holder of the Seller Certificate any Shared Principal Collections that otherwise would be distributed to the Holder of the Seller Certificate, but shall deposit such funds in the Excess Funding Account. Excess Finance Charge Collections . On each Distribution Date, (a) the Servicer shall allocate Excess Finance Charge Collections with respect to the Series in a Group to each Series in such Group, pro rata, in proportion to the Finance Charge Shortfalls, if any, with respect to each such Series and (b) the Servicer shall withdraw (or shall instruct the Trustee to withdraw) from the Collection Account and pay to the Holder of the Seller Certificate an amount equal to the excess, if any, of (x) the aggregate amount for all outstanding Series in a Group of the amounts that the related Supplements specify are to be treated as "Excess Finance Charge Collections" for such Distribution Date over (y) the aggregate amount for all outstanding Series in such Group that the related Supplements specify are "Finance Charge Shortfalls" for such Distribution Date; provided, however, that the sharing of Excess Finance Charge Collections among Series in a Group will continue only until such time, if any, at which the Seller shall deliver to the Trustee an Officer's Certificate to the effect that, in the reasonable belief of the Seller, the continued sharing of Excess Finance Charge Collections among Series in any Group would have adverse regulatory implications with respect to the Seller. Following the delivery by the Seller of such an Officer's Certificate to the Trustee, there will not be any further sharing of Excess Finance Charge Collections among Series in any Group. Allocations During Funding Period . To the extent that the Servicer establishes an Eligible Deposit Account as a pre-funding account (the "Pre-Funding Account") with respect to any Series, bearing a designation indicating that the funds deposited therein are for the benefit of such Series, during the period (the "Funding Period"), as set forth in the related Supplement, that the Pre-Funding Account maintains a balance, the date upon which an increase in the Invested Amount of such Series in accordance with the terms of such related Supplement occurs shall be treated as an Addition Date solely for the purpose of calculating the Floating Allocation Percentage and the Principal Allocation Percentage. Such Addition Date shall be deemed to occur on the date of each such increase and the Floating Allocation Percentage and Principal Allocation Percentage shall be calculated accordingly. ARTICLE V Distributions and Reports to Certificateholders Distributions shall be made to, and reports shall be provided to, Certificateholders as set forth in the applicable Supplement. ARTICLE VI The Certificates The Certificates . The Investor Certificates of any Series or Class may be issued in bearer form ("Bearer Certificates") with attached interest coupons and any other applicable coupon (collectively, the "Coupons") or in fully registered form ("Registered Certificates") and shall be substantially in the form of the exhibits with respect thereto attached to the applicable Supplement. The Seller Certificate will be issued in registered form, substantially in the form of Exhibit A, and shall upon issue, be executed and delivered by the Seller to the Trustee for authentication and redelivery as provided in Section 6.02. Except as otherwise provided in Section 6.03 or in any Supplement, Bearer Certificates shall be issued in minimum denominations of $5,000 and Registered Certificates shall be issued in minimum denominations of $1,000 and in integral multiples of $1,000 in excess thereof. If specified in any Supplement, the Investor Certificates of any Series or Class shall be issued upon initial issuance as a single certificate evidencing the aggregate original principal amount of such Series or Class as described in Section 6.13. The Seller Certificate shall initially be a single certificate and shall initially represent the entire Seller's Interest. Each Certificate shall be executed by manual or facsimile signature on behalf of the Seller by its President or any Vice President. Certificates bearing the manual or facsimile signature of an individual who was, at the time when such signature was affixed, authorized to sign on behalf of the Seller shall not be rendered invalid, notwithstanding that such individual ceased to be so authorized prior to the authentication and delivery of such Certificates or does not hold such office at the date of such Certificates. No Certificates shall be entitled to any benefit under this Agreement, or be valid for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein executed by or on behalf of the Trustee by the manual signature of a duly authorized signatory, and such certificate of authentication upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. Bearer Certificates shall be dated the Closing Date. All Registered Certificates and the Seller Certificate shall be dated the date of their authentication. Authentication of Certificates . The Trustee shall authenticate and deliver the Investor Certificates of each Series and Class that are issued upon original issuance to or upon the order of the Seller against payment to the Seller of the purchase price therefor. The Trustee shall authenticate and deliver the Seller Certificate to the Seller simultaneously with its delivery of the Investor Certificates of the first Series to be issued hereunder. If specified in the related Supplement for any Series or Class, the Trustee shall authenticate and deliver outside the United States the Global Certificate that is issued upon original issuance thereof. New Issuances (a) . (a) The Seller may from time to time direct the Trustee, on behalf of the Trust, to authenticate one or more new Series of Investor Certificates. The Investor Certificates of all outstanding Series shall be equally and ratably entitled as provided herein to the benefits of this Agreement without preference, priority or distinction, all in accordance with the terms and provisions of this Agreement and the applicable Supplement except, with respect to any Series or Class, as provided in the related Supplement. (b) On or before the Closing Date relating to any new Series, the parties hereto will execute and deliver a Supplement that will specify the Principal Terms of such new Series. The terms of such Supplement may modify or amend the terms of this Agreement solely as applied to such new Series. The obligation of the Trustee to authenticate the Investor Certificates of such new Series and to execute and deliver the related Supplement is subject to the satisfaction of the following conditions; provided, however, that the conditions set forth in clauses (i), (iii), (iv) and (v) shall not be applicable to the issuance of the first Series of Investor Certificates: (i) on or before the fifth Business Day immediately preceding the Closing Date, the Seller shall have given the Trustee, the Servicer, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement notice of such issuance and the Closing Date; (ii) the Seller shall have delivered to the Trustee the related Supplement, executed by each party hereto other than the Trustee; (iii) the Seller shall have delivered to the Trustee any related Enhancement Agreement executed by each of the parties thereto, other than the Trustee; (iv) the Rating Agency Condition shall have been satisfied with respect to such issuance; (v) the Seller shall have delivered to the Trustee and any Series Enhancer entitled thereto pursuant to the relevant Supplement an Officer's Certificate, dated the Series Issuance Date, to the effect that the Seller reasonably believes that such issuance will not, based on the facts known to such officer at the time of such certification, then or thereafter cause a Pay Out Event to occur with respect to any Series; (vi) the Seller shall have delivered to the Trustee and each Rating Agency a Tax Opinion, dated the Closing Date, with respect to such issuance; and (vii) the Retained Interest shall not be less than the Required Retained Interest, and the Seller's Interest (excluding the interest represented by any Supplemental Certificate) shall not be less than the Required Seller's Interest, in each case as of the Closing Date and after giving effect to such issuance. Upon satisfaction of the above conditions, the Trustee shall execute the Supplement and authenticate the Investor Certificates of such Series upon execution thereof by the Seller. (c) The Seller may surrender the Seller Certificate to the Trustee in exchange for a newly issued Seller Certificate and one or more additional certificates (each a "Supplemental Certificate"), the terms of which shall be defined in a Supplement (which Supplement shall be subject to Section 13.01(a) to the extent that it amends any of the terms of this Agreement), to be delivered to or upon the order of the Seller (or the Holder of a Supplemental Certificate, in the case of the transfer or exchange thereof, as provided below), upon satisfaction of the following conditions: (i) the Retained Interest shall not be less than the Required Retained Interest, and the Seller's Interest shall not be less than the Required Seller's Interest, in each case as of the date of, and after giving effect to, such exchange; (ii) the Rating Agency Condition shall have been satisfied with respect to such exchange (or transfer or exchange as provided below); and (iii) the Seller shall have delivered to the Trustee and each Rating Agency a Tax Opinion, dated the date of such exchange (or transfer or exchange as provided below), with respect thereto. Any Supplemental Certificate may be transferred or exchanged only upon satisfaction of the conditions set forth in clauses (ii) and (iii) above. (d) The Seller Certificate (or any interest therein) may be transferred to a Person that is a member of the "affiliated group" as defined in Code Section 1504(a) of which The Neiman Marcus Group, Inc. is a member without the consent or approval of the Holders of the Investor Certificates, provided that the Rating Agency Condition shall have been satisfied with respect to such transfer and the Seller shall have delivered to the Trustee and each Rating Agency a Tax Opinion, dated the date of such transfer, with respect thereto. In connection with any such transfer, the Seller may at its option require that the Person to whom the Seller Certificate is transferred will, by its acquisition and holding of an interest in the Seller Certificate, assume all of the rights and obligations of the Seller as described in this Agreement and in any Supplement or amendment thereto (including the right under this subsection (d) with respect to subsequent transfers of an interest in the Seller Certificate). Registration of Transfer and Exchange of Certificates (a) . (a) The Trustee shall cause to be kept at the office or agency to be maintained in accordance with the provisions of Section 11.16 a register (the "Certificate Register") in which, subject to such reasonable regulations as it may prescribe, a transfer agent and registrar (which may be the Trustee) (the "Transfer Agent and Registrar") shall provide for the registration of the Registered Certificates and of transfers and exchanges of the Registered Certificates as herein provided. The Transfer Agent and Registrar shall initially be The Bank of New York (replacing The Chase Manhattan Bank, N.A.) and any cotransfer agent and coregistrar chosen by the Seller and acceptable to the Trustee, including, if and so long as any Series or Class is listed on the Luxembourg Stock Exchange and such exchange shall so require, a co-transfer agent and coregistrar in Luxembourg; provided, however, that The Chase Manhattan Bank shall continue to serve as Transfer Agent and Registrar for the Trust's Series 1995-1 Certificates, and its rights, duties and obligations in that capacity will continue to be governed by the Existing Agreement. So long as any Investor Certificates are outstanding, the Seller shall maintain a cotransfer agent and coregistrar in New York City. Any reference in this Agreement to the Transfer Agent and Registrar shall include any cotransfer agent and co-registrar unless the context requires otherwise. The Trustee may revoke such appointment and remove any Transfer Agent and Registrar if the Trustee determines in its sole discretion that such Transfer Agent and Registrar failed to perform its obligations under this Agreement in any material respect. Any Transfer Agent and Registrar shall be permitted to resign as Transfer Agent and Registrar upon 30 days' notice to the Seller, the Trustee and the Servicer; provided, however, that such resignation shall not be effective and such Transfer Agent and Registrar shall continue to perform its duties as Transfer Agent and Registrar until the Trustee has appointed a successor Transfer Agent and Registrar reasonably acceptable to the Seller. Subject to paragraph (c) below, upon surrender for registration of transfer of any Registered Certificate at any office or agency of the Transfer Agent and Registrar maintained for such purpose, one or more new Registered Certificates (of the same Series and Class) in authorized denominations of like aggregate fractional undivided interests in the Certificateholders' Interest shall be executed, authenticated and delivered, in the name of the designated transferee or transferees. At the option of a Registered Certificateholder, Registered Certificates (of the same Series and Class) may be exchanged for other Registered Certificates of authorized denominations of like aggregate fractional undivided interests in the Certificateholders' Interest, upon surrender of the Registered Certificates to be exchanged at any such office or agency; Registered Certificates, including Registered Certificates received in exchange for Bearer Certificates, may not be exchanged for Bearer Certificates. At the option of the Holder of a Bearer Certificate, subject to applicable laws and regulations, Bearer Certificates may be exchanged for other Bearer Certificates or Registered Certificates (of the same Series and Class) of authorized denominations of like aggregate fractional undivided interests in the Certificateholders' Interest, upon surrender of the Bearer Certificates to be exchanged at an office or agency of the Transfer Agent and Registrar located outside the United States. Each Bearer Certificate surrendered pursuant to this Section shall have attached thereto all unmatured Coupons; provided that any Bearer Certificate, so surrendered after the close of business on the Record Date preceding the relevant payment date or distribution date after the expected final payment date need not have attached the Coupon relating to such payment date or distribution date (in each case, as specified in the applicable Supplement). Whenever any Investor Certificates are so surrendered for exchange, the Seller shall execute, the Trustee shall authenticate and the Transfer Agent and Registrar shall deliver (in the case of Bearer Certificates, outside the United States) the Investor Certificates that the Investor Certificateholder making the exchange is entitled to receive. Every Investor Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in a form satisfactory to the Trustee or the Transfer Agent and Registrar duly executed by the Investor Certificateholder or the attorney- in-fact thereof duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Investor Certificates, but the Transfer Agent and Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any such transfer or exchange. All Investor Certificates (together with any Coupons) surrendered for registration of transfer and exchange or for payment shall be canceled and disposed of in a manner satisfactory to the Trustee. The Trustee shall cancel and destroy any Global Certificate upon its exchange in full for Definitive Euro-Certificates and shall deliver a certificate of destruction to the Seller. Such certificate shall also state that a certificate or certificates of a Foreign Clearing Agency to the effect referred to in Section 6.13 was received with respect to each portion of the Global Certificate exchanged for Definitive Euro-Certificates. The Seller shall execute and deliver to the Trustee Bearer Certificates and Registered Certificates in such amounts and at such times as are necessary to enable the Trustee to fulfill its responsibilities under this Agreement, each Supplement and the Certificates. (b) The Transfer Agent and Registrar will maintain at its expense in the City of New York, and, if and so long as any Series or Class is listed on the Luxembourg Stock Exchange, Luxembourg, an office or agency where Investor Certificates may be surrendered for registration of transfer or exchange (except that Bearer Certificates may not be surrendered for exchange at any such office or agency in the United States). (i) (i) Registration of transfer of Investor Certificates containing (x) a legend substantially to the effect set forth on Exhibit E1-A shall be effected only if such transfer is made pursuant to an effective registration statement under the Act or is exempt from the registration requirements under the Act and (y) a legend substantially to the effect set forth on Exhibit E-1-B shall be effected only if such transfer is made to a Person that is not (1) an employee benefit plan or other plan, trust or account (including an individual retirement account) that is subject to ERISA or Section 4975 of the Code or (2) any collective investment fund, insurance company separate or general account or other entity (except an entity registered under the Investment Company Act of 1940, as amended) whose underlying assets include "plan assets" under ERISA by reason of a plan's investment in such entity (a "Benefit Plan"). In the event that registration of a transfer is to be made in reliance upon an exemption from the registration requirements under the Act, the transferor or the transferee shall deliver, at its expense, to the Seller, the Servicer and the Trustee, an investment letter from the transferee, substantially in the form of the investment representation letter attached hereto as Exhibit E2, and no registration of transfer shall be made until such letter is so delivered. Investor Certificates issued upon registration or transfer of, or Investor Certificates issued in exchange for, Investor Certificates bearing the legend referred to above shall also bear such legend unless the Seller, the Servicer, the Trustee and the Transfer Agent and Registrar receive an opinion of counsel, satisfactory to each of them, to the effect that such legend may be removed. Whenever an Investor Certificate containing the legend referred to above is presented to the Transfer Agent and Registrar for registration of transfer, the Transfer Agent and Registrar shall promptly seek instructions from the Servicer regarding such transfer and shall be entitled to receive instructions signed by a Servicing Officer prior to registering any such transfer. The Seller hereby agrees to indemnify the Transfer Agent and Registrar and the Trustee and to hold each of them harmless against any loss, liability or expense incurred without negligence or bad faith on their part arising out of or in connection with actions taken or omitted by them in relation to any such instructions furnished pursuant to this clause (i). (ii) Registration of transfer of Investor Certificates containing a legend to the effect set forth on Exhibit E3 shall be effected only if such transfer is made to a Person that is not a Benefit Plan. By accepting and holding any such Investor Certificate, an Investor Certificateholder shall be deemed to have represented and warranted that it is not a Benefit Plan. By acquiring any interest in a Book-Entry Certificate that contains such legend, a Certificate Owner shall be deemed to have represented and warranted that it is not a Benefit Plan. (iii) If so requested by the Seller, the Trustee will make available to any prospective purchaser of Investor Certificates who so requests, a copy of a letter provided to the Trustee by or on behalf of the Seller relating to the transferability of any Series or Class to a Benefit Plan. Mutilated, Destroyed, Lost or Stolen Certificates . If (a) any mutilated Certificate (together, in the case of Bearer Certificates, with all unmatured Coupons (if any) appertaining thereto) is surrendered to the Transfer Agent and Registrar, or the Transfer Agent and Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there is delivered to the Transfer Agent and Registrar and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Trustee that such Certificate has been acquired by a bona fide purchaser, the Seller shall execute, the Trustee shall authenticate and the Transfer Agent and Registrar shall deliver (in the case of Bearer Certificates, outside the United States), in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor and aggregate fractional undivided interest. In connection with the issuance of any new Certificate under this Section, the Trustee or the Transfer Agent and Registrar may require the payment by the Certificateholder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and Transfer Agent and Registrar) connected therewith. Any duplicate Certificate issued pursuant to this Section shall constitute complete and indefeasible evidence of ownership in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. Persons Deemed Owners . The Trustee, the Paying Agent, the Transfer Agent and Registrar and any agent of any of these may (a) prior to due presentation of a Registered Certificate for registration of transfer, treat the Person in whose name any Registered Certificate is registered as the owner of such Registered Certificate for the purpose of receiving distributions pursuant to the terms of the applicable Supplement and for all other purposes whatsoever, and (b) treat the bearer of a Bearer Certificate or Coupon as the owner of such Bearer Certificate or Coupon for the purpose of receiving distributions pursuant to the terms of the applicable Supplement and for all other purposes whatsoever; and, in any such case, neither the Trustee, the Paying Agent, the Transfer Agent and Registrar nor any agent of any of these shall be affected by any notice to the contrary. Notwithstanding the foregoing, in determining whether the Holders of the requisite Investor Certificates have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Certificates owned by the Seller, the Servicer, any other Holder of the Seller Certificate, the Trustee or any Affiliate thereof, shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Certificates that the Trustee actually knows to be so owned shall be so disregarded. Certificates so owned that have been pledged in good faith shall not be disregarded and may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Seller, the Servicer, any other Holder of the Seller Certificate or any Affiliate thereof. Appointment of Paying Agent . The Paying Agent shall make distributions to Investor Certificateholders from the Collection Account or any applicable Series Account pursuant to the provisions of the applicable Supplement and shall report the amounts of such distributions to the Trustee. Any Paying Agent shall have the revocable power to withdraw funds from the Collection Account or any applicable Series Account for the purpose of making the distributions referred to above. The Trustee may revoke such power and remove the Paying Agent if the Trustee determines in its sole discretion that the Paying Agent shall have failed to perform its obligations under this Agreement or any Supplement in any material respect. The Paying Agent shall initially be The Bank of New York and any copaying agent chosen by the Seller and acceptable to the Trustee, including, if and so long as any Series or Class is listed on the Luxembourg Stock Exchange and such exchange so requires, a copaying agent in Luxembourg or another western European city; provided, however, that The Chase Manhattan Bank shall continue to serve as Paying Agent for the Trust's Series 1995-1 Certificates, and its rights, duties and obligations in that capacity will continue to be governed by the Existing Agreement. Any Paying Agent shall be permitted to resign as Paying Agent upon 30 days' notice to the Trustee. In the event that any Paying Agent shall resign, the Trustee shall appoint a successor to act as Paying Agent. The Trustee shall cause each successor or additional Paying Agent to execute and deliver to the Trustee an instrument in which such successor or additional Paying Agent shall agree with the Trustee that it will hold all sums, if any, held by it for payment to the Investor Certificateholders in trust for the benefit of the Investor Certificateholders entitled thereto until such sums shall be paid to such Investor Certificateholders. The Paying Agent shall return all unclaimed funds to the Trustee and upon removal shall also return all funds in its possession to the Trustee. The provisions of Sections 11.01, 11.02, 11.03 and 11.05 shall apply to the Trustee also in its role as Paying Agent, for so long as the Trustee shall act as Paying Agent. Any reference in this Agreement to the Paying Agent shall include any copaying agent unless the context requires otherwise. Access to List of Registered Certificateholders' Names and Addresses . The Trustee will furnish or cause to be furnished by the Transfer Agent and Registrar to the Servicer or the Paying Agent, within five Business Days after receipt by the Trustee of a request therefor, a list in such form as the Servicer or the Paying Agent may reasonably require, of the names and addresses of the Registered Certificateholders. If any Holder or group of Holders of Investor Certificates of any Series or all outstanding Series, as the case may be, evidencing not less than 10% of the aggregate unpaid principal amount of such Series or all outstanding Series, as applicable (the "Applicants"), apply to the Trustee, and such application states that the Applicants desire to communicate with other Investor Certificateholders with respect to their rights under this Agreement or any Supplement or under the Investor Certificates and is accompanied by a copy of the communication that such Applicants propose to transmit, then the Trustee, after having been adequately indemnified by such Applicants for its costs and expenses shall afford or shall cause the Transfer agent and Registrar to afford such Applicants access during normal business hours to the most recent list of Registered Certificateholders of such Series or all outstanding Series, as applicable, held by the Trustee, within five Business Days after the receipt of such application. Such list shall be as of a date no more than 45 days prior to the date of receipt of such Applicants' request. Every Registered Certificateholder, by receiving and holding a Registered Certificate, agrees with the Trustee that neither the Trustee, the Transfer Agent and Registrar, nor any of their respective agents, shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Registered Certificateholders hereunder, regardless of the sources from which such information was derived. Authenticating Agent (a) . (a) The Trustee may appoint one or more authenticating agents with respect to the Certificates that shall be authorized to act on behalf of the Trustee in authenticating the Certificates in connection with the issuance, delivery, registration of transfer, exchange or repayment of the Certificates. Whenever reference is made in this Agreement to the authentication of Certificates by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication on behalf of the Trustee by an authenticating agent and certificate of authentication executed on behalf of the Trustee by an authenticating agent. Each authenticating agent must be acceptable to the Seller and the Servicer. (b) Any institution succeeding to the corporate agency business of an authenticating agent shall continue to be an authenticating agent without the execution or filing of any power or any further act on the part of the Trustee or such authenticating agent. An authenticating agent may at any time resign by giving notice of resignation to the Trustee and to the Seller. The Trustee may at any time terminate the agency of an authenticating agent by giving notice of termination to such authenticating agent and to the Seller. Upon receiving such a notice of resignation or upon such a termination, or in case at any time an authenticating agent shall cease to be acceptable to the Trustee or the Seller, the Trustee promptly may appoint a successor authenticating agent. Any successor authenticating agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an authenticating agent. No successor authenticating agent shall be appointed unless acceptable to the Trustee and the Seller. The Seller agrees to pay to each authenticating agent from time to time reasonable compensation for its services under this Section. The provisions of Sections 11.01, 11.02 and 11.03 shall be applicable to any authenticating agent. (c) Pursuant to an appointment made under this Section, the Certificates may have endorsed thereon, in lieu of the Trustee's certificate of authentication, an alternate certificate of authentication in substantially the following form: This is one of the Certificates described in the Pooling and Servicing Agreement. as Authenticating Agent for the Trustee, By: Authorized Officer Book-Entry Certificates . Unless otherwise specified in the related Supplement for any Series or Class, the Investor Certificates, upon original issuance, shall be issued in the form of one or more typewritten Investor Certificates representing the Book-Entry Certificates, to be delivered to the Clearing Agency, by, or on behalf of, the Seller. The Investor Certificates shall initially be registered on the Certificate Register in the name of the Clearing Agency or its nominee, and no Certificate Owner will receive a definitive certificate representing such Certificate Owner's interest in the Investor Certificates, except as provided in Section 6.12. Unless and until definitive, fully registered Investor Certificates ("Definitive Certificates") have been issued to the applicable Certificate Owners pursuant to Section 6.12 or as otherwise specified in any such Supplement: (a) the provisions of this Section shall be in full force and effect; (b) the Seller, the Servicer and the Trustee may deal with the Clearing Agency and the Clearing Agency Participants for all purposes (including the making of distributions) as the authorized representatives of the respective Certificate Owners; (c) to the extent that the provisions of this Section conflict with any other provisions of this Agreement, the provisions of this Section shall control; and (d) the rights of the respective Certificate Owners shall be exercised only through the Clearing Agency and the Clearing Agency Participants and shall be limited to those established by law and agreements between such Certificate Owners and the Clearing Agency or the Clearing Agency Participants. Pursuant to the Depository Agreement, unless and until Definitive Certificates are issued pursuant to Section 6.12, the Clearing Agency will make book- entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal and interest on the related Investor Certificates to such Clearing Agency Participants. For purposes of any provision of this Agreement requiring or permitting actions with the consent of, or at the direction of, Investor Certificateholders evidencing a specified percentage of the aggregate unpaid principal amount of Investor Certificates, such direction or consent may be given by Certificate Owners (acting through the Clearing Agency and the Clearing Agency Participants) owning Investor Certificates evidencing the requisite percentage of principal amount of Investor Certificates. Notices to Clearing Agency . Whenever any notice or other communication is required to be given to Investor Certificateholders of any Series or Class with respect to which Book-Entry Certificates have been issued, unless and until Definitive Certificates shall have been issued to the related Certificate Owners, the Trustee shall give all such notices and communications to the applicable Clearing Agency. Definitive Certificates . If Book-Entry Certificates have been issued with respect to any Series or Class and (a) the Seller advises the Trustee that the Clearing Agency is no longer willing or able to discharge properly its responsibilities under the Depository Agreement with respect to such Series or Class and the Trustee or the Seller is unable to locate a qualified successor, (b) the Seller, at its option, advises the Trustee that it elects to terminate the book-entry system with respect to such Series or Class through the Clearing Agency or (c) after the occurrence of a Servicer Default, Certificate Owners of such Series or Class evidencing not less than 50% of the aggregate unpaid principal amount of such Series or Class advise the Trustee and the Clearing Agency through the Clearing Agency Participants that the continuation of a book-entry system with respect to the Investor Certificates of such Series or Class through the Clearing Agency is no longer in the best interests of the Certificate Owners with respect to such Certificates, then the Trustee shall notify all Certificate Owners of such Certificates, through the Clearing Agency, of the occurrence of any such event and of the availability of Definitive Certificates to Certificate Owners requesting the same. Upon surrender to the Trustee of any such Certificates by the Clearing Agency, accompanied by registration instructions from the Clearing Agency for registration, the Seller shall execute and the Trustee shall authenticate and deliver such Definitive Certificates. Neither the Seller nor the Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of such Definitive Certificates all references herein to obligations imposed upon or to be performed by the Clearing Agency shall be deemed to be imposed upon and performed by the Trustee, to the extent applicable with respect to such Definitive Certificates and the Trustee shall recognize the Holders of such Definitive Certificates as Investor Certificateholders hereunder. Global Certificate . If specified in the related Supplement for any Series or Class, the Investor Certificates for such Series or Class will initially be issued in the form of a single temporary global Certificate (the "Global Certificate") in bearer form, without interest coupons, in the denomination of the aggregate principal amount of such Series or Class and substantially in the form set forth in the exhibit with respect thereto attached to the related Supplement. The Global Certificate will be executed by the Seller and authenticated by the Trustee upon the same conditions, in substantially the same manner and with the same effect as the Definitive Certificates. The Global Certificate may be exchanged for Bearer or Registered Certificates in definitive form (the "Definitive Euro-Certificates") pursuant to the terms of any applicable Supplement. Uncertificated Classes . Notwithstanding anything to the contrary contained in this Article VI or in Article XII, unless otherwise specified in any Supplement, any provisions contained in this Article VI and in Article XII relating to the registration, form, execution, authentication, delivery, presentation, cancellation and surrender of Certificates shall not be applicable to any uncertificated Certificates. ARTICLE VII Other Matters Relating to the Seller Liability of the Seller . The Seller shall be liable in all respects for the obligations, covenants, representations and warranties of the Seller arising under or related to this Agreement or any Supplement . The Seller shall be liable only to the extent of the obligations specifically undertaken by it in its capacity as Seller. Merger or Consolidation of, or Assumption of the Obligations of, the Seller (a) . (a) The Seller shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any Person unless: (i) (x) the business entity formed by such consolidation or into which the Seller is merged or the Person that acquires by conveyance or transfer the properties and assets of the Seller substantially as an entirety shall be, if the Seller is not the surviving entity, organized and existing under the law of the United States of America or any State or the District of Columbia, and, if the Seller is not the surviving entity, such business entity shall expressly assume, by an agreement supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the performance of every covenant and obligation of the Seller hereunder, including its obligations under Section 7.04; (y) the Seller has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance or transfer and such supplemental agreement comply with this Section, that such supplemental agreement is a valid and binding obligation of such surviving entity enforceable against such surviving entity in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally from time to time in effect and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity), and that all conditions precedent herein provided for relating to such transaction have been complied with; (ii) the Rating Agency Condition shall have been satisfied with respect to such consolidation, merger, conveyance or transfer; (iii) the Seller shall have delivered to the Trustee and each Rating Agency a Tax Opinion, dated the date of such consolidation, merger, conveyance or transfer, with respect thereto; (iv) in connection with any merger or consolidation, the business entity into which the Seller shall merge or consolidate shall be (x) a business entity that is not subject to Title 11 of the United States Code or (y) a special- purpose corporation, the powers and activities of which shall be limited to the performance of the Seller's obligations under this Agreement, any Supplement and the Purchase Agreements; and (v) if the Seller is not the surviving entity, the surviving entity shall file new UCC1 financing statements with respect to the interest of the Trust in the Receivables. (b) The obligations of the Seller hereunder shall not be assignable nor shall any Person succeed to the obligations of the Seller hereunder except in each case in accordance with (i) the provisions of the foregoing paragraph, (ii) Sections 2.13 or 6.03(d), or (iii) conveyances, mergers, consolidations, assumptions, sales or transfers to other entities (1) for which the Seller delivers a Officer's Certificate to the Trustee indicating that the Seller reasonably believes that such action will not adversely affect in any material respect the interests of any Investor Certificateholder, (2) that meet the requirements of clause (ii) of the preceding paragraph and (3) for which such purchaser, transferee, pledgee or entity shall expressly assume, in an agreement supplemental hereto, executed and delivered to the Trustee in writing in form satisfactory to the Trustee, the performance of every covenant and obligation of the Seller thereby conveyed. (c) This Section 7.02 shall not be construed to prohibit or in any way limit the Seller's ability to effectuate any consolidation or merger pursuant to which the Seller would be the surviving entity. Limitations on Liability of the Seller . Subject to Sections 7.01 and 7.04, neither the Seller nor any of the directors, officers, employees or agents of the Seller acting in such capacities shall be under any liability to the Trust, the Trustee, the Certificateholders, any Series Enhancer or any other Person for any action taken or for refraining from the taking of any action in good faith in their capacities as Seller pursuant to this Agreement; provided, however, that this provision shall not protect the Seller or any such Person against any liability that would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of duties or by reason of reckless disregard of obligations and duties hereunder . The Seller and any director, officer, employee or agent of the Seller may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person (other than the Seller) respecting any matters arising hereunder. Seller Indemnification of the Trust and the Trustee . Subject to the limitation on remedies specified in Section 2.06, the Seller shall indemnify and hold harmless the Trust and the Trustee and its officers, directors, employees and agents, from and against any loss, liability, expense, damage or injury suffered or sustained by reason of any acts or omissions of the Seller with respect to the Trust pursuant to this Agreement, including any judgment, award, settlement, reasonable attorneys' fees and other costs or expenses incurred in connection with the defense of any action, proceeding or claim; provided, however, that the Seller shall not indemnify the Trustee if such acts, omissions or alleged acts or omissions constitute or are caused by fraud, negligence, or willful misconduct by the Trustee; provided further, that the Seller shall not indemnify the Trust, the Investor Certificateholders or the Certificate Owners for any liabilities, costs or expenses of the Trust with respect to any action taken by the Trustee at the request of the Investor Certificateholders; provided further, that the Seller shall not indemnify the Trust, the Investor Certificateholders or the Certificate Owners as to any losses, claims or damages incurred by any of them in their capacities as investors, including, without limitation, losses with respect to market or investment risks associated with ownership of the Investor Certificates or losses incurred as a result of Defaulted Receivables; and provided further, that the Seller shall not indemnify the Trust, the Investor Certificateholders or the Certificate Owners for any liabilities, costs or expenses of the Trust, the Investor Certificateholders or the Certificate Owners arising under any tax law, including without limitation, any Federal, state, local or foreign income or franchise taxes or any other tax imposed on or measured by income (or any interest or penalties with respect thereto or arising from a failure to comply therewith) required to be paid by the Trust, the Investor Certificateholders or the Certificate Owners in connection herewith to any taxing authority. Indemnification pursuant to this Section shall be payable solely to the extent that the Seller has funds sufficient to make payments after satisfying its obligations then payable under this Agreement and otherwise shall not constitute a claim against the Seller. ARTICLE VIII Other Matters Relating to the Servicer Liability of the Servicer . The Servicer shall be liable under this Article only to the extent of the obligations specifically undertaken by the Servicer in its capacity as Servicer. Merger or Consolidation of, or Assumption of the Obligations of, the Servicer . The Servicer shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any Person, unless: (i) (i) the corporation formed by such consolidation or into which the Servicer is merged or the Person that acquires by conveyance or transfer the properties and assets of the Servicer substantially as an entirety shall be, if the Servicer is not the surviving entity, a corporation organized and existing under the laws of the United States of America or any State or the District of Columbia, and, if the Servicer is not the surviving entity, such corporation shall expressly assume, by an agreement supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the performance of every covenant and obligation of the Servicer hereunder; (ii) the Servicer has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance or transfer and such supplemental agreement comply with this Section, that such supplemental agreement is a valid and binding obligation of such surviving entity enforceable against such surviving entity in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally from time to time in effect and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity), and that all conditions precedent herein provided for relating to such transaction have been complied with; and (iii) either (x) the corporation formed by such consolidation or into which the Servicer is merged or the Person that acquired by conveyance or transfer the properties and assets of the Servicer substantially as an entirety shall be an Eligible Servicer (taking into account, in making such determination, the experience and operations of the predecessor Servicer) or (y) upon the effectiveness of such consolidation, merger, conveyance or transfer, a Successor Servicer shall have assumed the obligations of the Servicer in accordance with this Agreement. (b) This Section 8.02 shall not be construed to prohibit or in any way limit the Servicer's ability to effectuate any consolidation or merger pursuant to which the Servicer would be the surviving entity. (c) The Servicer shall notify each Rating Agency promptly after any consolidation, merger, conveyance or transfer effected pursuant to this Section 8.02. Limitation on Liability of the Servicer and Others . Except as provided in Sections 8.04 and 11.05, neither the Servicer nor any of the directors, officers, employees or agents of the Servicer in its capacity as Servicer shall be under any liability to the Trust, the Trustee, the Certificateholders, any Series Enhancers or any other person for any action taken or for refraining from the taking of any action in good faith in its capacity as Servicer pursuant to this Agreement; provided, however, that this provision shall not protect the Servicer or any such Person against any liability that would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of duties or by reason of reckless disregard of obligations and duties hereunder. The Servicer and any director, officer, employee or agent of the Servicer may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person (other than the Servicer) respecting any matters arising hereunder. The Servicer shall not be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its duties as Servicer in accordance with this Agreement and that in its reasonable judgment may involve it in any expense or liability. The Servicer may, in its sole discretion, undertake any such legal action that it may deem necessary or desirable for the benefit of the Certificateholders with respect to this Agreement and the rights and duties of the parties hereto and the interests of the Certificateholders hereunder. Servicer Indemnification of the Trust and the Trustee . The Servicer shall indemnify and hold harmless the Trust and the Trustee and its officers, directors, employees and agents, from and against any loss, liability, expense, damage or injury suffered or sustained by reason of any acts or omissions of the Servicer with respect to the Trust pursuant to this Agreement, including any judgment, award, settlement, reasonable attorneys' fees and other costs or expenses incurred in connection with the defense of any action, proceeding or claim; provided, however, that the Servicer shall not indemnify the Trustee if such acts, omissions or alleged acts or omissions constitute or are caused by fraud, negligence, or willful misconduct by the Trustee; provided further, that the Servicer shall not indemnify the Trust, the Investor Certificateholders or the Certificate Owners for any liabilities, costs or expenses of the Trust with respect to any action taken by the Trustee at the request of the Investor Certificateholders; provided further, that the Servicer shall not indemnify the Trust, the Investor Certificateholders or the Certificate Owners as to any losses, claims or damages incurred by any of them in their capacities as investors, including, without limitation, losses with respect to market or investment risks associated with ownership of the Investor Certificates or losses incurred as a result of Defaulted Receivables; and provided further, that the Servicer shall not indemnify the Trust, the Investor Certificateholders or the Certificate Owners for any liabilities, costs or expenses of the Trust, the Investor Certificateholders or the Certificate Owners arising under any tax law, including without limitation, any Federal, state, local or foreign income or franchise taxes or any other tax imposed on or measured