CAUSE NO.

DC-18-18371

MARBLE RIDGE CAPITAL LP and § IN THE DISTRICT COURT

MARBLE RIDGE MASTER FUND LP, §
§
Plaintiffs, §
§
v. § DALLAS COUNTY, TEXAS
§
NEIMAN MARCUS GROUP, INC., §
MARIPOSA INTERMEDIATE §
HOLDINGS LLC, NEIMAN MARCUS §
GROUP LTD LLC, THE NEIMAN §
MARCUS GROUP LLC, and §
NEIMAN MARCUS GROUP §
INTERNATIONAL LLC, §
§
Defendants. § 116TH JUDICIAL DISTRICT

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL,

AND ORIGINAL COUNTERCLAIMS

Defendants Neiman Marcus Group, Inc. (“Neiman Marcus Inc.”), Mariposa Intermediate

Holdings LLC (“Mariposa Holdings”), Neiman Marcus Group LTD LLC (“Neiman Marcus

LTD”), The Neiman Marcus Group LLC (“Neiman Marcus LLC”), and NMG International LLC

(“NMG International”) (collectively, “Neiman Marcus”) file this Original Answer, Verified

Denial, and Original Counterclaims against Plaintiffs Marble Ridge Capital LP (“Marble Ridge”)

and Marble Ridge Master Fund LP (“Master Fund” and, with Marble Ridge, the “Marble Ridge

Plaintiffs”). In support thereof, Neiman Marcus respectfully shows the Court as follows.

I. INTRODUCTION

These Counterclaims are necessary to stop Marble Ridge’s illegal scheme to injure Neiman

Marcus and extract improper benefits for itself. Over the last several months, Marble Ridge has

repeatedly disseminated false statements through the mails and wires accusing Neiman Marcus of

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 1

AND ORIGINAL COUNTERCLAIMS
being in default under its debt documents. On information and belief, Marble Ridge is making

these false statements to manipulate the price of Neiman Marcus’ debt so Marble Ridge can

improperly profit on its trades and to attempt to extort value from Neiman Marcus. Neiman

Marcus believes this is not the first time Marble Ridge has engaged in such practices. Neiman

Marcus is simply Marble Ridge’s latest target. Neiman Marcus brings these Counterclaims to

prevent further injuries from Marble Ridge’s false statements and to recover damages for the harm

it has suffered to date.

Each of the Neiman Marcus Defendants is a member of the Neiman Marcus Group, a

leading worldwide luxury fashion retailer that is headquartered in Dallas and has approximately

6,000 full-time employees in Texas. Through its Neiman Marcus, Bergdorf Goodman and other

brands, the Neiman Marcus Group offers a range of distinctive and fashionable apparel, handbags,

shoes, cosmetics and jewelry to customers around the world. To be clear, Neiman Marcus is not

in default under any of its debt documents. Neiman Marcus likewise is not insolvent. Neiman

Marcus just completed its fifth consecutive quarter of positive sales, all stores in the Neiman

Marcus Group are EBITDA positive, and adjusted EBITDA increased 10.6% from the same

quarter last year. Neiman Marcus also has $620 million in liquidity and ample runway to refinance

its debt with no near-term maturities.

Marble Ridge is a New York hedge fund formed by Dan Kamensky in 2016. On

information and belief, the Master Fund that Marble Ridge advises owns less than one percent of

Neiman Marcus’ total debt and none of the term loan.

Since September, Marble Ridge has waged a public campaign against Neiman Marcus by

sending letters filled with false statements to Neiman Marcus in Texas and simultaneously blasting

the letters to the news media and industry publications.

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 2

AND ORIGINAL COUNTERCLAIMS
 In an effort to be constructive, Neiman Marcus repeatedly encouraged Marble Ridge to

join one of two creditor groups that have formed—which in total include holders of more than $2

billion of debt—to negotiate an extension of Neiman Marcus’ debt maturities. Neiman Marcus is

paying legal and financial advisors for each group and has provided extensive diligence to them.

Neiman Marcus likewise encouraged Marble Ridge to form its own group to the extent it was

serious about participating in the process. Marble Ridge never responded or joined either group.

Instead, it has attempted to disrupt Neiman Marcus’ negotiations with the creditor groups by

making false public statements that Neiman Marcus is in default under the Debt Documents.

Marble Ridge’s campaign has targeted three transactions that certain of Neiman Marcus

Defendants executed over the last four years. Contrary to Marble Ridge’s false statements, each

of these transactions complied with all of the applicable terms of the two credit agreements and

three indentures that govern Neiman Marcus’ debt (collectively, the “Debt Documents”). The

transactions likewise complied with all applicable laws.

First, in late 2014 and early 2017, Neiman Marcus LTD designated the entities that operate

MyTheresa (the “MyTheresa Subsidiaries”) as unrestricted subsidiaries under the Debt Documents

(the “Designation”). In general, the Debt Documents contain covenants that limit Neiman Marcus

LTD and certain of its subsidiaries from taking specified actions, such as paying dividends, making

investments, or disposing of assets. Unrestricted subsidiaries generally are not subject to those

covenants, and are not required to provide guarantees or liens on their assets. Neiman Marcus also

specifically negotiated for exceptions to the covenants in its Debt Documents, which are referred

to as “baskets.” Neiman Marcus can use these baskets either without limitation or up to specified

dollar amounts for designating entities as unrestricted subsidiaries or for transactions that

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 3

AND ORIGINAL COUNTERCLAIMS
otherwise would be prohibited by the covenants. Neiman Marcus used a portion of its baskets for

the Designation and left several hundred million dollars of basket capacity to spare.

Second, in March 2017, Neiman Marcus LTD designated a separate entity, Nancy Holdings

LLC, as an unrestricted subsidiary, Neiman Marcus LLC invested three real properties into Nancy

Holdings, and Nancy Holdings then leased the properties back to Neiman Marcus LLC (the

“PropCo Transaction”). Neiman Marcus relied on additional basket capacity under the Debt

Documents to complete the PropCo Transaction.

