GNC 2008 Annual Report Download - page 30

Table of Contents
obligations. As of December 31, 2007 substantially all of our debt was subject to acceleration clauses. A default on any of our debt obligations
could trigger these acceleration clauses and cause those and our other obligations to become immediately due and payable. Upon an
acceleration of any of our debt, we may not be able to make payments under our debt.
We may not have the ability to raise the funds necessary to finance the change of control offer required by the indentures, which
could cause us to default on our debt obligations, including the New Senior Notes and the New Senior Subordinated Notes.
Upon certain "change of control" events, as that term is defined in the indentures governing the New Senior Notes and the New Senior
Subordinated Notes, we will be required to make an offer to repurchase all or any part of each holder's notes at a price equal to 101% of the
principal thereof, plus accrued interest to the date of repurchase. Because we do not have access to the cash flow of our subsidiaries, we will
likely not have sufficient funds available at the time of any change of control event to repurchase all tendered notes pursuant to this
requirement. Our failure to offer to repurchase notes or to repurchase notes tendered following a change of control would result in a default
under the indentures. Accordingly, prior to repurchasing the notes upon a change of control event, we must refinance all of our outstanding
indebtedness. We may be unable to refinance all of our outstanding indebtedness on terms acceptable to us or at all. If we were unable to
refinance all such indebtedness, we would remain effectively prohibited from offering to repurchase the notes.
Restrictions in the agreements governing our existing indebtedness may prevent us from taking actions that we believe would be in
the best interest of our business.
The agreements governing our existing indebtedness contain customary restrictions on us or our subsidiaries, including covenants that
restrict us or our subsidiaries, as the case may be, from:
• incurring additional indebtedness and issuing preferred stock;
• granting liens on our assets;
• making investments;
• consolidating or merging with, or acquiring, another business;
• selling or otherwise disposing our assets;
• paying dividends and making other distributions to GNC Parent LLC or GNC Corporation; and
• entering into transactions with our affiliates.
Our ability to comply with these covenants and other provisions of the New Senior Credit Facility and the indentures governing the New
Senior Notes and the New Senior Subordinated Notes may be affected by changes in our operating and financial performance, changes in
general business and economic conditions, adverse regulatory developments, or other events beyond our control. The breach of any of these
covenants could result in a default under our debt, which could cause those and other obligations to become immediately due and payable. If
any of our debt is accelerated, we may not be able to repay it.
The senior credit facility also requires that we meet specified financial ratios, including, but not limited to, maximum total leverage ratios.
These restrictions may prevent us from taking actions that we believe would be in the best interest of our business and may make it difficult for
us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted.
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