by income (or any interest or penalties with respect thereto or arising from a failure to comply therewith) required to be paid by the Trust, the Investor Certificateholders or the Certificate Owners in connection herewith to any taxing authority. Indemnification pursuant to this Section shall not be payable from the Trust Assets. The provisions of this indemnity shall run directly to and be enforceable by an injured party subject to the limitations hereof. The Servicer Not To Resign . The Servicer shall not resign from the obligations and duties hereby imposed on it except (x) upon the determination that (i) the performance of its duties hereunder is no longer permissible under Requirements of Law (other than the charter and by-laws of the Servicer) and (ii) there is no reasonable action that the Servicer could take to make the performance of its duties hereunder permissible under such Requirements of Law or (y) as may be required, in connection with the Servicer's consolidation with, or merger into any other corporation or the Servicer's conveyance or transfer of its properties and assets substantially as an entirety to any person in each case, in accordance with Section 8.02. Any determination permitting the resignation of the Servicer pursuant to clause (x) above shall be evidenced by an Opinion of Counsel to such effect delivered to the Trustee. No resignation shall become effective until the Trustee or a Successor Servicer shall have assumed the responsibilities and obligations of the Servicer in accordance with Section 10.02. If within 120 days of the date of the determination that the Servicer may no longer act as Servicer, and if the Trustee is unable to appoint a Successor Servicer, the Trustee shall serve as Successor Servicer. Notwithstanding the foregoing, the Trustee shall, if it is legally unable so to act, petition a court of competent jurisdiction to appoint any established institution having a net worth of not less than $50,000,000 and whose regular business includes the servicing of credit card accounts as the Successor Servicer hereunder. The Trustee shall give prompt notice to each Rating Agency and each Series Enhancer entitled thereto under the terms of the applicable Supplement upon the resignation of the Servicer or the appointment of a Successor Servicer. Access to Certain Documentation and Information Regarding the Receivables . The Servicer shall provide to the Trustee access to the documentation regarding the Accounts and the Receivables in such cases where the Trustee is required in connection with the enforcement of the rights of Certificateholders or by applicable statutes or regulations to review such documentation, such access being afforded without charge but only (a) upon reasonable request, (b) during normal business hours, (c) subject to the Servicer's normal security and confidentiality procedures and (d) at reasonably accessible offices in the continental United States designated by the Servicer. Nothing in this Section shall derogate from the obligation of the Account Originators, the Seller, the Trustee and the Servicer to observe any applicable law prohibiting disclosure of information regarding the Obligors and the failure of the Servicer to provide access as provided in this Section as a result of such obligation shall not constitute a breach of this Section. Delegation of Duties . In the ordinary course of business, the Servicer may at any time delegate any duties hereunder to any Person who agrees to conduct such duties in accordance with the Account Guidelines and this Agreement; provided, however, at least 30 days prior written notice shall be given to the Trustee, each Rating Agency and each Series Enhancer entitled thereto pursuant to the relevant Supplement, of such delegation. Any such delegation shall not relieve the Servicer of its liability and responsibility with respect to such duties, and shall not constitute a resignation within the meaning of Section 8.05 hereof. Examination of Records . The Seller and the Servicer shall clearly and unambiguously indicate in their computer files or other records that the Receivables arising in the Accounts have been conveyed to the Trustee, on behalf of the Trust, pursuant to this Agreement for the benefit of the Certificateholders. The Seller and the Servicer shall, prior to the sale or transfer to a third party of any receivable held in its custody, examine its computer and other records to determine that such receivable is not a Receivable. ARTICLE IX Pay Out Events Pay Out Events . If any one of the following events (each, a "Pay Out Event") shall occur with respect to any Series: (a) The Neiman Marcus Group, Inc., the Seller or any Holder of the Seller Certificate shall fail generally to, or admit in writing its inability to, pay its debts as they become due; or a proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of The Neiman Marcus Group, Inc., the Seller or any Holder of the Seller Certificate in an involuntary case under any Debtor Relief Law, or for the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of such Person or for any substantial part of its property, or for the winding-up or liquidation of its affairs and, if instituted against the Seller or any Holder of the Seller Certificate, any such proceeding shall continue undismissed or unstayed and in effect, for a period of 60 consecutive days, or any of the actions sought in such proceeding shall occur; or the commencement by The Neiman Marcus Group, Inc., the Seller or any Holder of the Seller Certificate, of a voluntary case under any Debtor Relief Law, or such Person's consent to the entry of an order for relief in an involuntary case under any Debtor Relief Law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of such Person or for any substantial part of its property, or any general assignment for the benefit of creditors; or such Person or any Subsidiary of such Person shall have taken any corporate action in furtherance of any of the foregoing actions (any such event, an "Insolvency Event"); (b) the Trust shall become an "investment company" within the meaning of the Investment Company Act; or (c) a Transfer Restriction Event shall occur; then in the case of any such event, a Pay Out Event shall occur with respect to such Series without any notice or other action on the part of the Trustee or the Investor Certificateholders, immediately upon the occurrence of such event. Section 9.02 Additional Rights upon the Occurrence of Certain Events. If an Insolvency Event occurs with respect to any Seller or Holder of the Seller Certificate, the Seller shall on the day any such Insolvency Event occurs, immediately cease to transfer Principal Receivables or any Participation Interests to the Trust and shall promptly give notice to the Trustee thereof. Notwithstanding any cessation of the transfer to the Trust of additional Principal Receivables or any Participation Interests, Principal Receivables or any Participation Interests transferred to the Trust prior to the occurrence of such Insolvency Event and Collections in respect of such Principal Receivables and Participation Interests, and Finance Charge Receivables whenever created accrued in respect of such Principal Receivables, shall continue to be a part of the Trust. The provisions of Sections 9.01 and 9.02 shall not be deemed to be mutually exclusive. ARTICLE X Servicer Defaults Servicer Defaults . If any one of the following events (a "Servicer Default") shall occur and be continuing: (a) any failure by the Servicer to make any payment, transfer or deposit or to give instructions or notice to the Trustee pursuant to the terms of this Agreement or any Supplement on or before the date occurring five Business Days after the date such payment, transfer or deposit or such instruction or notice is required to be made or given, as the case may be, under the terms of this Agreement or any Supplement; (b) failure on the part of the Servicer to duly observe or perform in any material respect any other covenants or agreements of the Servicer set forth in this Agreement or any Supplement that has a material adverse effect on the interests hereunder of the Investor Certificateholders of any Series or Class (which determination shall be made without regard to whether funds are then available pursuant to any Series Enhancement) and that continues unremedied for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee, or to the Servicer and the Trustee by Holders of Investor Certificates evidencing not less than 25% of the aggregate unpaid principal amount of all Investor Certificates (or, with respect to any such failure that does not relate to all Series, 25% of the aggregate unpaid principal amount of all Series to which such failure relates); or the Servicer shall delegate its duties under this Agreement, except as permitted by Sections 8.02 and 8.07, a Responsible Officer of the Trustee has actual knowledge of such delegation and such delegation continues unremedied for 15 days after the date on which written notice thereof, requiring the same to be remedied, shall have been given to the Servicer by the Trustee, or to the Servicer and the Trustee by Holders of Investor Certificates evidencing not less than 25% of the aggregate unpaid principal amount of all Investor Certificates; (c) any representation, warranty or certification made by the Servicer in this Agreement or any Supplement or in any certificate delivered pursuant to this Agreement or any Supplement shall prove to have been incorrect when made, that has a material adverse effect on the rights of the Investor Certificateholders of any Series or Class (which determination shall be made without regard to whether funds are then available pursuant to any Series Enhancement) and that continues to be incorrect in any material respect for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee, or to the Servicer and the Trustee by the Holders of Investor Certificates evidencing not less than 25% of the aggregate unpaid principal amount of all Investor Certificates (or, with respect to any such representation, warranty or certification that does not relate to all Series, 25% of the aggregate unpaid principal amount of all Series to which such representation, warranty or certification relates); or (d) The Servicer shall fail generally to, or admit in writing its inability to, pay its debts as they become due; or a proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of the Servicer in an involuntary case under any Debtor Relief Law, or for the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of such Person or for any substantial part of its property, or for the winding-up or liquidation of its affairs and, if instituted against the Servicer, any such proceeding shall continue undismissed or unstayed and in effect, for a period of 60 consecutive days, or any of the actions sought in such proceeding shall occur; or the commencement by the Servicer, of a voluntary case under any Debtor Relief Law, or such Person's consent to the entry of an order for relief in an involuntary case under any Debtor Relief Law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of such Person or for any substantial part of its property, or any general assignment for the benefit of creditors; or such Person or any Subsidiary of such Person shall have taken any corporate action in furtherance of any of the foregoing actions; then, in the event of any Servicer Default, so long as the Servicer Default shall not have been remedied, either the Trustee or the Holders of Investor Certificates evidencing more than 50% of the aggregate unpaid principal amount of all Investor Certificates, by notice given to the Servicer (and to the Trustee and any Series Enhancer entitled thereto pursuant to the relevant Supplement if given by the Investor Certificateholders) (a "Termination Notice"), may terminate all but not less than all the rights and obligations of the Servicer as Servicer under this Agreement and in and to the Receivables and the proceeds thereof; provided, however, if within 60 days of receipt of a Termination Notice the Trustee does not receive any bids from Eligible Servicers in accordance with Section 10.02(c) to act as a Successor Servicer and receives an Officer's Certificate of the Servicer to the effect that the Servicer cannot in good faith cure the Servicer Default that gave rise to the Termination Notice, the Trustee shall offer the Seller the right at its option to purchase the Certificateholders' Interest on the Distribution Date occurring in the next calendar month. The purchase price for the Certificateholders' Interest shall be equal to the sum of the amounts specified therefor with respect to each outstanding Series in the related Supplement. The Seller shall notify the Trustee prior to the Record Date for the related Distribution Date of the purchase if it is exercising such option. If it exercises such option, the Seller shall (x) deliver to the Trustee an Opinion of Counsel (which must be an independent outside counsel) to the effect that, in reliance on certain certificates to the effect that the Receivables constitute fair value for consideration paid therefor and as to the solvency of the Seller, the purchase would not be considered a fraudulent conveyance and (y) deposit the purchase price into the Collection Account not later than 12:00 noon, New York City time, on such Distribution Date in immediately available funds. The purchase price shall be allocated and distributed to Investor Certificateholders in accordance with Article IV and the terms of each Supplement. After receipt by the Servicer of such Termination Notice, and on the date that a Successor Servicer shall have been appointed by the Trustee pursuant to Section 10.02, all authority and power of the Servicer under this Agreement shall pass to and be vested in the Successor Servicer; and, without limitation, the Trustee is hereby authorized and empowered (upon the failure of the Servicer to cooperate) to execute and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all documents and other instruments upon the failure of the Servicer to execute or deliver such documents or instruments, and to do and accomplish all other acts or things necessary or appropriate to effect the purposes of such transfer of servicing rights. The Servicer agrees to cooperate with the Trustee and the Successor Servicer in effecting the termination of the responsibilities and rights of the Servicer to conduct servicing hereunder including, without limitation, the transfer to the Successor Servicer of all authority of the Servicer to service the Receivables provided for under this Agreement, including, without limitation, all authority over all Collections that shall on the date of transfer be held by the Servicer for deposit, or that have been deposited by the Servicer, in the Collection Account, or that shall thereafter be received with respect to the Receivables, and in assisting the Successor Servicer and in enforcing all rights to Insurance Proceeds. The Servicer shall promptly transfer its electronic records relating to the Receivables to the Successor Servicer in such electronic form as the Successor Servicer may reasonably request and shall promptly transfer to the Successor Servicer all other records, correspondence and documents necessary for the continued servicing of the Receivables in the manner and at such times as the Successor Servicer shall reasonably request. To the extent that compliance with this Section 10.01 shall require the Servicer to disclose to the Successor Servicer information of any kind that the Servicer reasonably deems to be confidential, the Successor Servicer shall be required to enter into such customary licensing and confidentiality agreements as the Servicer shall deem necessary to protect its interests. Notwithstanding the foregoing, any delay in or failure of performance under Section 10.01(a) for a period of five Business Days or under Section 10.01(b) or (c) for a period of 60 days (in addition to any period provided in Section 10.01(a), (b) or (c)) shall not constitute a Servicer Default until the expiration of such additional five Business Days or 60 days, respectively, if such delay or failure could not be prevented by the exercise of reasonable diligence by the Servicer and such delay or failure was caused by an act of God or the public enemy, acts of declared or undeclared war, public disorder, rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes, earthquakes, floods or similar causes. The preceding sentence shall not relieve the Servicer from the obligation to use its best efforts to perform its obligations in a timely manner in accordance with the terms of this Agreement and any Supplement and the Servicer shall provide the Trustee, each Rating Agency, any Series Enhancer entitled thereto pursuant to the relevant Supplement, the Holder of the Seller Certificate and the Investor Certificateholders with an Officer's Certificate giving prompt notice of such failure or delay by it, together with a description of its efforts to so perform its obligations. Trustee to Act; Appointment of Successor (a) . (a) On and after the receipt by the Servicer of a Termination Notice pursuant to Section 10.01, the Servicer shall continue to perform all servicing functions under this Agreement until the date specified in the Termination Notice or otherwise specified by the Trustee or until a date mutually agreed upon by the Servicer and Trustee. The Trustee shall promptly as possible after the giving of a Termination Notice appoint an Eligible Servicer as a successor servicer (the "Successor Servicer"), and such Successor Servicer shall accept its appointment by a written assumption in a form acceptable to the Trustee. In the event that a Successor Servicer has not been appointed or has not accepted its appointment at the time when the Servicer ceases to act as Servicer, the Trustee without further action shall automatically be appointed the Successor Servicer. The Trustee may delegate any of its servicing obligations to an Affiliate of the Trustee or agent in accordance with Section 3.01(b) and 8.07. Notwithstanding the foregoing, the Trustee shall, if it is legally unable so to act, petition a court of competent jurisdiction to appoint any established institution having a net worth of not less than $50,000,000 and whose regular business includes the servicing of credit card receivables as the Successor Servicer hereunder. The Trustee shall give prompt notice to each Rating Agency and each Series Enhancer entitled thereto pursuant to the applicable Supplement upon the appointment of a Successor Servicer. (b) Upon its appointment, the Successor Servicer shall be the successor in all respects to the Servicer with respect to servicing functions under this Agreement and shall be subject to all the responsibilities, duties and liabilities (except for liabilities arising during the period of time when the prior Servicer was performing and acting as Servicer) relating thereto placed on the Servicer by the terms and provisions hereof, and all references in this Agreement to the Servicer shall be deemed to refer to the Successor Servicer. (c) In connection with any Termination Notice, the Trustee will review any bids that it obtains from Eligible Servicers and shall be permitted to appoint any Eligible Servicer submitting such a bid as a Successor Servicer for servicing compensation not in excess of the aggregate Servicing Fees for all Series; provided, however, that the Holder of the Seller Certificate shall be responsible for payment of the portion of such aggregate Servicing Fees allocable to the Holder of the Seller Certificate and that no such monthly compensation paid out of Collections shall be in excess of such aggregate Servicing Fees. Each Holder of the Seller Certificate agrees that, if The Neiman Marcus Group, Inc. (or any Successor Servicer) is terminated as Servicer hereunder, the portion of the Collections in respect of Finance Charge Receivables that the Holder of the Seller Certificate is entitled to receive pursuant to this Agreement or any Supplement shall be reduced by an amount sufficient to pay the Holder of the Seller Certificate share (determined by reference to the Supplements with respect to any outstanding Series) of the compensation of the Successor Servicer. (d) All authority and power granted to the Successor Servicer under this Agreement shall automatically cease and terminate upon termination of the Trust pursuant to Section 12.01 and shall pass to and be vested in the Seller and, without limitation, the Seller is hereby authorized and empowered to execute and deliver, on behalf of the Successor Servicer, as attorney-in-fact or otherwise, all documents and other instruments, and to do and accomplish all other acts or things necessary or appropriate to effect the purposes of such transfer of servicing rights. The Successor Servicer agrees to cooperate with the Seller in effecting the termination of the responsibilities and rights of the Successor Servicer to conduct servicing on the Receivables. The Successor Servicer shall transfer its electronic records relating to the Receivables to the Seller in such electronic form as the Seller may reasonably request and shall transfer all other records, correspondence and documents to the Seller in the manner and at such times as the Seller shall reasonably request. To the extent that compliance with this Section 10.02 shall require the Successor Servicer to disclose to the Seller information of any kind that the Successor Servicer deems to be confidential, the Seller shall be required to enter into such customary licensing and confidentiality agreements as the Successor Servicer shall deem necessary to protect its interests. Notification to Certificateholders . Within two Business Days after the Servicer becomes aware of any Servicer Default, the Servicer shall give notice thereof to the Trustee, each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement and the Trustee shall give notice to the Investor Certificateholders. Upon any termination or appointment of a Successor Servicer pursuant to this Article, the Trustee shall give prompt notice thereof to the Investor Certificateholders. ARTICLE XI The Trustee Duties of Trustee (a) . (a) The Trustee, prior to the occurrence of a Servicer Default and after the curing of all Servicer Defaults that may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Agreement. If a Servicer Default has occurred (which has not been cured or waived) the Trustee shall exercise such of the rights and powers vested in it by this Agreement, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) The Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee that are specifically required to be furnished pursuant to any provision of this Agreement, shall examine them to determine whether they conform to the requirements of this Agreement. The Trustee shall give prompt written notice to the Certificateholders of any material lack of conformity of any such instrument to the applicable requirements of this Agreement discovered by the Trustee that would entitle a specified percentage of the Certificateholders to take any action pursuant to this Agreement. (c) Subject to Section 11.01(a), no provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own misconduct; provided, however, that: (i) the Trustee shall not be personally liable for an error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (ii) the Trustee shall not be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of the Holders of Investor Certificates relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement; provided that, such direction is delivered by the Holder of Investor Certificates evidencing the percentage of the aggregate unpaid principal amount of Investor Certificates of all Series to which such action relates required for such action by the terms of this Agreement; and (iii) the Trustee shall not be charged with knowledge of any failure by the Servicer referred to in clauses (a) and (b) of Section 10.01 unless a Responsible Officer of the Trustee obtains actual knowledge of such failure or the Trustee receives written notice of such failure from the Servicer, any Holders of Investor Certificates evidencing not less than 25% of the aggregate unpaid principal amount of all Investor Certificates (or, with respect to any such failure that does not relate to all Series, 25% of the aggregate unpaid principal amount of all Investor Certificates of all Series to which such failure relates, or the Series Enhancers for all Series to which such failure relates). (d) The Trustee shall not be required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers hereunder or thereunder, if there is reasonable ground for believing that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it, and none of the provisions contained in this Agreement shall in any event require the Trustee to perform, or be responsible for the manner of performance of, any of the obligations of the Servicer under this Agreement except during such time, if any, as the Trustee shall be the successor to, and be vested with the rights, duties, powers and privileges of, the Servicer in accordance with the terms of this Agreement. (e) The Trustee shall have no power to vary the corpus of the Trust, except as expressly provided in this Agreement. (f) In the event that the Paying Agent or the Transfer Agent and Registrar shall fail to perform any obligation, duty or agreement in the manner or on the day required to be performed by the Paying Agent or the Transfer Agent and Registrar, as the case may be, under this Agreement, the Trustee shall be obligated as soon as possible upon knowledge of a Responsible Officer thereof and receipt of appropriate records, if any, to perform such obligation, duty or agreement in the manner so required. (g) If the Seller has agreed to transfer any of its receivables (other than the Receivables) to another Person, upon the written request of the Seller, the Trustee will enter into such intercreditor agreements with the transferee of such receivables as are customary and necessary to separately identify the rights of the Trust and such other Person in the Seller's receivables; provided that the Trustee shall not be required to enter into any intercreditor agreement that could adversely affect the interests of the Certificateholders and, upon the request of the Trustee, the Seller will deliver an Opinion of Counsel on any matters relating to such intercreditor agreement, reasonably requested by the Trustee. Certain Matters Affecting the Trustee . Except as otherwise provided in Section 11.01: (a) the Trustee may rely on and shall be protected in acting on, or in refraining from acting in accord with, any resolution, Officer's Certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document reasonably believed by it to be genuine and to have been signed or presented to it pursuant to this Agreement by the proper party or parties; (b) the Trustee may consult with counsel, and any advice of such counsel, or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (c) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement or any Enhancement Agreement, or to institute, conduct or defend any litigation hereunder or thereunder or in relation to this Agreement or any Enhancement Agreement, at the request, order or direction of any of the Certificateholders, pursuant to the provisions of this Agreement or any Enhancement Agreement, unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred therein or thereby; nothing contained herein shall, however, relieve the Trustee of the obligations, upon the occurrence of any Servicer Default (which has not been cured) to exercise such of the rights and powers vested in it by this Agreement, and to use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs; (d) the Trustee shall not be personally liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement; (e) the Trustee shall not be bound to make any investigation into the facts of matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless requested in writing to do so by Holders of Investor Certificates evidencing more than 25% of the aggregate unpaid principal amount of all Investor Certificates (or, with respect to any such matters that do not relate to all Series, 25% of the aggregate unpaid principal amount of the Investor Certificates of all Series to which such matters relate); (f) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian, and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent, attorney or custodian appointed with due care by it hereunder; and (g) except as may be required by subsection 11.01(a) hereof, the Trustee shall not be required to make any initial or periodic examination of any documents or records related to the Receivables or the Accounts for the purpose of establishing the presence or absence of defects, the compliance by the Seller with its representations and warranties or for any other purpose. Trustee Not Liable for Recitals in Certificates . The Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates (other than the certificate of authentication on the Certificates). Except as set forth in Section 11.15, the Trustee makes no representations as to the validity or sufficiency of this Agreement or any Supplement or of the Certificates (other than the certificate of authentication on the Certificates) or of any Receivable or related document. The Trustee shall not be accountable for the use or application by the Seller of any of the Certificates or of the proceeds of such Certificates, or for the use or application of any funds paid to the Seller or the Holder of the Seller Certificate in respect of the Receivables or deposited in or withdrawn from the Collection Account, any Series Accounts or any other accounts hereafter established to effectuate the transactions contemplated by this Agreement and in accordance with the terms of this Agreement. Trustee May Own Certificates . Subject to Section 6.06, the Trustee in its individual or any other capacity may become the owner or pledgee of Investor Certificates with the same rights as it would have if it were not the Trustee. The Servicer To Pay Trustee's Fees and Expenses . The Servicer covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to receive, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by it in the execution of the trust hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee, and the Servicer will pay or reimburse the Trustee (without reimbursement from the Collection Account or otherwise) upon its request for all reasonable expenses or disbursements incurred or made by the Trustee in accordance with any of the provisions of this Agreement or any Enhancement Agreement (including the reasonable fees and expenses of its agents, any cotrustee and counsel) except any such expense, disbursement or advance as may arise from its own negligence, willful misconduct or bad faith and except as provided in the following sentence. If the Trustee is appointed Successor Servicer pursuant to Section 10.02, the provisions of this Section 11.05 shall not apply to expenses, disbursements and advances made or incurred by the Trustee in its capacity as Successor Servicer. The obligations of the Servicer under Section 8.04 and this Section 11.05 shall survive the termination of the Trust and the resignation or removal of the Trustee. Eligibility Requirements for Trustee . The Trustee hereunder shall at all times be a bank, trust company or a corporation organized and doing business under the laws of the United States of America or any state thereof authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal or state authority and maintain any credit or deposit rating required by any Rating Agency (as of the date hereof, Baa3 for Moody's and BBB- for Standard & Poor's). If such bank or corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section 11.06, the combined capital and surplus of such bank or corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 11.06, the Trustee shall resign immediately in the manner and with the effect specified in Section 11.07. Resignation or Removal of Trustee (a) . (a) The Trustee may at any time resign and be discharged from the trust hereby created by giving written notice thereof to the Servicer and to each Rating Agency. Upon receiving such notice of resignation, the Seller shall promptly appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee. (b) If at any time the Trustee shall cease to be eligible in accordance with the provisions of Section 11.06 and shall fail to resign after written request therefor by the Servicer or the Seller, or if at any time the Trustee shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, in which event the Servicer shall remove the Trustee and promptly appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee. (c) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant to any of the provisions of this Section 11.07 shall not become effective until acceptance of appointment by the successor trustee as provided in Section 11.08 and any liability of the Trustee arising hereunder shall survive such appointment of a successor trustee. Successor Trustee (a) . (a) Any successor trustee appointed as provided in Section 11.07 shall execute, acknowledge and deliver to the Seller, to the Servicer and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with the like effect as if originally named as Trustee herein. The predecessor Trustee shall deliver to the successor trustee all documents and statements held by it hereunder, and the Seller and the predecessor Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor trustee all such rights, powers, duties and obligations. (b) No successor trustee shall accept appointment as provided in this Section 11.08 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 11.06. (c) Upon acceptance of appointment by a successor trustee as provided in this Section, such successor trustee shall provide notice of such succession hereunder to all Investor Certificateholders and the Servicer shall provide such notice to each Rating Agency and any Series Enhancer entitled thereto pursuant to the relevant Supplement. Merger or Consolidation of Trustee . Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be eligible under the provisions of Section 11.06, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Appointment of CoTrustee or Separate Trustee (a) . (a) Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust may at the time be located, the Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a cotrustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Certificateholders, such title to the Trust, or any part thereof, and, subject to the other provisions of this Section 11.10, such powers, duties, obligations, rights and trusts as the Trustee may consider necessary or desirable; provided, however, that the Trustee shall exercise due care in the appointment of any cotrustee. No cotrustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 11.06 and no notice to Certificateholders of the appointment of any cotrustee or separate trustee shall be required under Section 11.08. (b) Every separate trustee and cotrustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or cotrustee jointly (it being understood that such separate trustee or cotrustee is not authorized to act separately without the Trustee joining in such act) except to the extent that under any laws of any jurisdiction in which any particular act or acts are to be performed (whether as Trustee hereunder or as successor to the Servicer hereunder) the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Trustee; (ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and (iii) the Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. (c) Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and cotrustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or cotrustee shall refer to this Agreement and the conditions of this Article XI. Each separate trustee and cotrustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee and a copy thereof given to the Servicer. (d) Any separate trustee or cotrustee may at any time constitute the Trustee its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect to this Agreement on its behalf and in its name. If any separate trustee or cotrustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. Tax Return . In the event the Trust shall be required to file tax returns, the Servicer shall prepare or shall cause to be prepared any tax returns required to be filed by the Trust and shall remit such returns to the Trustee for signature at least five days before such returns are due to be filed; the Trustee shall promptly sign such returns and deliver such returns after signature to the Servicer and such returns shall be filed by the Servicer. The Servicer in accordance with the terms of each Supplement shall also prepare or shall cause to be prepared all tax information required by law to be distributed to Investor Certificateholders. The Trustee upon request, will furnish the Servicer with all such information known to the Trustee as may be reasonably required in connection with the preparation of all tax returns of the Trust. In no event shall the Trustee or the Servicer (except as provided in Sections 7.04 or 8.04) be liable for any liabilities, costs or expenses of the Trust or the Investor Certificateholders arising under any tax law, including without limitation Federal, state, local or foreign income or excise taxes or any other tax imposed or measured by income (or any interest or penalty with respect thereto or arising from a failure to comply therewith). Trustee May Enforce Claims Without Possession of Certificates . All rights of action and claims under this Agreement or the Certificates may be prosecuted and enforced by the Trustee without the possession of any of the Certificates or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Certificateholders in respect of which such judgment has been obtained. Suits for Enforcement . If a Servicer Default shall occur and be continuing, the Trustee, in its discretion may, subject to the provisions of Sections 10.01 and 11.14 proceed to protect and enforce its rights and the rights of the Certificateholders under this Agreement by a suit, action or proceeding in equity or at law or otherwise, whether for the specific performance of any covenant or agreement contained in this Agreement or in aid of the execution of any power granted in this Agreement or for the enforcement of any other legal, equitable or other remedy as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce any of the rights of the Trustee or the Certificateholders. Rights of Certificateholders to Direct Trustee . Holders of Investor Certificates evidencing more than 50% of the aggregate unpaid principal amount of all Investor Certificates (or, with respect to any remedy, trust or power that does not relate to all Series, 50% of the aggregate unpaid principal amount of the Investor Certificates of all Series to which such remedy, trust or power relates) shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee relating to such proceeding; provided, however, that, subject to Section 11.01, the Trustee shall have the right to decline to follow any such direction if the Trustee being advised by counsel determines that the action so directed may not lawfully be taken, or if the Trustee in good faith shall, by a Responsible Officer or Responsible Officers of the Trustee, determine that the proceedings so directed would be illegal or involve it in personal liability or be unduly prejudicial to the rights of Certificateholders not parties to such direction; and provided further that nothing in this Agreement shall impair the right of the Trustee to take any action deemed proper by the Trustee and that is not inconsistent with such direction. Representations and Warranties of Trustee . The Trustee represents and warrants as of each Closing Date that: (a) the Trustee is a banking corporation organized, existing and in good standing under the laws of the state of New York; (b) the Trustee has full power, authority and right to execute, deliver and perform this Agreement and each Supplement, and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement and each Supplement; and (c) this Agreement and each Supplement has been duly executed and delivered by the Trustee and is a binding obligation of the Trustee enforceable against the Trustee in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). Maintenance of Office or Agency . The Trustee will maintain at its expense an office or agency (the "Corporate Trust Office") where notices and demands to or upon the Trustee in respect of the Certificates and this Agreement may be served (a) in the City of New York, in the case of Registered Certificates and Holders thereof, and (b) in London or Luxembourg, in the case of Bearer Certificates and Holders thereof, if and for so long as any Bearer Certificates are outstanding. The Corporate Trust Office shall initially be located at 101 Barclay Street, Floor 12E, New York, New York 10286. The Trustee will give prompt notice to the Servicer and to Investor Certificateholders of any change in the location of the Certificate Register or any such office or agency. Confidentiality . Information provided by the Account Originators or the Seller to the Trustee related to the transaction effected hereunder, including all information related to the Obligors with respect to the Receivables, and any computer software provided to the Trustee in connection with the transaction effected hereunder or under any Supplement, in each case whether in the form of documents, reports, lists, tapes, discs or any other form, shall be "Confidential Information." The Trustee and its agents, representatives or employees shall at all times maintain the confidentiality of all Confidential Information and shall not, without the prior written consent of the applicable Account Originator or the Seller, as applicable, disclose to third parties (including Certificateholders) or use such information, in any manner whatsoever, in whole or in part, except as expressly permitted under this Agreement or under any Supplement or as required to fulfill an obligation of the Trustee under this Agreement or under any Supplement, in which case such Confidential Information shall be revealed only to the extent expressly permitted or only to the Trustee's agents, representatives and employees who need to know such Confidential Information to the extent required for the purpose of fulfilling an obligation of the Trustee under this Agreement or under any Supplement. Notwithstanding the above, Confidential Information may be disclosed to the extent required by law or legal process, provided that the Trustee gives prompt written notice to the applicable Account Originator or the Seller, as applicable, of the nature and scope of such disclosure. ARTICLE XII Termination Termination of Trust . The Trust and the respective obligations and responsibilities of the Seller, the Servicer and the Trustee created hereby (other than the obligation of the Trustee to make payments to Investor Certificateholders as hereinafter set forth) shall terminate, except with respect to the duties described in Sections 7.04, 8.04, and 12.02(b), upon the earlier of (i) March 1, 2015, and (ii) the day following the Distribution Date on which the Invested Amount and Enhancement Invested Amount for each Series is zero (provided that the Seller has delivered a written notice to the Trustee electing to terminate the Trust). Section 12.02 Final Distribution. (a) The Servicer shall give the Trustee at least 30 days prior notice of the Distribution Date on which the Investor Certificateholders of any Series or Class may surrender their Investor Certificates for payment of the final distribution on and cancellation of such Investor Certificates (or, in the event of a final distribution resulting from the application of Section 2.06, 9.02 or 10.01, notice of such Distribution Date promptly after the Servicer has determined that a final distribution will occur, if such determination is made less than 30 days prior to such Distribution Date). Such notice shall be accompanied by an Officer's Certificate setting forth the information specified in Section 3.05 covering the period during the then current calendar year through the date of such notice. Not later than the fifth day of the month in which the final distribution in respect of such Series or Class is payable to Investor Certificateholders, the Trustee shall provide notice to Investor Certificateholders of such Series or Class specifying (i) the date upon which final payment of such Series or Class will be made upon presentation and surrender of Investor Certificates of such Series or Class at the office or offices therein designated, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such payment date is not applicable, payments being made only upon presentation and surrender of such Investor Certificates at the office or offices therein specified (which, in the case of Bearer Certificates, shall be outside the United States). The Trustee shall give such notice to the Transfer Agent and Registrar and the Paying Agent at the time such notice is given to Investor Certificateholders. Notwithstanding a final distribution to the Investor Certificateholders of any Series or Class (or the termination of the Trust), except as otherwise provided in this paragraph, all funds then on deposit in the Collection Account, the Excess Funding Account and any Series Account allocated to such Investor Certificateholders shall continue to be held in trust for the benefit of such Investor Certificateholders and the Paying Agent or the Trustee shall pay such funds to such Investor Certificateholders upon surrender of their Investor Certificates (and any excess shall be paid in accordance with the terms of any relevant Enhancement Agreement). In the event that all such Investor Certificateholders shall not surrender their Investor Certificates for cancellation within six months after the date specified in the notice from the Trustee described in paragraph (a), the Trustee shall give a second notice to the remaining such Investor Certificateholders to surrender their Investor Certificates for cancellation and receive the final distribution with respect thereto (which surrender and payment, in the case of Bearer Certificates, shall be outside the United States). If within one year after the second notice all such Investor Certificates shall not have been surrendered for cancellation, the Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining such Investor Certificateholders concerning surrender of their Investor Certificates, and the cost thereof shall be paid out of the funds in the Collection Account or any Series Account held for the benefit of such Investor Certificateholders. The Trustee and the Paying Agent shall pay to the Seller any moneys held by them for the payment of principal or interest that remains unclaimed for two years. After payment to the Seller, Investor Certificateholders entitled to the money must look to the Seller for payment as general creditors unless an applicable abandoned property law designates another Person. (a) In the event that the Invested Amount with respect to any Series is greater than zero on its Series Termination Date or such earlier date as is specified in the related Supplement (after giving effect to deposits and distributions otherwise to be made on such date), the Trustee will sell or cause to be sold on such Series Termination Date, in accordance with the procedures and subject to the conditions described in such Supplement, Principal Receivables and the related Finance Charge Receivables (or interests therein) in an amount equal to the Invested Amount with respect to such Series on such date (after giving effect to such deposits and distributions; provided, however, that in no event shall such amount exceed such Series' allocable share of Receivables on such Series Termination Date). The proceeds from any such sale shall be allocated and distributed in accordance with the terms of the applicable Supplement. Seller's Termination Rights . Upon the termination of the Trust pursuant to Section 12.01 and the surrender of the Seller Certificate and any Supplemental