Third, in September 2018, NMG International distributed its equity and debt interests in

the MyTheresa Subsidiaries to Neiman Marcus Inc. (the “Distribution” and, with the Designation

and PropCo Transaction, the “Transactions”). This, too, was expressly permitted by the Debt

Documents, which allow the distribution of the stock and intercompany loans of unrestricted

subsidiaries.

Neiman Marcus’ strict compliance with all of its legal and contractual obligations did not

deter Marble Ridge. On September 14, 2018, Marble Ridge contacted Neiman Marcus’ financial

advisor to express purported “concerns” that the Designation and PropCo Transaction may have

caused a default under the Debt Documents. At that point, Neiman Marcus LTD had publicly

disclosed the Designation and PropCo Transaction 18 months earlier. They were also widely

covered in the financial press, including in articles that described why the transactions were

allowed under the Debt Documents. No creditor had challenged either transaction, threatened

litigation or even hinted at allegations of a default under the Debt Documents. Marble Ridge

promised a letter would be coming.

On September 18, Marble Ridge sent a letter to Neiman Marcus challenging the

Designation, PropCo Transaction and Distribution (as Neiman Marcus LTD had disclosed the

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 4

AND ORIGINAL COUNTERCLAIMS
Distribution earlier that day). In the letter, Marble Ridge falsely accused Neiman Marcus of being

in default under the Debt Documents to raise the specter that Neiman Marcus’ entire $4.7 billion

capital structure could soon be accelerated. As Marble Ridge well understood, allegations of

default are particularly harmful to retailers like Neiman Marcus that rely on trade credit to support

their businesses. A private letter to Neiman Marcus, however, was not sufficient to allow Marble

Ridge to accomplish its objectives. Accordingly, Marble Ridge provided the letter to the media

and issued a press release through the wires that falsely accused Neiman Marcus and its equity

sponsors of engaging in a “theft of assets” and other unlawful activities. Just as Marble Ridge

intended, numerous media and wire services picked up the letter and press release, and published

articles disseminating Marble Ridge’s false statements about Neiman Marcus.

Marble Ridge’s statements, of course, were not true as Neiman Marcus explained in

response to the initial letter. But Marble Ridge doubled down on its scheme by sending additional

missives simultaneously to Neiman Marcus and the media on September 25 and December 3.

Marble Ridge knew the accusations in its letters were false when it made them. On

information and belief, Marble Ridge engaged in this entire campaign to manipulate the price of

Neiman Marcus’ debt to improperly profit on its trades and to attempt to extort value from Neiman

Marcus. This is not the first time Marble Ridge has engaged in such questionable tactics. On

information and belief, Marble Ridge has levied false accusations against other companies that

had engaged in transactions expressly allowed by their debt documents for its own economic gain.

As intended, Marble Ridge’s false accusations have damaged Neiman Marcus. In part

based on the “noise” created by Marble Ridge’s false statements, certain of Neiman Marcus’ credit

ratings were downgraded. Marble Ridge’s conduct also has damaged Neiman Marcus’

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 5

AND ORIGINAL COUNTERCLAIMS
relationships with its customers and business partners, caused Neiman Marcus to lose business

opportunities, profits and value, and tarnished its valuable brands.

Neiman Marcus will not stand by idly as Marble Ridge attempts to derail the positive

momentum its businesses have achieved over the last several years. Accordingly, Neiman Marcus

brings these Counterclaims to recover damages for the harm Marble Ridge’s false statements have

inflicted on Neiman Marcus and its businesses.

II. GENERAL DENIAL

1. Pursuant to Texas Rule of Civil Procedure 92, Neiman Marcus generally denies all

allegations contained in the Marble Ridge Plaintiffs’ Original Petition. Neiman Marcus demands

strict proof of each of the Marble Ridge Plaintiffs’ allegations.

III. SPECIFIC DENIAL

2. Pursuant to Texas Rule of Civil Procedure 93, Neiman Marcus denies that the

Marble Ridge Plaintiffs have satisfied the conditions precedent for recovery of attorneys’ fees.

IV. VERIFIED DENIAL

3. Pursuant to Texas Rule of Civil Procedure 93, Neiman Marcus denies that the

Marble Ridge Plaintiffs have capacity to bring their alleged claims against Neiman Marcus.

4. Plaintiff Marble Ridge lacks legal capacity to sue Neiman Marcus because it does

not allege that it is a creditor of any Defendant, and it does allege any contractual or other legal

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 6

AND ORIGINAL COUNTERCLAIMS
relationship with any Defendant that would allow it to sue under the fraudulent transfer laws or

to seek the appointment of a receiver.

5. Plaintiff Master Fund lacks legal capacity to sue Neiman Marcus based on its

alleged note holdings because the indentures that govern the notes that are the subject of the

allegations in the Original Petition preclude it from bringing suit.

6. Plaintiff Master Fund lacks legal capacity to sue Neiman Marcus based on its

alleged holdings of term loans because, as verified by the Affidavit of Adam Orvos, Chief

Financial Officer of Neiman Marcus LTD, attached hereto as Exhibit A, neither Master Fund nor

Marble Ridge are lenders under Neiman Marcus’ Term Loan Agreement that is the subject of the

allegations in the Original Petition.

V. AFFIRMATIVE DEFENSES

7. As to the Marble Ridge Plaintiffs’ claims, Neiman Marcus asserts that the Marble

Ridge Plaintiffs’ claims are barred, in whole or in part, by the following affirmative defenses:

a. Unclean hands;

b. Unconscionability;

c. Laches;

d. Waiver;

e. The Marble Ridge Plaintiffs lack standing to assert their claims; and

f. The Marble Ridge Plaintiffs lack capacity to assert their claims.

