GNC 2011 Annual Report Download - page 101

Table of Contents
NOTE 12. LONG-TERM DEBT / INTEREST (Continued)
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. At December 31, 2010, the Company's consolidated subsidiaries' restricted net
assets were $1,982.4 million and the amount of unrestricted retained earnings was $26.2 million.
The 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 Revolving Credit Facility at a per annum rate equal to 0.5%. The Company
pays interest on outstanding borrowings on the Revolving Credit Facility at a Eurodollar rate or ABR plus the applicable margin in effect. As of December 31,
2010 and 2009, the ABR was 4.00% and 4.25%, respectively. The Company also pays an additional interest rate between 1.75% and 2.25% per annum on all
outstanding letters of credit issued. As of December 31, 2010 and 2009, $8.8 million and $7.9 million, respectively, of the Revolving Credit Facility was
utilized to secure letters of credit.
Senior Notes. In connection with the Merger, the Company completed a private offering of $300.0 million of Senior Notes at 99% of par value. The
Senior Notes are the Company's senior non collateralized obligations and are effectively subordinated to all of the Company's existing and future
collateralized debt, including the Senior Credit Facility, to the extent of the assets securing such debt, rank equally with all the Company's existing and future
non collateralized senior debt and rank senior to all the Company's existing and future senior subordinated debt, including the Senior Subordinated Notes. The
Senior Notes are guaranteed on a senior non collateralized basis by each of the Company's existing and future domestic subsidiaries (as defined in the Senior
Notes indenture). If the Company fails to make payments on the Senior Notes, the notes guarantors must make them instead.
The Company may elect in its sole discretion to pay interest on the Senior Notes in cash, entirely by increasing the principal amount of the Senior Notes
or issuing new Senior Notes ("PIK interest"), or on 50% of the outstanding principal amount of the Senior Notes in cash and on 50% of the outstanding
principal amount of the Senior Notes by increasing the principal amount of the Senior Notes or by issuing new Senior Notes ("partial PIK interest"). Cash
interest on the Senior Notes accrues at six-month LIBOR (1.25% minimum) plus 4.5% per annum, and PIK interest, if any,
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