Certificate, the Trustee shall sell, assign and convey to the Seller or its designee, without recourse, representation or warranty, all right, title and interest of the Trust in the Receivables, whether then existing or thereafter created, all moneys due or to become due and all amounts received with respect thereto and all proceeds thereof, except for amounts held by the Trustee pursuant to Section 12.02(b). The Trustee shall execute and deliver such instruments of transfer and assignment, in each case without recourse, as shall be reasonably requested by the Seller to vest in the Seller or its designee all right, title and interest that the Trust had in the Receivables and such other related assets. Defeasance . Notwithstanding anything to the contrary in this Agreement or any Supplement: (a) The Seller may at its option be discharged from its obligations hereunder with respect to any Series or all outstanding Series (the "Defeased Series") on the date the applicable conditions set forth in Section 12.04(c) are satisfied ("Defeasance"); provided, however, that the following rights, obligations, powers, duties and immunities shall survive with respect to the Defeased Series until otherwise terminated or discharged hereunder: (i) the rights of Holders of Investor Certificates of the Defeased Series to receive, solely from the trust fund provided for in Section 12.04(c), payments in respect of principal of and interest on such Investor Certificates when such payments are due; (ii) the Seller's obligations with respect to such Certificates under Sections 6.04 and 6.05; (iii) the rights, powers, trusts, duties and immunities of the Trustee, the Paying Agent and the Transfer Agent and Registrar hereunder; and (iv) this Section 12.04. Notwithstanding the foregoing, the Seller may not defease a Series during an Amortization Period for that Series. (b) In order to defease a Series, the Seller may direct the Trustee to apply Collections of Principal Receivables allocated to the Defeased Series and available to purchase additional Receivables to be applied to purchase Eligible Investments rather than additional Receivables. (c) The following shall be the conditions to Defeasance under Section 12.04(a): (i) the Seller irrevocably shall have deposited or caused to be deposited with the Trustee, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds in trust for making the payments described below, Eligible Investments purchased as described in clause (b) in an amount that through the scheduled payment of principal and interest in respect thereof will provide, not later than the due date of payment thereon, money in an amount sufficient to pay and discharge, and that shall be applied by the Trustee to pay and discharge, all remaining scheduled interest and principal payments on all outstanding Investor Certificates of the Defeased Series on the dates scheduled for such payments in this Agreement and the applicable Supplements and all amounts owing to the Series Enhancers with respect to the Defeased Series; (ii) prior to its first exercise of its right pursuant to this Section 12.04 with respect to a Defeased Series to substitute money or Eligible Investments for Receivables, the Seller shall have delivered to the Trustee a Tax Opinion with respect to such deposit and termination of obligations and an Opinion of Counsel to the effect that such deposit and termination of obligations will not result in the Trust being required to register as an "investment company" within the meaning of the Investment Company Act; (iii) the Seller shall have delivered to the Trustee and each Series Enhancer entitled thereto pursuant to the relevant Supplement an Officer's Certificate of the Seller stating that the Seller reasonably believes that such deposit and termination of obligations will not, based on the facts known to such officer at the time of such certification, then cause a Pay Out Event or any event that, with the giving of notice or the lapse of time, would constitute a Pay Out Event to occur with respect to any Series; and (iv) the Rating Agency Condition has been satisfied. ARTICLE II Miscellaneous Provisions Amendment; Waiver of Past Defaults . (a) This Agreement or any Supplement may be amended from time to time by the Servicer, the Seller and the Trustee, without the consent of any of the Investor Certificateholders including without limitation in connection with (i) adding covenants, restrictions or conditions of the Seller, such further covenants, restrictions or conditions as its Board of Directors and the Trustee shall consider to be for the benefit or protection of the Investor Certificateholders, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions a default or Pay Out Event permitting the enforcement of all or any of the several remedies provided in this Agreement as herein set forth; provided, however, that in respect of any such additional covenant, restriction or condition such amendment may provide for a particular period of grace after default or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default, (ii) curing any ambiguity or correcting or supplementing any provision contained herein or in any Supplement that may be defective or inconsistent with any other provision contained herein or in any Supplement or to surrender any right or power conferred upon the Seller, (iii) the issuance of a Supplemental Certificate, (iv) the addition of a Participation Interest to the Trust, (v) the assumption by another entity, in accordance with the provisions of this Agreement, of the Seller's obligations hereunder, or (vi) the provision of additional Series Enhancement for the benefit of Certificateholders of any Series) by the Servicer, the Seller and the Trustee without the consent of any of the Certificateholders; provided that (x) the Seller shall have delivered to the Trustee an Officer's Certificate to the effect that the Seller reasonably believes that such action shall not adversely affect in any material respect the interests of any Investor Certificateholder and (y) the Rating Agency Condition shall have been satisfied with respect to any such amendment. The designation of additional Sellers pursuant to Section 2.13 shall be subject to this Section 13.01 only to the extent that the supplement to this Agreement providing for such designation amends any of the terms of this Agreement. This Agreement or any Supplement may also be amended from time to time by the Servicer, the Seller and the Trustee, with prior written notice to each Rating Agency and with the consent of the Holders of Investor Certificates evidencing not less than 662/3% of the aggregate unpaid principal amount of the Investor Certificates of all adversely affected Classes, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or any Supplement or of modifying in any manner the rights of the Certificateholders; provided, however, that no such amendment shall (i) reduce in any manner the amount of or delay the timing of any distributions to be made to Investor Certificateholders or deposits of amounts to be so distributed or the amount available under any Series Enhancement without the consent of each affected Certificateholder (provided that any amendment of the terms of a Pay Out Event shall not be deemed to be within the scope of this clause (i)), (ii) change the definition of or the manner of calculating the interest of any Investor Certificateholder without the consent of each affected Investor Certificateholder or (iii) reduce the aforesaid percentage required to consent to any such amendment without the consent of each Investor Certificateholder. Any amendment to be effected pursuant to this paragraph shall be deemed to adversely affect all outstanding Classes, other than any Classes with respect to which such action shall not, as evidenced by an Opinion of Counsel for the Seller, addressed and delivered to the Trustee, adversely affect in any material respect the interests of any Investor Certificateholder of such Classes. The Trustee may, but shall not be obligated to, enter into any such amendment that affects the Trustee's rights, duties or immunities under this Agreement or otherwise. (a) Promptly after the execution of any such amendment or consent (other than an amendment pursuant to paragraph (a)), the Trustee shall furnish notification of the substance of such amendment to each Investor Certificateholder, and the Servicer shall furnish notification of the substance of such amendment to each Rating Agency and each Series Enhancer entitled thereto pursuant to the relevant Supplement. (b) It shall not be necessary for the consent of Investor Certificateholders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Investor Certificateholders shall be subject to such reasonable requirements as the Trustee may prescribe. (c) Any Supplement executed in accordance with the provisions of Section 6.03 shall not be considered an amendment to this Agreement for the purposes of this Section. (d) The Holders of Investor Certificates evidencing more than 662/3% of the aggregate unpaid principal amount of the Investor Certificates of each Series, or, with respect to any Series with two or more Classes, of each Class (or, with respect to any default that does not relate to all Series, 662/3% of the aggregate unpaid principal amount of the Investor Certificates of each Series to which such default relates or, with respect to any such Series with two or more Classes, of each Class) may, on behalf of all Certificateholders, waive any default by the Seller or the Servicer in the performance of their obligations hereunder and its consequences, except the failure to make any distributions required to be made to Investor Certificateholders or to make any required deposits of any amounts to be so distributed. Upon any such waiver of a past default, such default shall cease to exist, and any default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived. Protection of Right, Title and Interest to Trust (a) . (a) The Servicer shall cause this Agreement, all amendments and supplements hereto and all financing statements and continuation statements and any other necessary documents covering the Certificateholders' and the Trustee's right, title and interest to the Trust to be promptly recorded, registered and filed, and at all times to be kept recorded, registered and filed, all in such manner and in such places as may be required by law fully to preserve and protect the right, title and interest of the Certificateholders and the Trustee hereunder to all property comprising the Trust Assets. The Servicer shall deliver to the Trustee filestamped copies of, or filing receipts for, any document recorded, registered or filed as provided above, as soon as available following such recording, registration or filing. The Seller shall cooperate fully with the Servicer in connection with the obligations set forth above and will execute any and all documents reasonably required to fulfill the intent of this paragraph. (b) Within 30 days after the Seller makes any change in its name, identity or corporate structure that would make any financing statement or continuation statement filed in accordance with paragraph (a) seriously misleading within the meaning of Section 9402(7) (or any comparable provision) of the UCC, the Seller shall give the Trustee notice of any such change and shall file such financing statements or amendments as may be necessary to continue the perfection of the Trust's security interest in the Receivables and the proceeds thereof. (c) The Seller and the Servicer will give the Trustee prompt notice of any relocation of any office from which it services Receivables or keeps records concerning the Receivables or of its principal executive office and whether, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement and shall file such financing statements or amendments as may be necessary to perfect or to continue the perfection of the Trust's security interest in the Receivables and the proceeds thereof. The Seller and the Servicer will at all times maintain each office from which it services Receivables and its principal executive offices within the United States. (d) The Servicer will deliver to the Trustee and any Series Enhancer entitled thereto pursuant to the relevant Supplement: (i) upon the execution and delivery of each amendment of this Agreement or any Supplement, an Opinion of Counsel to the effect specified in Exhibit H1; (ii) on each Addition Date on which any Additional Accounts (other than Automatic Additional Accounts) are to be designated as Accounts pursuant to Section 2.09(a) or (b), an Opinion of Counsel substantially in the form of Exhibit H2, and on each Addition Date on which any Participation Interests are to be included in the Trust pursuant to Section 2.09(a) or (b), an Opinion of Counsel covering the same substantive legal issues addressed by Exhibit H2 but conformed to the extent appropriate to relate to Participation Interests; and (iii) on or before March 31 of each year, beginning with March 31, 1996, an Opinion of Counsel substantially in the form of Exhibit H2. Limitation on Rights of Certificateholders (a) . (a) The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or the Trust, nor shall such death or incapacity entitle such Certificateholders' legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. (b) No Investor Certificateholder shall have any right to vote (except as expressly provided in this Agreement) or in any manner otherwise control the operation and management of the Trust, or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Certificates, be construed so as to constitute the Investor Certificateholders from time to time as partners or members of an association, nor shall any Investor Certificateholder be under any liability to any third person by reason of any action taken by the parties to this Agreement pursuant to any provision hereof. (c) No Investor Certificateholder shall have any right by virtue of any provisions of this Agreement to institute any suit, action or preceding in equity or at law upon or under or with respect to this Agreement, unless such Investor Certificateholder previously shall have made, and unless the Holders of Investor Certificates evidencing more than 50% of the aggregate unpaid principal amount of all Investor Certificates (or, with respect to any such action, suit or proceeding that does not relate to all Series, 50% of the aggregate unpaid principal amount of the Investor Certificates of all Series to which such action, suit or proceeding relates) shall have made, a request to the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee, for 60 days after such request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding; it being understood and intended, and being expressly covenanted by each Investor Certificateholder with every other Investor Certificateholder and the Trustee, that no one or more Investor Certificateholders shall have any right in any manner whatever by virtue or by availing itself or themselves of any provisions of this Agreement to affect, disturb or prejudice the rights of the Holders of any other of the Investor Certificates, or to obtain or seek to obtain priority over or preference to any other such Investor Certificateholder, or to enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all Investor Certificateholders except as otherwise expressly provided in this Agreement. For the protection and enforcement of the provisions of this Section, each and every Investor Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. GOVERNING LAW . THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Notices, Payments (a) . (a) All demands, notices, instructions, directions and communications (collectively, "Notices") under this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered at, mailed by registered mail, return receipt requested, or sent by facsimile transmission (i) in the case of the Seller, to Neiman Marcus Funding Corporation, c/o The Neiman Marcus Group, Inc., 27 Boylston Street, Chestnut Hill, Massachusetts 02467, Attention of the General Counsel (facsimile no. 617-278-5397), with a copy to Neiman Marcus Funding Corporation, 1201 Elm Street, Dallas, Texas 75201, Attention of the President (facsimile no. 214761-2650), (ii) in the case of the Servicer, to The Neiman Marcus Group, Inc., 27 Boylston Street, Chestnut Hill, Massachusetts 02467, Attention of the General Counsel (facsimile no. 617-278-5397), (iii) in the case of the Trustee, to The Bank of New York, 101 Barclay Street, Floor 12E, New York, New York, 10286, Attention: Corporate Trust Administration Asset-Backed Finance Unit (facsimile 212/815-5544), (iv) in the case of Moody's, to 99 Church Street, New York, New York 10007, Attention of ABS Monitoring Department 4th Floor (facsimile no. 2125534600), (v) in the case of Standard & Poor's, to 55 Water Street, New York, New York 10041, Attention of Asset Backed Group (facsimile no. 2124120323), (vi) in the case of the Paying Agent or the Transfer Agent and Registrar, to The Bank of New York , 101 Barclay Street, Floor 12E, New York, New York, 10286, Attention: Corporate Trust Administration Asset- Backed Finance Unit (facsimile 212/815-5544) and (vii) to any other Person as specified in any Supplement; or, as to each party, at such other address or facsimile number as shall be designated by such party in a written notice to each other party. (b) Any Notice required or permitted to be given to a Holder of Registered Certificates shall be given by firstclass mail, postage prepaid, at the address of such Holder as shown in the Certificate Register. No Notice shall be required to be mailed to a Holder of Bearer Certificates or Coupons but shall be given as provided below. Any Notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Investor Certificateholder receives such Notice. In addition, (a) if and so long as any Series or Class is listed on the Luxembourg Stock Exchange and such Exchange shall so require, any Notice to Investor Certificateholders shall be published in an Authorized Newspaper of general circulation in Luxembourg within the time period prescribed in this Agreement and (b) in the case of any Series or Class with respect to which any Bearer Certificates are outstanding, any Notice required or permitted to be given to Investor Certificateholders of such Series or Class shall be published in an Authorized Newspaper within the time period prescribed in this Agreement. Rule 144A Information . For so long as any of the Investor Certificates of any Series or Class are "restricted securities" within the meaning of Rule 144(a)(3) under the Act, each of the Seller, the Trustee, the Servicer and any Series Enhancer agree to cooperate with each other to provide to any Investor Certificateholders of such Series or Class and to any prospective purchaser of Certificates designated by such Investor Certificateholder, upon the request of such Investor Certificateholder or prospective purchaser, any information required to be provided to such holder or prospective purchaser to satisfy the condition set forth in Rule 144A(d)(4) under the Act. Severability of Provisions . If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such provisions shall be deemed severable from the remaining provisions of this Agreement and shall in no way affect the validity or enforceability of the remaining provisions or of the Certificates or the rights of the Certificateholders. Assignment . Notwithstanding anything to the contrary contained herein, except as provided in Article VIII, this Agreement may not be assigned by the Servicer without the prior consent of Holders of Investor Certificates evidencing not less than 662/3% of the aggregate unpaid principal amount of all outstanding Investor Certificates. Certificates Nonassessable and Fully Paid . It is the intention of the parties to this Agreement that the Certificateholders shall not be personally liable for obligations of the Trust, that the interests in the Trust represented by the Certificates shall be nonassessable for any losses or expenses of the Trust or for any reason whatsoever and that Certificates upon authentication thereof by the Trustee pursuant to Section 6.02 are and shall be deemed fully paid. Further Assurances . The Seller and the Servicer agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the Trustee more fully to effect the purposes of this Agreement, including the execution of any financing statements or continuation statements relating to the Receivables for filing under the provisions of the UCC of any applicable jurisdiction. Nonpetition Covenant . Notwithstanding any prior termination of this Agreement, the Servicer, the Trustee, the Seller, each Series Enhancer and each Holder of a Supplemental Certificate shall not, prior to the date that is one year and one day after the termination of this Agreement with respect to the Trust or the Seller, acquiesce, petition or otherwise invoke or cause the Trust or the Seller to invoke the process of any Governmental Authority for the purpose of commencing or sustaining a case against the Trust or the Seller under any Federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Trust or the Seller or any substantial part of their respective property or ordering the windingup or liquidation of the affairs of the Trust or the Seller. No Waiver; Cumulative Remedies . No failure to exercise and no delay in exercising, on the part of the Trustee or the Certificateholders, any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided under this Agreement are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. Counterparts . This Agreement may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. Third-Party Beneficiaries . This Agreement will inure to the benefit of and be binding upon the parties hereto, the Certificateholders, any Series Enhancer (to the extent provided in this Agreement and the related Supplement) and their respective successors and permitted assigns. Except as otherwise expressly provided in this Agreement (including, without limitation, Section 7.04), no other Person will have any right or obligation hereunder. Actions by Certificateholders (a) . (a) Wherever in this Agreement a provision is made that an action may be taken or a Notice given by Certificateholders, such action or Notice may be taken or given by any Certificateholder, unless such provision requires a specific percentage of Certificateholders. (b) Any Notice, request, authorization, direction, consent, waiver or other act by the Holder of a Certificate shall bind such Holder and every subsequent Holder of such Certificate and of any Certificate issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or omitted to be done by the Trustee or the Servicer in reliance thereon, whether or not notation of such action is made upon such Certificate. Merger and Integration . Except as specifically stated otherwise herein, this Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement. This Agreement may not be modified, amended, waived or supplemented except as provided herein. Headings . The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. No Proceedings . Each of the Trustee, the Seller, the Servicer, and each Certificateholder by acceptance of its Certificate, hereby agrees that it will not institute against the Holder of the Seller Certificate, or join any other Person in instituting against the Holder of the Seller Certificate, on account of its ownership of the Seller Certificate or its obligations hereunder, any bankruptcy, insolvency, liquidation, readjustment of debt, marshalling of assets or any similar proceeding so long as there shall not have elapsed one year plus one day since the last day on which any Investor Certificates shall have been outstanding. IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have caused this Agreement to be duly executed by their respective officers as of the day and year first above written. NEIMAN MARCUS FUNDING CORPORATION, as Seller, By: Name: Paul F. Gibbons Title: Vice President and Treasurer THE NEIMAN MARCUS GROUP, INC., as Servicer, By: Name: Paul F. Gibbons Title: Vice President and Treasurer THE BANK OF NEW YORK , as Trustee, By: Name: Rick Squinteri Title: Assistant Vice President EXHIBIT A FORM OF SELLER CERTIFICATE THIS SELLER CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS SELLER CERTIFICATE NOR ANY PORTION HEREOF MAY BE OFFERED OR SOLD EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS. THIS SELLER CERTIFICATE IS NOT PERMITTED TO BE TRANSFERRED, ASSIGNED, EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. No. R-1 One Unit Neiman Marcus Group Credit Card Master TrustSELLER CERTIFICATE THIS CERTIFICATE REPRESENTS AN INTERESTIN CERTAIN ASSETS OF THENEIMAN MARCUS GROUP CREDIT CARD MASTER TRUST Evidencing an interest in a trust, the corpus of which consists primarily of receivables generated from time to time in the ordinary course of business in a portfolio of revolving accounts owned by The Neiman Marcus Group, Inc. (the "Seller"). (Not an interest in or obligation of the Selleror any affiliate thereof) This certifies that NEIMAN MARCUS FUNDING CORPORATION is the registered owner of a fractional interest in the assets of a trust (the "Trust") not allocated to the Certificateholders' Interest or the interest of any Holder of a Supplemental Certificate pursuant to the Pooling and Servicing Agreement dated as of March 1, 1995 and amended and restated as of July 2, 2000 (as amended and supplemented, the "Agreement"), among Neiman Marcus Funding Corporation, a Delaware corporation, as Seller, The Neiman Marcus Group, Inc., a Delaware corporation, as Servicer, and The Bank of New York , a New York banking corporation, as trustee (the "Trustee"). The corpus of the Trust consists of (i) a portfolio of all receivables (the "Receivables") existing in the revolving credit card accounts or other consumer revolving credit or installment accounts identified under the Agreement from time to time (the "Accounts"), (ii) all Receivables generated under the Accounts from time to time thereafter, (iii) funds collected or to be collected from accountholders in respect of the Receivables, (iv) all funds which are from time to time on deposit in the Collection Account, Excess Funding Account and in the Series Accounts, (v) the benefits of any Series Enhancements issued and to be issued by Series Enhancers with respect to one or more Series of Investor Certificates and (vi) all other assets and interests constituting the Trust. Although a summary of certain provisions of the Agreement is set forth below, this Certificate does not purport to summarize the Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds and duties evidenced hereby and the rights, duties and obligations of the Trustee. A copy of the Agreement may be requested from the Trustee by writing to the Trustee at 4 Metrotech Center, Brooklyn, New York 11245, Attention of Corporate Trust Administration. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to them in the Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement, as amended and supplemented from time to time, the Holder of this Certificate by virtue of the acceptance hereof assents and is bound. The Receivables consist of Principal Receivables which arise generally from the purchase of merchandise and services and Finance Charge Receivables which arise generally from Periodic Finance Charges, Late Fees and other fees and charges with respect to the Accounts. This Certificate is the Seller Certificate, which represents the Seller's interest in certain assets of the Trust, including the right to receive a portion of the Collections and other amounts at the times and in the amounts specified in the Agreement. The aggregate interest represented by the Seller Certificate at any time in the Receivables in the Trust shall not exceed the Seller's Interest at such time. In addition to the Seller Certificate, (i) Investor Certificates will be issued to investors pursuant to the Agreement, which will represent the Certificateholders' Interest, and (ii) Supplemental Certificates may be issued pursuant to the Agreement, which will represent that portion of the Seller's Interest not allocated to the Holder of the Seller Certificate. This Seller Certificate shall not represent any interest in the Collection Account, the Excess Funding Account or the Series Accounts, except as expressly provided in the Agreement, or any Series Enhancements. The Seller has entered into the Agreement, and this Certificate is issued, with the intention that, for Federal, state and local income and franchise tax purposes only, the Investor Certificates (except Seller Retained Certificates which are held by the Seller) will qualify as debt secured by the Receivables. The Seller, by entering into the Agreement and the Holder of the Seller Certificate by acceptance of this Seller Certificate, agree to treat such Investor Certificates for Federal, state and local income and franchise tax purposes as debt under applicable tax law. Subject to certain conditions and exceptions specified in the Agreement, the obligations created by the Agreement and the Trust created thereby shall terminate upon the earlier of (i) March 1, 2015 and (ii) the day following the Distribution Date on which the Invested Amount and Enhancement Invested Amount for each Series is zero (provided the Seller has delivered a written notice to the Trustee electing to terminate the Trust). Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Holder of the Seller Certificate has caused this Certificate to be duly executed. NEIMAN MARCUS FUNDING CORPORATION, as Seller, By: Name: Title: Dated: July __, 2000 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is the Seller Certificate described in the within-mentioned Agreement. THE BANK OF NEW YORK , as Trustee, By Authorized Signatory or By [_______________________], as Authenticating Agent for the Trustee, By ________________________ Authorized Signatory EXHIBIT B FORM OF ASSIGNMENT OF RECEIVABLES IN ADDITIONAL ACCOUNTS (As required by Section 2.09 ofThe Pooling and Servicing Agreement) ASSIGNMENT No. ________ OF RECEIVABLES IN ADDITIONAL ACCOUNTS dated as of ________, /, by and among NEIMAN MARCUS FUNDING CORPORATION, a Delaware corporation, as Seller (the "Seller"), THE NEIMAN MARCUS GROUP, INC., as Servicer (the "Servicer"), and THE BANK OF NEW YORK, (as successor to The Chase Manhattan Bank, N.A.) a New York banking corporation (the "Trustee"), pursuant to the Pooling and Servicing Agreement referred to below. WITNESSETH WHEREAS the Seller, the Servicer and the Trustee are parties to the Pooling and Servicing Agreement dated as of March 1, 1995 and amended and restated as of July 2, 2000 (as may be amended and supplemented from time to time, the "Agreement"); WHEREAS, pursuant to the Agreement, the Seller wishes to designate Additional Accounts owned by one or more Account Originators to be included as Accounts and to convey the Receivables of such Additional Accounts, whether now existing or hereafter created, to the Trust as part of the corpus of the Trust (as each such term is defined in the Agreement); and WHEREAS the Trustee is willing to accept such designation and conveyance subject to the terms and conditions hereof; NOW, THEREFORE, the Seller, the Servicer and the Trustee hereby agree as follows: 1. Defined Terms. All capitalized terms used herein shall have the meanings ascribed to them in the Agreement unless otherwise defined herein. "Addition Date" shall mean, with respect to the Additional Accounts designated hereby, ________, ____. "Addition Cut-Off Date" shall mean, with respect to the Additional Accounts designated hereby, ________, ____. 2. Designation of Additional Accounts. On or before the Document Delivery Date, the Seller will deliver to the Trustee a computer file, microfiche list or printed list containing a true and complete schedule identifying all such Additional Accounts specifying for each such Account, as of the Addition Cut-Off Date, its account number, the aggregate amount outstanding in such Account and the aggregate amount of Principal Receivables outstanding in such Account, which computer file, microfiche list or printed list shall supplement Schedule I to the Agreement. 3. Conveyance of Receivables. (a) The Seller does hereby sell, transfer, assign, set over and otherwise convey to the Trust, for the benefit of the Certificateholders, all its right, title and interest in, to and under the Receivables of such Additional Accounts existing at the close of business on the Addition Date and thereafter created from time to time until the termination of the Trust, all monies due or to become due and all amounts received with respect thereto and all proceeds (including "proceeds" as defined in the UCC) thereof. The foregoing does not constitute and is not intended to result in the creation or assumption by the Trust, the Trustee, any Investor Certificateholder or any Series Enhancer of any obligation of the Servicer, the Seller, any Account Originator or any other Person in connection with the Accounts, the Receivables or under any agreement or instrument relating thereto, including any obligation to Obligors, merchant banks, merchants clearance systems or insurers. (b) The Seller agrees to record and file, at its own expense, financing statements (and continuation statements when applicable) with respect to the Receivables now in Additional Accounts, meeting the requirements of applicable state law in such manner and in such jurisdictions as are necessary to perfect, and maintain perfection of, the sale and assignment of such Receivables to the Trust, and to deliver a filestamped copy of each such financing statement or other evidence of such filing to the Trustee on or prior to the Addition Date. The Trustee shall be under no obligation whatsoever to file such financing or continuation statements or to make any other filing under the UCC in connection with such sale and assignment. (c) In connection with such sale, the Seller further agrees, at its own expense, on or prior to the date of this Assignment, to cause each applicable Account Originator to indicate in the appropriate computer files that Receivables created in connection with the Additional Accounts and designated hereby have been conveyed to the Trust pursuant to the Agreement and this Assignment for the benefit of the Certificateholders. (d) The Seller does hereby grant to the Trustee a security interest in all of its right, title and interest in and to the Receivables now existing and hereafter created in the Additional Accounts, all monies due or to become due and all amounts received with respect thereto and all "proceeds" (including "proceeds" as defined in the UCC) thereof. This Assignment constitutes a security agreement under the UCC. 4. Acceptance by Trustee. The Trustee hereby acknowledges its acceptance on behalf of the Trust of all right, title and interest to the property, now existing and hereafter created, conveyed to the Trust pursuant to Section 3(a) of this Assignment, and declares that it shall maintain such right, title and interest, upon the trust set forth in the Agreement for the benefit of all Certificateholders. The Trustee further acknowledges that, prior to or simultaneously with the execution and delivery of this Assignment, the Seller delivered to the Trustee the computer file, microfiche list or printed list described in Section 2 of this Assignment. 5. Representations and Warranties of the Seller. The Seller hereby represents and warrants to the Trustee, on behalf of the Trust, as of the date of this Assignment and as of the Addition Date that: (a) Legal, Valid and Binding Obligation. This Assignment constitutes a legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity); (b) Eligibility of Accounts. Each Additional Account designated hereby is an Eligible Account; (c) Insolvency. As of each of the Addition Cut- Off Date and the Addition Date, no Insolvency Event with respect to any applicable Account Originator or the Seller has occurred and the transfer by the Seller of Receivables arising in the Additional Accounts to the Trust has not been made in contemplation of the occurrence thereof; (d) Pay Out Event. The Seller reasonably believes that (A) the addition of the Receivables arising in the Additional Accounts will not, based on the facts known to the Seller, then or thereafter cause a Pay Out Event to occur with respect to any Series and (B) no selection procedure was utilized by the Seller which would result in the selection of Additional Accounts (from among the available Eligible Accounts owned by each applicable Account Originator) that would be materially adverse to the interests of the Investor Certificateholders of any Series as of the Addition Date; (e) Security Interest. This Assignment constitutes a valid transfer and assignment to the Trust of all right, title and interest of the Seller in the Receivables and other Trust Assets conveyed to the Trust by the Seller and all monies due or to become due and all amounts received with respect thereto and the proceeds as defined in the UCC, and this Assignment constitutes a grant of a "security interest" (as defined in the UCC) in such property to the Trust, which, in the case of existing Receivables and the proceeds thereof, is enforceable upon execution and delivery of this Assignment, and which will be enforceable with respect to such Receivables hereafter created and the proceeds thereof upon such creation. Upon the filing of the financing statements described in Section 3 of this Assignment and, in the case of the Receivables hereafter created and the proceeds thereof, upon the creation thereof, the Trust shall have a first priority security interest in such property except for Liens permitted under Section 2.07(b) of the Agreement; (f) No Conflict. The execution and delivery by the Seller of this Assignment, the performance of the transactions contemplated by this Assignment and the fulfillment of the terms hereof applicable to the Seller, will not conflict with or violate any Requirements of Law applicable to the Seller or conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a material default under, any indenture, contract, agreement, mortgage, deed of trust or other instrument to which the Seller is a party or by which it or its properties are bound; (g) No Proceedings. There are no proceedings or investigations, pending or, to the best knowledge of the Seller, threatened against the Seller before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality (i) asserting the invalidity of this Assignment, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Assignment, (iii) seeking any determination or ruling that, in the reasonable judgment of the Seller, would materially and adversely affect the performance by the Seller of its obligations under this Assignment, (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Assignment or (v) seeking to affect adversely the income tax attributes of the Trust under the Federal, or applicable state income or franchise tax systems; and (h) All Consents. All authorizations, consents, orders or approvals or other actions of any Person or of any court or other governmental authority required to be obtained by the Seller in connection with the execution and delivery of this Assignment by the Seller and the performance of the transactions contemplated by this Assignment by the Seller, have been obtained. 6. Ratification of Agreement. As supplemented by this Assignment, the Agreement is in all respects ratified and confirmed and the Agreement as so supplemented by this Assignment shall be read, taken and construed as one and the same instrument. 7. Counterparts. This Assignment may be executed in two or more counterparts, and by different parties on separate counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. 8. GOVERNING LAW. THIS ASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have caused this Assignment to be duly executed by their respective officers as of the day and year first above written. NEIMAN MARCUS FUNDING CORPORATION,as Seller, By Name:Title: THE NEIMAN MARCUS GROUP, INC., as Servicer, By Name:Title: THE BANK OF NEW YORK , as Trustee By Name:Title: EXHIBIT C FORM OF REASSIGNMENT OF RECEIVABLES IN REMOVED ACCOUNTS(As required by Section 2.10 ofthe Pooling and Servicing Agreement) REASSIGNMENT No. OF RECEIVABLES dated as of __________,/ by and among NEIMAN MARCUS FUNDING CORPORATION, a Delaware corporation, as Seller (the "Seller"), THE NEIMAN MARCUS GROUP, INC., a Delaware corporation, as Servicer (the "Servicer") and THE BANK OF NEW YORK (as successor to The Chase Manhattan Bank, N.A.), a New York banking corporation (the "Trustee"), pursuant to the Pooling and Servicing Agreement referred to below. WITNESSETH: WHEREAS the Seller, the Servicer and the Trustee are parties to the Pooling and Servicing Agreement dated as of March 1, 1995 and amended and restated as of July 2, 2000 (as may be amended and supplemented from time to time, the "Agreement"); WHEREAS pursuant to the Agreement, the Seller wishes to remove from the Trust all Receivables in certain designated Accounts (the "Removed Accounts") and to cause the Trustee to reconvey the Receivables of such Removed Accounts, whether now existing or hereafter created, from the Trust to the Seller; and WHEREAS the Trustee is willing to accept such designation and to reconvey the Receivables in the Removed Accounts subject to the terms and conditions hereof; NOW, THEREFORE, the Seller, the Servicer and the Trustee hereby agree as follows: 1. Defined Terms. All terms defined in the Agreement and used herein shall have such defined meanings when used herein, unless otherwise defined herein. "Removal Date" shall mean, with respect to the Removed Accounts designated hereby, , . "Removal Notice Date" shall mean, with respect to the Removed Accounts, __________ , . 2. Designation of Removed Accounts. On or before the date that is 10 Business Days after the Removal Date, the Seller will deliver to the Trustee a computer file, microfiche list or printed list containing a true and complete schedule identifying all Accounts the Receivables of which are being removed from the Trust, specifying for each such Account, as of the Removal Notice Date, its account number, the aggregate amount outstanding in such Account and the aggregate amount of Principal Receivables in such Account, which computer file, microfiche list or printed list shall supplement Schedule 1 to the Agreement. 3. Conveyance of Receivables. (a) The Trustee does hereby transfer, assign, set over and otherwise convey to the Seller, without recourse, on and after the Removal Date, all right, title and interest of the Trust in, to and under the Receivables existing at the close of business on the Removal Date and thereafter created from time to time in the Removed Accounts designated hereby, all monies due or to become due and all amounts received with respect thereto and all proceeds thereof. (b) In connection with such transfer, the Trustee agrees to execute and deliver to the Seller on or prior to the date this Reassignment is delivered, applicable termination statements with respect to the Receivables existing at the close of business on the Removal Date and thereafter created from time to time in the Removed Accounts reassigned hereby and the proceeds thereof evidencing the release by the Trust of its interest in the Receivables in the Removed Accounts, and meeting the requirements of applicable state law, in such manner and such jurisdictions as are necessary to terminate such interest. 4. Representations and Warranties of the Seller. The Seller hereby represents and warrants to the Trustee, on behalf of the Trust, as of the Removal Date: (a) Legal, Valid and Binding Obligation. This Reassignment constitutes a legal, valid and binding obligation of the Seller enforceable against the Seller, in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity); (b) Pay Out Event. The Seller reasonably believes that (A) the removal of the Receivables existing in the Removed Accounts will not, based on the facts known to the Seller, then or thereafter cause a Pay Out Event to occur with respect to any Series and (B) no selection procedure was utilized by the Seller which would result in a selection of Removed Accounts that would be materially adverse to the interests of the Investor Certificateholders of any Series as of the Removal Date; and (c) List of Removed Accounts. The list of Removed Accounts delivered pursuant to Section 2.10(c) of the Agreement, as of the Removal Date, is true and complete in all material respects. (d) Defaulted Receivables. No selection procedure was utilized by the Seller with the intent to include a disproportionately higher level of Defaulted Receivables in the Removed Accounts than exist in the Accounts or to remove Accounts for the intended purpose of mitigating losses to the Trust. 5. Ratification of Agreement. As supplemented by this Reassignment, the Agreement is in all respects ratified and confirmed and the Agreement as so supplemented by this Reassignment shall be read, taken and construed as one and the same instrument. 6. Counterparts. This Reassignment may be executed in two or more counterparts, and by different parties on separate counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. 7. GOVERNING LAW. THIS REASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have caused this Reassignment to be duly executed by their respective officers as of the day and year first above written. NEIMAN MARCUS FUNDING CORPORATION, as Seller, By Name:Title: THE NEIMAN MARCUS GROUP, INC., as Servicer, By Name:Title: THE BANK OF NEW YORK , as Trustee By Name:Title: EXHIBIT D FORM OF ANNUAL SERVICER'S CERTIFICATE (To be delivered on or before October 31 ofeach calendar year beginning with October 31, 1995,pursuant to Section 3.05 of the Pooling andServicing Agreement referred to below) NEIMAN MARCUS GROUP NEIMAN MARCUS GROUP CREDIT CARD MASTER TRUST The undersigned, a duly authorized representative of The Neiman Marcus Group, Inc., as Servicer ("NMG"), pursuant to the Pooling and Servicing Agreement dated as of March 1, 1995 and amended and restated as of July 2, 2000 (as may be amended and supplemented from time to time, the "Agreement"), among Neiman Marcus Funding Corporation, as Seller, NMG as Servicer, and The Bank of New York (as successor to The Chase Manhattan Bank, N.A.), as Trustee, does hereby certify that: 1. NMG is, as of the date hereof, the Servicer under the Agreement. Capitalized terms used in this Certificate have their respective meanings as set forth in the Agreement. 2. The undersigned is a Servicing Officer who is duly authorized pursuant to the Agreement to execute and deliver this Certificate to the Trustee. 3. A review of the activities of the Servicer during the fiscal year ended _________, , and of its performance under the Agreement was conducted under my supervision. 4. Based on such review, the Servicer has, to the best of my knowledge, performed in all material respects its obligations under the Agreement throughout such year and no default in the performance of such obligations has occurred or is continuing except as set forth in paragraph 5 below. 