VI. JURISDICTION, VENUE, AND RELIEF SOUGHT

8. This Court has personal jurisdiction over Marble Ridge. The basis for Neiman

Marcus’ Counterclaims is a series of false public statements that Marble Ridge published about

Texas residents as each of the Neiman Marcus Defendants is headquartered in Texas and has its

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AND ORIGINAL COUNTERCLAIMS
principal place of business in Texas. Marble Ridge specifically directed those statements to Texas

by addressing the false letters to Neiman Marcus’ general counsel in Dallas, Texas, sending the

letters by courier to Texas, and publishing the letters throughout Texas by the media and press

wires. As intended, Marble Ridge has also inflicted harm on Neiman Marcus in Texas as each of

the Neiman Marcus Defendants is located here and prominent Texas media outlets, such as the

Dallas Morning News, have re-published Marble Ridge’s defamatory statements. The Marble

Ridge Plaintiffs further subjected themselves to personal jurisdiction in this Court by affirmatively

seeking relief from this Court.

9. This Court has subject matter jurisdiction over Neiman Marcus’ Counterclaims

because the amount in controversy is within the jurisdictional limits of this Court.

10. Venue for Neiman Marcus’ Counterclaims is proper in Dallas County pursuant to

Texas Civil Practice & Remedies Code § 15.002(a)(1). Dallas County is the county in which a

substantial part of the events giving rise to the Counterclaims occurred, as it is the county into

which Marble Ridge sent its false letters and threats and is the county in which each of the Neiman

Marcus Defendants suffered harm. Venue is also proper in Dallas County under Texas Civil

Practice & Remedies Code § 15.017, which requires that a suit for defamation be brought in the

county in which the claimant resided at the time of the accrual of the cause of action. Each of the

Neiman Marcus Defendants resided in Dallas County at the time their cause of action accrued.

11. Pursuant to Texas Rule of Civil Procedure 47(c), Neiman Marcus hereby discloses

that it seeks monetary relief over $1,000,000.

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 8

AND ORIGINAL COUNTERCLAIMS
 VII. FACTUAL BACKGROUND

A. Neiman Marcus Is Party to a Series of Debt Documents That Afford Neiman Marcus
Significant Flexibility.

12. The Neiman Marcus Group is one of the leading luxury fashion retailers in the

world. Through its Neiman Marcus, Bergdorf Goodman and other brands, the Neiman Marcus

Group offers a range of distinctive and fashionable apparel, handbags, shoes, cosmetics and

jewelry to customers around the world. Neiman Marcus and its subsidiaries have approximately

6,000 full-time employees based in Texas.

13. Neiman Marcus Inc. is the top entity in the Neiman Marcus Group corporate

structure. Neiman Marcus Inc. is a Delaware corporation that is governed by a Board of Directors,

which includes independent directors that are not affiliated with Neiman Marcus or its private

equity sponsors. The remaining Neiman Marcus Defendants are all member-managed limited

liability companies that are direct or indirect subsidiaries of Neiman Marcus Inc.

14. Neiman Marcus LTD is the primary borrower under and issuer of $4.7 billion of

debt. Specifically, Neiman Marcus LTD is party to a Revolving Credit Agreement, dated as of

October 25, 2013 (as amended, the “ABL Agreement”), and a Term Loan Credit Agreement, dated

as of October 25, 2013 (as amended, the “Term Loan Agreement”). Neiman Marcus LTD is also

an issuer of unsecured notes under an Indenture, dated as of October 21, 2013, for the issuance of

8.75%/9.50% Senior PIK Toggle Notes due 2021 (as supplemented, the “PIK Indenture”), and an

Indenture, dated as of October 21, 2013, for the issuance of 8.00% Senior Cash Pay Notes due

2021 (as supplemented, the “CP Indenture,” and together with the PIK Indenture, the “Notes

Indentures”). In addition, Neiman Marcus LLC is an issuer of senior debentures issued pursuant

to an Indenture dated May 27, 1998 (as supplemented, the “2028 Indenture” and, with the ABL

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 9

AND ORIGINAL COUNTERCLAIMS
Agreement, the Term Loan Agreement, and the Notes Indentures, as previously defined, the “Debt

Documents”). Neiman Marcus Inc. is not an obligor on or guarantor of any of the debt.

15. The Debt Documents include covenants that limit Neiman Marcus LTD and certain

of its subsidiaries from paying dividends, making investments, disposing of assets or taking other

actions (“Restrictive Covenants”). But these limitations are not absolute. They do not apply to

unrestricted subsidiaries, which are generally permitted to engage in transactions without being

limited by the Restrictive Covenants. The Debt Documents also contain exceptions to the

Restrictive Covenants known as baskets that allow Neiman Marcus LTD and its restricted

subsidiaries to engage in certain transactions either without limitation or up to specified dollar

amounts. Neiman Marcus specifically bargained for—and its financial creditors agreed to

provide—the significant flexibility afforded by the ability to designate entities as unrestricted

subsidiaries as well as the very broad baskets under the Debt Documents. These carefully and

specifically bargained for terms are among the most critical and heavily negotiated because they

allow Neiman Marcus to engage in transactions that otherwise would be prohibited under the Debt

Documents. Not all companies negotiate for and obtain such flexibility, but Neiman Marcus did.

B. The Debt Documents Expressly Permitted the Designation of the MyTheresa

Subsidiaries as Unrestricted Subsidiaries.

16. The MyTheresa Subsidiaries operate MyTheresa, a retail entity that appeals to

younger luxury customers primarily in Europe, Asia, and the Middle East. MyTheresa conducts

sales through mytheresa.com and MyTheresa’s mobile app. It also has a flagship store in Munich,

Germany. The Neiman Marcus Group acquired MyTheresa in late 2014 for $196 million in cash

plus contingent earn-out payments totaling $57 million that were paid in April 2016 and March

2017.

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 10

AND ORIGINAL COUNTERCLAIMS
 17. The MyTheresa Subsidiaries consist of non-parties Mariposa Luxembourg I S.à r.l.

