GNC 2008 Annual Report Download - page 95

Table of Contents
GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Description of Debt:
2007 Senior Credit Facility. In connection with the Merger, the Company entered into the 2007 Senior Credit Facility with a syndicate of
lenders. The 2007 Senior Credit Facility consists of a $675.0 million term loan facility and a $60.0 million revolving credit facility. The Company
borrowed the entire $675.0 million under the term loan facility, as well as $10.5 million of the $60.0 million revolving credit facility (excluding
approximately $9.4 million of letters of credit), to fund the Merger and related transactions. The $10.5 million borrowing under the new senior
revolving credit facility was repaid by the end of March 2007. The term loan facility will mature in September 2013. The revolving credit facility
will mature in March 2012. The 2007 Senior Credit Facility permits the Company to prepay a portion or all of the outstanding balance without
incurring penalties (except LIBOR breakage costs). Subject to certain exceptions, the Credit Agreement requires that 100% of the net cash
proceeds from certain asset sales, casualty insurance, condemnations and debt issuances, and a specified percentage of excess cash flow for
each fiscal year must be used to pay down outstanding borrowings. GNC Corporation, the Company's direct parent company, and the
Company's existing and future direct and indirect domestic subsidiaries have guaranteed the Company's obligations under the 2007 Senior
Credit Facility. In addition, the 2007 Senior Credit Facility is collateralized by first priority pledges (subject to permitted liens) of the Company's
equity interests and the equity interests of the Company's domestic subsidiaries.
All borrowings under the 2007 Senior Credit Facility bear interest, at the Company's option, at a rate per annum equal to (i) the higher of
(x) the prime rate (as publicly announced by JP Morgan Chase Bank, N.A. as its prime rate in effect) and (y) the federal funds effective rate,
plus 0.50% per annum plus, in each case, applicable margins of 1.25% per annum for the term loan facility and 1.25% per annum for the
revolving credit facility or (ii) adjusted LIBOR plus 2.25% per annum for the term loan facility and 2.25% per annum for the revolving credit
facility. In addition to paying interest on outstanding principal under the 2007 Senior Credit Facility, the Company is required to pay a
commitment fee to the lenders under the revolving credit facility in respect of unutilized revolving loan commitments at a rate of 0.50% per
annum.
The 2007 Senior Credit Facility contains customary covenants, including incurrence covenants and certain other limitations on the ability of
GNC Corporation, the Company, and its subsidiaries to incur additional debt, guarantee other obligations, grant liens on assets, make
investments or acquisitions, dispose of assets, make optional payments or modifications of other debt instruments, pay dividends or other
payments on capital stock, engage in mergers or consolidations, enter into sale and leaseback transactions, enter into arrangements that
restrict the Company's and its subsidiaries' ability to pay dividends or grant liens, engage in transactions with affiliates, and change the passive
holding company status of GNC Corporation.
The 2007 Senior Credit Facility contains events of default, including (subject to customary cure periods and materiality thresholds) defaults
based on (1) the failure to make payments under the senior credit facility when due, (2) breach of covenants, (3) inaccuracies of
representations and warranties, (4) cross-defaults to other material indebtedness, (5) bankruptcy events, (6) material judgments, (7) certain
matters arising under the Employee Retirement Income Security Act of 1974, as amended, (8) the actual or asserted invalidity of documents
relating to any guarantee or security document, (9) the actual or asserted invalidity of any subordination terms supporting the senior credit
facility, and (10) the occurrence of a change in control. If any such event of default occurs, the lenders would be entitled to accelerate the
facilities and take various other actions, including all actions permitted to be taken by a collateralized creditor. If certain bankruptcy events
occur, the facilities will automatically accelerate.
The Company issues letters of credit as a guarantee of payment to third-payment vendors in accordance with specified terms and
conditions. It also issues letters of credit for various insurance contracts. The revolving credit facility allows for $25.0 million of the $60.0 million
revolving credit facility to be used as collateral for outstanding letters of credit. The Company pays interest based on the aggregate available
amount of the credit facility at a per annum rate equal to 0.5%. The Company pays
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