5. The following is a description of each default in the performance of the Servicer's obligations under the provisions of the Agreement known to me to have been made by the Servicer during the fiscal year ended , , which sets forth in detail (i) the nature of each such default, (ii) the action taken by the Servicer, if any, to remedy each such default and (iii) the current status of each such default: [If applicable, insert "None."] IN WITNESS WHEREOF, the undersigned has duly executed this Certificate this ____ day of ________, 20____. NEIMAN MARCUS GROUP, INC., as Servicer, By Name:Title: EXHIBIT E-1-A THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). NEITHER THIS CERTIFICATE NOR ANY PORTION HEREOF MAY BE OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF THE 1933 ACT AND ANY APPLICABLE PROVISIONS OF ANY STATE BLUE SKY OR SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS. THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. EXHIBIT E-1-B THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT PLAN (AS DEFINED BELOW). EXHIBIT E-2 [FORM OF UNDERTAKING LETTER] [Date] [ Attention: ] Neiman Marcus Funding Corporation 1201 Elm Street Dallas, Texas 75201 Attention: General Counsel Re: Purchase of $___________/ principal amount of Neiman Marcus Group Credit Card Master Trust, [Class ___], [ %] [Floating Rate] Asset Backed Certificates, Series [ ] Dear Sirs: In connection with our purchase of the above-referenced Asset Backed Certificates (the "Certificates") we confirm that: (i) we understand that the Certificates are not being registered under the Securities Act of 1933, as amended (the "1933 Act"), and are being sold to us in a transaction that is exempt from the registration requirements of the 1933 Act; (ii) any information we desire concerning the Certificates or any other matter relevant to our decision to purchase the certificates is or has been made available to us; (iii) we have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Certificates, and we (and any account for which we are purchasing under paragraph (iv) below) are able to bear the economic risk of an investment in the Certificates; we (and any account for which we are purchasing under paragraph (iv) below) are an "accredited investor" (as such term is defined in Rule 501(a)(1), (2) or (3) of Regulation D under the 1933 Act); and we are not, and none of such accounts is, a Benefit Plan; (iv) we are acquiring the Certificates for our own account or for accounts as to which we exercise sole investment discretion and not with a view to any distribution of the Certificates, subject, nevertheless, to the understanding that the disposition of our property shall at all times be and remain within our control; (v) we agree that the Certificates must be held indefinitely by us unless subsequently registered under the 1933 Act or an exemption from any registration requirements of that Act and any applicable state securities laws available; (vi) we agree that in the event that at some future time we wish to dispose of or exchange any of the Certificates (such disposition or exchange not being currently foreseen or contemplated), we will not transfer or exchange any of the Certificates unless (A)(1) the sale is of at least U.S. $100,000 principal amount of Certificates to an Eligible Purchaser (as defined below), (2) a letter to substantially the same effect as paragraphs (i), (ii), (iii), (iv), (v) and (vi) of this letter is executed promptly by the purchaser and (3) all offers or solicitations in connection with the sale, whether directly or through any agent acting on our behalf, are limited only to Eligible Purchasers and are not made by means of any form of general solicitation or general advertising whatsoever; or (B) the Certificates are transferred pursuant to Rule 144 under the 1933 Act by us after we have held them for more than three years; or (C) the Certificates are sold in any other transaction that does not require registration under the 1933 Act and, if the Seller, the Servicer, the Trustee or the Transfer Agent and Registrar so requests, we theretofore have furnished to such party an opinion of counsel satisfactory to such party, in form and substance satisfactory to such party, to such effect; or (D) the Certificates are transferred pursuant to an exception from the registration requirements of the 1933 Act under Rule 144A under the 1933 Act; and we understand that the Certificates will bear a legend to substantially the following effect: "THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). NEITHER THIS CERTIFICATE NOR ANY PORTION HEREOF MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF THE 1933 ACT AND ANY APPLICABLE PROVISIONS OF ANY STATE BLUE SKY OR SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS. THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN." ["THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT PLAN (AS DEFINED BELOW)."] The first paragraph of this legend may be removed if the Seller, the Servicer, the Trustee and the Transfer Agent and Registrar have received an opinion of counsel satisfactory to them, in form and substance satisfactory to them, to the effect that such paragraph may be removed. "Eligible Purchaser" means either an Eligible Dealer or a corporation, partnership or other entity which we have reasonable grounds to believe and do believe can make representations with respect to itself to substantially the same effect as the representations set forth herein. "Eligible Dealer" means any corporation or other entity the principal business of which is acting as a broker and/or dealer in securities. ["Benefit Plan" means (a) any employee benefit plan or other plan, trust or account (including an individual retirement account) that is subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended, or (b) any collective investment fund, insurance company separate or general account or other entity (except an entity registered under the Investment Company Act of 1940, as amended) whose underlying assets include "plan assets" under ERISA by reason of a plan's investment in such entity.] Capitalized terms used but not defined herein shall have the meanings given to such terms in the Pooling and Servicing Agreement, dated as of March 1, 1995 and Amended and Restated as of July 2, 2000, among Neiman Marcus Funding Corporation, The Neiman Marcus Group, Inc. and The Bank of New York, as Trustee. Very truly yours, (Name of Purchaser) By (Authorized Officer) EXHIBIT E-3 THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT PLAN (AS DEFINED BELOW)./ EXHIBIT F Examples of Account Agreements EXHIBIT G RESERVED. EXHIBIT H1 FORM OF OPINION OF COUNSELWITH RESPECT TO AMENDMENTS Provisions to be included inOpinion of Counsel to be delivered pursuantto Section 13.02(d)(i) The opinions set forth below may be subject to all the qualifications, assumptions, limitations and exceptions taken or made in the Opinions Of Counsel delivered on any applicable Closing Date. (i) The amendment to the [Pooling and Servicing Agreement], [Supplement], attached hereto as Schedule 1 (the "Amendment" ), has been duly authorized, executed and delivered by the Seller and the Servicer and constitutes the legal, valid and binding agreement of the Seller and the Servicer, respectively, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws from time to time in effect affecting creditors' rights generally or the rights of creditors of New York banking corporations. The enforceability of the respective obligations of the Seller and the Servicer is also subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) (ii) The Amendment has been entered into in accordance with the terms and provisions of Section 13.01 of the Pooling and Servicing Agreement. EXHIBIT H-2 FORM OF OPINION OF COUNSELWITH RESPECT TO ACCOUNTS Provisions to be included inOpinion of Counsel to bedelivered pursuant toSection 13.02(d)(ii) or (iii) The opinions set forth below may be subject to appropriate qualifications, assumptions, limitations and exceptions. Paragraphs 1-3 are not required if the opinion is being delivered solely under Section 13.02(d)(iii). 1. The Receivables arising in such Additional Accounts constitute either "general intangibles," "accounts" or "chattel paper," in each case as defined under Section 9106 of the UCC. 2. The Pooling and Servicing Agreement creates in favor of the Trust a security interest in the Seller's rights in the Receivables in such Additional Accounts and the proceeds thereof. 3. The security interest described in paragraph 2 is perfected and of first priority under the UCC. 4. No further filings or actions are required under the UCC prior to March 31, _____, in order to maintain the perfection and priority of the security interest created by the Pooling and Servicing Agreement in favor of the Trust in the Seller's rights in the Receivables and the proceeds thereof. SCHEDULE 1 List of Accounts [Original list delivered to Trustee] EX-10.19 8 0008.txt SERIES 2000-1 SUPPLEMENT 7/21/2000 EXHIBIT 10.19 NEIMAN MARCUS FUNDING CORPORATION Seller THE NEIMAN MARCUS GROUP, INC. Servicer and THE BANK OF NEW YORK Trustee on behalf of the Series 2000-1 Certificateholders SERIES 2000-1 SUPPLEMENT Dated as of July 21, 2000 to POOLING AND SERVICING AGREEMENT Dated as of March 1, 1995 and amended and restated as of July 2, 2000 NEIMAN MARCUS GROUP CREDIT CARD MASTER TRUST $225,000,000 Floating Rate Class A Asset Backed Certificates, Series 2000-1 $23,800,000 Class B Asset Backed Certificates, Series 2000-1 $68,200,000 Class C Asset Backed Certificates, Series 2000-1 TABLE OF CONTENTS Page ARTICLE I CREATION OF THE SERIES 2000-1 CERTIFICATES . . . . . . . . . .1 Section 1.1 Designation.. . . . . . . . . . . . .1 ARTICLE II DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . .1 Section 2.1 Definitions . . . . . . . . . . . . .1 ARTICLE III SERVICER . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.1 Servicing Compensation. . . . . . . 16 ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 4.1 Rights of Certificateholders. . . . 17 Section 4.2 Collections and Allocation; Payments on Seller Certificate ... . . . . . . . . . . . . . . 17 Section 4.3 Determination of Monthly Interest for the Series 2000-1 Certificates . . . . . . . . . . . . 20 Section 4.4 Determination of Principal Amounts. 21 Section 4.5 Shared Principal Collections. . . . 22 Section 4.6 Application of Funds on Deposit in the Collection Account for the Certificates. . . . . . 22 Section 4.7 Coverage of Required Amount for the Series 2000-1 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 4.8 Investor Charge-Offs. . . . . . . . 25 Section 4.9 Reallocated Principal Collections for the Series 2000-1 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 4.10 Discount Option Percentage. . . . . 26 ARTICLE V DISTRIBUTIONS AND REPORTS TO SERIES 2000-1 INVESTOR CERTIFICATEHOLDERS . . . . . . . . . . . . . . . . . . . . . 27 Section 5.1 Distributions . . . . . . . . . . . 27 Section 5.2 Reports and Statements to Series 2000-1 Certificateholders . . . . . . . . . . . . . . . . 28 ARTICLE VI EARLY AMORTIZATION EVENTS. . . . . . . . . . . . . . . . . . 28 Section 6.1 Series 2000-1 Pay Out Events. . . . 28 ARTICLE VII OPTIONAL REPURCHASE; SERIES TERMINATION; SALE OF CLASS C CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 7.1 Optional Repurchase . . . . . . . . 30 Section 7.2 Series 2000-1 Termination . . . . . 30 Section 7.3 Reduction of Class C Invested Amount During the Revolving Period; Designation of Class C Certificate Terms; Sale of Class C Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 ARTICLE VIII FINAL DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . 31 Section 8.1 Sale of Receivables or Certificateholders' Interest pursuant to Section 2.06 or 10.01 of the Agreement and Section 7.1 or 7.2 of this Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE IX MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . 32 Section 9.1 Delivery and Payment for the Series 2000-1 Certificates . . . . . . . . . . . . . . . . . . . 33 Section 9.2 Form of Delivery of Series 2000-1 Certificates . . . . . . . . . . . . . . . . . . . 33 Section 9.3 Legend on Certificates. . . . . . . 33 Section 9.4 Ratification of Agreement . . . . . 34 Section 9.5 Counterparts. . . . . . . . . . . . 34 Section 9.6 GOVERNING LAW . . . . . . . . . . . 34 Section 9.7 Instructions in Writing . . . . . . 34 EXHIBITS EXHIBIT A-1 FORM OF CLASS A INVESTOR CERTIFICATE EXHIBIT A-2 FORM OF CLASS B INVESTOR CERTIFICATE EXHIBIT A-3 FORM OF CLASS C INVESTOR CERTIFICATE EXHIBIT B FORM OF MONTHLY SERIES 2000-1 CERTIFICATEHOLDERS' STATEMENT EXHIBIT C FORM OF MONTHLY SERVICER'S CERTIFICATE SERIES 2000-1 SUPPLEMENT, dated as of July 21, 2000 (this "Supplement") by and among NEIMAN MARCUS FUNDING CORPORATION, a corporation organized and existing under the laws of the State of Delaware, as Seller (the "Seller"), THE NEIMAN MARCUS GROUP, INC., a corporation organized and existing under the laws of the State of Delaware, as Servicer (the "Servicer"), and THE BANK OF NEW YORK, a New York banking corporation, as trustee (together with its successors in trust thereunder as provided in the Agreement referred to below, the "Trustee") under the Pooling and Servicing Agreement dated as of March 1, 1995 and amended and restated as of July 2, 2000 (as amended, the "Agreement") among the Seller, the Servicer and the Trustee. Section 6.03 of the Agreement provides, among other things, that the Seller and the Trustee may at any time and from time to time enter into a supplement to the Agreement for the purpose of authorizing the issuance by the Seller, for execution and redelivery to the Trustee for authentication, of one or more Series of Certificates. Pursuant to this Supplement, the Seller and the Trustee shall create a new Series of Investor Certificates and shall specify the Principal Terms thereof. ARTICLE I CREATION OF THE SERIES 2000-1 CERTIFICATES Section 1.1 Designation. There is hereby created a Series of Investor Certificates to be issued pursuant to the Agreement and this Supplement to be known generally as the "Series 2000-1 Certificates." The Series 2000-1 Certificates shall be issued in three Classes, which shall be designated generally as the $225,000,000 Floating Rate Class A Asset Backed Certificates, Series 2000-1 (the "Class A Certificates"), the $23,800,000 Class B Asset Backed Certificates, Series 2000-1 (the "Class B Certificates") and the $68,200,000 Class C Asset Backed Certificates, Series 2000-1 (the "Class C Certificates"). The Series 2000-1 Certificates shall be included in Group I. ARTICLE II DEFINITIONS Section 2.1 Definitions. In the event that any term or provision contained herein shall conflict with or be inconsistent with any provision contained in the Agreement, the terms and provisions of this Supplement shall govern with respect to the Series 2000-1 Certificates. All Article, Section or subsection references herein shall mean Article, Section or subsections of this Supplement except as otherwise provided herein. All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Agreement. Each capitalized term defined herein shall relate only to the Series 2000-1 Certificates and no other Series of Certificates issued by the Trust. "Additional Interest" shall mean, at any time of determination, the sum of Class A Additional Interest, Class B Additional Interest and Class C Additional Interest. "Available Principal Collections" shall have the meaning specified in subsection 4.4(a). "Amortization Period Commencement Date" shall mean the earlier of the first day of the March 2005 Monthly Period and the Rapid Amortization Commencement Date. "Available Series 2000-1 Finance Charge Collections" shall have the meaning specified in subsection 4.6(a). "Base Rate" shall mean, with respect to any Monthly Period, the sum of (a) the average of the Class A Certificate Rate, the Class B Certificate Rate and the Class C Certificate Rate, in each case for the Interest Accrual Period that begins during that Monthly Period, weighted by the unpaid principal amount of each respective Class of Certificates plus (b) the Servicing Fee Rate. "Business Day" shall mean any day other than (a) a Saturday or Sunday or (b) any other day on which national banking associations or state banking institutions in New York, New York, Dallas, Texas or Boston, Massachusetts are authorized or obligated by law, executive order or governmental decree to be closed; provided that as used in the definition of "LIBOR" and "LIBOR Determination Date," "Business Day" shall mean a day for dealings by and between banks in U.S. dollar deposits in the London interbank eurodollar markets. "Carryover Class A Interest" shall mean, with respect to any Distribution Date, (a) any Class A Monthly Interest due but not paid on any previous Distribution Date plus (b) any Class A Additional Interest. "Carryover Class B Interest" shall mean, with respect to any Distribution Date, (a) any Class B Monthly Interest due but not paid on any previous Distribution Date plus (b) any Class B Additional Interest. "Carryover Class C Interest" shall mean, with respect to any Distribution Date, (a) any Class C Monthly Interest due but not paid on any previous Distribution Date plus (b) any Class C Additional Interest. "Carryover Interest" shall mean, with respect to any Distribution Date, the sum of Carryover Class A Interest, Carryover Class B Interest and Carryover Class C Interest. "Class A Additional Interest" shall have the meaning specified in subsection 4.3. "Class A Certificateholder" shall mean the Person in whose name a Class A Certificate is registered in the Certificate Register. "Class A Certificateholders' Interest" shall mean, with respect to any date, the portion of the Series 2000-1 Certificateholders' Interest evidenced by the Class A Certificates. "Class A Certificate Rate" shall mean, with respect to any Interest Accrual Period, a per annum rate equal to 0.27% in excess of LIBOR prevailing on the related LIBOR Determination Date. "Class A Certificates" shall mean any of the certificates executed by the Seller and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A-1 hereto. "Class A Controlled Amortization Amount" shall mean $37,500,000. "Class A Controlled Distribution Amount" shall mean, with respect to any Distribution Date, an amount equal to the Class A Controlled Amortization Amount plus the Class A Deficit Controlled Amortization Amount determined on the preceding Distribution Date, if any. "Class A Deficit Controlled Amortization Amount" shall mean (a) on the first Distribution Date with respect to the Controlled Amortization Period, the excess, if any, of the Class A Controlled Amortization Amount for such Distribution Date over the amount distributed from the Collection Account as Class A Principal for such Distribution Date and (b) on each subsequent Distribution Date with respect to the Controlled Amortization Period the excess, if any, of the Class A Controlled Distribution Amount for such subsequent Distribution Date over the amount distributed from the Collection Account as Class A Principal, for such subsequent Distribution Date. "Class A Expected Final Payment Date" shall mean the September 2005 Distribution Date. "Class A Fixed Allocation Percentage" shall mean, with respect to any Monthly Period, the percentage equivalent of a fraction, the numerator of which is (x) during the Controlled Amortization Period, the Class A Invested Amount as of the last day of the Revolving Period and (y) during the Rapid Amortization Period, the Class A Invested Amount as of the last day of the Revolving Period, or, if less, the last numerator used to calculate the Class A Fixed Allocation Percentage in the Controlled Amortization Period, if any, and the denominator of which is the greater of (a) the sum of the total amount of Principal Receivables in the Trust and the amount on deposit in the Excess Funding Account as of the last day of the immediately preceding Monthly Period (or, in the case of the first Monthly Period, the Closing Date) and (b) the sum of the numerators used to calculate the principal allocation percentages for all Classes outstanding as of the date as to which such determination is being made; provided (x) that if Series 2000-1 is paired with a Paired Series and a rapid amortization event occurs with respect to such Paired Series during the Controlled Amortization Period, the Seller may, after satisfying the Rating Agency Condition with respect to the Series 2000-1 Certificates, by written notice delivered to the Trustee and the Servicer, designate a different numerator (provided that such numerator is not less than the Class A Invested Amount minus the amounts available in the Excess Funding Account allocable to the Class A Certificates as of the last day of the revolving period for such Paired Series) and (y) during the Controlled Amortization Period, at the option of the Seller, after satisfying the Rating Agency Condition with respect to the Series 2000-1 Certificates, the numerator of the Class A Fixed Allocation Percentage may be reduced below the numerator used in the previous Monthly Period to an amount not less than the greater of (A) the Class A Invested Amount as of the last day of the immediately preceding Monthly Period and (B) an amount that, if used as the numerator of the Class A Fixed Allocation Percentage for the remainder of the Controlled Amortization Period, would assure that the Class A Principal would equal at least 125% of the Class A Controlled Amortization Amount for each Monthly Period for so long as the Class A Invested Amount is greater than zero assuming for this purpose that (1) the payment rate with respect to Collections of Principal Receivables remains constant at a level equal to the average of the levels of the three immediately preceding Monthly Periods, (2) the total amount of Principal Receivables in the Trust (and the principal amount on deposit in the Excess Funding Account, if any) remains constant at the level of such reduction, (3) no Pay Out Event with respect to any Series will subsequently occur and (4) no additional Series (other than any Series being issued on the date of such reduction) will be subsequently issued; provided further, if one or more Reset Dates occur in a Monthly Period, the Class A Fixed Allocation Percentage for the portion of the Monthly Period falling after each such Reset Date (the "subject Reset Date") and prior to or on any subsequent Reset Date will be reset using a denominator equal to the greater of the amounts specified in clauses (a) and (b) above determined as of the close of business on the subject Reset Date. "Class A Floating Allocation Percentage" shall mean, with respect to any Monthly Period, the percentage equivalent of a fraction, the numerator of which is the Class A Invested Amount as of the close of business on the last day of the immediately preceding Monthly Period (or, in the case of the first Monthly Period, the Closing Date) and the denominator of which is the greater of (i) the total amount of Principal Receivables in the Trust and the amount on deposit in the Excess Funding Account as of the close of business on such date and (ii) the sum of the numerators with respect to all Classes of all Series then outstanding used to calculate the allocation percentage for the type of Collections (or the Defaulted Amount) to which the Class A Floating Allocation Percentage is to be applied; provided, that if one or more Reset Dates occur in a Monthly Period, the Class A Floating Allocation Percentage for the portion of the Monthly Period falling after each such Reset Date (the "subject Reset Date") and prior to or on any subsequent Reset Date will be reset using a denominator equal to the greater of the amounts specified in clauses (i) and (ii) above determined as of the close of business on the subject Reset Date. "Class A Initial Invested Amount" shall mean the aggregate initial principal amount of the Class A Certificates, which is $225,000,000. "Class A Interest Shortfall" shall have the meaning specified in subsection 4.3. "Class A Invested Amount" shall mean, when used with respect to any date of determination, an amount equal to (a) the Class A Initial Invested Amount, minus (b) the aggregate amount of principal payments made to Class A Certificateholders prior to such date, minus (c) the aggregate amount of Class A Investor Charge-Offs for all prior Distribution Dates, and plus (d) the sum of the aggregate amount allocated with respect to Class A Investor Charge-Offs and available on all prior Distribution Dates pursuant to subsection 4.6(a)(v) for the purpose of reinstating amounts reduced pursuant to the foregoing clause (c). "Class A Investor Adjustment Amount" shall mean, with respect to each Distribution Date, an amount equal to the product of (a) the Class A Floating Allocation Percentage and (b) any Unpaid Adjustment Amount for that Distribution Date; provided that if one or more Reset Dates occurred during the related Monthly Period, then the daily average Class A Floating Allocation Percentage for the related Monthly Period shall be used in clause (a). "Class A Investor Charge-Offs" shall have the meaning specified in subsection 4.8(c). "Class A Investor Defaulted Amount" shall mean, with respect to each Distribution Date, an amount equal to the product of (a) the Class A Floating Allocation Percentage and (b) the Defaulted Amount, in each case for the related Monthly Period; provided that if one or more Reset Dates occurred during the related Monthly Period, then the daily average Class A Floating Allocation Percentage for the related Monthly Period shall be used in clause (a). "Class A Monthly Interest" shall have the meaning specified in subsection 4.3. "Class A Principal" shall mean the principal distributable in respect of the Class A Certificates as calculated in accordance with subsection 4.4(a). "Class A Principal Allocation Percentage" shall mean, with respect to any Monthly Period (a) during the Revolving Period, the Class A Floating Allocation Percentage and (b) during the Controlled Amortization Period or the Rapid Amortization Period, the Class A Fixed Allocation Percentage. "Class A Required Amount" shall mean, with respect to each Distribution Date, the amount determined by the Servicer equal to the excess, if any, of (a) the sum of (i) Class A Monthly Interest for the related Monthly Period, (ii) any Carryover Class A Interest previously due but not paid to the Class A Certificateholders on a prior Distribution Date and (iii) if The Neiman Marcus Group, Inc. or an Affiliate of The Neiman Marcus Group, Inc. is no longer the Servicer, the Class A Servicing Fee for the related Monthly Period over (b) the Available Series 2000-1 Finance Charge Collections plus any Excess Finance Charge Collections from other Series allocable to Series 2000-1 applied pursuant to subsections 4.6(a)(i) and (iii). "Class A Servicing Fee" shall have the meaning specified in Section 3.1. "Class B Additional Interest"shall mean the amount, if any, distributable in respect of the Class B Certificates as calculated pursuant to a supplemental agreement entered into in accordance with Section 7.3. "Class B Certificateholder" shall mean the Person in whose name a Class B Certificate is registered in the Certificate Register. "Class B Certificateholders' Interest" shall mean, with respect to any date, the portion of the Series 2000-1 Certificateholders' Interest evidenced by the Class B Certificates. "Class B Certificate Rate" shall mean, with respect to any Interest Accrual Period, a per annum rate equal to 0%; provided, however such interest rate may be increased pursuant to the terms of a supplemental agreement entered into in accordance with Section 7.3. "Class B Certificates" shall mean any of the certificates executed by the Seller and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A-2 hereto. "Class B Controlled Amortization Amount" shall mean $23,800,000. "Class B Expected Final Payment Date" shall mean the October 2005 Distribution Date. "Class B Fixed Allocation Percentage" shall mean, with respect to any Monthly Period, the percentage equivalent of a fraction, the numerator of which is the Class B Invested Amount as of the last day of the Revolving Period, and the denominator of which is the greater of (a) the sum of the total amount of Principal Receivables in the Trust and the amount on deposit in the Excess Funding Account as of the last day of the immediately preceding Monthly Period (or, in the case of the first Monthly Period, the Closing Date) and (b) the sum of the numerators used to calculate the principal allocation percentages for all Classes outstanding as of the date as to which such determination is being made; provided that if one or more Reset Dates occur in a Monthly Period, the Class B Fixed Allocation Percentage for the portion of the Monthly Period falling after each such Reset Date (the "subject Reset Date") and prior to or on any subsequent Reset Date will be reset using a denominator equal to the greater of the amounts specified in clauses (a) and (b) above determined as of the close of business on the subject Reset Date. "Class B Floating Allocation Percentage" shall mean, with respect to any Monthly Period, the percentage equivalent of a fraction, the numerator of which is the Class B Invested Amount as of the close of business on the last day of the immediately preceding Monthly Period (or, in the case of the first Monthly Period, the Closing Date) and the denominator of which is the greater of (a) the total amount of Principal Receivables in the Trust and the amount on deposit in the Excess Funding Account as of the close of business on such date and (b) the sum of the numerators with respect to all Classes of all Series then outstanding used to calculate the applicable allocation percentage for the type of Collections (or the Defaulted Amount) to which the Class B Floating Allocation Percentage is to be applied; provided, that if one or more Reset Dates occur in a Monthly Period, the Class B Floating Allocation Percentage for the portion of the Monthly Period falling after each such Reset Date (the "subject Reset Date") and prior to or on any subsequent Reset Date will be reset using a denominator equal to the greater of the amounts specified in clauses (i) and (ii) above determined as of the close of business on the subject Reset Date. "Class B Initial Invested Amount" shall mean the aggregate initial principal amount of the Class B Certificates, which is $23,800,000. "Class B Interest Shortfall" shall have the meaning specified in Section 7.3(b) "Class B Invested Amount" shall mean, when used with respect to any date of determination, an amount equal to (a) the Class B Initial Invested Amount, minus (b) the aggregate amount of principal payments made to Class B Certificateholders prior to such date, minus (c) the aggregate amount of Class B Investor Charge-Offs for all prior Distribution Dates, minus (d) the aggregate amount of Reallocated Class B Principal Collections for which the Class B Invested Amount has been reduced for all prior Distribution Dates, and plus (e) the sum of the aggregate amount allocated and available on all prior Distribution Dates pursuant to subsection 4.6(a)(vii) for the purpose of reinstating amounts reduced pursuant to the foregoing clauses (c) and (d). "Class B Investor Adjustment Amount" shall mean, with respect to each Distribution Date, an amount equal to the product of (a) the Class B Floating Allocation Percentage and (b) any Unpaid Adjustment Amount for that Distribution Date; provided that if one or more Reset Dates occurred during the related Monthly Period, then the daily average Class B Floating Allocation Percentage for the related Monthly Period shall be used in clause (a). "Class B Investor Charge-Offs" shall have the meaning specified in subsection 4.8(b). "Class B Investor Defaulted Amount" shall mean, with respect to each Distribution Date, an amount equal to the product of (a) the Class B Floating Allocation Percentage and (b) the Defaulted Amount, in each case for the related Monthly Period; provided that if one or more Reset Dates occurred during the related Monthly Period, then the daily average Class B Floating Allocation Percentage for the related Monthly Period shall be used in clause (a). "Class B Monthly Interest" shall mean the interest, if any, distributable in respect of the Class B Certificates as may be calculated pursuant to a supplemental agreement entered into in accordance with Section 7.3. "Class B Principal" shall mean the principal distributable in respect of the Class B Certificates as calculated in accordance with subsection 4.4(b). "Class B Principal Allocation Percentage" shall mean (a) during the Revolving Period, the Class B Floating Allocation Percentage and (b) during the Controlled Amortization Period or the Rapid Amortization Period, the Class B Fixed Allocation Percentage. "Class B Principal Payment Commencement Date" shall mean the earliest of (a) the Distribution Date in the Controlled Amortization Period after the one on which the Class A Invested Amount is paid in full, (b) the Distribution Date falling in the Rapid Amortization Period on which the Class A Invested Amount is paid in full and (c) the Distribution Date following a sale or repurchase of the Receivables as set forth in Sections 2.06, 10.02, 12.01 or 12.02 of the Agreement and Section 7.1 of this Supplement. "Class B Required Amount" shall mean, with respect to each Distribution Date, the amount determined by the Servicer equal to the excess, if any, of (a) the sum of (i) Class B Monthly Interest for the related Monthly Period, (ii) any Carryover Class B Interest previously due but not paid to the Class B Certificateholders on a prior Distribution Date and (iii) if The Neiman Marcus Group, Inc. or an Affiliate of The Neiman Marcus Group, Inc. is no longer the Servicer, the Class B Servicing Fee for the related Monthly Period over (b) the Available Series 2000-1 Finance Charge Collections plus any Excess Finance Charge Collections from other Series allocable to Series 2000-1 applied pursuant to subsections 4.6(a)(ii) and (iii). "Class B Servicing Fee" shall have the meaning specified in Section 3.1. "Class C Additional Interest" shall mean the amount, if any, distributable in respect of the Class C Certificates as calculated pursuant to a supplemental agreement entered into in accordance with Section 7.3. "Class C Certificateholder" shall mean the Person in whose name a Class C Certificate is registered in the Certificate Register. "Class C Certificateholders' Interest" shall mean, with respect to any date, the portion of the Series 2000-1 Certificateholders' Interest evidenced by the Class C Certificates. "Class C Certificate Rate" shall mean, with respect to any Interest Accrual Period, a per annum rate equal to 0%; provided, however such interest rate may be increased pursuant to the terms of a supplemental agreement entered into in accordance with Section 7.3. "Class C Certificates" shall mean any of the certificates executed by the Seller and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A-3 hereto. "Class C Excess Invested Amount" shall mean, as to any Distribution Date, an amount equal to the excess, if any, of the Class C Invested Amount on that Distribution Date (after giving effect to any Class C Investor Charge-Offs occurring or Reallocated Class C Principal Collections applied on that Distribution Date) over the Class C Required Invested Amount. "Class C Fixed Allocation Percentage" shall mean, with respect to any Monthly Period, the percentage equivalent of a fraction, the numerator of which is the Class C Invested Amount as of the last day of the Revolving Period, and the denominator of which is the greater of (a) the sum of the total amount of Principal Receivables in the Trust and the amount on deposit in the Excess Funding Account as of the last day of the immediately preceding Monthly Period (or, in the case of the first Monthly Period, the Closing Date) and (b) the sum of the numerators used to calculate the principal allocation percentages for all Classes outstanding as of the date as to which such determination is being made; provided that if one or more Reset Dates occur in a Monthly Period, the Class C Fixed Allocation Percentage for the portion of the Monthly Period falling after each such Reset Date (the "subject Reset Date") and prior to or on any subsequent Reset Date will be reset using a denominator equal to the greater of the amounts specified in clauses (a) and (b) above determined as of the close of business on the subject Reset Date. "Class C Floating Allocation Percentage" shall mean with respect to any Monthly Period the percentage equivalent of a fraction, the numerator of which is the Class C Invested Amount as of the close of business on the last day of the immediately preceding Monthly Period (or, in the case of the first Monthly Period, the Closing Date) and the denominator of which is the greater of (a) the total amount of Principal Receivables in the Trust and the amount on deposit in the Excess Funding Account as of the close of business on such date and (b) the sum of the numerators with respect to all Classes of all Series then outstanding used to calculate the applicable allocation percentage for the type of Collections (or the Defaulted Amount) to which the Class C Floating Allocation Percentage is to be applied; provided, that if one or more Reset Dates occur in a Monthly Period, the Class C Floating Allocation Percentage for the portion of the Monthly Period falling after each such Reset Date (the "subject Reset Date") and prior to or on any subsequent Reset Date will be reset using a denominator equal to the greater of the amounts specified in clauses (i) and (ii) above determined as of the close of business on the subject Reset Date. "Class C Initial Invested Amount" shall mean the aggregate initial principal amount of the Class C Certificates, which is $68,200,000. "Class C Interest Shortfall" shall have the meaning specified in Section 7.3(b) "Class C Invested Amount" shall mean, when used with respect to any date of determination, an amount equal to (a) the Class C Initial Invested Amount, minus (b) the aggregate amount of principal payments made to Class C Certificateholders prior to such date, minus (c) the aggregate amount of Class C Investor Charge-Offs for all prior Distribution Dates, minus (d) the aggregate amount of Reallocated Class C Principal Collections for which the Class C Invested Amount has been reduced for all prior Distribution Dates, plus (e) the sum of the aggregate amount allocated and available on all prior Distribution Dates pursuant to subsection 4.6(a)(x) for the purpose of reinstating amounts reduced pursuant to the foregoing clauses (c) and (d). "Class C Investor Adjustment Amount" shall mean, with respect to each Distribution Date, an amount equal to the product of (a) the Class C Floating Allocation Percentage and (b) any Unpaid Adjustment Amount for that Distribution Date; provided that if one or more Reset Dates occurred during the related Monthly Period, then the daily average Class C Floating Allocation Percentage for the related Monthly Period shall be used in clause (a). "Class C Investor Charge-Offs" shall have the meaning specified in subsection 4.8(a). "Class C Investor Defaulted Amount" shall mean, with respect to each Distribution Date, an amount equal to the product of (a) the Class C Floating Allocation Percentage and (b) the Defaulted Amount, in each case for the related Monthly Period; provided that if one or more Reset Dates occurred during the related Monthly Period, then the daily average Class C Floating Allocation Percentage for the related Monthly Period shall be used in clause (a). "Class C Monthly Interest" shall mean the interest, if any, distributable in respect of the Class C Certificates as may be calculated pursuant to a supplemental agreement entered into in accordance with Section 7.3. "Class C Percentage" shall mean 21.5%; provided, however, such percentage may be decreased without the consent of the Series 2000-1 Certificateholders if the Rating Agency Condition is satisfied with respect to such decrease. "Class C Principal" shall mean the principal distributable in respect of the Class C Certificates as calculated in accordance with subsection 4.4(c). "Class C Principal Allocation Percentage" shall mean (a) during the Revolving Period, the Class C Floating Allocation Percentage and (b) during the Controlled Amortization Period or the Rapid Amortization Period, the Class C Fixed Allocation Percentage. "Class C Required Invested Amount" shall mean, for any Distribution Date, the amount that the Class C Invested Amount would have to equal in order for the Class C Invested Amount to equal the product of the Class C Percentage and the Invested Amount (after giving effect to all reductions on that Distribution Date); provided that (a) the Class C Required Invested Amount shall not be less than 3% of the Initial Invested Amount, (b) the Class C Required Invested Amount will not reduce during a Rapid Amortization Period and (c) notwithstanding the foregoing clauses (a) and (b), the Class C Required Invested Amount shall never exceed the sum of the Class A Invested Amount and the Class B Invested Amount. "Class C Servicing Fee" shall have the meaning specified in Section 3.1. "Clearstream" shall mean Clearstream Banking, societe anonyme, a limited liability company organized under the laws of Luxembourg. "Closing Date" shall mean July 21, 2000. "Controlled Amortization Period" shall mean, with respect to the Series 2000-1 Certificates, unless a Pay Out Event shall have occurred with respect to such Series prior thereto, the period commencing on the Amortization Period Commencement Date and ending on the first to occur of (x) the payment in full to the Investor Certificateholders of the Invested Amount, and (y) the commencement of the Rapid Amortization Period. "Daily Servicing Fee Amount" shall mean, for any Date of Processing, an amount equal to (a) the Monthly Servicing Fee for the Monthly Period in which that Date of Processing falls, divided by (b) the number of Dates of Processing in that Monthly Period. "Distribution Date" shall mean September 15, 2000 and the fifteenth day of each month thereafter, or if such day is not a Business Day, the next succeeding Business Day. "Enhancement" shall mean, (a) with respect to the Class A Certificates, the subordination of the Class B Invested Amount and the Class C Invested Amount and (b) with respect to the Class B Certificates, the subordination of the Class C Invested Amount. "Euroclear" shall mean the Euroclear system operated by Morgan Guaranty Trust Company of New York, Brussels office. "Excess Finance Charge Collections" shall mean, with respect to any Distribution Date, as the context requires, either (a) the amount described in subsection 4.6(a)(xii) allocated to the Series 2000-1 Certificates but available to cover shortfalls in amounts paid from Collections of Finance Charge Receivables for other Series, if any or (b) the aggregate amount of Collections of Finance Charge Receivables allocable to other Series in excess of the amounts necessary to make required payments with respect to such Series, if any, and available to cover shortfalls with respect to the Series 2000-1 Certificates. "Fixed Allocation Percentage" shall mean, with respect to any date of determination, the sum of the Class A Fixed Allocation Percentage, Class B Fixed Allocation Percentage and Class C Fixed Allocation Percentage on such date. "Floating Allocation Percentage" shall mean, with respect to any date of determination, the sum of the Class A Floating Allocation Percentage, Class B Floating Allocation Percentage and Class C Floating Allocation Percentage on such date. "Initial Invested Amount" shall mean the aggregate initial principal amount of the Investor Certificates of Series 2000-1, which is $317,000,000. "Interest Accrual Period" shall mean, with respect to a Distribution Date, the period from and including the preceding Distribution Date to and excluding such Distribution Date; provided, however, that the initial Interest Accrual Period shall be the period from the Closing Date to and excluding the first Distribution Date. "Invested Amount" or "Series Invested Amount" shall mean, when used with respect to any date of determination, an amount equal to the sum of (a) the Class A Invested Amount as of such date, (b) the Class B Invested Amount as of such date and (c) the Class C Invested Amount as of such date. "Investor Adjustment Amount" shall mean, with respect to any Distribution Date, an amount equal to the sum of the Class A Investor Adjustment Amount, the Class B Investor Adjustment Amount and the Class C Investor Adjustment Amount for that Distribution Date. "Investor Certificateholder" shall mean the Holder of record of an Investor Certificate of Series 2000-1. "Investor Certificates" shall mean the Class A Certificates, the Class B Certificates and the Class C Certificates; provided, however, that the Class B and Class C Certificates shall not be considered to be Investor Certificates for purposes of any Tax Opinion or other opinion relating to tax matters hereunder or under the Agreement. "Investor Charge-Offs" shall mean the sum of Class A Investor Charge- Offs, Class B Investor Charge-Offs and Class C Investor Charge-Offs. "Investor Defaulted Amount" shall mean, with respect to any Distribution Date, an amount equal to the sum of the Class A Investor Defaulted Amount, the Class B Investor Defaulted Amount and the Class C Investor Defaulted Amount for that Distribution Date . "Issuance Date" shall mean the Closing Date. "LIBOR" shall mean, as of any LIBOR Determination Date, the rate for deposits in United States dollars for a one-month period that appears on the Telerate Page 3750, or a similar replacement page, as of 11:00 a.m, London time, on such date as determined by the Trustee. If such rate does not appear on Telerate Page 3750, the rate for that LIBOR Determination Date shall be determined on the basis of the rates at which deposits in United States dollars are offered by four reference banks selected by the Trustee at approximately 11:00 a.m., London time, on that day to prime banks in the London interbank market for a one-month period. The Trustee shall request the principal London office of each of the reference banks it selects to provide a quotation of such rate. If at least two such quotations are provided, the rate for that LIBOR Determination Date shall be the arithmetic mean of such quotations. If fewer than two quotations are provided as requested, the rate for that LIBOR Determination Date shall be the arithmetic mean of the rates of four reference banks selected by the Trustee at approximately 11:00 a.m., New York City time, on that day for loans in United States dollars to leading European banks for a one-month period. "LIBOR Determination Date" shall mean July 19, 2000 with respect to the period from the Closing Date through August 14, 2000, August 11, 2000 with respect to the period from August 15, 2000 through September 14, 2000, and, with respect to each Interest Accrual Period thereafter, the second Business Day prior to the Distribution Date on which such Interest Accrual Period begins, commencing with the September 2000 Distribution Date. "Monthly Period" shall have the meaning specified in the Agreement, except that the first Monthly Period with respect to the Series 2000-1 Certificates shall begin on and include the Closing Date and shall end on and include August 31, 2000. "Monthly Servicing Fee" shall have the meaning specified in Section 3.1. "Participant" shall mean a participating organization in DTC. "Percentage Allocation" shall have the meaning specified in Section 4.2(b). "Portfolio Yield" shall mean for the Series 2000-1 Certificates, with respect to any Monthly Period, the annualized percentage equivalent of a fraction, the numerator of which is an amount equal to the sum of the aggregate amount of Available Series 2000-1 Finance Charge Collections for such Monthly Period, minus the Investor Defaulted Amount and any Investor Adjustment Amount for such Monthly Period, and the denominator of which is the Invested Amount as of the last day of the preceding Monthly Period. "Principal Allocation Percentage" shall mean, with respect to any date of determination, the sum of the Class A Principal Allocation Percentage, Class B Principal Allocation Percentage and Class C Principal Allocation Percentage on such date. "Principal Shortfalls" shall mean on any Distribution Date (a) for Series 2000-1, (i) during the Controlled Amortization Period, the excess of the Class A Controlled Distribution Amount over the aggregate amount applied with respect thereto for such Distribution Date and for each prior Distribution Date in such Monthly Period, and (ii) at all other times, the Invested Amount of the class then receiving principal payments after the application of Collections of Principal Receivables on such Distribution Date or (b) for any other Series the amounts specified as such in the Supplement for such other Series. "Rapid Amortization Commencement Date" shall mean the date on which a Trust Pay Out Event is deemed to occur pursuant to Section 9.01 of the Agreement or a Series 2000-1 Pay Out Event is deemed to occur pursuant to Section 6.1. "Rapid Amortization Period" shall mean the period beginning on the day on which a Pay Out