GNC 2009 Annual Report Download - page 31

Table of Contents
Despite our current significant level of debt, we may still be able to incur additional debt, which could increase the risks described
above, adversely affect our financial health, or prevent us from fulfilling our obligations under the Senior Toggle Notes and the
10.75% Senior Subordinated Notes.
We and our subsidiaries may be able to incur additional debt in the future, including collateralized debt. Although the 2007 Senior Credit
Facility and the indentures governing the Senior Toggle Notes and the 10.75% Senior Subordinated Notes contain restrictions on the
incurrence of additional debt, these restrictions are subject to a number of qualifications and exceptions. If additional debt is added to our
current level of debt, the risks described above would increase.
We require a significant amount of cash to service our debt. Our ability to generate cash depends on many factors beyond our
control and, as a result, we may not be able to make payments on our debt obligations.
We may be unable to generate sufficient cash flow from operations, to realize anticipated cost savings and operating improvements on
schedule or at all, or to obtain future borrowings under our credit facilities or otherwise in an amount sufficient to enable us to pay our debt or to
fund our other liquidity needs. In addition, because we conduct our operations through our operating subsidiaries, we depend on those entities
for dividends and other payments to generate the funds necessary to meet our financial obligations, including payments on our debt. Under
certain circumstances, legal and contractual restrictions, as well as the financial condition and operating requirements of our subsidiaries, may
limit our ability to obtain cash from our subsidiaries. If we do not have sufficient liquidity, we may need to refinance or restructure all or a portion
of our debt on or before maturity, sell assets, or borrow more money. We may not be able to do so on terms satisfactory to us or at all.
If we are unable to meet our obligations with respect to our debt, we could be forced to restructure or refinance our debt, seek equity
financing, or sell assets. If we are unable to restructure, refinance, or sell assets in a timely manner or on terms satisfactory to us, the trading
price of the Senior Toggle Notes and the 10.75% Senior Subordinated Notes could decline and we may default under our obligations. As of
December 31, 2008 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 Senior Notes and the Senior Subordinated Notes.
Upon certain "change of control" events, as that term is defined in the indentures governing the Senior Toggle Notes and the 10.75% 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: 26