(“Lux I”) and Mariposa Luxembourg II S.à r.l. (“Lux II”)—which is a wholly-owned subsidiary

of Lux I—as well as four other non-parties which are wholly-owned, indirectly or directly, by Lux

II: (i) NMG Germany GmbH, (ii) mytheresa.com GmbH, (iii) mytheresa.com Service GmbH, and

(iv) Theresa Warenvertrieb GmbH (each of the entities described in clauses (i) through (iv),

together with Lux I and Lux II, as previously defined, the “MyTheresa Subsidiaries”).

18. At acquisition, the MyTheresa Subsidiaries were subsidiaries of NMG

International. As foreign subsidiaries, they were non-guarantors under the Debt Documents but

subject to Restrictive Covenants. In late 2014, Neiman Marcus LTD designated the then-existing

MyTheresa Subsidiaries as unrestricted subsidiaries under the ABL and Term Loan Agreements

and delivered the required notices of designation to the Administrative Agents and Collateral

Agents. In November 2016, the Neiman Marcus Group created mytheresa.com Service GmbH

(“MyT Service”) to hold and perform MyTheresa’s logistics, warehouse, and service functions.

Neiman Marcus LTD designated MyT Service as an unrestricted subsidiary under the ABL and

Term Loan Agreements in April 2017 and delivered the required notices to the Administrative

Agents and Collateral Agents.

19. In March 2017, Neiman Marcus LTD designated the MyTheresa Subsidiaries as

unrestricted subsidiaries under the Notes Indentures and delivered the required notices of

designation to the Trustee. At that time, a third-party valuation firm determined that the value of

the MyTheresa Subsidiaries was approximately $280 million.

20. On March 14, 2017, Neiman Marcus LTD disclosed in its 10-Q filing that the

MyTheresa Subsidiaries had been designated as unrestricted subsidiaries under the ABL and Term

Loan Agreements and the Notes Indentures. Neiman Marcus LTD repeated this disclosure in each

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 11

AND ORIGINAL COUNTERCLAIMS
of its subsequent 10-Q and 10-K filings. Because there are no applicable restrictions under the

2028 Indenture, no designation was necessary.

1. The ABL and Term Loan Agreements Expressly Permitted the Designation of
the MyTheresa Subsidiaries as Unrestricted Subsidiaries.

21. The ABL Agreement allows Neiman Marcus LTD to designate a subsidiary as an

unrestricted subsidiary if (i) no Event of Default is continuing; (ii) the designation would not cause

an Event of Default; (iii) the Payment Conditions test is met; and (iv) there is sufficient basket

capacity to make an investment in the amount of the value of the unrestricted subsidiary under

Section 6.04 of the ABL Agreement (which provides unlimited investment basket capacity if the

Payment Conditions test is met). ABL Agreement, “Unrestricted Subsidiary” definition.

22. In late 2014, there was no Event of Default under the ABL Agreement and no Event

of Default occurred from the Designation. Neiman Marcus LTD also satisfied the Payment

Conditions test as its Excess Availability (which assesses Neiman Marcus LTD’s ability to borrow

additional funds) exceeded $225 million. Because the Payment Conditions test was satisfied,

Neiman Marcus LTD had unlimited capacity to designate unrestricted subsidiaries under the

investment basket in Section 6.04(28) of the ABL Agreement.

23. The Term Loan Agreement allows Neiman Marcus LTD to designate a subsidiary

as an unrestricted subsidiary if (i) no Event of Default is continuing; (ii) the designation would not

cause an Event of Default; (iii) the Fixed Charge Coverage Ratio (a contractually-defined metric

that compares earnings to debt expense) is at least 1.0x on a pro forma basis; and (iv) there is

sufficient basket capacity to make an investment in the amount of the value of the unrestricted

subsidiary under Section 6.04 of the Term Loan Agreement. Term Loan Agreement, “Unrestricted

Subsidiary” definition.

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 12

AND ORIGINAL COUNTERCLAIMS
 24. In late 2014, there was no Event of Default under the Term Loan Agreement and

no Event of Default occurred from the Designation. The Fixed Charge Coverage Ratio was over

2.05x—more than double the minimum required threshold—on a pro forma basis. Neiman Marcus

LTD also had at least $502 million of capacity under three separate investment baskets in Section

6.04 of the Term Loan Agreement in late 2014: approximately $252 million under the “Available

Amount” basket, $100 million under the “Foreign Subsidiary” basket, and $150 million under the

general investment basket. Term Loan Agreement §§ 6.04(3), (6), (29). The value of MyTheresa

in late 2014 was approximately $253 million (based on the transaction consideration of the initial

$196 million cash payment plus $57 million in subsequent earn-out payments). Thus, Neiman

Marcus only used $253 million of its $502 million in investment basket capacity for the

Designation, leaving nearly half of its investment basket capacity under the Term Loan Agreement

untapped. 1

2. The Notes Indentures Expressly Permitted Designation of the MyTheresa

Subsidiaries as Unrestricted Subsidiaries.

25. The Notes Indentures allow Neiman Marcus LTD to designate a subsidiary as an

unrestricted subsidiary if (i) it does not hold any equity interests or indebtedness of, or own or hold

any liens on the property of, Neiman Marcus LTD or any other Neiman Marcus LTD subsidiary

(other than its own subsidiaries), or have any indebtedness that provides recourse to Neiman

Marcus LTD or its Restricted Subsidiaries, and (ii) there is sufficient capacity to make a Permitted

1
It was not necessary to designate MyT Service as an unrestricted subsidiary under the
ABL or Term Loan Agreements when it was created in November 2016. MyT Service was a
wholly-owned subsidiary of an existing unrestricted subsidiary to which no new assets were
contributed, so its assets were already outside the restrictions of the ABL and Term Loan
Agreements. Regardless, Neiman Marcus provided notices of designation to the Agents because
it had more than sufficient investment capacity to designate MyT Service as an unrestricted
subsidiary under the ABL and Term Loan Agreements.

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 13

AND ORIGINAL COUNTERCLAIMS
Investment or Restricted Payment in the amount of the value of the unrestricted subsidiary under

the Notes Indentures. Notes Indentures §§ 3.4(c), 3.13(a)(ii).