Event occurs or is deemed to have occurred and ending on the earlier of (i) the date on which the Class A Invested Amount, the Class B Invested Amount and the Class C Invested Amount have been paid in full and (ii) the Series 2000-1 Termination Date. "Rating Agency" shall mean Standard & Poor's and Moody's. "Reallocated Class B Principal Collections" shall have the meaning specified in subsection 4.9(b). "Reallocated Class C Principal Collections" shall have the meaning specified in subsection 4.9(a). "Reallocated Principal Collections" shall mean the sum of Reallocated Class B Principal Collections and Reallocated Class C Principal Collections. "Reassignment Amount" shall mean, with respect to any Distribution Date, after giving effect to any deposits and distributions otherwise to be made on such Distribution Date, the sum of (a) the Invested Amount on such Distribution Date, plus (b) the sum of the Class A Monthly Interest, Class B Monthly Interest and Class C Monthly Interest for such Distribution Date and the sum of Class A Monthly Interest, Class B Monthly Interest and Class C Monthly Interest previously due but not distributed to the Series 2000-1 Certificateholders on a prior Distribution Date, plus (c) the amount of Additional Interest, if any, for such Distribution Date and any Additional Interest previously due but not distributed to the Series 2000-1 Certificateholders on a prior Distribution Date. "Regulation S" shall mean Regulation S under the Act, as such Regulation may be amended from time to time. "Regulation S Permanent Global Certificates" shall have the meaning specified in Article IX. "Regulation S Temporary Global Certificates" shall have the meaning specified in Article IX. "Required Amount" shall have the meaning specified in Section 4.7. "Required Retained Percentage" shall mean 0%. "Required Seller's Percentage" shall mean (a) 1% with respect to any date of determination during each June and December Monthly Period and (b) 0% for any other date of determination. "Reset Date" shall mean each day that is: (a) an Addition Cut-Off Date (other than for Automatic Additional Accounts); (b) a Removal Date; (c) the last day prior to any day on which a Series is issued; and (d) the last day prior to any day on which there is an increase or decrease in the Invested Amount of any Variable Funding Certificates. "Revolving Period" shall mean the period from and including the Closing Date to, but not including, the Amortization Period Commencement Date. "Rule 144A Global Certificates" shall have the meaning specified in Article IX. "Scheduled Series 2000-1 Termination Date" shall mean the September 2008 Distribution Date. "Seller Certificates" shall mean investor certificates of any Series, including the Class C Certificates, that the Seller retains, but only to the extent that and for so long as the Seller is the Holder of such Certificates. "Series 2000-1" shall mean the Series of the Neiman Marcus Group Credit Card Master Trust represented by the Series 2000-1 Certificates. "Series 2000-1 Certificateholder" shall mean the holder of record of any Series 2000-1 Investor Certificate. "Series 2000-1 Certificateholders' Interest" shall have the meaning specified in Section 4.1. "Series 2000-1 Certificates" shall have the meaning specified in Section 1.1. "Series 2000-1 Pay Out Event" shall have the meaning specified in Section 6.1. "Series 2000-1 Termination Date" shall mean the earlier to occur of (i) the day after the Distribution Date on which the Series 2000-1 Certificates are paid in full, or (ii) the Scheduled Series 2000-1 Termination Date. "Servicing Base Amount" shall have the meaning specified in Section 3.1. "Servicing Fee Rate" shall mean 2% per annum. "Shared Principal Collections" shall mean, as the context requires, either (a) the amount allocated to the Series 2000-1 Certificates that, in accordance with subsections 4.6(b) and 4.6(c)(iv), may be applied in accordance with Section 4.04 of the Agreement or (b) the amounts allocated to the investor certificates of other Series that the applicable Supplements for such Series specify are to be treated as "Shared Principal Collections" and which may be applied to cover Principal Shortfalls with respect to the Series 2000-1 Certificates. "Specified Consignor" shall mean Barry Kieselstein Enterprises Incorporated, provided that such entity shall cease to be treated as a Specified Consignor if (i) arrangements are made so that sales of goods consigned by such entity no longer give rise to Unreleased Consignment Liens and (ii) the Seller delivers to the Trustee, with a copy to each Rating Agency, an opinion of counsel as to the matters in clause (i). "Unpaid Adjustment Amount" shall mean, with respect to any Distribution Date, an amount equal to the aggregate amount of any adjustment payments that the Servicer was required but failed to make pursuant to Section 3.09(a) of the Agreement with respect to the related Monthly Period. "Unreleased Consignment Liens" shall mean a Lien on a Receivable that (a) arises because the Receivable represents the purchase price of goods that were consigned to an Account Originator, (b) has been perfected by the filing of a UCC financing statement and (c) has not been released by the consignor. ARTICLE III SERVICER Section 3.1 Servicing Compensation. The share of the Servicing Fee allocable to the Series 2000-1 Certificateholders with respect to any Distribution Date (the "Monthly Servicing Fee") shall be equal to one-twelfth of the product of (a) the Servicing Fee Rate and (b) (i) the Invested Amount as of the last day of the Monthly Period preceding such Distribution Date, minus (ii) the product of the amount, if any, on deposit in the Excess Funding Account as of the last day of the Monthly Period preceding such Distribution Date and the Floating Allocation Percentage with respect to such Monthly Period (the amount calculated pursuant to this clause (b) is referred to as the "Servicing Base Amount"); provided, however, that with respect to the first Distribution Date, the Monthly Servicing Fee shall be $[528,333.33]. The share of the Monthly Servicing Fee allocable to the Class A Certificateholders (the "Class A Servicing Fee"), to the Class B Certificateholders (the "Class B Servicing Fee") and to the Class C Certificateholders (the "Class C Servicing Fee") with respect to any Distribution Date shall be determined by multiplying the Monthly Servicing Fee times a fraction, the numerator of which is the invested amount of the applicable Class and the denominator of which is the Invested Amount. The remainder of the Servicing Fee shall be paid by the Holder of the Seller Certificate or the Certificateholders of other Series (as provided in the related Supplements), and in no event shall the Trust, the Trustee or the Series 2000-1 Certificateholders be liable for the share of the Servicing Fee to be paid by the Holder of the Seller Certificate or the Certificateholders of any other Series. The Monthly Servicing Fee shall be payable to the Servicer solely to the extent amounts are available for distribution in respect thereof pursuant to Sections 4.2(b)(i)(x), 4.2(b)(ii)(x), 4.6(a)(iii) and 4.6(a)(xi). All funds applied to pay the Monthly Servicing Fee pursuant to any such Section shall be applied first to the Class A Servicing Fee, second to the Class B Servicing Fee and third to the Class C Servicing Fee. ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS Section 4.1 Rights of Certificateholders. The Series 2000-1 Certificates shall represent undivided interests in the Trust, consisting of the right to receive, to the extent necessary to make the required payments with respect to such Series 2000-1 Certificates at the times and in the amounts specified in this Agreement, (a) the Floating Allocation Percentage and the Fixed Allocation Percentage (as applicable from time to time) of Collections available in the Collection Account and (b) funds allocable to the Series 2000-1 Certificates on deposit in the Excess Funding Account (for such Series, the "Series 2000-1 Certificateholders' Interest"). The Class B Invested Amount and the Class C Invested Amount shall be subordinated to the Class A Certificates, and the Class C Invested Amount shall be subordinated to the Class B Certificates, in each case to the extent provided in this Article IV. The Class B Certificates will not have the right to receive payments of principal until the Class A Invested Amount has been paid in full. Section 4.2 Collections and Allocation; Payments on Seller Certificate. (a) Collections. The Servicer will apply or will instruct the Trustee to apply all funds on deposit in the Collection Account and the Excess Funding Account allocable to the Series 2000-1 Certificates as described in this Article IV. (b) Allocations. The Servicer will apply, or will instruct the Trustee to apply, all collections and other funds on deposit in the Collection Account that are allocated to the Investor Certificates as follows: (i) Daily Allocations During the Revolving Period. During the Revolving Period, the Servicer shall, prior to the close of business on any Date of Processing, allocate the following amounts as set forth below: (x) Allocate to the Investor Certificateholders and retain in the Collection Account an amount equal to the product of (A) the Floating Allocation Percentage and (B) the aggregate amount of Collections of Finance Charge Receivables on such Date of Processing; provided, however, that on and after the LIBOR Determination Date occurring in such Monthly Period, (1) such amount will only be retained in the Collection Account until such time as the amount retained in the Collection Account pursuant to this clause (x) (including amounts retained prior to such LIBOR Determination Date) equals the sum of Class A Monthly Interest plus Class B Monthly Interest plus Class C Monthly Interest for the related Distribution Date plus 125% of the Investor Defaulted Amount (or such lesser percentage as to which the Rating Agency Condition has been satisfied) for the previous Distribution Date plus an amount equal to the aggregate amount of any adjustment payments that the Seller was required but failed to make pursuant to Section 3.09(a) of the Agreement on or prior to that Date of Processing and (2) the balance (including any excess amounts retained over the sum specified above) shall be first paid to the Servicer on account of the Daily Servicing Fee Amount for that Date of Processing and any unpaid Daily Servicing Fee Amounts for prior Dates of Processing and second paid to the Holder of the Seller Certificate, provided that the Finance Charge Collections otherwise payable to the Holder of the Seller Certificate shall be retained in the Collection Account if either the Servicer shall have a credit rating from any Rating Agency in one of its generic credit rating categories that signifies lower than investment grade or a Successor Servicer has been appointed. (y) Allocate to the Investor Certificateholders an amount equal to the product of (A) the Principal Allocation Percentage on such Date of Processing and (B) the aggregate amount of Collections of Principal Receivables on such Date of Processing and pay such amount to the Holder of the Seller Certificate; provided, however, that the amount to be paid to the Holder of the Seller Certificate pursuant to this Section 4.2(b)(i)(y) on any Date of Processing shall be paid to such Holder only to the extent that the Seller's Interest on such Date of Processing is greater than the Required Seller's Interest and the Retained Interest is greater than the Required Retained Interest (after giving effect to all Principal Receivables transferred to the Trust on such day) and otherwise shall be deposited in the Excess Funding Account. (ii) Daily Allocations During the Controlled Amortization Period. During the Controlled Amortization Period, the Servicer shall, prior to the close of business on any Date of Processing, allocate the following amounts as set forth below: (x) Allocate to the Investor Certificateholders and retain in the Collection Account an amount equal to the product of (A) the Floating Allocation Percentage and (B) the aggregate amount of Collections of Finance Charge Receivables on such Date of Processing; provided, however, that (1) on and after the LIBOR Determination Date occurring in such Monthly Period, such amount will only be retained in the Collection Account until such time as the amount retained in the Collection Account pursuant to this clause (x) (including amounts retained prior to such LIBOR Determination Date) equals the sum of Class A Monthly Interest plus Class B Monthly Interest plus Class C Monthly Interest for the related Distribution Date plus 125% of the Investor Defaulted Amount (or such lesser percentage as to which the Rating Agency Condition has been satisfied) for the previous Distribution Date plus an amount equal to the aggregate amount of any adjustment payments that the Seller was required but failed to make pursuant to Section 3.09(a) of the Agreement on or prior to that Date of Processing and (2) the balance (including any excess amounts retained over the sum specified above) shall be first paid to the Servicer on account of the Daily Servicing Fee Amount for that Date of Processing and any unpaid Daily Servicing Fee Amounts for prior Dates of Processing and second paid to the Holder of the Seller Certificate, provided that the Finance Charge Collections otherwise payable to the Holder of the Seller Certificate shall be retained in the Collection Account if either the Servicer shall have a credit rating from any Rating Agency in one of its generic credit rating categories that signifies lower than investment grade or a Successor Servicer has been appointed. (y) Allocate to the Investor Certificateholders and retain in the Collection Account an amount equal to the product of (A) the Principal Allocation Percentage on such Date of Processing and (B) the aggregate amount of Collections of Principal Receivables on such Date of Processing (for any such date, a "Percentage Allocation"); provided, however, that if the sum of such Percentage Allocations with respect to the Class A Certificates for the same Monthly Period exceeds the Class A Controlled Distribution Amount for the related Distribution Date, then such excess shall not be treated as a Percentage Allocation and shall be paid to the Holder of the Seller Certificate only to the extent that the Seller's Interest on such Date of Processing is greater than the Required Seller's Interest and the Retained Interest is greater than the Required Retained Interest (after giving effect to all Principal Receivables transferred to the Trust on such day) and otherwise shall be deposited in the Excess Funding Account. (iii) Daily Allocations During the Rapid Amortization Period. During the Rapid Amortization Period, the Servicer shall, prior to the close of business on any Date of Processing, allocate the following amounts as set forth below: (x) Allocate to the Investor Certificateholders and retain in the Collection Account an amount equal to the product of (A) the Fixed Allocation Percentage on such Date of Processing and (B) the aggregate amount of Collections of Finance Charge Receivables on such Date of Processing. (y) Allocate to the Investor Certificateholders and retain in the Collection Account an amount equal to the product of (A) the Principal Allocation Percentage on such Date of Processing and (B) the aggregate amount of Collections of Principal Receivables on such Date of Processing; provided, however, that after the date on which an amount of such Collections equal to the Invested Amount has been deposited into the Collection Account and allocated to the Investor Certificateholders, the amount determined in accordance with this subsection (y) shall be first, if any other Principal Sharing Series is outstanding and in its Amortization Period, retained in the Collection Account for application, to the extent necessary, as Shared Principal Collections on the related Distribution Date and second shall be paid to the Holder of the Seller Certificate to the extent that the Seller's Interest on such Date of Processing is greater than the Required Seller's Interest and the Retained Interest is greater than the Required Retained Interest (after giving effect to all Principal Receivables transferred to the Trust on such day) and otherwise shall be deposited in the Excess Funding Account. (iv) Monthly Allocations During the Revolving Period and Controlled Amortization Period. During the Revolving Period and Controlled Amortization Period, the Servicer shall, prior to the close of business on any Transfer Date allocate to the Investor Certificateholders and retain in the Collection Account an amount equal to (a) the product of (x) the Floating Allocation Percentage on such Distribution Date and (y) the aggregate amount of Collections of Finance Charge Receivables for the related Monthly Period, less (b) the daily amounts retained in the Collection Account during such Monthly Period pursuant to Sections 4.2(b)(i)(x) and 4.2(b)(ii)(x) with respect to the Revolving Period and the Controlled Amortization Period, respectively. The allocations to be made pursuant to this Section 4.2 also apply to deposits into the Collection Account that are treated as Collections, including adjustment payments made in accordance with Section 3.09 of the Agreement, payment of the reassignment price pursuant to Section 2.05(b) of the Agreement and proceeds from the sale, disposition or liquidation of the Receivables pursuant to Section 10.02, 12.01 or 12.02 of the Agreement and Section 7.1. Such deposits to be treated as Collections will be allocated as Finance Charge Receivables or Principal Receivables as provided in the Agreement. Section 4.3 Determination of Monthly Interest for the Series 2000-1 Class A Certificates. The amount of monthly interest (the "Class A Monthly Interest") allocable to the Class A Certificates with respect to any Distribution Date shall be an amount equal to the product of (i) the Class A Certificate Rate, (ii) the outstanding principal balance of the Class A Certificates as of the close of business on the immediately preceding Distribution Date (or the Closing Date, in the case of the first Distribution Date) and (iii) a fraction, the numerator of which is the number of days in the related Interest Accrual Period and the denominator of which is 360. On the Determination Date preceding each Distribution Date, the Servicer shall determine an amount (the "Class A Interest Shortfall") equal to the excess, if any, of (x) the Class A Monthly Interest for that Distribution Date over (y) the amount available to be paid to the Class A Certificateholders in respect of interest on such Distribution Date. If there is a Class A Interest Shortfall with respect to any Distribution Date, an additional amount ("Class A Additional Interest") shall be payable as provided herein with respect to the Class A Certificates on each Distribution Date following such Distribution Date, to and including the Distribution Date on which such Class A Interest Shortfall is paid to Class A Certificateholders, equal to the product of (i) the Class A Certificate Rate, and (ii) such Class A Interest Shortfall remaining unpaid and (iii) a fraction, the numerator of which is the number of days in the related Interest Accrual Period and the denominator of which is 360. Notwithstanding anything to the contrary herein, Class A Additional Interest shall be payable or distributed to Class A Certificateholders only to the extent permitted by applicable law. Section 4.4 Determination of Principal Amounts. (a) The amount of principal (the "Class A Principal") distributable from the Collection Account with respect to the Class A Certificates on each Distribution Date with respect to the Amortization Period shall be equal to an amount calculated as follows: the sum of (i) the aggregate amount retained in the Collection Account pursuant to Sections 4.2(ii)(y) and 4.2(iii)(y) (minus any Reallocated Principal Collections) with respect to the preceding Monthly Period, (ii) any amount on deposit in the Excess Funding Account allocated to the Class A Certificates pursuant to subsection 4.6(d) with respect to the preceding Monthly Period, (iii) the amount, if any, required to be treated as Available Principal Collections pursuant to subsections 4.6(a)(iv), (v), (vi), (vii) (ix) and (x) and (iv) the amount of Shared Principal Collections allocated to the Class A Certificates with respect to the preceding Monthly Period pursuant to Section 4.04 of the Agreement (collectively, the "Available Principal Collections"); provided, however, that (i) with respect to any Distribution Date during the Controlled Amortization Period, Class A Principal may not exceed the Class A Controlled Distribution Amount for such Distribution Date; (ii) with respect to any Distribution Date, Class A Principal may not exceed the Class A Invested Amount (after giving effect to any Class A Investor Charge-Off on that Distribution Date); and (iii) with respect to the Scheduled Series 2000-1 Termination Date, Class A Principal shall be an amount equal to the Class A Invested Amount. (b) The amount of principal (the "Class B Principal") distributable from the Collection Account with respect to the Class B Certificates on each Distribution Date, beginning with the Class B Principal Payment Commencement Date, shall equal the Available Principal Collections minus the Class A Principal, in each case for that Distribution Date; provided, however, that (i) with respect to any Distribution Date, Class B Principal may not exceed the Class B Invested Amount (after giving effect to any Class B Investor Charge-Off or Reallocated Class B Principal Collections on that Distribution Date) and (ii) with respect to the Scheduled Series 2000- 1 Termination Date, Class B Principal shall be an amount equal to the Class B Invested Amount. (c) The amount of principal (the "Class C Principal") distributable from the Collection Account with respect to the Class C Certificates on each Distribution Date with respect to the Controlled Amortization Period or the Rapid Amortization Period shall equal the Available Principal Collections minus the Class A Principal and Class B Principal, in each case for that Distribution Date; provided, however, that (i) with respect to any Distribution Date, Class C Principal may not exceed the Class C Excess Invested Amount, and (ii) with respect to the Scheduled Series 2000-1 Termination Date, Class C Principal shall be an amount equal to the Class C Invested Amount. Section 4.5 Shared Principal Collections. Shared Principal Collections allocated to the Series 2000-1 Certificates for any Distribution Date with respect to the Amortization Period shall mean an amount (which shall not exceed the Principal Shortfall) equal to the product of (x) Shared Principal Collections for all Series for such date and (y) a fraction, the numerator of which is the Principal Shortfall for the Series 2000-1 Certificates for such date and the denominator of which is the aggregate amount of Principal Shortfalls for all Series for such date. For any Distribution Date with respect to the Revolving Period, Shared Principal Collections allocated to the Series 2000-1 Certificates shall be zero. In addition, if the Principal Shortfall for any Distribution Date is greater than the Shared Principal Collections allocated to Series 2000-1, then collections of Principal Receivables allocated to the Seller Certificate shall be made available to cover the remaining Principal Shortfall on the same basis as Shared Principal Collections. Section 4.6 Application of Funds on Deposit in the Collection Account for the Certificates. (a) On each Distribution Date, the Servicer shall instruct the Trustee to withdraw, and the Trustee, acting in accordance with such instructions, shall withdraw, to the extent of Collections of Finance Charge Receivables retained in the Collection Account pursuant to Sections 4.2(b)(i)(x), 4.2(b)(ii)(x) and 4.2(b)(iii)(x) and the deposit made into the Collection Account on such Distribution Date pursuant to Section 4.2(b)(iv) (the "Available Series 2000-1 Finance Charge Collections"), in the following priority: (i) Class A Monthly Interest. An amount equal to the Class A Monthly Interest and Carryover Class A Interest for that Distribution Date shall be used to pay interest to the Class A Certificateholders pursuant to Section 5.1(a). (ii) Class B Monthly Interest. An amount equal to the Class B Monthly Interest and Carryover Class B Interest for that Distribution Date shall be used to pay interest to the Class B Certificateholders pursuant to Section 5.1(c). (iii) Servicing Fee. On each Distribution Date on which The Neiman Marcus Group, Inc. or an Affiliate of The Neiman Marcus Group, Inc. is not the Servicer, the Monthly Servicing Fee for such Monthly Period plus any unpaid Servicing Fees from prior Monthly Periods shall, to the extent not previously paid pursuant to Section 4.2(b), be distributed to the Servicer. (iv) Class A Investor Defaulted Amount and Class A Investor Adjustment Amount. An amount equal to the sum of (A) the Class A Investor Defaulted Amount plus (B) any Class A Investor Adjustment Amount, in each case for such Distribution Date, shall be (i) during the Revolving Period, treated as Shared Principal Collections, (ii) during the Amortization Period, treated as Available Principal Collections. (v) Reimbursement of Class A Investor Charge-Offs. An amount equal to the unreimbursed Class A Investor Charge-Offs, if any, will be applied to reimburse Class A Investor Charge-Offs, such amount during the Revolving Period to be treated as Shared Principal Collections, and during the Amortization Period to be treated as Available Principal Collections. (vi) Class B Investor Defaulted Amount and Class B Investor Adjustment Amount. An amount equal to the sum of (A) the Class B Investor Defaulted Amount for such Distribution Date plus (B) any Class B Investor Adjustment Amount, in each case for such Distribution Date, shall be (i) during the Revolving Period, treated as Shared Principal Collections, (ii) during the Amortization Period, treated as Available Principal Collections. (vii) Reimbursement of Class B Investor Charge-Offs. An amount equal to the unreimbursed amount by which the Class B Invested Amount has been reduced on prior Distribution Dates pursuant to clauses (c) and (d) of the definition of Class B Invested Amount, if any, (i) during the Revolving Period, shall be treated as Shared Principal Collections, (ii) during the Amortization Period shall be treated as Available Principal Collections. (viii) Class C Monthly Interest. An amount equal to the Class C Monthly Interest and Carryover Class C Interest for that Distribution Date shall be used to pay interest to the Class C Certificateholders. (ix) Class C Investor Defaulted Amount and Class C Investor Adjustment Amount. An amount equal to the sum of (A) the aggregate Class C Investor Defaulted Amount plus (B) any Class C Investor Adjustment Amount, in each case for such Distribution Date, shall be (i) during the Revolving Period, treated as Shared Principal Collections, (ii) during the Amortization Period, treated as Available Principal Collections. (x) Reimbursement of Class C Investor Charge-Offs. An amount equal to the unreimbursed amount by which the Class C Invested Amount has been reduced on prior Distribution Dates pursuant to clauses (c) and (d) of the definition of Class C Invested Amount, if any, shall be (i) during the Revolving Period, treated as Shared Principal Collections, (ii) during the Amortization Period, treated as Available Principal Collections. (xi) Servicing Fee. On each Distribution Date on which The Neiman Marcus Group, Inc. or an Affiliate of The Neiman Marcus Group, Inc. is the Servicer, the Monthly Servicing Fee for such Monthly Period plus any unpaid Servicing Fees from prior Monthly Periods shall be distributed to the Servicer provided that the Monthly Servicing Fee shall be applied first to the Class A Servicing Fee, then to the Class B Servicing Fee and then to the Class C Servicing Fee. (xii) Excess Finance Charge Collections. Any Available Series 2000-1 Finance Charge Collections remaining after giving effect to the withdrawals pursuant to subsection 4.6(a)(i) through (xi), shall be treated as Excess Finance Charge Collections, and the Servicer shall direct the Trustee in writing on each Distribution Date to withdraw such amounts from the Collection Account and to first make such amounts available to pay to Certificateholders of other Series to the extent of shortfalls, if any, in amounts payable to such certificateholders from Collections of Finance Charge Receivables allocated to such other Series, and then pay any remaining Excess Finance Charge Collections to the Seller. (b) For each Distribution Date with respect to the Revolving Period, the product of (i) the Floating Allocation Percentage and (ii) Collections of Principal Receivables with respect to such Distribution Date (subtracting from such product the amount of Reallocated Principal Collections on such Distribution Date) will be treated as Shared Principal Collections and applied, for such Distribution Date, as provided in Section 4.04 of the Agreement; provided however, that if the Required Class C Invested Amount is reduced in accordance with Section 7.3(a), such amount plus the Class C Floating Allocation Percentage of Collections of Principal Receivables may be distributed to the Class C Certificateholders in an amount equal to such reduction. (c) For each Distribution Date with respect to the Controlled Amortization Period or the Rapid Amortization Period, the Trustee, acting pursuant to the Servicer's instructions, will distribute the amount of funds on deposit in the Collection Account available for payment of principal to Series 2000-1 Certificateholders in accordance with Section 4.4 in the following priority: (i) to the Class A Certificateholders, an amount equal to Class A Principal, subject to each proviso listed in Section 4.4(a); (ii) to the Class B Certificateholders, on and after the Class B Principal Payment Commencement Date, an amount equal to Class B Principal, subject to each proviso listed in Section 4.4(b); (iii) to the Class C Certificateholders, an amount equal to Class C Principal, subject to each proviso listed in Section 4.4(c); (iv) an amount equal to the excess, if any, of (A) the sum of the amounts described in subsections 4.4(a)(i) and (iii) and 4.4(b)(i) and (iii) over (B) the sum of Class A Principal and Class B Principal will be treated as Shared Principal Collections and applied as provided in Section 4.04 of the Agreement. (d) On each Distribution Date relating to the Amortization Period, funds on deposit in the Excess Funding Account shall be treated as Shared Principal Collections and, to the extent allocable to Series 2000-1, shall be deposited in the Collection Account and included in the Available Principal Collections. Section 4.7 Coverage of Required Amount for the Series 2000-1 Certificates. To the extent that on any Distribution Date payments are being made pursuant to any of subsections 4.6(a)(i) through (xi), respectively, and the full amount to be paid pursuant to any such subsection receiving payments on such Distribution Date is not paid in full on such Distribution Date, the Servicer shall apply all or a portion of the Excess Finance Charge Collections from other Series with respect to such Distribution Date allocable to the Series 2000-1 Certificates in an amount equal to the excess of the full amount to be allocated or paid pursuant to the applicable subsection over the amount applied with respect thereto from Available Series 2000-1 Finance Charge Collections on such Distribution Date (the "Required Amount"). Excess Finance Charge Collections allocated to the Series 2000-1 Certificates for any Distribution Date shall mean an amount equal to the product of (x) Excess Finance Charge Collections available from all other Series for such Distribution Date and (y) a fraction, the numerator of which is the Required Amount for such Distribution Date and the denominator of which is the aggregate amount of shortfalls in required amounts or other amounts to be paid from Collections of Finance Charge Receivables for all Series for such Distribution Date. Section 4.8 Investor Charge-Offs. (a) If, on any Distribution Date, the sum of the Investor Defaulted Amount and any Investor Adjustment Amount exceeded the Available Series 2000-1 Finance Charge Collections applied to the payment thereof pursuant to subsections 4.6 (a)(iv), (vi) and (ix) and the amount of Excess Finance Charge Collections allocated thereto pursuant to Section 4.7, the Class C Invested Amount will be reduced by the amount by which the remaining aggregate Defaulted Amount and Investor Adjustment Amount exceed such aggregate amount applied with respect thereto (a "Class C Investor Charge-Off"). (b) If any such reduction of the Class C Invested Amount pursuant to Section 4.8(a) would cause the Class C Invested Amount to be a negative number, the Class C Invested Amount will be reduced to zero, and the Class B Invested Amount will be reduced by the amount by which the Class C Invested Amount would have been reduced below zero (a "Class B Investor Charge-Off"), provided that the Class B Investor Charge-Off shall not be greater than the sum of the Class A Investor Default Amount, the Class A Investor Adjustment Amount, the Class B Investor Default Amount and the Class B Investor Adjustment Amount for such Distribution Date. (c) If any such reduction of the Class B Invested Amount pursuant to Section 4.8(b) would cause the Class B Invested Amount to be a negative number, the Class B Invested Amount will be reduced to zero, and, the Class A Invested Amount will be reduced (but not less than zero) by the amount by which the Class B Invested Amount would have been reduced below zero (a "Class A Investor Charge-Off"), provided that the Class A Investor Charge- Off shall not be greater than the sum of the Class A Investor Default Amount and the Class A Investor Adjustment Amount for such Distribution Date. Section 4.9 Reallocated Principal Collections for the Series 2000-1 Certificates. (a) On each Distribution Date, the Servicer will apply or cause the Trustee to apply an amount equal to the least of (i) the Class C Invested Amount (after giving effect to any Class C Investor Charge-Off on that Distribution Date), (ii) the product of (x) the sum of (1) the Class C Principal Allocation Percentage and (2) the Class B Principal Allocation Percentage and (y) the amount of Collections of Principal Receivables with respect to the Monthly Period relating to such Distribution Date, (iii) the aggregate amount retained in the Collection Account pursuant to Sections 4.2(ii)(y) and 4.2(iii)(y) with respect to the preceding Monthly Period and (iv) an amount equal to the sum of (a) the Class A Required Amount for such Distribution Date and (b) the Class B Required Amount for such Distribution Date (such amount called "Reallocated Class C Principal Collections") first to the components of the Class A Required Amount and then to the components of the Class B Required Amount in the same priority as amounts are applied to such components from Available Series 2000-1 Finance Charge Collections pursuant to subsection 4.6(a); provided, that the portion of such Collections allocated to pay the components of the Class B Required Amount shall not exceed the result of (I) the product of the Class C Principal Allocation Percentage times the amount of Collections of Principal Receivables with respect to the Monthly Period relating to such Distribution Date, minus (II) the total amount of Collections reallocated to pay the components of the Class A Required Amount. (b) On each Distribution Date, the Servicer will apply or cause the Trustee to apply an amount equal to the least of (i) the Class B Invested Amount (after giving effect to any Class B Investor Charge-Off on that Distribution Date), (ii) the product of (x) the Class B Principal Allocation Percentage and (y) the amount of Collections of Principal Receivables for the Monthly Period relating to such Distribution Date, (iii) an amount equal to the excess, if any, of the aggregate amount retained in the Collection Account pursuant to Sections 4.2(ii)(y) and 4.2(iii)(y) with respect to the preceding Monthly Period over the Reallocated Principal Collections for that Distribution Date and (iv) an amount equal to the excess, if any, of the Class A Required Amount for such Distribution Date over the sum of the amount of Reallocated Class C Principal Collections applied with respect thereto for such Distribution Date (such amount called "Reallocated Class B Principal Collections") to the Class A Required Amount in the same priority as amounts are applied to such components from Available Series 2000-1 Finance Charge Collections pursuant to subsection 4.6(a). Section 4.10 Discount Option Percentage. The Discount Percentage as of the Closing Date shall be 2%. The Seller may increase, reduce or withdraw the Discount Percentage applicable to Receivables arising after the date of such change, at any time and from time to time. The Seller shall provide to the Servicer, the Trustee and each Rating Agency 30 days' prior written notice of any such increase, reduction or withdrawal, and any such increase, reduction or withdrawal shall become effective on the date designated therein only if: (i) the Seller shall have delivered to the Trustee an Officer's Certificate of the Seller stating that the Seller reasonably believes that such increase, reduction or withdrawal will not, based on the facts known to such officer at the time of such certification, cause a Pay Out Event or any event that, after the giving of notice or the lapse of time, would constitute a Pay Out Event with respect to any Series; (ii) if such designation would cause the Discount Percentage to be less than 1% or more than 3%, the Rating Agency Condition shall have been satisfied; and (iii) with respect to any reduction of the Discount Option Percentage, the Seller shall have delivered to the Trustee an Officer's Certificate stating that the Seller reasonably believes that such reduction of the Discount Option Percentage will not, based on the facts known to such officer at the time of such certification, cause the Servicing Fee to exceed Available Series 2000-1 Finance Charge Collections allocable to the Servicing Fee. Section 4.11 Consignments. So long as the Series 2000-1 Certificates remain outstanding, the following provisions shall apply with respect to Unreleased Consignment Liens: (a) Not later than the Closing Date and each Determination Date, the Servicer shall calculate an amount (the "Consignment Reserve Amount") equal to CRA, where: CRA = CS x 1/PR CS = the highest aggregate dollar amount of retail sales by The Neiman Marcus Group, Inc. of goods consigned to it by the Specified Consignor during any one of the preceding 12 Monthly Periods PR = the arithmetic mean of the principal payment rates of the Receivables for the prior three Monthly Periods, with the principal payment rate for each Monthly Period calculated as the total amount of payments on the Principal Receivables received during such Monthly Period divided by the aggregate Principal Receivables outstanding at the beginning of such Monthly Period. (b) For purposes of all calculations of the Seller's Interest and all other calculations affected by the amount of Principal Receivables during the period from and including each Determination Date until the next Determination Date, a portion of the Principal Receivables in an amount equal to the Consignment Reserve Amount determined on the first such Determination Date shall be deemed to have a balance of zero. For the period from and including the Closing Date through but excluding the first Determination Date, a Consignment Reserve Amount of $2,375,000 shall be used and applied as provided in the preceding sentence. (c) For purposes of Section 2.05 of the Agreement: (i) the amount of the Ineligible Receivables resulting from Unreleased Consignment Liens at any time shall (except as provided in clause (iii) below) be deemed to equal the Consignment Reserve Amount; (ii) such Ineligible Receivables are not required to be removed from the Trust, but the Seller shall be required to make any deposits into the Excess Funding Account required by Section 2.05(b); and (iii) if the existence of Unreleased Consignment Liens results in an actual impairment of the Trust's access to any Receivables, and the amount of Receivables subject to Unreleased Consignment Liens is greater than the Consignment Reserve Amount, then the actual amount of Receivables subject to Unreleased Consignment Liens shall be used for purposes of determining the Seller's deposit obligations under Section 2.05(b). (d) To the extent that the Seller is required to make any deposit to the Excess Funding Account as a result of the deduction of the Consignment Reserve Amount or of the actual amount of Receivables subject to Unreleased Consignment Liens as provided above and in Section 2.05(b), The Neiman Marcus Group, Inc. shall pay to the Seller the amount of the required deposit. (e) The Neiman Marcus Group, Inc. hereby represents, warrants and agrees that the only Person who consigns goods to it under arrangements that give rise to Unreleased Consignment Liens is the Specified Consignor, and except for accepting additional goods on consignment from the Specified Consignor, it will not enter into arrangements in the future that give rise to Unreleased Consignment Liens. (f) Bergdorf Goodman, Inc. hereby represents, warrants and agrees that there are no Unreleased Consignment Liens relating to Receivables originated by Bergdorf Goodman, Inc., and it will not enter into arrangements in the future that give rise to Unreleased Consignment Liens. Section 4.12 Adjustments. So long as the Series 2000-1 Certificates remain outstanding, the third and fourth sentences of Section 3.09 of the Agreement shall be deemed to read as follows: "Any adjustment required pursuant to either of the two preceding sentences shall be made on the first Business Day after the Date of Processing for the event giving rise to such adjustment. If, following the exclusion of such Principal Receivables from the calculation of the Seller's Interest, the Seller's Interest would be less than the Required Seller's Interest, then on the first Business Day after the Date of Processing for the event giving rise to such adjustment, the Seller shall make a deposit into the Excess Funding Account in immediately available funds in an amount equal to the amount by which the Seller's Interest would be less than the Required Seller's Interest (up to the amount of such Principal Receivables)." ARTICLE V DISTRIBUTIONS AND REPORTS TO SERIES 2000-1 INVESTOR CERTIFICATEHOLDERS Section 5.1 Distributions. (a) On each Distribution Date, the Paying Agent shall distribute to each Class A Certificateholder of record on the related Record Date (other than as provided in Section 12.02 of the Agreement) such Class A Certificateholder's pro rata share of the amounts that are allocated and available on such Distribution Date to pay interest on the Class A Certificates pursuant to this Supplement. (b) On each Distribution Date with respect to the Controlled Amortization Period or a Rapid Amortization Period, the Paying Agent shall distribute to each Class A Certificateholder of record on the related Record Date (other than as provided in Section 12.02 of the Agreement) such Class A Certificateholder's pro rata share of the amounts that are allocated and available on such date to pay principal of the Class A Certificates pursuant to this Supplement up to a maximum amount on any such date equal to the Class A Invested Amount on such date. (c) On each Distribution Date, the Paying Agent shall distribute to each Class B Certificateholder of record on the related Record Date (other than as provided in Section 12.02 of the Agreement) such Class B Certificateholder's pro rata share of the amounts that are allocated and available on such Distribution Date to pay interest on the Class B Certificates pursuant to this Supplement. (d) On each Distribution Date with respect to the Controlled Amortization Period or a Rapid Amortization Period, the Paying Agent shall distribute to each Class B Certificateholder of record on the related Record Date (other than as provided in Section 12.02 of the Agreement) such Class B Certificateholder's pro rata share of the amounts that are allocated and available on such date to pay principal of the Class B Certificates pursuant to this Supplement up to a maximum amount on any such date equal to the Class B Invested Amount on such date. (e) The distributions to be made pursuant to this Section 5.1 are subject to the provisions of Sections 2.06, 10.01 and 12.02 of the Agreement and Sections 8.1 and 8.2. (f) Except as provided in Section 12.02 of the Agreement with respect to a final distribution, distributions to Series 2000-1 Certificateholders hereunder shall be made by check mailed to each Series 2000-1 Certificateholder at such Series 2000-1 Certificateholder's address appearing in the Certificate Register without presentation or surrender of any Series 2000-1 Certificate or the making of any notation thereon; provided, however, that with respect to Series 2000-1 Certificates registered in the name of a Clearing Agency, such distributions shall be made to such Clearing Agency in immediately available funds. Section 5.2 Reports and Statements to Series 2000-1 Certificateholders. (a) On each Distribution Date, the Paying Agent, on behalf of the Trustee, shall forward to each Class A Certificateholder a statement substantially in the form of Exhibit B prepared by the Servicer. (b) Not later than each Determination Date, the Servicer shall deliver to the Trustee, the Paying Agent and each Rating Agency (i) statements substantially in the form of Exhibit B prepared by the Servicer and (ii) a certificate of a Servicing Officer substantially in the form of Exhibit C. (c) On or before January 31 of each calendar year, beginning with calendar year 2001, the Paying Agent, on behalf of the Trustee, shall furnish or cause to be furnished to each Person who at any time during the preceding calendar year was a Series 2000-1 Certificateholder, a statement prepared by the Servicer containing the information that is required to be contained in the statement to Series 2000-1 Certificateholders, as set forth in subsections (a) or (b) above, as applicable, aggregated for such calendar year or the applicable portion thereof during which such Person was a Series 2000-1 Certificateholder, together with other information as is required to be provided by an issuer of indebtedness under the Internal Revenue Code of 1986, as amended from time to time (the "Internal Revenue Code"). Such obligation of the Servicer shall be deemed to have been satisfied to the extent that substantially comparable information shall be provided by the Paying Agent pursuant to any requirements of the Internal Revenue Code. ARTICLE VI EARLY AMORTIZATION EVENTS Section 6.1 Series 2000-1 Pay Out Events. If any one of the following events shall occur with respect to the Series 2000-1 Certificates: (a) failure on the part of the Seller (i) to make any payment or deposit required to be made by the Seller by the terms of (A) the Agreement or (B) this Supplement, on or before the date occurring five Business Days after the date such payment or deposit is required to be made herein, (ii) to perform in all material respects the Seller's covenant not to sell, pledge, assign, or transfer to any person, or grant any unpermitted lien on, any Receivable; or (iii) duly to observe or perform in any material respect any covenants or agreements of the Seller set forth in the Agreement or this Supplement, which failure has a material adverse effect on the Series 2000-1 Certificateholders and continues unremedied for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller by the Trustee, or to the Seller and the Trustee by any Holder of Series 2000- 1 Certificates; (b) any representation or warranty made by the Seller in the Agreement or this Supplement (i) shall prove to have been incorrect in any material respect when made, that continues to be incorrect in any material respect for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller by the Trustee, or to the Seller and the Trustee by any Holder of Series 2000-1 Certificates, and (ii) as a result of which the interests of the Series 2000-1 Certificateholders are materially and adversely affected; provided, however, that a Series 2000-1 Pay Out Event pursuant to this subsection 6.1(b) shall not be deemed to have occurred hereunder if the Seller has accepted reassignment of the related Receivable, or all of such Receivables, if applicable, during such period in accordance with the provisions of the Agreement; (c) the average of the Portfolio Yields for any three consecutive Monthly Periods is reduced to a rate that is less than the average of the Base Rates for such three consecutive Monthly Periods; (d) a failure by The Neiman Marcus Group, Inc. or the Seller to make an Addition within five Business Days after the Required Designation Date; (e) failure to pay the Class A Invested Amount in full on or prior to the Class A Expected Final Payment Date or to pay the Class B Invested Amount in full on or prior to the Class B Expected Final Payment Date; (f) any Servicer Default shall occur that would have a material adverse effect on the Series 2000-1 Certificateholders; or (g) the amount on deposit in the Excess Funding Account as a percentage of the sum of the aggregate amount of Principal Receivables plus the amount on deposit in the Excess Funding Account shall equal or exceed 30% on the last day of three consecutive Monthly Periods; then, the Trustee shall within five days publish a notice of such Pay Out Event and in the case of any event described in subsections (a), (b) or (f), after the applicable grace period, if any, set forth in such subsections, the Trustee or Holders of Series 2000-1 Certificates evidencing undivided interests aggregating more than 50% of the Invested Amount of this Series 2000-1 by notice then given in writing to the Trustee, the Seller and the Servicer may declare that a pay out event (a "Series 2000-1 Pay Out Event") has occurred as of the date of such notice, and in the case of any event described in subsections (c), (d), (e) or (g), a Series 2000-1 Pay Out Event shall occur without any notice or other action on the part of the Trustee or the Series 2000-1 Certificateholders immediately upon the occurrence of such event. ARTICLE VII OPTIONAL REPURCHASE; SERIES TERMINATION; SALE OF CLASS C CERTIFICATES Section 7.1 Optional Repurchase. The Series 2000-1 Certificates shall be subject to termination by the Seller at its option on any Distribution Date on or after the Distribution Date on which the Class A Invested Amount is reduced to an amount less than or equal to 10% of the Class A Initial Invested Amount. The deposit required in connection with any such termination and final distribution shall be equal to the outstanding principal amount of the Class A Certificates Amount plus accrued and unpaid interest on the Class A Certificates through the day prior to the Distribution Date on which the final distribution occurs. Section 7.2 Series 2000-1 Termination. (a) If, on the July 15, 2008 Distribution Date, the Invested Amount (after giving effect to all changes therein on such date) would be greater than zero, the Servicer, on behalf of the Trustee, shall, within the forty-day period that begins on such Distribution Date, solicit bids for the sale of Principal Receivables and the related Finance Charge Receivables (or interests therein), such Principal Receivables to be in an amount equal to the sum of (i) the Invested Amount plus (ii) the result of the Seller's Interest multiplied by a fraction the numerator of which is the Invested Amount and the denominator of which is the sum of the Invested Amounts for all Series then outstanding (including Series 2000-1), all measured at the close of business on the last day of the Monthly Period preceding the Scheduled Series 2000-1 Termination Date (after giving effect to all distributions required to be made on the Scheduled Series 2000-1 Termination Date, except pursuant to this Section 7.2). Such bids shall require that such sale shall (subject to Section 7.2(b)) occur on the Scheduled Series 2000-1 Termination Date. The Seller shall be entitled to participate in, and to receive from the Trustee a copy of each other bid submitted in connection with, such bidding process. (b) The Servicer, on behalf of the Trustee, shall sell such Receivables (or interests therein) on the Scheduled Series 2000-1 Termination Date to the bidder who made the highest cash purchase offer. The proceeds of any such sale shall be treated as Collections on the Receivables allocated to the Series 2000-1 Certificateholders pursuant to the Agreement and this Supplement; provided, however, that the Servicer shall determine conclusively the amount of such proceeds that are allocable to Finance Charge Receivables and the amount of such proceeds that are allocable to Principal Receivables. During the period from the September 2000 Distribution Date to the Scheduled Series 2000-1 Termination Date, the Servicer shall continue to collect payments on the Receivables and allocate and deposit such Collections in accordance with the provisions of the Agreement and this Supplement. Section 7.3 Reduction of Class C Invested Amount During the Revolving Period; Designation of Class B and Class C Certificate Terms; Sale of Class B Certificates and Class C Certificates. (a) The Required Class C Invested Amount may be reduced during the Revolving Period by distributing Collections of Principal Receivables to the Class C Certificateholders in accordance with Section 4.6(b), provided that (i) the Rating Agency Condition shall have been satisfied with respect to such reduction and (ii) the Seller shall have delivered to the Trustee an Officer's Certificate stating that the Seller reasonably believes that such reduction will not, based on the facts known to such officer at the time of such certification, cause a Pay Out Event or any event that, after the giving of notice or the lapse of time, would constitute a Pay Out Event. (b) The Seller may at any time, without the consent of the Investor Certificateholders, (i) sell or transfer all or a portion of the Class B or Class C Certificates and (ii) in connection with any such sale or transfer, enter into a supplemental agreement with the Trustee pursuant to which the Seller and the Trustee may (x) amend the Class C Certificate Rate, set forth the amount of monthly interest due Class C Certificateholders (the "Class C Monthly Interest"), provide for the payment of additional amounts (the "Class C Additional Interest") with respect to any shortfall (the "Class C Interest Shortfall") in such Class C Monthly Interest and provide for such other provisions with respect to the Class C Certificates as may be specified in such supplemental agreement, (y) amend the Class B Certificate Rate, set forth the amount of monthly interest due Class B Certificateholders (the "Class B Monthly Interest"), provide for the payment of additional amounts (the "Class B Additional Interest") with respect to any shortfall (the "Class B Interest Shortfall") in such Class B Monthly Interest and provide for such other provisions with respect to the Class B Certificates as may be specified in such supplemental agreement, and (z) reallocate a portion of the Class B Invested Amount to the Class C Invested Amount or vice versa, provided that in each such case (A) the Seller shall have given notice to the Trustee, the Servicer and the Rating Agencies of such proposed sale or transfer of the Class B or Class C Certificates and such supplemental agreement at least five business days prior to the consummation of such sale or transfer and the execution of such proposed supplemental agreement; (B) the Rating Agency Condition shall have been satisfied; (C) no Pay Out Event shall have occurred prior to the consummation of such proposed sale or transfer of Class B or Class C Certificates or the execution of such supplemental agreement; (D) the Seller shall have delivered an Officer's Certificate, dated the date of the consummation of such sale or transfer and the effectiveness of such supplemental agreement, to the effect that, in the reasonable belief of the Seller, such action will not, based on the facts known to such officer at the time of such certification, cause a Pay Out Event to occur with respect to any Series, and (E) the Seller will have delivered a Tax Opinion, dated the date of such certificate with respect to such action; provided, further, (i) as a condition to the sale or transfer of all or a portion of the Class B or Class C Certificates the transferee shall be required to agree not to institute against, or join any other Person in instituting against, the Trust or the Seller any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and one day after all Investor Certificates are paid in full and (ii) the Class B or Class C Certificates may not be sold or transferred, in whole or in part, to The Neiman Marcus Group, Inc. or Bergdorf Goodman, Inc. ARTICLE VIII FINAL DISTRIBUTION Section 8.1 Sale of Receivables or Certificateholders' Interest pursuant to Section 2.06 or 10.01 of the Agreement and Section 7.1 or 7.2 of this Supplement. (a) The amount to be paid by the Seller with respect to Series 2000-1 in connection with a reassignment of Receivables to the Seller pursuant to Section 2.06 of the Agreement or a repurchase of the Certificateholder's Interest pursuant to Section 10.01 of the Agreement shall equal the Reassignment Amount for the first Distribution Date following the Monthly Period in which the reassignment obligation arises under the Agreement. (b) With respect to the Reassignment Amount deposited into the Collection Account pursuant to Sections 7.1 or 8.1 or any amounts allocable to the Series 2000-1 Certificateholders' Interest deposited into the Collection Account pursuant to Section 7.2, the Trustee shall, not later than 12:00 noon, New York City time, on the related Distribution Date, make deposits or distributions of the following amounts (in the priority set forth below and, in each case after giving effect to any deposits and distributions otherwise to be made on such date) in immediately available funds: (i) (x) the Class A Invested Amount on such Distribution Date will be distributed to the Paying Agent for payment to the Class A Certificateholders and (y) an amount equal to the sum of (A) Class A Monthly Interest for such Distribution Date, (B) any Class A Monthly Interest previously due but not distributed to the Class A Certificateholders on a prior Distribution Date and (C) the amount of Class A Additional Interest, if any, for such Distribution Date and any Class A Additional Interest previously due but not distributed to the Class A Certificateholders on any prior Distribution Date, will be distributed to the Paying Agent for payment to the Class A Certificateholders, (ii) (x) the Class B Invested Amount on such Distribution Date will be distributed to the Paying Agent for payment to the Class B Certificateholders and (y) an amount equal to the sum of (A) Class B Monthly Interest for such Distribution Date, (B) any Class B Monthly Interest previously due but not distributed to the Class B Certificateholders on a prior Distribution Date and (C) the amount of Class B Additional Interest, if any, for such Distribution Date and any Class B Additional Interest previously due but not distributed to the Class B Certificateholders on any prior Distribution Date, will be distributed to the Paying Agent for payment to the Class B Certificateholders, (iii) (x) the Class C Invested Amount on such Distribution Date will be distributed to the Paying Agent for payment to the Class C Certificateholders and (y) an amount equal to the sum of (A) Class C Interest for such Distribution Date, (B) any Class C Monthly Interest previously due but not distributed to the Class C Certificateholders on a prior Distribution Date and (C) the amount of Class C Additional Interest, if any, for such Distribution Date and any Class C Additional Interest previously due but not distributed to the Class C Certificateholders on any prior Distribution Date, will be distributed to the Paying Agent for payment to the Class C Certificateholders and (iv) the balance, if any, will be distributed to the Holder of the Seller Certificate. (c) Notwithstanding anything to the contrary in this Supplement or the Agreement, all amounts distributed to the Paying Agent pursuant to Section 8.1(b) for payment to the Series 2000-1 Certificateholders shall be deemed distributed in full to the Series 2000-1 Certificateholders on the date on which such funds are distributed to the Paying Agent pursuant to this Section and shall be deemed to be a final distribution pursuant to Section 12.02 of the Agreement. ARTICLE IX MISCELLANEOUS PROVISIONS Section 9.1 Delivery and Payment for the Series 2000-1 Certificates. The Seller shall execute and deliver the Series 2000-1 Certificates to the Trustee for authentication in accordance with Section 6.01 of the Agreement. The Trustee shall deliver the Series 2000-1 Certificates to or upon the order of the Seller when authenticated in accordance with Section 6.02 of the Agreement. Section 9.2 Form of Delivery of Series 2000-1 Certificates. The Class A Certificates, the Class B Certificates and the Class C Certificates shall be delivered as Registered Certificates as provided in Section 6.01 of the Agreement. The Class B Certificates and the Class C Certificates shall be delivered as Definitive Certificates. Section 9.3 Provisions Relating to Global Certificates and Regulation S Certificates. (a) Class A Certificates offered and sold to Qualified Institutional Buyers in reliance on Rule 144A shall be issued initially in the form of one or more Global Certificates (the "Rule 144A Global Certificates"), which shall be deposited on behalf of the purchasers of the Book-Entry Certificates represented thereby with the Trustee, as custodian for the Clearing Agency, and registered in the name of the Clearing Agency or a nominee of the Clearing Agency, duly executed by the Seller and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Rule 144A Global Certificates may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Clearing Agency or its nominee as hereinafter provided. The Trustee shall not be liable for any error or omission by the Clearing Agency in making such record adjustments and the records of the Trustee shall be controlling with regard to outstanding principal amount of Certificates hereunder. (b) Class A Certificates offered and sold in reliance on Regulation S shall be issued initially, and during the "40 day distribution compliance period" described below remain, in the form of temporary Global Certificates (the "Regulation S Temporary Global Certificates"), which shall be deposited on behalf of the purchasers of the Book-Entry Certificates represented thereby with the Trustee, as custodian for the Clearing Agency, and registered in the name of the Clearing Agency or the nominee of the Clearing Agency for the investors' respective accounts at Euroclear and/or Clearstream, duly executed by the Seller and authenticated by the Trustee as hereinafter provided. The "40 day distribution compliance period" (as defined in Regulation S) shall be terminated upon the later of (i) 40 days after the Closing Date and (ii) receipt by the Trustee of a written certificate from the Clearing Agency, together with copies of certificates from Euroclear and/or Clearstream, certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Certificates (except to the extent of any beneficial owners thereof who will take delivery of a beneficial ownership interest in a Rule 144A Global Certificate). Following the termination of the 40 day distribution compliance period, beneficial interests in the Regulation S Temporary Global Certificates shall be exchanged for beneficial interests in permanent Global Certificates (the "Regulation S Permanent Global Certificates"), which will be deposited with the Trustee, as custodian, and registered in the name of a nominee of the Clearing Agency. Simultaneously with the authentication of Regulation S Permanent Global Certificates, the Trustee shall cancel the Regulation S Temporary Global Certificates. The aggregate principal amount of the Regulation S Temporary Global Certificates and the Regulation S Permanent Global Certificates may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Clearing Agency or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. The Trustee shall incur no liability for any error or omission of the Clearing Agency in making such record adjustments and the records of the Trustee shall be controlling with regard to outstanding principal amount of Regulation S Global Certificates hereunder. (c) Each Global Certificate shall represent such of the outstanding Book-Entry Certificates as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Book-Entry Certificates from time to time endorsed thereon and that the aggregate amount of outstanding Book-Entry Certificates represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Certificate to reflect the amount of any increase or decrease in the amount of outstanding Book-Entry Certificates represented thereby shall be made by the Trustee, or by the custodian at the direction of the Trustee, in accordance with instructions given by the holder thereof as required by clause (d) below. (d) Transfer and Exchange of Global Certificates. The transfer and exchange of Global Certificates or beneficial interests therein shall be effected through the Clearing Agency, in accordance with this Supplement and the procedures of the Clearing Agency therefor, which shall include restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Beneficial interests in a Global Certificate may be transferred to persons who take delivery thereof in the form of a beneficial interest in the same Global Certificate in accordance with the transfer restrictions set forth in the legend referred to in clauses (e) through (h) below. (e) Transfer of Rule 144A Global Certificate to Regulation S Global Certificate. If, at any time, a Certificate Owner of a beneficial interest in a Rule 144A Global Certificate deposited with the Clearing Agency (or the Trustee as custodian for the Clearing Agency) wishes to transfer its interest in such Rule 144A Global Certificate to a person who is required or permitted to take delivery thereof in the form of a beneficial interest in a Regulation S Global Certificate, such Certificate Owner shall, subject to compliance with the procedures described in the next sentence of this clause (e), exchange or cause the exchange of such beneficial interest for an equivalent beneficial interest in a Regulation S Global Certificate. Upon receipt by the Trustee of (1) instructions given in accordance with the applicable procedures of the Clearing Agency from a Participant directing the Trustee to credit or cause to be credited a beneficial interest in the Regulation S Global Certificate in an amount equal to the beneficial interest in the Rule 144A Global Certificate to be exchanged, (2) a written order given in accordance with the applicable procedures of the Clearing Agency containing information regarding the participant account of the Clearing Agency and Euorclear and/or Clearstream account to be credited with such increase, and (3) an officer's certificate given by the transferring Certificate Owner stating that the transfer of such interest has been made in compliance with the transfer restrictions applicable to the Global Certificates and pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S, then the Certificate Registrar shall instruct the Clearing Agency to reduce or cause to be reduced the outstanding principal amount of the applicable Rule 144A Global Certificate and to increase or cause to be increased the outstanding principal amount of the applicable Regulation S Global Certificate by the outstanding principal amount of the beneficial interest in the Rule 144A Global Certificate to be exchanged, to credit or cause to be credited to the account of the person specified in such instructions a beneficial interest in the Regulation S Global Certificate equal to the reduction in the outstanding principal amount of the Rule 144A Global Certificate, and to debit, or cause to be debited, from the account of the person making such exchange or transfer the beneficial interest in the Rule 144A Global Certificate that is being exchanged or transferred. (f) Transfer of Regulation S Global Certificate to Rule 144A Global Certificate. If at any time a Certificate Owner of a beneficial interest in a Regulation S Global Certificate deposited with the Clearing Agency or with the Trustee as custodian for the Clearing Agency wishes to transfer its interest in such Regulation S Global Certificate to a person who is required or permitted to take delivery thereof in the form of a beneficial interest in a Rule 144A Global Certificate, such Certificate Owner shall, subject to the applicable procedures of the Clearing Agency, exchange or cause the exchange of such beneficial interest for an equivalent beneficial interest in a Rule 144A Global Certificate as provided in this clause (f). Upon receipt by the Trustee of (1) instructions from Euroclear or Clearstream, if applicable, and the Clearing Agency directing the Trustee, as Certificate Registrar, to credit or cause to be credited a beneficial interest in the Rule 144A Global Certificate equal to the beneficial interest in the Regulation S Global Certificate to be exchanged and containing information regarding the participant account with the Clearing Agency to be credited with such increase, (2) a written order given in accordance with the applicable procedures of the Clearing Agency containing information regarding the participant account of the Clearing Agency and (3) if such transfer is being effected prior to the expiration of the 40-day distribution compliance period, a certificate in the form of Exhibit D attached hereto given by the Certificate Owner of such beneficial interest, then the Trustee, as Certificate Registrar, shall instruct the Clearing Agency to reduce or cause to be reduced the outstanding principal amount of such Regulation S Global Certificate and to increase or cause to be increased the outstanding principal amount of the applicable Rule 144A Global Certificate by the outstanding principal amount of the beneficial interest in the Regulation S Global Certificate to be exchanged, and the Trustee, as Certificate Registrar, shall instruct the Clearing Agency, concurrently with such reduction, to credit or cause to be credited to the account of the person specified in such instructions a beneficial interest in the applicable Rule 144A Global Certificate equal to the reduction in the outstanding principal amount of such Regulation S Global Certificate and to debit or cause to be debited from the account of the person making such transfer the beneficial interest in the Regulation S Global Certificate that is being transferred. (g) Transfer and Exchange of a Definitive Certificate for a Book-Entry Certificate in a Rule 144A Global Certificate. The transfer and exchange of a Definitive Certificate for a beneficial interest in a Rule 144A Global Certificate shall be effected in accordance with this Supplement and the procedures of the Clearing Agency therefor, which shall include restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. If, at any time a Holder of a Definitive Certificate wishes to transfer its interest in such Certificate to a person who is required or permitted to take delivery thereof in the form of a beneficial interest in a Rule 144A Global Certificate, such Holder shall, subject to the applicable procedures of the Clearing Agency, exchange or cause the exchange of such Definitive Certificate for an equivalent beneficial interest in a Rule 144A Global Certificate as provided in this clause (g). Upon receipt by the Trustee of (1) the Definitive Certificates for registration of transfer or exchange duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Trustee duly executed by such Holder or by his attorney, duly authorized in writing, (2) the instructions from the Clearing Agency, directing the Trustee, as Certificate Registrar, to credit or cause to be credited a beneficial interest in the Rule 144A Global Certificate equal to the Definitive Certificate to be exchanged, such instructions to contain information regarding the participant account with the Clearing Agency to be credited with such increase, (3) a written order given in accordance with the applicable procedures of the Clearing Agency containing information regarding the participant account of the Clearing Agency, (4) an appropriately completed investment letter to that effect given by the proposed transferee, then the Trustee, as Certificate Registrar, shall instruct the Clearing Agency to increase or cause to be increased the outstanding principal amount of the applicable Rule 144A Global Certificate by the outstanding principal amount of the Definitive Certificate to be exchanged, and the Trustee, as Certificate Registrar, shall instruct the Clearing Agency, concurrently with such increase, to credit or cause to be credited to the account of the person specified in such instructions a beneficial interest in the applicable Rule 144A Global Certificate equal to the outstanding principal amount of such Definitive Certificate being transferred. (h) Transfer of a Book-Entry Certificate in a Rule 144A Global Certificate or Regulation S Permanent Global Certificate for a Definitive Certificate. Any person having a beneficial interest in a Rule 144A Global Certificate or Regulation S Permanent Global Certificate may upon request, subject to the applicable procedures of the Clearing Agency, exchange such beneficial interest for a Definitive Certificate. Upon receipt by the Trustee of written instructions or such other form of instructions as is customary for the Clearing Agency (or Euroclear or Clearstream, if applicable), from the Clearing Agency or its nominee on behalf of any Person having a beneficial interest in a Rule 144A Global Certificate or Regulation S Permanent Global Certificate, and, in the case of a Restricted Certificate, (i) if such beneficial interest is being transferred to the Person designated by the Clearing Agency as being the Certificate Owner, an appropriately completed investment letter to that effect from such person; or (ii) if such beneficial interest is being transferred to a Qualified Institutional Buyer in accordance with Rule 144A or pursuant to an exemption from registration in accordance with Rule 144A or pursuant to an effective registration statement under the Securities Act, an appropriately completed investment letter to that effect from the proposed transferee, then the Trustee or the custodian, at the direction of the Trustee, shall, in accordance with the standing instructions and procedures existing between the Clearing Agency and the custodian, cause the outstanding principal amount of Rule 144A Global Certificates or Regulation S Permanent Global Certificates, as applicable, to be reduced accordingly and, following such reduction, the Seller shall execute and, the Trustee shall authenticate and deliver to the transferee a Definitive Certificate in the appropriate principal amount. Definitive Certificates issued in exchange for a Book-Entry Certificate in a Rule 144A Global Certificate or Regulation S Permanent Global Certificate, as applicable, pursuant to this clause (h) shall be registered in such names and in such authorized denominations as the Clearing Agency, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Definitive Certificates to the persons in whose names such Certificates are so registered. Following any such issuance of Definitive Certificates, the Trustee, as Certificate Registrar, shall instruct the Clearing Agency to reduce or cause to be reduced the outstanding principal amount of the applicable Global Certificate to reflect the transfer. (i) Legend on Certificates; Minimum Denominations. (i) Each Class A Certificate will bear a legend substantially in the following form: THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAW. EACH PURCHASER OF THIS CERTIFICATE IS HEREBY NOTIFIED THAT THE SELLER OF THIS CERTIFICATE MAY BE RELYING ON THE EXEMPTIONS FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S THEREUNDER. THIS CERTIFICATE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, UNITED STATES PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN "INSTITUTIONAL ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (B) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (C) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, IN THE CASE OF THIS CLAUSE (D), PRIOR TO SUCH TRANSFER, FURNISHES THE TRUST AND THE SELLER A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUST AND THE SELLER) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF CERTIFICATES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE NEIMAN MARCUS GROUP, INC., THE SELLER, THE TRUST AND BERGDORF GOODMAN, INC., THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, (3) REPRESENTS THAT EITHER (A) IT IS NOT ACQUIRING THE CERTIFICATES WITH THE ASSETS OF A BENEFIT PLAN OR (B) ITS PURCHASE AND HOLDING OF THE CERTIFICATES WILL NOT RESULT IN A NONEXEMPT PROHIBITED TRANSACTION UNDER SECTION 406(a) OF ERISA OR SECTION 4975 OF THE CODE, AND (4) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE POOLING AGREEMENT UNDER WHICH THIS CERTIFICATE WAS ISSUED CONTAINS A PROVISION REQUIRING THE TRUST AND THE SELLER TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING. (ii) Each Class B and Class C Certificate will bear a legend substantially in the following form: THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAW. THE HOLDER OF THIS CERTIFICATE SHALL BE PROHIBITED FROM TRANSFERRING ANY INTEREST IN OR PORTION OF THIS CERTIFICATE UNLESS, PRIOR TO SUCH TRANSFER, IT SHALL HAVE DELIVERED TO THE TRUSTEE A TAX OPINION (AS DEFINED IN THE POOLING AND SERVICING AGREEMENT). (iii) Each Regulation S Temporary Global Certificate shall bear a legend in substantially the following form: THIS REGULATION S TEMPORARY GLOBAL CERTIFICATE IS A TEMPORARY GLOBAL CERTIFICATE FOR PURPOSES OF REGULATIONS S UNDER THE SECURITIES ACT WHICH IS EXCHANGEABLE FOR A PERMANENT GLOBAL CERTIFICATE SUBJECT TO THE TERMS AND CONDITIONS SET FORTH HEREIN. (iv) Each Regulation S Permanent Global Certificate shall bear a legend in substantially the following form: THIS REGULATION S PERMANENT GLOBAL CERTIFICATE IS A GLOBAL CERTIFICATE WHICH IS EXCHANGEABLE FOR INTERESTS IN OTHER GLOBAL CERTIFICATES AND DEFINITIVE CERTIFICATES SUBJECT TO THE TERMS AND CONDITIONS SET FORTH HEREIN AND IN THE SERIES 2000-1 SUPPLEMENT (AS DEFINED HEREIN). (j) The Class A Certificates shall be issued in minimum denominations of $100,000 and greater integral multiples of $1,000. Section 9.4 Ratification of Agreement. As supplemented by this Supplement, the Agreement is in all respects ratified and confirmed and the Agreement as so supplemented by this Supplement shall be read, taken, and construed as one and the same instrument. Section 9.5 Notification of Consolidation, etc. of Trustee. The Servicer shall notify each Rating Agency promptly after any merger, conversion or consolidation of the Trustee pursuant to Section 11.09 of the Agreement Section 9.6 Counterparts. This Supplement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument. Section 9.7 GOVERNING LAW. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 9.8 Instructions in Writing. All instructions or other communications given by the Servicer or any other person to the Trustee pursuant to this Supplement shall be in writing. IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have caused this Series 2000-1 Supplement to be duly executed by their respective officers as of the day and year first above written. NEIMAN MARCUS FUNDING CORPORATION, Seller By: Name: Paul F. Gibbons Title: Vice President & Treasurer THE NEIMAN MARCUS GROUP, INC., Servicer By: Name: Paul F. Gibbons Title: Vice President & Treasurer THE BANK OF NEW YORK, Trustee By: Name: Title: Solely for purposes of Section 4.11(f): BERGDORF GOODMAN, INC. By: Name: Title: Exhibit A-1 [FORM OF CLASS A INVESTOR CERTIFICATE] REGISTERED $___________ No. R-A_ [CUSIP NO. 640203 AC 9 ISIN NO. US640203AC95] [CUSIP NO. U63109 AA 7 ISIN NO. USU63109AA74] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAW. EACH PURCHASER OF THIS CERTIFICATE IS HEREBY NOTIFIED THAT THE SELLER OF THIS CERTIFICATE MAY BE RELYING ON THE EXEMPTIONS FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S THEREUNDER. THIS CERTIFICATE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, UNITED STATES PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN "INSTITUTIONAL ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (B) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (C) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, IN THE CASE OF THIS CLAUSE (D), PRIOR TO SUCH TRANSFER, FURNISHES THE TRUST AND THE SELLER A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUST AND THE SELLER) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF CERTIFICATES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE NEIMAN MARCUS GROUP, INC., THE SELLER, THE TRUST AND BERGDORF GOODMAN, INC., THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, (3) REPRESENTS THAT EITHER (A) IT IS NOT ACQUIRING THE CERTIFICATES WITH THE ASSETS OF A BENEFIT PLAN OR (B) ITS PURCHASE AND HOLDING OF THE CERTIFICATES WILL NOT RESULT IN A NONEXEMPT PROHIBITED TRANSACTION UNDER SECTION 406(a) OF ERISA OR SECTION 4975 OF THE CODE, AND (4) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE POOLING AGREEMENT UNDER WHICH THIS CERTIFICATE WAS ISSUED CONTAINS A PROVISION REQUIRING THE TRUST AND THE SELLER TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING. [THIS REGULATION S TEMPORARY GLOBAL CERTIFICATE IS A "TEMPORARY GLOBAL CERTIFICATE" FOR PURPOSES OF REGULATION S UNDER THE SECURITIES ACT WHICH IS EXCHANGEABLE FOR A PERMANENT GLOBAL CERTIFICATE SUBJECT TO THE TERMS AND CONDITIONS SET FORTH HEREIN. ARTICLE IX OF THE SERIES 2000-1 SUPPLEMENT CONTAINS FURTHER RESTRICTIONS ON THE TRANSFER AND RESALE OF THIS CERTIFICATE AND ANY INTEREST HEREIN. EACH TRANSFEREE OF THIS CERTIFICATE, BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED THIS CERTIFICATE SUBJECT TO THE FOREGOING RESTRICTIONS ON TRANSFERABILITY. IN ADDITION, EACH TRANSFEREE OF THIS CERTIFICATE, BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE MADE THE REPRESENTATIONS AND AGREEMENTS SET FORTH IN ARTICLE IX OF THE SERIES 2000-1 SUPPLEMENT.] NEIMAN MARCUS GROUP CREDIT CARD MASTER TRUST SERIES 2000-1 FLOATING RATE CLASS A ASSET BACKED CERTIFICATE [(REGULATION S TEMPORARY GLOBAL CERTIFICATE)] Evidencing an undivided interest in a trust, the corpus of which consists of receivables generated from time to time in the ordinary course of business from a portfolio of consumer revolving credit or installment accounts generated or to be generated by The Neiman Marcus Group, Inc. ("NMG" or the "Servicer") and Bergdorf Goodman, Inc. and other assets and interests constituting the Trust under the Agreement described below. (Not an interest in or a recourse obligation of Neiman Marcus Funding Corporation, NMG or any affiliate of either of them.) This certifies that CEDE & CO. (the "Certificateholder") is the registered owner of a fractional undivided interest in the Neiman Marcus Group Credit Card Master Trust (the "Trust") issued pursuant to Pooling and Servicing Agreement dated as of March 1, 1995 and amended and restated as of July 2, 2000 ( the "Pooling and Servicing Agreement"; such term to include any amendment thereto) by and between Neiman Marcus Funding Corporation, as Seller (the "Seller"), NMG, as the Servicer, and The Bank of New York, as Trustee (the "Trustee"), and the Series 2000-1 Supplement, dated as of July 21 , 2000 (the "Series 2000-1 Supplement"), among the Seller, the Servicer and the Trustee. The Pooling and Servicing Agreement, as supplemented by the Series 2000-1 Supplement, is herein referred to as the "Agreement"). The corpus of the Trust consists of all of the Seller's right, title and interest in, to and under the Trust Assets (as defined in the Agreement). This Certificate represents the aggregate outstanding principal amount of Book-Entry Certificates (as defined in the Agreement) from time to time endorsed hereon, which amount may be reduced or increased, as appropriate, from time to time to reflect exchanges and redemptions. This Certificate does not purport to summarize the Agreement and reference is made to that Agreement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby and the rights, duties and obligations of the Trustee. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to them in the Agreement. This Certificate is one of a series of Certificates entitled "Neiman Marcus Group Credit Card Master Trust $225,000,000 Floating Rate Class A Asset Backed Certificates" (the "Class A Certificates"), each of which represents a fractional undivided interest in the Trust, and is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement, as amended from time to time, the Certificateholder by virtue of the acceptance hereof assents and by which the Certificateholder is bound. The Seller has structured the Agreement, the Class A Certificates, the "Neiman Marcus Group Credit Card Master Trust $23,800,000 Class B Asset Backed Certificates" (the "Class B Certificates") and the "Neiman Marcus Group Credit Card Master Trust $68,200,000 Class C Asset Backed Certificates" (the "Class C Certificates") with the intention that the Class A Certificates will qualify under applicable tax law as debt, and both the Seller and each holder of a Class A Certificate (a "Class A Certificateholder") or any interest therein by acceptance of its Certificate or any interest therein, agrees to treat the Class A Certificates for purposes of federal, state and local income or franchise taxes and any other tax imposed on or measured by income, as debt. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement, or be valid for any purpose. IN WITNESS WHEREOF, the Seller has caused this Certificate to be duly executed under its official seal. NEIMAN MARCUS FUNDING CORPORATION By: Name: Title: Dated: July __, 2000 CERTIFICATE OF AUTHENTICATION This is one of the Class A Certificates referred to in the within- mentioned Pooling and Servicing Agreement. THE BANK OF NEW YORK By: ______________________________ Name: Title: Exhibit A-2 [FORM OF CLASS B INVESTOR CERTIFICATE] REGISTERED $__________ No. R-B_ THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAW. THE HOLDER OF THIS CERTIFICATE SHALL BE PROHIBITED FROM TRANSFERRING ANY INTEREST IN OR PORTION OF THIS CERTIFICATE UNLESS, PRIOR TO SUCH TRANSFER, IT SHALL HAVE DELIVERED TO THE TRUSTEE A TAX OPINION (AS DEFINED IN THE AGREEMENT). NEIMAN MARCUS GROUP CREDIT CARD MASTER TRUST SERIES 2000-1 CLASS B ASSET BACKED CERTIFICATE Evidencing an undivided interest in a trust, the corpus of which consists of receivables generated from time to time in the ordinary course of business from a portfolio of consumer revolving credit or installment accounts generated or to be generated by The Neiman Marcus Group, Inc. ("NMG" or the "Servicer") and Bergdorf Goodman, Inc. and other assets and interests constituting the Trust under the Agreement described below. (Not an interest in or a recourse obligation of Neiman Marcus Funding Corporation, NMG or any affiliate of either of them.) This certifies that CEDE & CO. (the "Certificateholder") is the registered owner of a fractional undivided interest in the Neiman Marcus Group Credit Card Master Trust (the "Trust") issued pursuant to the Pooling and Servicing Agreement dated as of March 1, 1995 and amended and restated as of July 2, 2000 (the "Pooling and Servicing Agreement"; such term to include any amendment thereto) by and between Neiman Marcus Funding Corporation, as Seller (the "Seller"), NMG, as the Servicer, and The Bank of New York, as Trustee (the "Trustee"), and the Series 2000-1 Supplement, dated as of July 21 , 2000 (the "Series 2000-1 Supplement"), among the Seller, NMG, as Servicer and the Trustee. The Pooling and Servicing Agreement, as supplemented by the Series 2000-1 Supplement, is herein referred to as the "Agreement". The corpus of the Trust consists of all of the Seller's right, title and interest in, to and under the Trust Assets (as defined in the Agreement). This Certificate does not purport to summarize the Agreement and reference is made to that Agreement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby and the rights, duties and obligations of the Trustee. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to them in the Agreement. This Certificate is one of a series of Certificates entitled "Neiman Marcus Group Credit Card Master Trust $23,800,000 Class B Asset Backed Certificates, Series 2000-1" (the "Class B Certificates"), each of which represents a fractional undivided interest in the Trust, and is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement, as amended from time to time, the Certificateholder by virtue of the acceptance hereof assents and by which the Certificateholder is bound. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement, or be valid for any purpose. IN WITNESS WHEREOF, the Seller has caused this Certificate to be duly executed under its official seal. NEIMAN MARCUS FUNDING CORPORATION By: Name: Title: Dated: July __, 2000 CERTIFICATE OF AUTHENTICATION This is one of the Class B Certificates referred to in the within- mentioned Pooling and Servicing Agreement. THE BANK OF NEW YORK By: Name: Title: Exhibit A-3 [FORM OF CLASS C INVESTOR CERTIFICATE] REGISTERED $__________ No. R-C_ THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAW. THE HOLDER OF THIS CERTIFICATE SHALL BE PROHIBITED FROM TRANSFERRING ANY INTEREST IN OR PORTION OF THIS CERTIFICATE UNLESS, PRIOR TO SUCH TRANSFER, IT SHALL HAVE DELIVERED TO THE TRUSTEE A TAX OPINION (AS DEFINED IN THE AGREEMENT). NEIMAN MARCUS GROUP CREDIT CARD MASTER TRUST SERIES 2000-1 CLASS C ASSET BACKED CERTIFICATE Evidencing an undivided interest in a trust, the corpus of which consists of receivables generated from time to time in the ordinary course of business from a portfolio of consumer revolving credit or installment accounts generated or to be generated by The Neiman Marcus Group, Inc. ("NMG" or the "Servicer") and Bergdorf Goodman, Inc. and other assets and interests constituting the Trust under the Agreement described below. (Not an interest in or a recourse obligation of Neiman Marcus Funding Corporation, NMG or any affiliate of either of them.) This certifies that Neiman Marcus Funding Corporation (the "Certificateholder") is the registered owner of a fractional undivided interest in the Neiman Marcus Group Credit Card Master Trust (the "Trust") issued pursuant to the Pooling and Servicing Agreement dated as of March 1, 1995 and amended and restated as of July 2, 2000 (the "Pooling and Servicing Agreement"; such term to include any amendment thereto) by and between Neiman Marcus Funding Corporation, as Seller (the "Seller"), NMG as the Servicer, and The Bank of New York, as Trustee (the "Trustee"), and the Series 2000-1 Supplement, dated as of July 21 , 2000 (the "Series 2000-1 Supplement"), among the Seller, NMG, as Servicer and the Trustee. The Pooling and Servicing Agreement, as supplemented by the Series 2000-1 Supplement, is herein referred to as the "Agreement". The corpus of the Trust consists of all of the Seller's right, title and interest in, to and under the Trust Assets (as defined in the Agreement). This Certificate does not purport to summarize the Agreement and reference is made to that Agreement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby and the rights, duties and obligations of the Trustee. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to them in the Agreement. This Certificate is one of a series of Certificates entitled "Neiman Marcus Group Credit Card Master Trust $68,200,000 Class C Asset Backed Certificates, Series 2000-1" (the "Class C Certificates"), each of which represents a fractional undivided interest in the Trust, and is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement, as amended from time to time, the Certificateholder by virtue of the acceptance hereof assents and by which the Certificateholder is bound. Unless the Rating Agency Condition and certain other conditions set forth in the Series 2000- 1 Supplement are satisfied, (i) no principal will be payable to the Class C Certificateholders until the first Distribution Date in the Amortization Period and (ii) no interest will accrue on the unpaid principal amount of the Class C Certificates. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement, or be valid for any purpose. IN WITNESS WHEREOF, the Seller has caused this Certificate to be duly executed under its official seal. NEIMAN MARCUS FUNDING CORPORATION By: Name: Title: Dated: July __, 2000 CERTIFICATE OF AUTHENTICATION This is one of the Class C Certificates referred to in the within- mentioned Pooling and Servicing Agreement. THE BANK OF NEW YORK By: Name: Title: EXHIBIT B MONTHLY CERTIFICATEHOLDER'S STATEMENT THE NEIMAN MARCUS GROUP, INC. NEIMAN MARCUS GROUP CREDIT CARD MASTER TRUST Pursuant to the Pooling and Servicing Agreement dated as of March 1, 1995 and amended and restated as of July 2, 2000 (as it may be amended, from time to time, the "Agreement"), as supplemented by the Series 2000-1 Supplement dated as of July 21, 2000 (as amended and supplemented, the "Series Supplement"), each among The Neiman Marcus Group, Inc., as Servicer, Neiman Marcus Funding Corporation, as Seller and The Bank of New York, as Trustee, the Servicer is required to prepare certain information each month regarding distributions to Certificateholders and the performance of the Trust. The information with respect to the applicable Distribution Date and Monthly Period is set forth below. Monthly Period: Distribution Date: Period (Revolving = 0-56, Controlled Amortization = 57-62) A. ORIGINAL DEAL PARAMETERS (a) Class A Initial Invested Amount $225,000,000 71.0% (b) Class B Initial Invested Amount $ 23,800,000 7.5% (c) Class C Initial Invested Amount $ 68,200,000 21.5% (d) Total Initial Invested Amount $317,000,000 (e) Class A Certificate Rate = One-month LIBOR plus 0.27% (f) Class B Certificate Rate 0% (g) Class C Certificate Rate 0% (h) Servicing Fee Rate 2% (i) Discount Percentage 2% B. CURRENT INTEREST RATES (a) Class A Certificate Rate (One-month LIBOR + A-(e)) ______% (b) Class B Certificate Rate 0%* (c) Class C Certificate Rate 0%* *Unless changed by supplement I. RECEIVABLES IN THE TRUST (a) Beginning of the Period Principal Receivables $________ (b) Beginning of the Period Finance Charge Receivables $________ (c) Beginning of the Period Discount Option Receivables $________ (d) Beginning of the Period Total Receivables (a+b+c) $________ (e) Removed Principal Receivables $________ (f) Removed Finance Charge Receivables $________ (g) Removed Total Receivables (e+f) $________ (h) Additional Principal Receivables $________ (i) Additional Finance Charge Receivables $________ (j) Additional Total Receivables (h+i) $________ (k) Ineligible Principal Receivables Excluded $________ (l) End of Period Principal Receivables $________ (m) End of Period Finance Charge Receivables $________ (n) End of Period Discount Option Receivables $________ (o) End of Period Total Receivables (l+m+n) $________ II. INVESTED AMOUNTS AND ALLOCATION PERCENTAGES (a) Class A Initial Invested Amount $________ ________% (b) Class B Initial Invested Amount $________ ________% (c) Class C Initial Invested Amount $________ ________% (d) Total Initial Invested Amount (a+b+c) $________ (e) Class A Invested Amount (a-(X.d)) $________ ________% (f) Class B Invested Amount (b-(X.h)) $________ ________% (g) Class C Invested Amount (c-(X.l)) ________% (h) Total Invested Amount (e+f+g) $________ (i) Floating Allocation Percentage (h/l.a)) ________% (j) Class A Floating Allocation Percentage (e/(I.a)) ________% (k) Class B Floating Allocation Percentage (f/(I.a)) ________% (l) Class C Floating Allocation Percentage (g/(I.a)) ________% (m) Fixed Allocation Percentage (h/(I.a)) ________% (n) Class A Fixed Allocation Percentage (e/(I.a)) ________% (o) Class B Fixed Allocation Percentage (f/(I.a)) ________% (p) Class C Fixed Allocation Percentage (g/(I.a)) ________% (q) Servicing Fee (h*(A.h)) % $________ (r) Investor Defaulted Amount (i*(IV.o)) $________ (r) Investor Adjustment Amount (i*(IV.p)) $________ III. SELLER'S INTEREST, RETAINED INTEREST AND EXCESS FUNDING ACCOUNT (a) Beginning Seller's Interest (I.a-II.h) $________ (b) Ending Seller's Interest (I.l-II.h) $________ (c) Required Seller's Interest $________ (d) Retained Interest (II.g+III.b) $________ (e) Required Retained Interest $________ (f) Required Principal Balance $________ (g) Amount on deposit in Special Funding Account $________ IV. PERFORMANCE SUMMARY COLLECTIONS: $________ (a) Collections of Principal Receivables $________ (b) Collections of Finance Charge Receivables $________ (c) Collections of Discount Option Receivables $________ (d) Total Finance Charge Collections (b+c) $________ (e) Total Collections (a+b+c) $________ DELINQUENCIES AND LOSSES: (f) End of the month delinquencies: $________ (g) 30 days delinquent $________ (h) 60 days delinquent $________ (i) 90 days delinquent $________ (j) 120+ days delinquent $________ (k) Total 30+ days delinquent (g+h+i+j) $________ (l) Gross Charge-Offs during the month $________ (m) Recoveries during the month $________ (n) Net Charge-Offs during the month (l-m) $________ (o) Defaulted Amount $________ (p) Unpaid adjustment Payments $________ V. EMPLOYEE AND NON-U.S. ACCOUNTS Amount # of Accounts (a) Employee Accounts at end of month $________ (b) as a percentage of total (a/(e)) ________% ________% (c) Non-US Accounts at end of month $________ (d) as a percentage of total (c/(e)) ________% ________% (e) Total amount/number of Accounts in Trust (at end of month) $________ VI. AVAILABLE SERIES 2000-1 FINANCE CHARGE COLLECTIONS (a) Available Series 2000-1 Finance Charge Collections (((IV.d))*II.