26. In March 2017, the MyTheresa Subsidiaries did not own any equity interests or

indebtedness of, or own or hold any liens on the property of, Neiman Marcus LTD or Neiman

Marcus LTD subsidiaries (other than the MyTheresa Subsidiaries) or have any indebtedness that

provides recourse to Neiman Marcus LTD or its Restricted Subsidiaries. Neiman Marcus LTD

also had at least $578 million of Permitted Investment and Restricted Payment capacity under the

Notes Indentures:

• The Notes Indentures provide a “builder basket” that increases based on positive
financial results. Notes Indentures § 3.4(a)(C). This basket is available when there
is no continuing Default or Event of Default, the use of the basket would not cause
a Default or Event of Default, and Neiman Marcus LTD could incur an additional
dollar of debt based on an Interest Coverage Ratio (a contractually-defined metric
that compares earnings to interests expense) of at least 2.0x. Each of these
requirements was met in March 2017, and Neiman Marcus LTD therefore had $328
million of capacity under its builder basket to make Restricted Payments.

• The Notes Indentures also provide a general Restricted Payments basket so long as
no Default or Event of Default was continuing or would have been caused by the
use of the basket. Id. § 3.4(b)(xx). In March 2017, Neiman Marcus LTD had $100
million of capacity to make Restricted Payments under this basket.

• The Notes Indentures likewise provide a general Permitted Investments basket that
provided an additional $150 million of capacity in March 2017. Id., “Permitted
Investment” (27).

27. In March 2017, a third-party valuation firm determined that the value of the

MyTheresa Subsidiaries was approximately $280 million. Accordingly, Neiman Marcus LTD’s

approximately $578 million in Permitted Investment and Restricted Payment capacity was more

than sufficient to designate the MyTheresa Subsidiaries as Unrestricted Subsidiaries.

C. The Debt Documents Expressly Permitted The PropCo Transaction.

28. As part of its ongoing efforts to manage its capital structure in accordance with its

governing Debt Documents, the Neiman Marcus Group created a new subsidiary called Nancy

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 14

AND ORIGINAL COUNTERCLAIMS
Holdings LLC (“Nancy Holdings”) in February 2017. Neiman Marcus LLC is the sole member

of Nancy Holdings.

29. In March 2017, Neiman Marcus LTD designated Nancy Holdings as an unrestricted

subsidiary, Neiman Marcus LLC contributed its property interests in two stores (San Antonio,

Texas and McLean, Virginia) and a distribution center (Longview, Texas) to Nancy Holdings, and

Neiman Marcus LLC and Nancy Holdings entered into leases with respect to those properties

(collectively, as previously defined, the “PropCo Transaction”). A third-party valuation firm

determined that the value of real property contributed to Nancy Holdings was approximately $73

million and that the collective terms of the leases between Neiman Marcus LLC and Nancy

Holdings were fair.

30. On March 13, 2017, Neiman Marcus LTD delivered notices of the designation of

Nancy Holdings as an unrestricted subsidiary to the Trustee under the Notes Indentures and the

Administrative Agents and Collateral Agents under the ABL and Term Loan Agreements. The

following day, Neiman Marcus LTD publicly disclosed the PropCo Transaction in its 10-Q filing

with the SEC. Neiman Marcus’ ability to execute the PropCo Transaction was reported in the

financial press both before and after the transaction. See, e.g., “Neiman Marcus’ Debt Documents

Likely Permit Substantial Investments in Unrestricted Subsidiaries and Non-Guarantor

Subsidiaries,” ReorgResearch, Feb. 15, 2017; “Neiman’s Designation of Unrestricted Subsidiaries

Raises Issues Around Credit Support, Strategic Options; Valuation May Determine Additional

Capacity,” ReorgResearch, Mar. 17, 2017.

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 15

AND ORIGINAL COUNTERCLAIMS
 1. The Debt Documents Expressly Permitted the Designation of and Investments
in Nancy Holdings.

31. Neiman Marcus LTD properly designated Nancy Holdings as an unrestricted

subsidiary under each of the applicable Debt Documents and then used available basket capacity

to contribute the three real properties to it.

32. The Payment Conditions test under the ABL Agreement was met in spring 2017

because Neiman Marcus LTD’s Excess Availability exceeded $225 million and there was no Event

of Default. Thus, Neiman Marcus LTD had unlimited capacity under the investment basket in

Section 6.04(28) to contribute the real properties to Nancy Holdings.

33. Under the Term Loan Agreement, in spring 2017, the Fixed Charge Coverage Ratio

remained above the 1.0x threshold—at approximately 1.64x—and there was no Event of Default.

After the MyTheresa designations, Neiman Marcus LTD still had approximately $249 million of

investment capacity remaining under Section 6.04 of the Term Loan Agreement. Accordingly,

there was ample capacity under the Term Loan Agreement to contribute real properties valued at

$73 million to Nancy Holdings.

34. With respect to the Notes Indentures, as discussed above, in spring 2017, Neiman

Marcus LTD satisfied all of the requirements to designate entities as unrestricted subsidiaries as

long as it had Permitted Investment or Restricted Payment capacity in excess of the value of the

entity designated. Following the MyTheresa designations, Neiman Marcus LTD still had

approximately $298 million in Permitted Investment and Restricted Payment capacity under the

Notes Indentures—more than enough basket availability to contribute $73 million of real

properties to Nancy Holdings.

35. There are no applicable restrictions under the 2028 Indenture so no designation of

Nancy Holdings or investment capacity was necessary for the PropCo Transaction.

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 16

AND ORIGINAL COUNTERCLAIMS
 2. The Debt Documents Expressly Permitted Neiman Marcus LLC’s Lease
Agreements with Nancy Holdings.

36. The ABL and Term Loan Agreements permit sale and leaseback transactions such

as the PropCo Transaction as long as they involve property owned by a Restricted Subsidiary and

the present value of the lease is less than $200 million. ABL and Term Loan Agreements § 6.03.