(i)) $________ (b) Class A Monthly Interest (((A.e)*(II.e))/12) $________ (c) [Reserved] $________ (d) Servicing Fee [if not Neiman Marcus] $________ (e) Class A Investor Defaulted Amount and Class A Investor Adjustment Amount (([IV.o+IV.p](II.j)) $________ (f) Reimbursement of Class A Investor Charge-Offs (g) Class B Investor Defaulted Amount and Class B Investor Adjustment Amount ((IV.o+IV.p](II.k)) $________ (h) Reimbursement of Class B Investor Charge-Offs and Reallocated Class B Principal Collections (i) Class C Investor Defaulted Amount and Class C Investor Adjustment Amount ((IV.o+IV.p](II.l)) $________ (j) Reimbursement of Class C Investor Charge-Offs and Reallocated Class C Principal Collections (k) Servicing Fee [if Neiman Marcus] $________ (l) Total Excess Finance Charge Collections (a-b-c-d-e-f- g-h-i-j-k) $________ $________ $________ VII. YIELD AND BASE RATE Base Rate (The sum of the current Class A Certificate Rate, Class B Certificate Rate, and Class C Certificate Rate weighted by the unpaid principal amount of each, plus the Servicing Fee Rate) (a) Base Rate (current month) ________% (b) Base Rate (prior month) ________% (c) Base Rate (2 months ago) ________% (d) 3 Month Average Base Rate ________% Portfolio Yield (Series 2000-1 Finance Charge Collections minus the Defaulted Amount/total invested amount) (e) Portfolio Yield (current month) ________% (f) Portfolio Yield (prior month) ________% (g) Portfolio Yield (2 months ago) ________% (h) 3 Month Average Portfolio Yield ________% VIII. PORTFOLIO PERFORMANCE RATES (a) Net Charge-Offs (% of Principal Receivables Outstanding (at beginning of month)) _______% (b) Monthly Payment Rate (% of Total Receivables Outstanding (at beginning of month)) ________% (c) Gross Yield to Investors (annualized) ________% (d) Portfolio Yield (3 month average (annualized)) ________% (e) Base Rate (3 month average) ________% (f) Excess Finance Charge Collections % (d-e) ________% IX. PRINCIPAL COLLECTIONS (a) Class A Principal Allocation Percentage (II.e/I.a) ________% (b) Class A Principal $________ (c) Class B Principal Allocation Percentage (II.f/I.a) ________% (d) Class B Principal $________ (e) Class C Principal Allocation Percentage (II.g/I.a) ________% (f) Class C Principal $________ (g) Total Monthly Principal (b+d+f) $________ (h) Reallocated Principal Collections $________ (i) Shared Principal Collections allocable from other Series $________ X. INVESTOR CHARGE-OFFS CLASS A INVESTOR CHARGE-OFFS (a) Class A Investor Charge-Offs $________ (b) Class A Investor Charge-Offs per $1,000 original certificate principal amount $________ (c) Total amount reimbursed in respect of Class A Investor Charge-Offs $________ (d) The amount, if any, by which the outstanding principal balance of the Class A Certificates exceeds the Class A Invested Amount after giving effect to all transactions on such Distribution Date. $________ CLASS B INVESTOR CHARGE-OFFS (e) Class B Investor Charge-Offs $________ (f) Class B Investor Charge-Offs per $1,000 original certificate principal amount $________ (g) Total amount reimbursed in respect of Class B Investor Charge-Offs $________ (h) The amount, if any, by which the outstanding principal balance of the Class B Certificates exceeds the Class B Invested Amount after giving effect to all transactions on such Distribution Date. $________ CLASS C INVESTOR CHARGE-OFFS (i) Class C Investor Charge-Offs $________ (j) Class C Investor Charge-Offs per $1,000 original certificate principal amount $________ (k) Total amount reimbursed in respect of Class C Investor Charge-Offs $________ (l) The amount, if any, by which the outstanding principal balance of the Class C Certificates exceeds the Class C Invested Amount after giving effect to all transactions on such Distribution Date. $________ XI. AMORTIZATION (a) Cumulative Class A principal paid (as of prior distribution dates) $________ (b) Class A Principal Payments $________ (c) Total Class A Principal Paid (a+b) $________ (d) Cumulative Class B Principal Paid (as of prior distribution dates $________ (e) Class B Principal Payments $________ (f) Total Class B Principal Paid (d+e) $________ (g) Cumulative Class C Principal Paid (as of prior distribution dates) $________ (h) Class C Principal Payments $________ (i) Total Class C Principal Paid (g+h) $________ THE NEIMAN MARCUS GROUP, INC., as Servicer By: ____________________________ Name: Title: EXHIBIT C MONTHLY SERVICER'S CERTIFICATE THE NEIMAN MARCUS GROUP, INC. NEIMAN MARCUS GROUP CREDIT CARD MASTER TRUST SERIES 2000-1 The undersigned, a duly authorized representative of The Neiman Marcus Group, Inc., as Servicer ("NMG"), pursuant to the Pooling and Servicing Agreement dated as of March 1, 1995 and amended and restated as of July 2, 2000 (as it may be amended, from time to time, the "Agreement"), as supplemented by the Series 2000-1 Supplement (as amended and supplemented, the "Series Supplement"), each among NMG, Neiman Marcus Funding Corporation and The Bank of New York, does hereby certify as follows: 1. Capitalized terms used in this Certificate have their respective meanings as set forth in the Agreement or the Series Supplement, as applicable. 2. NMG is, as of the date hereof, the Servicer under the Agreement. 3. The undersigned is a Servicing Officer. 4. This Certificate relates to the Distribution Date occurring on ___________, 200_. 5. As of the date hereof, to the best knowledge of the undersigned, the Servicer has performed in all material respects all its obligations under the Agreement through the Monthly Period preceding such Distribution Date. 6. As of the date hereof, to the best knowledge of the undersigned, no Pay Out Event occurred on or prior to such Distribution Date. 7. As of the date hereof, to the best knowledge of the undersigned, no lien has been placed on any of the Receivables other than pursuant to the Agreement. 8. The aggregate amount of Collections processed for the preceding Monthly Period was equal to $_________. 9. The aggregate amount of Collections of Finance Charge Receivables (including Discount Option Receivables) for the preceding Monthly period was equal to $_________. 10. The aggregate amount of Collections of Principal Receivables for the preceding Monthly Period was equal to $_________. 11. The total amount to be distributed to Investor Certificateholders on the next succeeding Distribution Date is equal to $_________. 12. The amount to be distributed to Class A Certificateholders on the next succeeding Distribution Date per $1,000 original principal amount is equal to: 13. The amount of such distribution allocable to principal is equal to $_________. 14. The amount of such distribution allocable to principal per $1,000 original principal amount for the Class A Certificates is equal to: 15. The amount of such distribution allocable to interest is equal to $_________. 16. The amount of such distribution allocable to interest per $1,000 original principal amount for the Class A Certificates is equal to: Attached hereto is a true and correct copy of the Monthly Certificateholders Statement required to be delivered by the Servicer on the date of this Certificate pursuant to the Agreement and the Series Supplement. IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Certificate this ___ day of ___________, 200__. THE NEIMAN MARCUS GROUP, INC., as Servicer By: ______________________________ Name: Title: EX-10.20 9 0009.txt TRUSTEE RESIGNATION 7/2/2000 EXHIBIT 10.20 TRUSTEE RESIGNATION AND AGENT APPOINTMENT AGREEMENT THIS AGREEMENT, dated as of July 2, 2000 is made by and among The Neiman Marcus Group, Inc., a Delaware corporation ("NMG"), Neiman Marcus Funding Corporation, a Delaware corporation (the "Seller" and, together with NMG, each a "Company"), The Chase Manhattan Bank (successor by merger to The Chase Manhattan Bank, N.A.) ("Chase") and THE BANK OF NEW YORK, a banking corporation duly organized and existing under the laws of the State of New York ("Successor Trustee"). BACKGROUND: A. The Companies and Chase are parties to a Pooling and Servicing Agreement (the "Base Agreement") dated as of March 1, 1995 and a Series 1995-1 Supplement (the "Existing Supplement" and together with the Base Agreement, the "Pooling Agreement") to the Base Agreement. The final payment on the Investor Certificates (the "1995-1 Certificates") issued pursuant to (and as defined in) the Existing Supplement is due on July 15, 2000 (the "Final Distribution Date"), and Chase, as trustee under the Pooling Agreement (in such capacity, together with any successor in that capacity, the "Trustee"), holds the funds (the "Final Distribution Funds") necessary to make that final payment. B. Section 11.07 of the Pooling Agreement provides that the Trustee may at any time resign by giving written notice of such resignation to NMG, in its capacity as Servicer, effective upon the acceptance by a successor Trustee of its appointment as a successor Trustee. C. Section 11.07 of the Pooling Agreement provides that, if the Trustee shall resign, the Seller shall promptly appoint a successor Trustee. D. Section 11.08 of the Pooling Agreement provides that any successor Trustee appointed in accordance with the Pooling Agreement shall execute, acknowledge and deliver to the Companies and to its predecessor trustee an instrument accepting such appointment under the Pooling Agreement, and thereupon the resignation of the predecessor Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of the predecessor trustee. E. Pursuant to Sections 6.04 and 6.07 of the Pooling Agreement, Chase was appointed Transfer Agent and Registrar (the "Registrar") and Paying Agent. F. The Company desires to appoint Successor Trustee as Trustee, Paying Agent and Registrar to succeed Chase in such capacities under the Pooling Agreement, except that Chase will continue as Paying Agent and Registrar for the 1995-1 Certificates pursuant to Section 1.5 below. G. Successor Trustee is willing to accept such appointment as successor Trustee, Paying Agent and Registrar under the Pooling Agreement. NOW, THEREFORE, the Companies, Chase and Successor Trustee, for and in consideration of the premises and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby consent and agree as follows: 1.THE RESIGNING TRUSTEE 1.1 Pursuant to Section 11.07 of the Pooling Agreement, Chase hereby notifies NMG, as the Servicer, that Chase is hereby resigning as Trustee under the Pooling Agreement. In its capacity as the resigning Trustee, Chase is referred to below as "Resigning Trustee." 1.2 Resigning Trustee hereby represents and warrants to Successor Trustee that: No covenant or condition contained in the Pooling Agreement has been waived by Resigning Trustee or, to the best knowledge of responsible officers of Resigning Trustee's corporate trust department, by the Holders of the percentage in aggregate principal amount of the 1995-1 Certificates required by the Pooling Agreement to effect any such waiver. There is no action, suit or proceeding pending or, to the best knowledge of responsible officers of Resigning Trustee's corporate trust department, threatened against Resigning Trustee before any court or any governmental authority arising out of any act or omission of Resigning Trustee as Trustee under the Pooling Agreement. As of the effective date of this Agreement, Resigning Trustee will hold no moneys or property under the Pooling Agreement, other than the Final Distribution Funds. Pursuant to Section 6.02 of the Pooling Agreement, Resigning Trustee duly authenticated and delivered, on March 15, 1995, $300,000,000 aggregate principal amount of 1995-1 Certificates, comprised of (a) $225,000,000 Class A Certificates, which have been paid in full, (b) $21,000,000 Class B Certificates (the "Class B Certificates"), which are to be paid in full with the Final Distribution Funds and (c) $54,000,000 of Class C Certificates (the "Class C Certificates"), which are registered in the name of the Seller and will be presented for cancellation on or about the Final Distribution Date. This Agreement has been duly authorized, executed and delivered on behalf of Resigning Trustee and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms. No responsible officer of the Resigning Trustee's corporate trust department has received notice of any event that has occurred and is continuing which is, or after notice or lapse of time would become, an Early Amortization Event under the Pooling Agreement. 1.3 Resigning Trustee hereby assigns, transfers, delivers and confirms to Successor Trustee all right, title and interest of Resigning Trustee in and to the trust under the Pooling Agreement and all the rights, powers and trusts of the Trustee under the Pooling Agreement, subject to Section 1.5 below. Resigning Trustee shall execute and deliver such further instruments and shall do such other things as Successor Trustee may reasonably require so as to more fully and certainly vest and confirm in Successor Trustee the rights, powers and trusts hereby assigned, transferred, delivered and confirmed to Successor Trustee as Trustee, Paying Agent and Registrar. 1.4 If the Class B Certificates are not paid in full, or the Class C Certificates are not cancelled, in either case on the Final Distribution Date, Resigning Trustee shall deliver to Successor Trustee, promptly after the Final Distribution Date, all of the documents listed on Exhibit A hereto. 1.5 Chase shall continue as Paying Agent and Registrar for the Class B Certificates and the Class C Certificates. Although the Companies and the Successor Trustee are amending and restating the Base Agreement as of the date of this Agreement, such amendment and restatement shall not affect in any way the rights, duties or obligations of Chase as Paying Agent and Registrar for the Class B Certificates and Class C Certificates, which Chase shall carry out under the terms of the Pooling Agreement as in effect prior to the amendment and restatement, without giving effect to the amendment and restatement. The Resigning Trustee hereby retains any rights under the Pooling Agreement which accrued to the benefit of the Resigning Trustee prior to the effective date of this resignation. 2.THE COMPANIES 2.1 The Companies hereby accept the resignation of Resigning Trustee as Trustee, Paying Agent and Registrar under the Pooling Agreement. 2.2 The Seller hereby appoints Successor Trustee as Trustee, Paying Agent and Registrar under the Pooling Agreement to succeed to, and hereby vests Successor Trustee with, all the rights, powers, duties and obligations of Resigning Trustee under the Pooling Agreement with like effect as if originally named as Trustee, Paying Agent and Registrar in the Pooling Agreement, subject to Section 1.5 above. 2.3 If the 1995-1 Class B Certificates are not paid in full on the Final Distribution Date, the Companies shall cause a notice, substantially in the form of Exhibit B annexed hereto, to be sent to each Holder of the 1995-1 Class B Certificates in accordance with the provisions of Section 11.08 of the Pooling Agreement. 2.4 Each Company hereby represents and warrants to Resigning Trustee and Successor Trustee that: It is a corporation duly and validly organized and existing pursuant to the laws of the State of Delaware. The Pooling Agreement was validly and lawfully executed and delivered by such Company and the 1995-1 Certificates were validly issued. It has performed or fulfilled prior to the date hereof, and will continue to perform and fulfill after the date hereof, each covenant, agreement, condition, obligation and responsibility under the Pooling Agreement. No event has occurred and is continuing which is, or after notice or lapse of time would become, an Early Amortization Event under the Pooling Agreement. No covenant or condition contained in the Pooling Agreement has been waived by such Company or, to the best of such Company's knowledge, by Holders of the percentage in aggregate principal amount of the 1995-1 Certificates required to effect any such waiver. There is no action, suit or proceeding pending or, to the best of such Company's knowledge, threatened against such Company before any court or any governmental authority arising out of any act or omission of such Company under the Pooling Agreement. This Agreement has been duly authorized, executed and delivered on behalf of such Company and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms. All conditions precedent relating to the appointment of The Bank of New York as successor Trustee, Paying Agent and Registrar under the Pooling Agreement have been complied with by such Company. 3. THE SUCCESSOR TRUSTEE 3.1 Successor Trustee hereby represents and warrants to Resigning Trustee and to the Company that: Successor Trustee is eligible under the provisions of Section 11.06 of the Pooling Agreement to act as Trustee under the Pooling Agreement. This Agreement has been duly authorized, executed and delivered on behalf of Successor Trustee and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms. 3.2 Successor Trustee hereby accepts its appointment as successor Trustee, Paying Agent and Registrar under the Pooling Agreement and assumes the rights, powers, duties and obligations of Resigning Trustee as Trustee, Paying Agent and Registrar under the Pooling Agreement, upon the terms and conditions set forth therein, with like effect as if originally named as Trustee, Paying Agent and Registrar under the Pooling Agreement, subject to Section 1.5 above. 4 .MISCELLANEOUS 4.1 Except as otherwise expressly provided herein or unless the context otherwise requires, all terms used herein which are defined in the Pooling Agreement shall have the meanings assigned to them in the Pooling Agreement. 4.2 This Agreement and the resignation, appointment and acceptance effected hereby shall be effective as of the opening of business on July 2, 2000. 4.3 This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 4.4 This Agreement may be executed in any number of counterparts each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. 4.5 The Companies, Resigning Trustee and Successor Trustee hereby acknowledge receipt of an executed and acknowledged counterpart of this Agreement and the effectiveness thereof. IN WITNESS WHEREOF, the parties hereto have caused this Trustee Resignation and Agent Appointment Agreement to be duly executed and acknowledged and their respective seals to be affixed hereunto and duly attested all as of the day and year first above written. [SEAL] Attest: THE NEIMAN MARCUS GROUP, INC., a Delaware corporation By: By: Name: Name: Title: Title: [SEAL] Attest: NEIMAN MARCUS FUNDING CORPORATION, a Delaware corporation By: By: Name: Name: Title: Title: [SEAL] Attest: THE CHASE MANHATTAN BANK, as Resigning Trustee By: By: Name: Name: Title: Title: [SEAL] Attest: THE BANK OF NEW YORK, a New York banking corporation, as Successor Trustee By: By: Name: Name: Title: Title: STATE OF ) : ss: COUNTY OF ) On the day of , 2000, before me personally came to me known, who, being by me duly sworn, did depose and say that he/she resides at __________________________________; that he/she is ____________________ of The Neiman Marcus Group, Inc., one of the corporations described in and which executed the above instrument; that he/she knows the corporate seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by the authority of the Board of Directors of said corporation; and that he/she signed his/her name thereto by like authority. Notary Public STATE OF ) : ss: COUNTY OF ) On the day of , 2000, before me personally came to me known, who, being by me duly sworn, did depose and say that he/she resides at __________________________________; that he/she is ____________________ of Neiman Marcus Funding Corporation, one of the corporations described in and which executed the above instrument; that he/she knows the corporate seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by the authority of the Board of Directors of said corporation; and that he/she signed his/her name thereto by like authority. Notary Public STATE OF ) : ss: COUNTY OF ) On the day of , 2000, before me personally came to me known, who, being by me duly sworn, did depose and say that he/she resides at __________________________________; that he/she is ____________________ of The Chase Manhattan Bank, one of the corporations described in and which executed the above instrument; that he/she knows the corporate seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by the authority of the Board of Directors of said corporation; and that he/she signed his/her name thereto by like authority. Notary Public STATE OF ) : ss: COUNTY OF ) On the day of , 2000, before me personally came to me known, who, being by me duly sworn, did depose and say that he/she resides at __________________________________; that he/she is ____________________ of The Bank of New York, one of the corporations described in and which executed the above instrument; that he/she knows the corporate seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by the authority of the Board of Directors of said corporation; and that he/she signed his/her name thereto by like authority. Notary Public EXHIBIT A Documents to be delivered to Successor Trustee 1. Executed copy of Pooling Agreement. 2. File of closing documents from initial issuance. 3. Certified list of Holders as of , including certificate detail and all "stop transfers" and the reason for such "stop transfers" (or, alternatively, if there are a substantial number of registered Holders, the computer tape reflecting the identity of such Holders). 4. Copies of any official notices sent by the Trustee to all the Holders of the 1995-1 Certificates pursuant to the terms of the Pooling Agreement during the past twelve months. EXHIBIT B [NMG LETTERHEAD] NOTICE To the Holders of of . NOTICE IS HEREBY GIVEN, pursuant to Section 11.08 of the Pooling and Servicing Agreement (the "Pooling Agreement") dated as of March 1, 1995 among Neiman Marcus Funding Corporation, (the "Seller"), The Neiman Marcus Group, Inc. and The Chase Manhattan Bank, as Trustee, that The Chase Manhattan Bank has resigned as Trustee, Paying Agent and Transfer Agent and Registrar under the Pooling Agreement. Pursuant to Sections 6.04, 6.07 and 11.08, respectively, of the Pooling Agreement, The Bank of New York, a corporation duly organized and existing under the laws of the State of New York, has accepted appointment as Trustee, Paying Agent and Transfer Agent and Registrar under the Pooling Agreement. The address of the corporate trust office of The Bank of New York is 101 Barclay Street, New York, New York 10286. The Chase Manhattan Bank resignation as Trustee, Paying Agent and Transfer Agent and Registrar and The Bank of New York's appointment as successor Trustee, Paying Agent and Transfer Agent and Registrar were effective as of the opening of business on July 2, 2000. Dated: Chestnut Hill, Massachusetts July __, 2000 Very truly yours, THE NEIMAN MARCUS GROUP, INC. BY: Name: Title: EX-13.1 10 0010.txt NEIMAN MARCUS ANNUAL REPORT EXHIBIT 13.1 [BEGIN PAGE 29] MANAGEMENT'S DISCUSSION AND ANALYSIS OVERVIEW The Company's operations include specialty retail stores, which consist of Neiman Marcus Stores and Bergdorf Goodman, and a direct marketing operation, Neiman Marcus Direct. The Company's revenues rose to $2.85 billion in fiscal 2000, representing a 22.1% increase over revenues of $2.34 billion in fiscal 1998. Net earnings increased 26.4% to $134.0 million in fiscal 2000 from $106.0 million in fiscal 1998. Approximately 85% of the Company's revenues are generated by its specialty retail stores, Neiman Marcus and Bergdorf Goodman, with the balance generated primarily by Neiman Marcus Direct. Revenue growth over the last three fiscal years at specialty retail stores can be attributed principally to increases in overall comparable store sales and new store openings. Since August 1996 the Company has opened three new Neiman Marcus stores, including most recently a new store in Honolulu, Hawaii in September 1998. The Company currently also plans to open five new Neiman Marcus stores in the next four years, one of which will be a replacement store. In fiscal 2000, average store sales per gross square foot reached a record high of $490, representing an increase of 11.4% over three years. The Company has consistently focused on renovating and modernizing its stores to improve productivity. The Company also aims to improve average transaction amounts and comparable sales growth with carefully edited assortments and marketing and sales programs which are designed to increase its customers' awareness of merchandise offerings in the stores. The Company launched its Brand Development Initiative in fiscal 1999, a strategy designed to create shareholder value by investing in designer resources that serve affluent customers. In February 1999, the Company acquired a 56% interest in Kate Spade LLC, a manufacturer of high-end leather handbags and accessories, for $33.6 million. In November 1998, the Company acquired a 51% interest in Gurwitch Bristow Products, which manufactures and markets the Laura Mercier cosmetic lines, for $6.7 million. In addition to opening new stores, the Company continues to make significant capital investments in an effort to increase productivity. During fiscal 1998, 1999 and 2000, the Company invested a total of approximately $261.2 million to remodel its existing stores, to construct a new Neiman Marcus store in Hawaii and to purchase a building adjacent to its existing San Francisco store as part of a plan to enlarge and remodel that store. In fiscal 2000, major projects included the commencement of multi-year construction projects to build new stores, to remodel and expand Neiman Marcus stores in San Francisco and Las Vegas, as well as to continue remodeling the plaza level of the main store of Bergdorf Goodman. On October 22, 1999, Harcourt General, Inc. (Harcourt General) completed the spin-off of its controlling equity position in the Company in a tax-free distribution to its shareholders. Harcourt General distributed approximately 21.4 million of its approximately 26.4 million shares of the Company. Harcourt General retained approximately 5.0 million shares. Each common shareholder of Harcourt General received .3013 of a share of Class B Common Stock of the Company for every share of Harcourt General Common Stock and Class B Stock held on October 12, 1999, which was the record date for the distribution. This transaction had no impact on the reported equity of the Company. [END PAGE 29] [BEGIN PAGE 30]
OPERATING RESULTS Fiscal years ended -------------------------------- July 29, July 31, August 1, (Dollars in Millions) 2000 1999 1998 -------------------------------- REVENUES (RESTATED)(3)(RESTATED)(3) Specialty Retail Stores $2,424.9 $2,171.0 $2,053.9 Direct Marketing 363.8 321.8 283.8 Other (1) 65.9 22.2 - -------------------------------- Total $2,854.6 $2,515.0 $2,337.7 ================================ OPERATING EARNINGS Specialty Retail Stores $ 248.5 $ 180.2 $ 197.6 Direct Marketing 24.4 14.5 15.6 Other (1) (24.5) (12.1) (14.6) -------------------------------- Total $ 248.4 $ 182.6 $ 198.6 ================================ OPERATING PROFIT MARGIN Specialty Retail Stores 10.2% 8.3% 9.6% Direct Marketing 6.7% 4.5% 5.5% Total (2) 8.7% 7.3% 8.5% ================================ (1) Other includes the operations of Kate Spade LLC and Gurwitch Bristow Products, corporate expenses, and e-commerce expenses incurred to launch the Company's Web site. (2) Includes Other. (3) Amounts restated for change from last-in, first-out (LIFO) method of accounting for inventories to the first-in, first-out (FIFO) method as well as restated for leased department sales.
FISCAL 2000 COMPARED TO FISCAL 1999 Revenues in fiscal 2000 increased $339.6 million to $2.85 billion from $2.52 billion in fiscal 1999. The 13.5% increase was primarily attributable to higher overall comparable sales. Total comparable sales increased 11.8%. Comparable sales increased 10.4% at Neiman Marcus Stores, 14.6% at Bergdorf Goodman, and 13.1% at Neiman Marcus Direct. Cost of goods sold including buying and occupancy costs increased 9.7% to $1.87 billion in fiscal 2000 from $1.70 billion in fiscal 1999, primarily due to increased sales. As a percentage of revenues, cost of goods sold was 65.3% in fiscal 2000 compared to 67.6% in fiscal 1999. The proportionate decrease in fiscal 2000 resulted primarily from higher gross margins at both Neiman Marcus Stores and Bergdorf Goodman in comparison to the prior year, principally as a result of lower markdowns and, to a lesser extent, higher gross margins at Neiman Marcus Direct. Selling, general and administrative expenses increased 17.8% in fiscal 2000 to $725.4 million from $615.9 million in fiscal 1999. As a percentage of revenues, selling, general and administrative expenses increased to 25.4% in fiscal 2000 from 24.5% in fiscal 1999. The proportionate increase in fiscal 2000 was primarily due to approximately $24.0 million of costs incurred to launch the Company's e-commerce initiative. [END PAGE 30] [BEGIN PAGE 31] Corporate expenses, which consist primarily of charges for salaries, benefits and overhead for the individuals who provide services under the intercompany services agreement with Harcourt General and professional fees, decreased 3.3% to $15.9 million from $16.4 million in the prior year. The decrease resulted primarily from expenses incurred in the prior year in connection with the Company's recapitalization. Operating earnings increased by 36.0% to $248.4 million from $182.6 million in the prior year. This increase was attributable to higher sales and higher gross margins. Interest expense increased 1.6% in fiscal 2000 to $25.4 million from $25.0 million in the prior year. The increase resulted from higher average borrowings which resulted primarily from borrowings incurred to repay the Company's securitization upon maturities during the second half of fiscal 2000. The Company's effective income tax rate was 38% in fiscal 2000, as compared to 39% in fiscal 1999. FISCAL 1999 COMPARED TO FISCAL 1998 Revenues in fiscal 1999 increased $177.3 million to $2.52 billion from $2.34 billion in fiscal 1998. The 7.6% increase was primarily attributable to higher overall comparable sales, sales from Chef's Catalog, acquired in January 1998, and the new Neiman Marcus store in Hawaii which opened in September 1998. Total comparable sales increased 2.6%. Comparable sales increased 3.4% at Neiman Marcus Stores, decreased 2.3% at Bergdorf Goodman, and increased 2.0% at Neiman Marcus Direct. Cost of goods sold including buying and occupancy costs increased 8.4% to $1.70 billion in fiscal 1999 from $1.57 billion in fiscal 1998, primarily due to increased sales. As a percentage of revenues, cost of goods sold was 67.6% in fiscal 1999 compared to 67.1% in fiscal 1998. The increase in fiscal 1999 resulted primarily from lower gross margins at both Neiman Marcus Stores and Bergdorf Goodman in comparison to the prior year, principally as a result of higher markdowns. Selling, general and administrative expenses increased 10.8% in fiscal 1999 to $615.9 million from $556.1 million in fiscal 1998. As a percentage of revenues, selling, general and administrative expenses increased to 24.5% in fiscal 1999 from 23.8% in fiscal 1998. The proportionate increase in 1999 was primarily due to higher selling and sales promotion expenses. Corporate expenses, which consist primarily of charges for salaries, benefits and overhead for the individuals who provide services under the intercompany services agreement with Harcourt General and professional fees, increased 12.2% to $16.4 million from $14.6 million in the prior year. The increase resulted primarily from expenses incurred in connection with the Company's recapitalization. Operating earnings decreased by 8.0% to $182.6 million from $198.6 million in the prior year. This decrease was attributable to lower gross margins, higher selling and sales promotion costs and Bergdorf Goodman's decline in comparable sales. Interest expense increased 14.2% in fiscal 1999 to $25.0 million from $21.9 million in the prior year. The increase resulted from higher average borrowings as well as a higher effective interest rate, which resulted from the issuance of fixed rate debt in May 1998. The Company's effective income tax rate was 39% in fiscal 1999, as compared to 40% in fiscal 1998. [END PAGE 31] [BEGIN PAGE 32] LIQUIDITY AND CAPITAL RESOURCES In fiscal 2000, the Company had sufficient cash flows from operations and its revolving credit facility to finance its working capital needs, capital expenditures, repayments under the Company's securitization, and stock repurchases. Operating activities provided net cash of $255.1 million in fiscal 2000. The Company's capital expenditures in fiscal 2000 included the construction of new stores and existing store renovations. Capital expenditures were $89.0 million in fiscal 2000, $91.0 million in fiscal 1999 and $81.2 million in fiscal 1998. The Company opened a new Neiman Marcus store in Honolulu's Ala Moana Center in September 1998. Capital expenditures are currently estimated to approximate $175 million for fiscal 2001. In February 1999, the Company acquired a 56% interest in Kate Spade LLC for approximately $33.6 million in cash. In November 1998, the Company acquired a 51% interest in Gurwitch Bristow Products for approximately $6.7 million in cash. Both acquisitions were funded primarily through borrowings under the Company's revolving credit facility. In January 1998 the Company acquired Chef's Catalog for approximately $31.0 million in cash, which was also funded primarily through borrowings under the Company's revolving credit facility. In April 2000, the Company's Board of Directors authorized the repurchase of an additional two million shares under the Company's stock repurchase program. During the year ended July 29, 2000, the Company repurchased 2,075,400 shares at an average price of $24.06 per share, and 1,924,600 shares were remaining under this program at July 29, 2000. During the years ended July 31, 1999 and August 1, 1998, the Company repurchased 827,000 and 160,100 shares at average prices of $18.57 and $29.32 per share, respectively. In May 1998, the Company issued $250 million of senior notes and debentures to the public, the proceeds from which were used to repay borrowings outstanding on the Company's revolving credit facility. The debt is comprised of $125 million 6.65% senior notes due 2008 and $125 million 7.125% senior debentures due 2028. Interest on the securities is payable semiannually. At July 29, 2000, the Company had $370.0 million available under its $450.0 million revolving credit facility, which expires in October 2002. The Company's five year revolving securitization of its accounts receivable matured during fiscal 2000. The Company primarily financed the repayment of the Class A and B certificates, which were sold to investors and had an aggregate principal value of $246 million, with a new securitization. Under the new securitization, the Company sold substantially all of the Neiman Marcus and Bergdorf Goodman credit card receivables through a subsidiary to a trust in exchange for certificates representing undivided interests in such receivables. The Class A Certificates, which have an aggregate principal value of $225 million, were sold to investors. The Company believes that it will have sufficient resources to fund its planned capital growth and operating requirements. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The market risk inherent in the Company's financial instruments represents the potential loss arising from adverse changes in interest rates. The Company does not enter into financial instruments for trading purposes. At July 29, 2000 and July 31,1999 the fair values of the Company's fixed rate debt were estimated at $215.2 million and $230.4 million, respectively, using quoted market prices and comparable publicly-traded issues. Such fair values were less than carrying value by approximately $34.5 million and $22.3 million at July 29, 2000 and July 31, 1999, respectively. Market risk is estimated as the potential change in fair value resulting from a hypothetical 10% adverse change in interest rates and amounted to approximately $14.4 million at July 29, 2000. [END PAGE 32] [BEGIN PAGE 33] At July 29, 2000 and July 31, 1999, the Company had $80.0 million and $25.0 million, respectively, of variable rate borrowings outstanding under its revolving credit facility, which approximate fair value. A hypothetical 10% adverse change in interest rates for this variable rate debt would have an approximate $.7 million negative effect on the Company's earnings and cash flows. The Company uses derivative financial instruments to manage foreign currency risk related to merchandise inventories. The effect of such instruments was not material to the Company's financial condition, results of operations, or cash flows. SEASONALITY The specialty retail industry is seasonal in nature, and a disproportionately higher level of the Company's sales and earnings are generated in the fall and holiday selling seasons. The Company's working capital requirements and inventories increase substantially in the first quarter in anticipation of the holiday selling season. IMPACT OF INFLATION The Company has adjusted selling prices to maintain certain profit levels and will continue to do so as economic conditions permit. In general, management believes that the impact of inflation or of changing prices has not had a material effect on the Company's results of operations during the last three fiscal years. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), which will require recognition of all derivatives as either assets or liabilities on the balance sheet at fair value. In June 1999, the issuance of SFAS 137, "Accounting for Derivative Instruments and Hedging Activities," delayed the provisions of SFAS 133 to be effective for fiscal 2001. The Company believes that the effect of adopting these new standards relates primarily to its use of forward foreign currency contracts. The Company expects that such contracts, used to manage foreign currency risk related to the purchase of merchandise inventories, will meet the criteria for hedge accounting and, as a result, the changes in fair values of these contracts will be reported in other comprehensive income rather than in results of operations. The Company does not expect such amounts to be material. FORWARD-LOOKING STATEMENTS Statements in this report referring to the expected future plans and performance of the Company are forward-looking statements. Actual future results may differ materially from such statements. Factors that could affect future performance include, but are not limited to: changes in economic conditions or consumer confidence; changes in consumer preferences or fashion trends; delays in anticipated store openings; adverse weather conditions, particularly during peak selling seasons; changes in demographic or retail environments; competitive influences; significant increases in paper, printing and postage costs; and changes in the Company's relationships with designers and other resources. [END PAGE 33] [BEGIN PAGE 34]
CONSOLIDATED BALANCE SHEETS July 29, July 31, (Dollar Amounts in Thousands) 2000 1999 ---------------------- ASSETS (Restated) CURRENT ASSETS Cash and equivalents $ 175,385 $ 29,191 Undivided interests in NMG Credit Card Master Trust 211,581 133,151 Accounts receivable, less allowance for doubtful accounts of $200 and $2,300 19,279 59,317 Merchandise inventories 575,344 545,252 Deferred income taxes 26,078 21,815 Other current assets 61,671 53,102 ---------------------- TOTAL CURRENT ASSETS 1,069,338 841,828 ---------------------- PROPERTY AND EQUIPMENT Land, buildings and improvements 527,153 486,862 Fixtures and equipment 391,714 364,757 Construction in progress 69,440 47,656 ---------------------- 988,307 899,275 Less accumulated depreciation and amortization 448,572 385,836 ---------------------- PROPERTY AND EQUIPMENT, NET 539,735 513,439 ---------------------- OTHER ASSETS Trademarks and other intangible assets, net 128,581 134,853 Other, net 24,403 28,730 ---------------------- 152,984 163,583 ---------------------- $ 1,762,057 $ 1,518,850 ====================== LIABILITIES AND SHAREHOLDERS` EQUITY CURRENT LIABILITIES Notes payable and current maturities of long-term liabilities $ 787 $ 921 Accounts payable 270,957 203,071 Accrued liabilities 220,562 192,188 ---------------------- TOTAL CURRENT LIABILITIES 492,306 396,180 ---------------------- LONG-TERM LIABILITIES Notes and debentures 329,663 274,640 Other long-term liabilities 73,954 74,664 Deferred income taxes 31,510 32,038 ---------------------- TOTAL LONG-TERM LIABILITIES 435,127 381,342 ---------------------- MINORITY INTEREST 8,882 4,485 COMMITMENTS AND CONTINGENCIES COMMON STOCKS Common Stock-$.01 par value - 490 Class A Common Stock-$.01 par value Authorized-100 million shares; issued and outstanding-27,531,797 shares 275 - Class B Common Stock-$.01 par value Authorized-100 million shares; issued and outstanding-19,941,432 shares 200 - ADDITIONAL PAID-IN CAPITAL 422,186 467,283 RETAINED EARNINGS 403,081 269,070 ---------------------- TOTAL SHAREHOLDERS' EQUITY 825,742 736,843 ---------------------- $ 1,762,057 $ 1,518,850 ====================== See Notes to Consolidated Financial Statements.
[END PAGE 34] [BEGIN PAGE 35]
CONSOLIDATED STATEMENTS OF EARNINGS Years Ended ------------------------------------ July 29, July 31, August 1, (In Thousands, Except for Per Share Data) 2000 1999 1998 ------------------------------------ (Restated) (Restated) Revenues $ 2,854,629 $ 2,515,008 $ 2,337,684 Cost of goods sold including buying and occupancy costs 1,865,008 1,700,098 1,568,439 Selling, general and administrative expenses 725,399 615,890 556,051 Corporate expenses 15,868 16,406 14,620 ------------------------------------ Operating earnings 248,354 182,614 198,574 Interest expense 25,375 24,972 21,862 ------------------------------------ Earnings before income taxes and minority interest 222,979 157,642 176,712 Income taxes 84,732 61,480 70,685 ------------------------------------ Earnings before minority interest 138,247 96,162 106,027 Minority interest in net earnings of subsidiaries (4,236) (1,310) - ------------------------------------ Net earnings $ 134,011 $ 94,852 $ 106,027 ==================================== Weighted average number of common and common equivalent shares outstanding: Basic 48,460 49,129 49,808 ==================================== Diluted 48,721 49,237 49,981 ==================================== Earnings per share: Basic $ 2.77 $ 1.93 $ 2.13 ==================================== Diluted $ 2.75 $ 1.93 $ 2.12 ==================================== See Notes to Consolidated Financial Statements.
[END PAGE 35] [BEGIN PAGE 36]
CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended ----------------------------------- July 29, July 31, August 1, (In Thousands) 2000 1999 1998 ----------------------------------- (Restated) (Restated) CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 134,011 $ 94,852 $ 106,027 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 68,878 64,921 60,097 Deferred income taxes (4,791) 3,702 228 Minority interest 4,236 1,310 - Other 4,457 (5,680) 1,299 Changes in current assets and liabilities: Accounts receivable (11,103) (1,999) 2,431 Merchandise inventories (30,092) (27,842) (32,506) Accounts payable and accrued liabilities 98,035 (18,784) 48,641 Other (8,569) 8,151 (3,985) ----------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 255,062 118,631 182,232 =================================== CASH FLOWS USED FOR INVESTING ACTIVITIES Additions to property and equipment (89,032) (91,026) (81,176) Purchases of held-to-maturity securities (969,393) (641,364) (636,342) Maturities of held-to-maturity securities 963,104 647,080 625,816 Acquisitions, net of cash acquired - (36,754) (31,000) ----------------------------------- NET CASH USED FOR INVESTING ACTIVITIES (95,321) (122,064) (122,702) =================================== CASH FLOWS USED FOR FINANCING ACTIVITIES Proceeds from borrowings 55,000 - 249,617 Repayment of debt - (10,000) (265,000) Repayment of receivables securitization (246,000) - - Proceeds from receivables securitization 225,000 - - Repurchase of common stock (49,930) (15,356) (4,694) Distribution paid (2,435) - - Other equity activities 4,818 1,336 330 ----------------------------------- NET CASH USED FOR FINANCING ACTIVITIES (13,547) (24,020) (19,747) =================================== CASH AND EQUIVALENTS Increase (decrease) during the year 146,194 (27,453) 39,783 Beginning balance 29,191 56,644 16,861 ----------------------------------- Ending balance $ 175,385 $ 29,191 $ 56,644 =================================== SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 24,777 $ 26,098 $ 20,932 =================================== Income taxes $ 88,784 $ 62,626 $ 59,656 =================================== See Notes to Consolidated Financial Statements.
[END PAGE 36] [BEGIN PAGE 37]
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Additional Common Stock Paid-in Retained (In Thousands) Shares Amount Capital Earnings ------------------------------------------ BALANCE-AUGUST 3, 1997 49,873 $ 499 $ 485,658 $ 68,571 Adjustment for sales returns reserve, net - - - (9,440) Adjustment for change of accounting method for inventories, net - - - 9,060 ------------------------------------------ RESTATED BALANCE-AUGUST 3, 1997 49,873 499 485,658 68,191 Net earnings - - - 106,027 Repurchase of common stock (160) (2) (4,692) - Other equity transactions 47 1 329 - ------------------------------------------ BALANCE-AUGUST 1, 1998 49,760 498 481,295 174,218 Net earnings - - - 94,852 Repurchase of common stock (827) (11) (15,345) - Other equity transactions 106 3 1,333 - ------------------------------------------ BALANCE-JULY 31, 1999 49,039 490 467,283 269,070 Net earnings - - - 134,011 Repurchase of common stock (2,075) (21) (49,909) - Other equity transactions 495 6 4,812 - ------------------------------------------ BALANCE-JULY 29, 2000 47,459 $ 475 $ 422,186 $ 403,081 ========================================== See Notes to Consolidated Financial Statements.