Both of these requirements were satisfied here. A Restricted Subsidiary (Neiman Marcus LLC)

owned the real property that it invested in Nancy Holdings. Neiman Marcus’ financial advisor

determined that the present value of the payments under the leases was approximately $44 million

(and even the undiscounted value of the lease payments was below the $200 million threshold).

37. The PropCo Transaction satisfied the requirements of the 2028 Indenture, which at

the time allowed sale leasebacks up to $1.1 billion. 2028 Indenture §§ 1006, 1007(1). There are

no applicable restrictions in the Notes Indentures.

D. The Debt Documents Expressly Permitted the MyTheresa Distribution.

38. Four years after the initial Designation, on September 14, 2018, NMG International

distributed to Neiman Marcus Inc. its equity interests in the MyTheresa Subsidiaries and in two

promissory notes (the “Lux II Notes”) owed by Lux II to NMG International (collectively, as

previously defined, the “Distribution”) as follows:

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 17

AND ORIGINAL COUNTERCLAIMS
 39. Neiman Marcus LTD publicly disclosed the Distribution in its 10-Q on September

18, 2018. As with the Designation, the financial press recognized that the Distribution was

permitted under the Debt Documents. See, e.g., “Neiman Marcus’ Transfer of MyTheresa Likely

Permitted by Debt Documents,” ReorgResearch, Sept. 18, 2018.

1. The ABL and Term Loan Agreements Expressly Permitted the Distribution.

40. The ABL and Term Loan Agreements allow “the distribution, as a dividend or

otherwise, of shares of Capital Stock of, or Indebtedness owed to the Borrower or any Restricted

Subsidiary by, one or more Unrestricted Subsidiaries (other than Unrestricted Subsidiaries the

primary assets of which are cash or Cash Equivalents).” ABL and Term Loan Agreements §

6.06(14).

41. As of September 2018, the MyTheresa Subsidiaries had been properly designated

as unrestricted subsidiaries under the ABL and Term Loan Agreements four years earlier. Thus,

the distribution of the Capital Stock of the MyTheresa Subsidiaries was expressly permitted under

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AND ORIGINAL COUNTERCLAIMS
the ABL and Term Loan Agreements. The same section of these agreements also expressly

permitted the distribution of the Lux II Notes because they were debt owed to a restricted

subsidiary (NMG International) by an unrestricted subsidiary (Lux II).

2. The Note Indentures Expressly Permitted the Distribution.

42. The Notes Indentures likewise allow “the distribution, as a dividend or otherwise,

of shares of Capital Stock of, or Indebtedness owed to the LLC Co-Issuer or a Restricted

Subsidiary by, one or more Unrestricted Subsidiaries (other than Unrestricted Subsidiaries the

primary assets of which are cash or Cash Equivalents).” Notes Indentures § 3.4(b)(xiv).

43. The MyTheresa Subsidiaries had been properly designated as unrestricted

subsidiaries under the Notes Indentures for a year and a half before the Distribution. Accordingly,

the stock of the MyTheresa Subsidiaries could be distributed to Neiman Marcus Inc. under the

express terms of the Notes Indentures. The Lux II Notes also could properly be distributed as debt

owed to a restricted subsidiary (NMG International) by an unrestricted subsidiary (Lux II).

44. There are no applicable limitations under the 2028 Indenture. Accordingly, the

Distribution fully complied with the Debt Documents.

3. The Distribution Complied with All Applicable Laws.

45. The Distribution complied with all applicable laws. As Delaware limited liability

companies governed by the Delaware LLC Act, NMG International, Neiman Marcus LLC,

Neiman Marcus LTD, and Mariposa Holdings can make distributions to their members as long as

each entity’s liabilities do not exceed the fair value of that entity’s assets following the distribution.

See 6 Del. C. § 18-607(a). They can each likewise make distributions without violating fraudulent

transfer laws as long as they do not have an intent to delay, hinder or defraud creditors through the

distribution and they are not insolvent or rendered insolvent, left with unreasonably small assets

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 19

AND ORIGINAL COUNTERCLAIMS
or unable to pay their debts as they mature following the distribution. See, e.g., Tex. Bus. &

Comm. C. § 24.005(a).

46. The Distribution satisfied every requirement under the law. Neiman Marcus is not

insolvent. To the contrary, at the time of the Distribution in September 2018, the Neiman Marcus

Group had just completed its fourth consecutive quarter of positive sales and Adjusted EBITDA

was up 16.4% from the same quarter in the previous year. At the same time, all Neiman Marcus

and Bergdorf Goodman stores were EBITDA positive and the Neiman Marcus Group had $800

million in liquidity. Neiman Marcus likewise has no near-term maturities and ample runway to

refinance its debt.

47. Before the Distribution, Neiman Marcus’ financial executives analyzed the

financial condition of each of the Neiman Marcus Defendants that would be making a distribution

after giving effect to the Distribution. Each analysis was based on a recent third-party valuation

of Neiman Marcus, Neiman Marcus’ recent financial performance, ordinary course financial

projections prepared by the Neiman Marcus management team, discussions among the Neiman

Marcus management team and its financial advisors, and other financial information. Based on

these analyses, Neiman Marcus’ financial executives determined that (i) the assets of each of the

Neiman Marcus Defendants making a distribution would exceed its liabilities following the

Distribution, each of these entities would be able to pay its debts as they came due in the ordinary

course of business and none would have an unreasonably small amount of assets or capital for its

business for at least a year after the Distribution, and (ii) the Distribution would not impair any of

these entities from operating as a going concern.

48. Neiman Marcus also did not intend to delay, hinder or defraud creditors through

the Distribution. Instead, the Distribution was part of Neiman Marcus’ ongoing efforts to

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 20

AND ORIGINAL COUNTERCLAIMS
maximize its operational, financial, and strategic flexibility in accordance with the express terms

of the Debt Documents.

E. Marble Ridge Launches Its Campaign Against Neiman Marcus.

49. For a year-and-a-half after Neiman Marcus LTD publicly disclosed the Designation

and PropCo Transaction, no creditor challenged either transaction, threatened litigation or even

hinted at allegations of a default under the Debt Documents. In fact, rather than saber rattling over

the Designation and PropCo Transaction, many of Neiman Marcus’ significant debtholders

organized into two groups—which in total hold more than $2 billion in debt—to discuss a

transaction intended to allow Neiman Marcus to proactively address its existing debt maturities on

mutually agreeable terms.

50. Marble Ridge refused to join either group. Instead, on information and belief,

Marble Ridge concocted a scheme to improperly profit on its trades by manipulating the price of

Neiman Marcus’ debt and to attempt to extort value from Neiman Marcus. Marble Ridge

published its false statements about Neiman Marcus via both mail and wire so that various media

outlets would reprint the allegations. This created a drumbeat of bad publicity that, on information

and belief, was intended to harm Neiman Marcus and allow Marble Ridge to take advantage of

resulting swings in the trading price of Neiman Marcus’ debt, and undermine Neiman Marcus’s

negotiations with its creditor groups.

51. Marble Ridge launched its campaign by contacting Neiman Marcus’ financial

advisor on September 14 to express purported “concerns” that the Designation and PropCo

Transaction may have caused a default under the Debt Documents. At that point, the Designation

and PropCo Transaction had been publicly disclosed for 18 months. They had also been widely

covered in the financial press, including in articles that described why the Transactions were

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 21

AND ORIGINAL COUNTERCLAIMS
allowed under the Debt Documents. No creditor had challenged Neiman Marcus’ ability to do

either the Designation or the PropCo Transaction. But Marble Ridge indicated that it would soon

send a letter doing just that.

52. On September 18, Marble Ridge sent a letter to Neiman Marcus challenging the

Designation, PropCo Transaction, and Distribution (as Neiman Marcus LTD had disclosed the

Distribution earlier that day). Marble Ridge asserted that “the Company may be in default under

its Indentures” based on the Designation and PropCo Transaction that occurred 18 months earlier.

Marble Ridge noted it previously had “relayed its concerns that the [Designation and PropCo

Transaction] may have caused a default under the Indentures to the Company’s representative at

Lazard Ltd.” Marble Ridge repeated that the Transactions “may trigger defaults under the

Indentures” and that it “has concerns that the Transactions do not comply with the Indentures.”

And it concluded: “Therefore, based on our review of all relevant public information, the

Transactions appear to have violated the Indentures and, accordingly, the Company may

now be in default thereunder.” (emphasis in original).

53. On information and belief, Marble Ridge concluded that simply sending the letter

to Neiman Marcus would not accomplish its objectives so it decided to up the ante on September

21 by providing copies of the September 18 letter to the media and issuing a press release through

the PR Newswire. In the press release, Marble Ridge trumpeted that it had “sent a letter to the

Board of Directors of the Neiman Marcus Group Ltd LLC expressing concern that the company

may be in default under its Indentures.” (As a member-managed LLC, Neiman Marcus LTD does

not have a Board of Directors—one of many assertions Marble Ridge failed to confirm before

sending the false and reckless letters and press release.) In a quote, Mr. Kamensky publicly stated

that Neiman Marcus’ private equity sponsors had engaged in a “theft of assets.”

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 22

AND ORIGINAL COUNTERCLAIMS
 54. Marble Ridge’s repeated assertions of default were serious accusations. On

information and belief, Marble Ridge falsely accused Neiman Marcus of being in default to raise

the specter that Neiman Marcus’ entire $4.7 billion capital structure could soon be accelerated. If

an Event of Default exists under one of the Debt Documents, the Agent or Trustee has the right to

accelerate that debt subject to the terms of that agreement. Following the acceleration of one

issuance, the agents and trustees, as applicable, under the remaining Debt Documents could then

declare the remainder of Neiman Marcus’ $4.7 billion capital structure immediately due and

payable, as well as pursue other remedies as allowed by the Debt Documents. As Marble Ridge

well understood, accusations regarding default are particularly harmful to retailers like Neiman

Marcus that rely on trade credit to support their business.

55. Given the litany of falsehoods in Marble Ridge’s letter and press release, Neiman

Marcus responded in writing to Marble Ridge on September 21 to set the record straight. Neiman

Marcus did not provide the response to the press despite numerous requests for a copy. In the

letter, Neiman Marcus set out the reasons why Marble Ridge’s accusations were wrong legally and

factually, pointed to articles from the financial press that supported Neiman Marcus’ compliance

with the Debt Documents and made clear it would seek to hold Marble Ridge liable for any damage

it causes to Neiman Marcus.

56. Undeterred, Marble Ridge responded on September 25 by doubling down on its

fraudulent statements in another letter. Marble Ridge sent a copy of the letter to the media at the

same time it was delivered to Neiman Marcus. Marble Ridge again claimed to have “serious

questions” about “potential defaults under the Indentures governing the Notes” and asked to “hear

a credible explanation, if that is possible” as to how the Designation and PropCo Transaction

“complied with the Indentures.”

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 23

AND ORIGINAL COUNTERCLAIMS
 57. On October 12, 2018, Neiman Marcus again responded to Marble Ridge privately

and encouraged it to join the ongoing discussions with groups representing more than $2 billion

of debt:

The Company has already provided significant information about

the transactions identified in your prior correspondence to its
creditors. As you know, the Company is in active discussions with
two ad hoc groups of creditors that we understand have significant
holdings of Term Loans and Notes. The Company is also paying
each ad hoc groups’ advisors’ fees. As part of those discussions, the
Company has provided detailed business and legal diligence to the
advisors to the two ad hoc groups concerning the designations of
MyTheresa and Nancy Holdings as unrestricted subsidiaries, the
investment of real property into Nancy Holdings, and the
distribution of NMG International’s interests in MyTheresa.