[END PAGE 37] [BEGIN PAGE 38] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF REPORTING The Company's businesses consist of specialty retail stores, which include Neiman Marcus Stores and Bergdorf Goodman, and Neiman Marcus Direct, the Company's direct marketing operation. The consolidated financial statements include the accounts of all of the Company's majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The Company's fiscal year ends on the Saturday closest to July 31. Prior year amounts have been restated and reclassified to conform with the current presentation. CASH AND EQUIVALENTS Cash and equivalents consist of cash and highly liquid investments with maturities of three months or less from the date of purchase. UNDIVIDED INTERESTS IN NMG CREDIT CARD MASTER TRUST The Company's five year revolving securitization of its accounts receivable matured in July 2000. During the year ended July 29, 2000, the Company used its credit facility to repay the $246 million of certificates which matured under the 1995 securitization. In July 2000, the Company ultimately financed the repayment of the certificates primarily with the proceeds from a new five year, floating rate securitization transaction. Under the new securitization, the Company sold substantially all of its Neiman Marcus and Bergdorf Goodman credit card receivables through a subsidiary to The Neiman Marcus Group Master Trust (the "Trust") in exchange for certificates representing undivided interests in such receivables. The undivided interests in the Trust include the interests retained by the Company's subsidiary which are represented by the Class B Certificate ($23.8 million), Class C Certificate ($68.2 million) and the Seller's Certificate (the excess of the total receivables transferred to the Trust over the portion represented by $225 million Class A Certificates sold to investors and the Class B and Class C Certificates). The undivided interests in the Trust represent securities which the Company intends to hold to maturity in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Due to the short-term revolving nature of the credit card portfolio, the carrying value of the Company's undivided interests in the Trust approximates fair value. MERCHANDISE INVENTORIES In fiscal 2000, the Company changed its method of determining the cost of inventories from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. Management believes that the FIFO method better measures the current value of such inventories and provides a more appropriate matching of revenues and expenses. Under the current low-inflationary environment, the use of the FIFO method more accurately reflects the Company's financial position. [END PAGE 38] [BEGIN PAGE 39] The change to the FIFO method has been applied by retroactively restating the accompanying consolidated financial statements. The effect of this change was to increase merchandise inventories, taxes payable and retained earnings by $15.1 million, $6.0 million and $9.1 million, respectively, as of August 2, 1997. For the years ended July 31, 1999 and August 1, 1998, the effect of the change increased net earnings by $1.3 million and decreased net earnings by $.3 million, respectively. For the years ended July 31, 1999 and August 1, 1998, the effect of the change increased diluted earnings per share by $.03 and decreased diluted earnings per share by $.01. OTHER LONG-TERM LIABILITIES Other long-term liabilities consist primarily of certain employee benefit obligations, postretirement health care benefits and the liability for scheduled rent increases. DERIVATIVES The Company uses treasury lock agreements (a derivative) as a means of managing interest-rate risk associated with current debt or anticipated debt transactions. The differentials to be received or paid under these contracts designated as hedges are deferred and amortized to interest expense over the remaining life of the associated debt. The Company also enters into forward foreign currency exchange contracts to minimize foreign currency exposure related to purchases of inventory. Gains and losses related to such contracts which qualify as hedges are deferred and recognized in the period the hedge settles. Gains and losses which do not qualify as hedges are marked to market and recognized currently. Derivative financial instruments are not held for trading purposes. DEPRECIATION AND AMORTIZATION Depreciation and amortization are provided on a straight-line basis over the shorter of the estimated useful lives of the related assets or the lease term. Buildings and improvements are depreciated over 10 to 30 years while fixtures and equipment are depreciated over two to 15 years. When property and equipment are retired or have been fully depreciated, the cost and the related accumulated depreciation are eliminated from the respective accounts. Gains or losses arising from dispositions are reported as income or expense. Intangibles are amortized on a straight-line basis over their estimated useful lives, ranging from four to 40 years. Amortization expense was $6.3 million in 2000, $6.4 million in 1999 and $4.8 million in 1998. Upon occurrence of an event or a change in circumstances, the Company compares the carrying value of its long-lived assets against projected undiscounted cash fiows to determine whether any impairment exists and to evaluate the reasonableness of the depreciation or amortization periods. INCOME TAXES Income taxes are calculated in accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109) "Accounting for Income Taxes." SFAS 109 requires the asset and liability method of accounting for income taxes. [END PAGE 39] [BEGIN PAGE 40] REVENUE RECOGNITION The Company recognizes revenue at point-of-sale or upon shipment. Sales from leased departments were previously recorded on a gross basis, with separate presentation of sales and cost of goods sold. In accordance with the provisions of Staff Accounting Bulletin No.101, "Revenue Recognition in Financial Statements," the current year presentation has been changed and previous years restated. As restated, commissions from leased departments are included in total revenues. Such restatements had no impact on previously reported gross profit, operating earnings, net earnings, shareholders' equity or cash fiows. Prior to fiscal 2000, the Company did not record sales returns on the accrual basis of accounting because the difference between the cash and accrual basis was not material. In fiscal 2000, the Company began accruing sales returns. Accordingly, the Company restated prior periods to adjust the opening balance sheet as of August 2, 1997 to establish a returns reserve of $16.0 million (classified in current liabilities), record a corresponding increase in deferred tax assets of $6.6 million and a decrease in retained earnings of $9.4 million. In fiscal 2000, the Company recorded a charge of $4.3 million or $.06 per share. Such charge included $1.9 million, or $.02 per share, which related to fiscal years 1999 and 1998. The 1999 and 1998 net income was not restated as such amounts were not material. FINANCE CHARGE INCOME AND CREDIT RISK The Company's credit operations generate finance charge income, which is recognized as income when earned and is recorded as a reduction of selling, general and administrative expenses. Finance charge income amounted to $51.9 million in 2000, $45.8 million in 1999 and $47.8 million in 1998. The securitization of the Company's credit card receivables had the effect of reducing finance change income by $13.2 million in 2000 and $19.0 million in each of 1999 and 1998. Concentration of credit risk with respect to trade receivables is limited due to the large number of customers to whom the Company extends credit. Ongoing credit evaluation of customers' financial positions is performed, and collateral is not required as a condition of extending credit. The Company maintains reserves for potential credit losses. PREOPENING EXPENSES Costs associated with the opening of new stores are expensed as incurred. ADVERTISING AND CATALOGUE COSTS Direct response advertising relates primarily to the production and distribution of the Company's catalogues and is amortized over the estimated life of the catalogue. The estimated lives of catalogues are based on their expected revenue streams, which range from three to six months. All other advertising costs are expensed in the period incurred. Advertising expenses were $140.4 million, $125.0 million and $114.4 million in 2000, 1999 and 1998, respectively. Direct response advertising amounts included in other current assets in the consolidated balance sheets as of July 29, 2000 and July 31, 1999 were $12.7 million and $10.6 million, respectively. SIGNIFICANT ESTIMATES The Company estimates the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. The primary estimates underlying the Company's consolidated financial statements include allowances for doubtful accounts and sales returns, accruals for pension and postretirement benefits, accruals for loyalty programs and other matters. Actual results could differ from these estimates. Management bases its estimates on historical experience and on various assumptions which are believed to be reasonable under the circumstances. [END PAGE 40] [BEGIN PAGE 41] RECENT ACCOUNTING DEVELOPMENTS In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," which will require recognition and measurement of all derivatives as either assets or liabilities on the balance sheet at fair value. In June 1999, the issuance of SFAS 137, "Accounting for Derivative Instruments and Hedging Activities," delayed the provisions of SFAS 133 to be effective for fiscal 2001. The Company believes that the effect of adopting these new standards relates primarily to its use of forward foreign currency contracts. The Company expects that such contracts, used to manage foreign currency risk related to the purchase of merchandise inventories, will meet the criteria for hedge accounting and, as a result, the changes in fair values of these contracts will be reported in other comprehensive income rather than in results of operations. The Company does not expect such amounts to be material. NOTE 2. ACQUISITIONS On February 1, 1999, the Company acquired a 56% interest in Kate Spade LLC for approximately $33.6 million in cash. Kate Spade is a manufacturer and marketer of high-end fabric and leather handbags and accessories. The acquisition has been accounted for by the purchase method of accounting and, accordingly, the results of operations of Kate Spade for the period from February 1, 1999 are included in the accompanying consolidated financial statements. The excess of cost over the estimated fair value of net assets acquired of $32.7 million was allocated to trademarks which are amortized on a straight- line basis over 25 years. Assets acquired and liabilities assumed have been recorded at their estimated fair values. On November 2, 1998, the Company acquired a 51% interest in Gurwitch Bristow Products for approximately $6.7 million in cash. Gurwitch Bristow Products manufactures and markets the Laura Mercier cosmetic line. The acquisition has been accounted for by the purchase method of accounting and, accordingly, the results of operations of Gurwitch Bristow Products for the period from November 2, 1998 are included in the accompanying consolidated financial statements. The excess of cost over the estimated fair value of net assets acquired of $5.3 million was allocated to trademarks, which is amortized on a straight-line basis over 25 years. Assets acquired and liabilities assumed have been recorded at their estimated fair values. On January 5, 1998, the Company acquired Chef's Catalog for approximately $31.0 million in cash. Chef's Catalog is a direct marketer of gourmet cookware and high-end kitchenware, and its operations have been integrated with Neiman Marcus Direct. The acquisition has been accounted for by the purchase method of accounting and, accordingly, the results of operations of Chef's Catalog for the period from the date of acquisition are included in the accompanying consolidated financial statements. The excess of cost over the estimated fair value of net assets acquired of $30.3 million was allocated to goodwill, customer lists, and trademarks, which are amortized on a straight-line basis over lives of 30 years, four years and 30 years, respectively. These acquisitions did not materially impact consolidated results, and therefore no pro forma information is provided. [END PAGE 41] [BEGIN PAGE 42] NOTE 3. OTHER ASSETS
July 29, July 31, (In Thousands) 2000 1999 ---------------------- Trademarks $ 126,654 $ 126,654 Goodwill 33,202 33,202 Other 18,600 18,600 ---------------------- 178,456 178,456 Accumulated amortization (49,875) (43,603) ---------------------- Trademarks and other intangible assets, net $ 128,581 $ 134,853 ======================
Trademarks and goodwill are amortized using the straight-line method over their estimated useful lives, ranging from 25 to 40 years. Customer lists (which are included in Other) are amortized using the straight-line method over their estimated useful lives, ranging from four to 11 years. NOTE 4. ACCRUED LIABILITIES Accrued liabilities consisted of the following:
July 29, July 31, (In Thousands) 2000 1999 ---------------------- Accrued salaries and related liabilities $ 46,314 $ 33,698 Self-insurance reserves 23,472 25,436 Income taxes payable 24,837 27,474 Other 125,939 105,580 ---------------------- $ 220,562 $ 192,188 ======================
NOTE 5. NOTES AND DEBENTURES Notes and debentures consisted of the following:
Interest July 29, July 31, (In Thousands) Rate 2000 1999 -------------------------------- Revolving credit facility Variable $ 80,000 $ 25,000 Senior notes 6.65% 124,879 124,863 Senior debentures 7.125% 124,784 124,777 -------------------- $329,663 $ 274,640 ====================
The Company has a revolving credit facility with 21 banks, pursuant to which the Company may borrow up to $450 million. In September 1999, the Company reduced the revolving credit facility from $650 million to reflect its current and anticipated cash flow requirements. The facility, which expires in October 2002, may be terminated by the Company at any time on three business days' notice. The rate of interest payable (6.9% at July 29, 2000) varies according to one of four pricing options selected by the Company. The revolving credit facility contains covenants which require the Company to maintain certain leverage and fixed charge ratios. In May 1998, the Company issued $250 million of senior notes and debentures to the public. The proceeds of the debt offering were used to repay borrowings outstanding on the Company's revolving credit facility. The debt is comprised of $125 million 6.65% senior notes due 2008 and $125 million 7.125% senior debentures due 2028. Interest on the securities is payable semiannually. The aggregate maturities of notes and debentures are $0 in fiscal 2001 and fiscal 2002, $80.0 million in fiscal 2003, $0 in fiscal 2004 and fiscal 2005 and $249.7 million thereafter. [END PAGE 42] [BEGIN PAGE 43] NOTE 6. SHAREHOLDERS' EQUITY SPIN-OFF FROM HARCOURT GENERAL, INC. On October 22, 1999, Harcourt General, Inc. (Harcourt General) completed the spin-off of its controlling equity position in the Company in a tax-free distribution to its shareholders. Harcourt General distributed approximately 21.4 million of its approximately 26.4 million shares of the Company. Harcourt General retained approximately 5.0 million shares. Each common shareholder of Harcourt General received .3013 of a share of Class B Common Stock of the Company for every share of Harcourt General Common Stock and Class B Stock held on October 12, 1999, which was the record date for the distribution. This transaction had no impact on the reported equity of the Company. The Company and Harcourt General are parties to an agreement pursuant to which Harcourt General provides certain management, accounting, financial, legal, tax and other corporate services to the Company. The fees for these services are based on Harcourt General's costs and are subject to the approval of a committee of directors of the Company who are independent of Harcourt General. This agreement may be terminated by either party on 180 days' notice. Charges to the Company under this agreement were $6.2 million in 2000, $6.0 million in 1999 and $5.4 million in 1998. Most of the senior officers of the Company serve in similar capacities with Harcourt General. Three of such officers also serve as directors of both companies. AUTHORIZED CAPITAL On September 15, 1999, shareholders of the Company approved a proposal to amend the Company's Restated Certificate of Incorporation to increase the Company's authorized capital to 250 million shares of common stock (consisting of 100 million shares of Class A Common Stock, 100 million shares of Class B Common Stock and 50 million shares of a new Class C Common Stock (having one-tenth (1/10) of one vote per share)) and 50 million shares of preferred stock. STOCKHOLDER RIGHTS PLAN On October 6, 1999, the Company's Board of Directors adopted a stockholder rights plan. The rights plan is designed to improve the ability of the Company's board to protect and advance the interests of the Company's stockholders in the event of an unsolicited proposal to acquire a significant interest in the Company. EXECUTIVE STOCK PURCHASE LOAN PLAN In accordance with the provisions of the Loan Plan, outstanding loans were used to acquire shares of common stock either in the open market or pursuant to stock option exercises and to discharge certain tax liabilities incurred in connection with the exercise of stock options and the release of restrictions on previous grants of restricted common stock. The loans are secured by a pledge of the purchased shares and bear interest at an annual rate of 5%, payable quarterly. Pursuant to the terms of the Loan Plan, each executive officer's loan will become due and payable seven months after his or her employment with the Company terminates. Loans outstanding as of July 29, 2000 were $1.7 million. [END PAGE 43] [BEGIN PAGE 44] COMMON STOCK Common stock is entitled to dividends if and when declared by the Board of Directors, and each share of Class A and Class B Common Stock outstanding carries one vote. Holders of common stock have no cumulative voting, conversion, redemption or preemptive rights. COMMON STOCK INCENTIVE PLANS The Company has established common stock incentive plans allowing for the granting of stock options, stock appreciation rights (SARs) and stock-based awards to its employees. The Company applies Accounting Principles Board (APB) Opinion No. 25 and related interpretations in accounting for its plans. Compensation cost for restricted stock is recognized on a straight-line basis over the expected life of the award with the offsetting entry to additional paid-in capital. For performance accelerated restricted stock, the expected life is determined based on management's best estimate of the number of years from the grant date to the date at which it is probable that the performance targets will be met (four or five years, depending on the grant). Compensation cost is calculated as if all instruments granted that are subject only to a service requirement will vest. The effect of actual forfeitures is recognized, prospectively, upon occurrence. The Company has adopted the disclosure-only provision of the Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). Had the fair-value based method of accounting been applied at grant date to the Company's stock incentive plans, net earnings and earnings per share would have been reduced to pro forma amounts for the years ended July 29, 2000, July 31, 1999 and August 1, 1998 as follows:
(In Thousands, Except for Per Share Amounts) 2000 1999 1998 ---------------------------------- Net earnings: (Restated) (Restated) As reported $ 134,011 $ 94,852 $ 106,027 Pro forma $ 129,914 $ 93,028 $ 105,039 Basic earnings per share: As reported $ 2.77 $ 1.93 $ 2.13 Pro forma $ 2.68 $ 1.89 $ 2.11 Diluted earnings per share: As reported $ 2.75 $ 1.93 $ 2.12 Pro forma $ 2.67 $ 1.89 $ 2.10
The effects on pro forma net earnings and earnings per share of expensing the estimated fair value of stock options are not necessarily representative of the effects on reported net earnings for future years due to such factors as the vesting period of the stock options and the potential for issuance of additional stock options in future years. In addition, the disclosure requirements of SFAS 123 are applicable only to options granted subsequent to July 30, 1995. The Company has adopted the 1997 Incentive Plan (the "1997 Plan") which is currently used for grants of equity-based awards to employees. All outstanding equity-based awards at July 29, 2000 were granted under the Company's 1997 Plan and the 1987 Stock Incentive Plan. At July 29, 2000, there were 2.2 million shares of common stock available for grants under the 1997 Plan. [END PAGE 44] [BEGIN PAGE 45] In fiscal years 2000, 1999 and 1998, the Company granted 453,500 restricted shares, 58,300 restricted shares and 46,650 restricted shares, respectively, at weighted-average grant date fair values of $23.50, $24.81 and $32.94. The Company records compensation expense on a straight-line basis over the expected life of the restricted stock granted. Compensation expense related to restricted stock grants was $2.6 million, $1.1 million and $0.8 million in fiscal years 2000, 1999 and 1998, respectively. Options outstanding at July 29, 2000 were granted at prices (not less than 100% of the fair market value on the date of the grant) varying from $11.63 to $33.38. Options generally vest ratably over five years and expire after ten years. There were 127 employees with options outstanding at July 29, 2000. For all outstanding options at July 29, 2000, the weighted-average exercise price was $24.28 and the weighted -average remaining contractual life was approximately 7.9 years. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions used for grants in 2000, 1999 and 1998, respectively: 2000 1999 1998 ----------------------------- Expected life (years) 7 7 8 Expected volatility 40.8% 45.6% 29.4% Risk-free interest rate 6.0% 6.0% 5.5% ============================= A summary of the status of the Company's 1997 and 1987 Stock Incentive Plans as of July 29, 2000, July 31, 1999 and August 1, 1998 and changes during the years ending on those dates is presented below:
2000 1999 1998 -------------------------------------------------------------------- Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price -------------------------------------------------------------------- Options outstanding at beginning of year 1,179,700 $ 24.36 847,960 $ 23.83 660,780 $ 17.95 Granted 1,410,150 23.93 468,000 24.82 325,800 32.87 SAR Surrenders - - - - (107,240) 17.75 Exercised (80,800) 15.08 (47,400) 14.62 (2,300) 14.90 Canceled (231,950) 25.22 (88,860) 26.98 (29,080) 24.92 --------- --------- ------- Outstanding at end of year 2,277,100 $ 24.28 1,179,700 $ 24.36 847,960 $ 23.83 ========= ========= ======= Options exercisable at year-end 515,180 $ 22.06 403,150 $ 19.23 286,700 $ 15.53 ========= ========= =======
[END PAGE 45] [BEGIN PAGE 46] The weighted-average fair value of options granted in 2000, 1999 and 1998 was $12.83, $14.17 and $15.94, respectively. The following summarizes information about the Company's stock options as of July 29, 2000.
Options Outstanding Options Exercisable ----------------------------------------- ----------------------- Weighted- Weighted- Weighted- Shares Average Average Shares Average Outstanding Remaining Exercise Outstanding Exercise Range of Exercise Prices At 7/29/00 Contractual Life Price At 7/29/00 Price ----------------------------------------- ----------------------- $11.63 - $15.38 275,350 3.1 $ 14.23 260,850 $ 14.17 $22.94 - $24.94 1,384,750 8.9 $ 23.61 89,000 $ 24.82 $25.94 - $29.19 282,100 9.4 $ 27.00 2,200 $ 29.19 $32.94 - $33.38 334,900 6.5 $ 33.05 163,130 $ 33.08 - ---------------- --------- ------- $11.63 - $33.38 2,277,100 7.9 $ 24.28 515,180 $ 22.06 ================ ========= =======
NOTE 7. STOCK REPURCHASE PROGRAM In September 1998, the Company's Board of Directors authorized an increase in the stock repurchase program to 1.5 million shares. In October 1999, the Company's Board of Directors authorized an increase in the stock repurchase program to two million shares. In April 2000, the Company's Board of Directors authorized the repurchase of an additional two million shares. During the year ended July 29, 2000, the Company repurchased 2,075,400 shares at an average price of $24.06 per share under this stock repurchase program; 1,924,600 shares were remaining under this program at July 29, 2000. During the years ended July 31, 1999 and August 1, 1998, the Company repurchased 827,000 and 160,100 shares at an average price of $18.57 and $29.32 per share, respectively. NOTE 8. INCOME TAXES Income tax expense was as follows:
Years ended ---------------------------------- July 29, July 31, August 1, (In Thousands) 2000 1999 1998 ---------------------------------- Current: (Restated) (Restated) Federal $ 82,371 $ 57,167 $ 61,925 State 7,152 7,309 8,532 ---------------------------------- 89,523 64,476 70,457 ---------------------------------- Deferred: Federal (4,328) (1,993) (101) State (463) (1,003) 329 ---------------------------------- (4,791) (2,996) 228 ---------------------------------- Income tax expense $ 84,732 $ 61,480 $ 70,685 ==================================
The Company's effective income tax rate was 38% in 2000, 39% in 1999 and 40% in 1998. The difference between the statutory federal tax rate and the effective tax rate is due primarily to state income taxes. [END PAGE 46] [START PAGE 47] Significant components of the Company's net deferred income tax liability stated on a gross basis were as follows:
July 29, July 31, (In Thousands) 2000 1999 ---------------------- Gross deferred income tax assets: (Restated) Financial accruals and reserves $ 26,444 $ 23,871 Employee benefits 26,166 25,640 Inventories 2,238 2,667 Deferred lease payments 1,658 2,003 Other 572 493 ---------------------- Total deferred tax assets 57,078 54,674 Gross deferred income tax liabilities: Excess tax depreciation (54,042) (55,610) Pension accrual (1,590) (1,273) Other assets previously deducted on tax return (6,878) (8,014) ---------------------- Total deferred tax liabilities (62,510) (64,897) ---------------------- Net deferred income tax liability ($ 5,432) ($ 10,223) ======================
NOTE 9. PENSION PLANS AND POSTRETIREMENT HEALTH CARE BENEFITS The Company has a noncontributory defined benefit pension plan covering substantially all full-time employees. The Company also sponsors an unfunded supplemental executive retirement plan which provides certain employees additional pension benefits. Benefits under the plans are based on the employees' years of service and compensation over defined periods of employment. When funding is required, the Company's policy is to contribute amounts that are deductible for federal income tax purposes. Pension plan assets consist primarily of equity and fixed income securities. Retirees and active employees hired prior to March 1, 1989 are eligible for certain limited postretirement health care benefits if they have met certain service and minimum age requirements. The cost of these benefits is accrued during the years in which an employee provides services. The Company paid postretirement health care benefit claims of $1.6 million during 2000, $1.2 million during 1999 and $1.3 million during 1998. Components of net pension expense were as follows:
Years Ended -------------------------------- July 29, July 31, August 1, (In Thousands) 2000 1999 1998 -------------------------------- Service cost $ 7,696 $ 7,160 $ 5,527 Interest cost on projected benefit obligation 13,760 12,641 10,843 Expected return on assets (13,637) (11,826) (9,270) Net amortization and deferral 1,036 1,208 1,178 -------------------------------- Net pension expense $ 8,855 $ 9,183 $ 8,278 =================================
[END PAGE 47] [START PAGE 48] The periodic postretirement health care benefit cost was as follows:
Years Ended -------------------------------- July 29, July 31, August 1, (In Thousands) 2000 1999 1998 -------------------------------- Service cost $ 75 136 $ 155 Interest cost on accumulated benefit obligation 856 1,151 1,282 Net amortization and deferral (342) (17) (30) -------------------------------- Net periodic cost $ 589 $ 1,270 $ 1,407 =================================
The changes in the benefit obligations and the reconciliations of the funded status of the Company's plans to the consolidated balance sheets were as follows:
CHANGE IN BENEFIT OBLIGATIONS: Pension Benefits Postretirement Benefits ---------------------- ----------------------- (In Thousands) 2000 1999 2000 1999 ---------------------- ----------------------- Benefit obligations at beginning of year $ 183,772 $ 179,427 $ 13,642 $16,942 Service cost 7,696 7,160 75 136 Interest 13,760 12,641 856 1,151 Benefits paid (7,495) (5,710) (1,574) (1,247) Actuarial gain (7,965) (9,746) (2,035) (3,340) ---------------------- ----------------------- Benefit obligations at end of year $ 189,768 $ 183,772 $ 10,964 $ 13,642 ====================== ======================= CHANGE IN PLAN ASSETS: Pension Plans ----------------------- (In Thousands) 2000 1999 ----------------------- Fair value of plan assets at beginning of year $ 163,665 $159,093 Actual return on assets 21,011 9,302 Company contributions 2,243 980 Benefits paid (7,495) (5,710) ----------------------- Fair value of plan assets at end of year $ 179,424 $163,665 ======================= FUNDED STATUS: Pension Plans Postretirement Plans ---------------------- ----------------------- (In Thousands) 2000 1999 2000 1999 ---------------------- ----------------------- Fair value of plan assets less than benefit obligation ($ 10,344) ($ 20,107) ($ 10,964)($ 13,642) Unrecognized net actuarial gain (25,027) (9,195) (7,036) (5,343) Unrecognized prior service cost 4,794 4,845 - - Unrecognized net obligation at transition 1,815 2,305 - - ---------------------- ----------------------- Liability recognized in the consolidated balance sheets ($ 28,762) ($ 22,152) ($ 18,000)($ 18,985) ====================== ======================= WEIGHTED-AVERAGE ASSUMPTIONS: Pension Benefits -------------------------------- 2000 1999 1998 -------------------------------- Discount rate 7.75% 7.5% 7.0% Expected long-term rate of return on plan assets 9.0% 9.0% 9.0% Rate of future compensation increases 5.0% 5.0% 5.0%
The weighted average assumptions for postretirement health care benefits included a discount rate of 7.75% in 2000, 7.5% in 1999 and 7.0% in 1998. [END PAGE 48] [BEGIN PAGE 49] For measurement purposes, a 6.0% annual rate of increase in the per capita cost of covered care benefits was assumed for fiscal 2001, and a 5.0% annual rate was assumed for fiscal 2002 and beyond. If the health care trend rate was increased one percentage point, postretirement benefit costs for the year ended July 29, 2000 would have been $.1 million higher, and the accumulated postretirement benefit obligation as of July 29, 2000 would have been $1.1 million higher. If the health care trend rate was decreased one percentage point, postretirement benefit costs for the year ended July 29, 2000 would have been $.1 million lower, and the accumulated postretirement benefit obligations as of July 29, 2000 would have been $.9 million lower. The Company has a qualified defined contribution 401(k) plan, which covers substantially all employees. Employees make contributions to the plan, and the Company matches 65% of the first 2% and 25% of the next 4% of an employee's contribution up to a maximum of 6% of the employee's compensation. Company contributions for the years ended July 29, 2000, July 31, 1999 and August 1, 1998 were $4.3 million, $2.9 million, and $2.9 million, respectively. NOTE 10. COMMITMENTS AND CONTINGENCIES OPERATING LEASES The Company's operations are conducted primarily in leased properties which include retail stores, distribution centers and other facilities. Substantially all leases are for periods of up to thirty years with renewal options at fixed rentals, except that certain leases provide for additional rent based on revenues in excess of predetermined levels. Rent expense under operating leases was as follows:
Years Ended --------------------------------- July 29, July 31, August 1, (In Thousands) 2000 1999 1998 --------------------------------- Minimum rent $ 36,100 $ 34,000 $ 31,800 Rent based on revenues 16,000 14,500 13,300 --------------------------------- Total rent expense $ 52,100 $ 48,500 $ 45,100 =================================
Future minimum lease payments, excluding renewal options, under operating leases are as follows: fiscal 2001-$38.6 million; fiscal 2002-$38.3 million; fiscal 2003-$36.9 million; fiscal 2004-$40.0 million; fiscal 2005-$39.3 million; all years thereafter-$527.4 million. LITIGATION The Company is involved in various suits and claims in the ordinary course of business. Management does not believe that the disposition of any such suits and claims will have a material adverse effect upon the consolidated results of operations, cash fiows or the financial position of the Company. [END PAGE 49] [BEGIN PAGE 50] LETTERS OF CREDIT The Company had approximately $12.9 million of outstanding irrevocable letters of credit relating to purchase commitments and insurance liabilities at July 29, 2000. FORWARD FOREIGN CURRENCY CONTRACTS At July 29, 2000, the Company had forward foreign currency contracts outstanding, which mature at various dates through August 2001, to buy the equivalent of $52.4 million of inventory. The fair value of such contracts was approximately $3.0 million lower than their contractual value, with such difference included in results of operations in fiscal 2000. NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair values of the Company's financial instruments are as reported and disclosed in the consolidated financial statements, and as discussed below. DEBT The fair values of the Company's senior notes and debentures were $215.2 million and $230.4 million, as of July 29, 2000 and July 31, 1999, respectively, and were based upon quoted prices and comparable publicly traded issues. The corresponding book values of the Company's senior notes and debentures were $249.7 million and $249.6 million as of July 29, 2000 and July 31, 1999, respectively. NOTE 12. EARNINGS PER SHARE Pursuant to the provisions of SFAS 128, the weighted-average shares used in computing basic and diluted earnings per share (EPS) are presented in the table below. No adjustments were made to net earnings applicable to common shareholders for the computations of basic and diluted EPS during the periods presented. Options to purchase 614,500 shares and 395,910 shares of common stock were not included in the computations of diluted EPS for the years ended July 29, 2000 and July 31, 1999, respectively, because the exercise price of those options was greater than the average market price of the common shares. All options were included in the computation of diluted EPS for the year ended August 1, 1998 because the exercise price of those options was less than the average market price of the common shares.
Year Ended ------------------------------- July 29, July 31, August 1, (In Thousands of Shares) 2000 1999 1998 ------------------------------- Shares for computation of basic EPS 48,460 49,129 49,808 Effect of dilutive stock options and nonvested stock under common stock incentive plans 261 108 173 ------------------------------- Shares for computation of diluted EPS 48,721 49,237 49,981 ==============================
[END PAGE 50] [BEGIN PAGE 51] NOTE 13. SEGMENT REPORTING In 1999, the Company adopted SFAS 131, "Disclosure about Segments of an Enterprise and Related Information," which established reporting and disclosure standards for an enterprise's operating segments. Operating segments are defined as components of an enterprise for which separate financial information is available and regularly reviewed by the Company's senior management. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. The Company's senior management evaluates the performance of the Company's assets on a consolidated basis. Therefore, separate financial information for the Company's assets on a segment basis is not available. Interest expense is not allocated by segment, and neither interest expense nor depreciation and amortization by segment is regularly reviewed by senior management. In applying SFAS 131, the Company identified two reportable segments, which are as follows: specialty retail stores and direct marketing. The specialty retail stores segment includes all Neiman Marcus and Bergdorf Goodman retail stores. Direct marketing includes the operations of Neiman Marcus Direct, which publishes NM by Mail, the Horchow catalogues, Chef's Catalog and the Neiman Marcus Christmas Catalogue. Other includes corporate expenses, costs incurred to launch the Company's e-commerce business, and operations which do not meet the quantitative thresholds of SFAS 131, including Kate Spade and Gurwitch Bristow Products. The following tables set forth the information for the Company's reportable segments:
Year ended ----------------------------------- July 29, July 31, August 1, (In Thousands) 2000 1999 1998 ----------------------------------- REVENUES: (RESTATED) (RESTATED) Specialty Retail Stores $ 2,424,909 $ 2,171,038 $ 2,053,890 Direct Marketing 363,815 321,747 283,794 Other 65,905 22,223 - ----------------------------------- Total $ 2,854,629 $ 2,515,008 $ 2,337,684 =================================== OPERATING EARNINGS: Specialty Retail Stores $ 248,452 $ 180,182 $ 197,623 Direct Marketing 24,369 14,543 15,571 Other (24,467) (12,111) (14,620) ----------------------------------- Total $ 248,354 $ 182,614 $ 198,574 =================================== CAPITAL EXPENDITURES: Specialty Retail Stores $ 73,234 $ 89,296 $ 79,920 Direct Marketing 3,298 970 1,256 Other 12,500 760 - ----------------------------------- Total $ 89,032 $ 91,026 $ 81,176 ===================================
[END PAGE 51] [BEGIN PAGE 52] NOTE 14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Year Ended July 29, 2000 ----------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter Total ----------------------------------------------------------- (Restated) (Restated) (Restated) (In Millions, Except for Per Share Data) Revenues $ 668.3 $ 878.1 $ 683.8 $ 624.4 $ 2,854.6 ========================================================== Gross profit $ 252.0 $ 288.7 $ 256.7 $ 192.2 $ 989.6 ========================================================== Net earnings $ 37.4 $ 41.3 $ 45.2 $ 10.1 $ 134.0 ========================================================== Earnings per share: Basic $ 0.76 $ 0.85 $ 0.94 $ 0.22 $ 2.77 ========================================================== Diluted $ 0.76 $ 0.84 $ 0.94 $ 0.21 $ 2.75 ========================================================== Year Ended July 31, 1999 (Restated) ----------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter Total ----------------------------------------------------------- Revenues $ 578.7 $ 779.6 $ 602.6 $ 554.1 $ 2,515.0 ========================================================== Gross profit $ 203.2 $ 242.4 $ 215.3 $ 154.0 $ 814.9 ========================================================== Net earnings $ 25.6 $ 31.2 $ 35.8 $ 2.3 $ 94.9 ========================================================== Earnings per share: Basic $ 0.52 $ 0.64 $ 0.73 $ 0.05 $ 1.93 ========================================================== Diluted $ 0.52 $ 0.64 $ 0.73 $ 0.05 $ 1.93 ==========================================================
[END PAGE 52] [BEGIN PAGE 53] INDEPENDENT AUDITORS' REPORT BOARD OF DIRECTORS AND SHAREHOLDERS THE NEIMAN MARCUS GROUP, INC. CHESTNUT HILL, MASSACHUSETTS We have audited the accompanying consolidated balance sheets of The Neiman Marcus Group, Inc. and subsidiaries as of July 29, 2000 and July 31, 1999, and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the three fiscal years in the period ended July 29, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Neiman Marcus Group, Inc. and subsidiaries as of July 29, 2000 and July 31, 1999, and the results of their operations and their cash flows for each of the three fiscal years in the period ended July 29, 2000, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 1, the accompanying financial statements have been restated to reflect an accrual for sales returns and to change the method of accounting for inventories. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Boston, Massachusetts August 31, 2000 STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS The management of The Neiman Marcus Group, Inc. and its subsidiaries is responsible for the integrity and objectivity of the financial and operating information contained in this Annual Report, including the consolidated financial statements covered by the Independent Auditors' Report. These statements were prepared in conformity with generally accepted accounting principles and include amounts that are based on the best estimates and judgments of management. The Company maintains a system of internal controls which provides management with reasonable assurance that transactions are recorded and executed in accordance with its authorizations, that assets are properly safeguarded and accounted for, and that records are maintained so as to permit preparation of financial statements in accordance with generally accepted accounting principles. This system includes written policies and procedures, an organizational structure that segregates duties, financial reviews and a comprehensive program of periodic audits by the internal auditors. The Company also has instituted policies and guidelines which require employees to maintain a high level of ethical standards. In addition, the Audit Committee of the Board of Directors, consisting solely of outside directors, meets periodically with management, the internal auditors and the independent auditors to review internal accounting controls, audit results and accounting principles and practices and annually recommends to the Board of Directors the selection of independent auditors. /s/ John R. Cook JOHN R. COOK Senior Vice President and Chief Financial Officer /s/ Catherine N. Janowski CATHERINE N. JANOWSKI Vice President and Controller [END PAGE 53] [BEGIN PAGE 54]
Years Ended -------------------------------------------------------- July 29, July 31, August 1, August 2, August 3, 2000 1999 1998 1997 1996(a) -------------------------------------------------------- (In Millions, Except for Per Share Data) OPERATING RESULTS: (Restated) (Restated) (Restated) (Restated) Revenues $ 2,854.6 $ 2,515.0 $ 2,337.7 $ 2,180.6 $ 2,042.4 ========================================================= Net earnings $ 134.0 $ 94.9 $ 106.0 $ 92.1 $ 77.0 ========================================================= Net earnings applicable to common shareholders $ 134.0 $ 94.9 $ 106.0 $ 63.6 $ 47.9 ========================================================= Basic amounts per share applicable to common shareholders: Basic net earnings $ 2.77 $ 1.93 $ 2.13 $ 1.35 $ 1.26 ========================================================= Diluted amounts per share applicable to common shareholders: Diluted net earnings $ 2.75 $ 1.93 $ 2.12 $ 1.34 $ 1.25 ========================================================= FINANCIAL POSITION: Total assets $ 1,762.1 $ 1,518.9 $ 1,459.0 $ 1,309.5 $ 1,272.4 Long-term liabilities $ 435.1 $ 381.3 $ 392.8 $ 401.6 $ 395.3 The selected financial data should be read in conjunction with the Consolidated Financial Statements contained elsewhere in this report. (a) Fiscal 1996 was a 53-week year.
[END PAGE 54] [BEGIN PAGE 55] SHAREHOLDER INFORMATION Requests for general information or published financial information should be made in writing to: CORPORATE RELATIONS DEPARTMENT The Neiman Marcus Group, Inc. Post Office Box 9187 Chestnut Hill, MA 02467-9187 (617) 232-0760 TRANSFER AGENT AND REGISTRAR Fleet National Bank c/o EquiServe Post Office Box 8040 Boston, MA 02266-8040 (800) 730-4001 FORM 10-K The Company's Form 10-K as filed with the Securities and Exchange Commission is available upon written request to the Corporate Relations Department of the Company. STOCK INFORMATION The Neiman Marcus Group's Class A Common Stock and Class B Com mon Stock are currently traded on the New York Stock Exchange under the symbols NMG.A and NMG.B, respectively. Class B Common Stock was distributed by Harcourt General to its shareholders in October 1999. The following table indicates for the past two fiscal years the quarterly price range of the Common Stock, traded under the symbol NMG prior to the Company's recapitalization during the first quarter of fiscal 2000.
NMG.A 2000 NMG.B 2000 1999 -------------- -------------- -------------- Quarter High Low High Low High Low -------------- -------------- -------------- First $25.06 $21.31 $24.75 $21.06 $33.50 $16.08 Second $28.69 $23.00 $27.00 $21.13 $26.75 $22.08 Third $28.50 $20.00 $28.31 $19.25 $27.00 $22.00 Fourth $33.19 $24.00 $32.00 $23.13 $31.00 $24.18 ============== ============== ==============
The Neiman Marcus Group is an Equal Opportunity Employer. Visit The Neiman Marcus Group Web site at www.NeimanMarcusGroup.com. ANNUAL MEETING The Annual Meeting of Stockholders will be held on Friday, January 19, 2001 at 10:00 a.m. at the Company's Corporate Headquarters, 27 Boylston Street, Chestnut Hill, Massachusetts. SHARES OUTSTANDING The Neiman Marcus Group had 27.5 million shares of Class A Common Stock and 19.9 million shares of Class B Common Stock outstanding, and 11,355 and 4,126 common shareholders of record, respectively, at July 29, 2000. CORPORATE ADDRESS The Neiman Marcus Group, Inc. 27 Boylston Street Post Office Box 9187 Chestnut Hill, MA 02467-9187 (617) 232-0760 [END PAGE 55] EX-21.1 11 0011.txt SUBSIDIARIES
EXHIBIT 21.1 THE NEIMAN MARCUS GROUP, INC. SUBSIDIARIES & AFFILIATES JURISDICTION OF SUBSIDIARY/AFFILIATE INCORPORATION STOCKHOLDER Bergdorf Goodman, Inc. New York Neiman Marcus Holdings, Inc. Bergdorf Graphics, Inc. New York Bergdorf Goodman, Inc. Chef's Catalog, Inc. Delaware The Neiman Marcus Group, Inc. Ermine Trading Corporation California The Neiman Marcus Group, Inc. Gurwich Bristow Products, L.L.C. Delaware The Neiman Marcus Group, Inc. (51%) Gurwitch Partners Limited (17.89%) Stephens Group, Inc. (18.57%) Other Investors (12.54%) Kate Spade LLC Delaware The Neiman Marcus Group, Inc. (56%) Alex Noel, Inc. (44%) NEMA Beverage Corporation Texas NEMA Beverage Holding Corporation NEMA Beverage Holding Corporation Texas NEMA Beverage Parent Corporation NEMA Beverage Parent Corporation Texas The Neiman Marcus Group, Inc. NM Direct de Mexico, S.A. de C.V. Mexico The Neiman Marcus Group, Inc. (49,999 shares) Neiman Marcus Holdings, Inc. (1 share) NM Financial Services, Inc. Delaware The Neiman Marcus Group, Inc. NM Nevada Trust Massachusetts The Neiman Marcus Group, Inc. (90 shares) Bergdorf Goodman, Inc. (10 shares) NM Office, Inc. Florida The Neiman Marcus Group, Inc. NM Visual, Inc. Florida The Neiman Marcus Group, Inc. Neiman Marcus Funding Corporation Delaware The Neiman Marcus Group, Inc. Neiman Marcus Holdings, Inc. California The Neiman Marcus Group, Inc. Neiman Marcus Special Events, Inc. Delaware The Neiman Marcus Group, Inc. Pastille By Mail, Inc. Delaware The Neiman Marcus Group, Inc. Worth Avenue Leasing Company Florida The Neiman Marcus Group, Inc.
EX-23.1 12 0012.txt CONSENT OF DELOITTE & TOUCHE EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements No. 33-35299, No. 333-35829 and No. 333-49893 of The Neiman Marcus Group, Inc. and subsidiaries on Forms S-8, S-8 and S-3, respectively, of our reports dated August 31, 2000, appearing in and incorporated by reference in the Annual Report on Form 10-K of the Neiman Marcus Group Inc. for the year ended July 29, 2000. /s/ Deloitte & Touche DELOITTE & TOUCHE Boston, Massachusetts October 26, 2000 EX-27.1 13 0013.txt FINANCIAL DATA SCHEDULE
5 This schedule contains a summary of financial information extracted from the Consolidated Balance Sheets and Consolidated Statements of Earnings and is qualified in its entirety by reference to such statements. 1000 YEAR JUL-29-2000 JUL-20-2000 175,385 211,581 19,479 200 575,344 1,069,338 988,307 448,572 1,762,057 492,306 329,663 0 0 475 825,267 1,762,057 2,854,629 2,854,629 1,865,008 2,606,275 0 1,357 25,375 222,979 84,732 134,011 0 0 0 134,011 2.77 2.75
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