As we discussed during our calls with you on September 27 and

October 4, the Company would like Marble Ridge to join one of the
existing ad hoc creditor groups so it can participate in the ongoing
discussions. Alternatively, you stated you were working on forming
your own ad hoc group due to Marble Ridge’s stated cross-holdings
in Term Loans and Notes, which we encouraged you to do. You
declined to disclose Marble Ridge’s holdings during our calls, but
we assume it has approximately 1% (or less) of the Company’s
outstanding debt . . . . Again, we would welcome Marble Ridge’s
participation in the existing process.

58. Marble Ridge never responded to the letter. Instead, on December 3, it fired off

another missive that it simultaneously sent to the press in furtherance of its scheme.

59. On information and belief, Marble Ridge knew its accusations regarding default

were false. In fact, on information and belief, Marble Ridge did not assess whether there was a

good faith basis for any of the reckless accusations it made and instead simply employed the same

tactics it had recently used to shakedown other companies and attempt to prevent companies from

exercising their express contractual rights.

60. Marble Ridge’s false statements have harmed Neiman Marcus. In part based on

the “noise” created by these false statements, certain of Neiman Marcus’ credit ratings were

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 24

AND ORIGINAL COUNTERCLAIMS
downgraded by Moody’s and S&P. The substantial negative publicity that Marble Ridge

intentionally created with its false allegations has also harmed Neiman Marcus’ relationships with

its customers and business partners. Neiman Marcus thus brings this lawsuit to prevent further

harm to its businesses and obtain damages for the injuries Marble Ridge has inflicted to date.

VIII. COUNTERCLAIMS

Count One – Defamation

61. Neiman Marcus incorporates the allegations of the preceding paragraphs as if they

were set forth herein.

62. On September 21, 2018, Marble Ridge issued a press release and the September 18

letter via the PR Newswire, without privilege or authorization, which included the following false

and defamatory statements:

• “Therefore, based on our review of all relevant public information, the

Transactions appear to have violated the Indentures and, accordingly, the
Company may now be in default thereunder” (emphasis in original);

• The Transactions “may trigger defaults under the Indentures”;

• Marble Ridge has “concerns that the Transactions do not comply with the
Indentures”;

• What Marble Ridge knows about the Designation and PropCo Transaction “led us
to believe that the Company may be in default under its Indentures”;

• The Designation and PropCo Transaction “may have caused a default under the
Indentures”; and

• There was a “theft of assets by” Neiman Marcus’ private equity sponsors.

63. On September 25, Marble Ridge sent Neiman Marcus another letter that again

referenced “serious questions” about “potential defaults.” Marble Ridge simultaneously

disseminated these false statements through the press as well.

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 25

AND ORIGINAL COUNTERCLAIMS
 64. Marble Ridge thus published statements of fact that referred to Neiman Marcus.

The statements were false and defamatory, and with regard to the truth of the statement, Marble

Ridge acted with actual malice or negligence.

65. By reason of the foregoing false and defamatory words printed and spoken about

Neiman Marcus, Neiman Marcus’ businesses and reputation have been damaged, including

through the recent credit ratings downgrades.

66. Neiman Marcus will prove its precise amount of damages at trial.

Count Two – Business Disparagement

67. Neiman Marcus incorporates the allegations of the preceding paragraphs as if they

were set forth herein.

68. Marble Ridge published disparaging words about Neiman Marcus’ economic

interests.

69. Marble Ridge’s statements were false.

70. Marble Ridge published its statements with malice and without privilege.

71. Marble Ridge’s publications caused special damages to Neiman Marcus.

IX. PRAYER

Neiman Marcus respectfully requests that the Court:

a. Issue an order that the Marble Ridge Plaintiffs do not have capacity to assert their

claims and request for receivership against Neiman Marcus;

b. Deny all relief as requested in the Marble Ridge Plaintiffs’ Original Petition;

c. Award Neiman Marcus all actual, incidental, and consequential damages as

allowed by law or in equity;

d. Award Neiman Marcus pre-judgment interest and post-judgment interest;

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 26

AND ORIGINAL COUNTERCLAIMS
 e. Award Neiman Marcus its reasonable attorneys’ fees;

f. Award Neiman Marcus its costs; and

g. Award all other relief to which Neiman Marcus may be entitled.

Dated: December 14, 2018 Respectfully submitted,

/s/ Michael P. Lynn

Michael P. Lynn
Texas Bar No. 12738500
mlynn@lynnllp.com
Elizabeth Y. Ryan
Texas Bar No. 24067758
eryan@lynnllp.com
Christopher Patton
Texas Bar No. 24083634
cpatton@lynnllp.com
Chisara Ezie-Boncoeur
Texas Bar No. 24103714
cezie-boncoeur@lynnllp.com

LYNN PINKER COX & HURST LLP

2100 Ross Avenue
Suite 2700
Dallas, Texas 75201
Tel: (214) 981-3800
Fax: (214) 981-3839

ATTORNEYS FOR DEFENDANTS

KIRKLAND & ELLIS LLP

Jeffrey J. Zeiger, P.C.
Josh Greenblatt, P.C.
Gavin C.P. Campbell
300 North LaSalle Street
Chicago, IL 60654
Telephone: (312) 862-2000
Facsimile: (312) 862-2200

OF COUNSEL

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 27

AND ORIGINAL COUNTERCLAIMS
 CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true and correct copy of the above and foregoing
document has been served as shown below on counsel of record on December 14, 2018:

Via Email and Electronic Service

Joshua L. Hedrick
josh@herickkring.com
HEDRICK KRING, PLLC
1700 Pacific Avenue, Suite 4650
Dallas, TX 75201

Attorneys for Plaintiffs

Via Email and Electronic Service

Sigmund Wissner-Gross
swissnergross@brownrudnick.com
Mary Orenstein
morenstein@brownrudnick.com
BROWN RUDNICK LLP
Seven Times Square
New York, NY 10036

Of Counsel for Plaintiffs

/s/ Michael P. Lynn

Michael P. Lynn

DEFENDANTS’ ORIGINAL ANSWER, VERIFIED DENIAL, PAGE 28

AND ORIGINAL COUNTERCLAIMS
EXHIBIT A
EXHIBIT A